Legal Question in Real Estate Law in California
I had an incorporated Mortgage and realstate business up to 2007. On December of 2007 I close the business and I desolved the coporation. The corporation had no Assets or any liabilities when desolved and no assets was tranfer to me as individual.
I had about 30 licencse agents who work as independant contractor under The Corporation Broker License and I was the broker of record of the corporation.The attorney who created my corporation and served as an agent for the corporation received a lawsuite againt my corporation and other Lender who is responsible for funding the loan I was not name in the lawsuite. The transaction was done by one of my agents. I was not personaly envolved on the transation other done being the broker. I have not done anything wrong that hurt anyone but is very possible that the agent that close this transation did. What it is my liability? can they sue a business that has close down?(corporation legaly disolve)
I was told by an attorney that the broker of record of a corporation is liable to the corporation but no liable to the third pary.
3 Answers from Attorneys
That attorney is misinformed as to the law. The broker of record is directly liable for the misconduct of agents under the corporation's license. Tell that attorney they need to read Holley v. Crank, 400 F.3d 667 (2004), and Norman v. Dep't. of Real Estate, 93 Cal.App.3d 768, 155 Cal.Rptr. 715 (1979). And yes, they can sue a closed business, as well as its shareholders. Whether they can succeed is another story, but they can file and maintain the suit. A corporation is not actually dissolved until all of its business affairs, including outstanding liabilities are wound up and resolved.
Mr. McCormick's answer contains a minor technical inaccuracy; a corporation can dissolve without winding up and resolving its outstanding liabilities. More accurately, a dissolved corporation is not immune from suit for liabilities it left unresolved. Corporations Code sections 2010 and 2011. Neither are its insiders (stockholders, officers, directors) if they got any corporate assets in the dissolution process, even if it was only taking home the old desk or the obsolete software that belonged to the corporation. It is high time to contact your liability insurer about coverage for, and defense of, the lawsuit.
A broker is definitely liable for the wrongdoings of his agents. That is the very definition of agency. Labelling them as independent contractors is not dispositive, and the courts and the DRE would ignore that label.
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