In the "Agent News" section of the December 29, 2006, publication of Realty Times, under the heading of, "You Have to Be Really Bad to Lose Your Real Estate License," there was an excellent and informative discussion of the Petropoulos v. Department of Real Estate Court of Appeal decision (142 Cal.App. 4th 554 - effective as of September 29, 2006). That California decision held that in order to be actionable for disciplinary purposes or for denial of a real estate license, misdemeanor crimes must involve "moral turpitude," in addition to being substantially related to the qualifications, functions or duties of a real estate licensee.

The Petropoulos holding created an extra, dual burden of proof for the California Department of Real Estate (DRE) that the vast majority of licensing agencies in California do not have. Those other agencies can take disciplinary action or seek denial of a license of a person who was convicted of a crime substantially related to the qualifications, functions and duties of the licensee, without reference to moral turpitude.

Before the Court of Appeal decision, DRE had concluded that the California Real Estate Commissioner (Commissioner) had the latitude to deny a license or impose discipline for crimes not involving moral turpitude under the provisions of sections 480 and 490, respectively, of the California Business and Professions Code (Code) pertaining to business licenses, as long as the crimes were substantially related to real estate licensure. And no California court had concluded otherwise.

But since the Petropoulos decision became final in 2006, DRE has been precluded from taking disciplinary action against a licensee or denying a person’s license application based on his or her conviction of, or entry of plea of guilty or nolo contendere to, a misdemeanor, unless that crime involved moral turpitude.

The problem with the moral turpitude standard is that it is an elusive and nebulous concept. Many years ago, U.S. Supreme Court Justice Robert Jackson called moral turpitude an "undefined and undefinable standard." It is often described as "an act of baseness, vileness or depravity in the private and social duties which man owes to his fellowmen, or to society in general" or as something "contrary to the accepted and customary rule of right and duty between man and man." Yet moral turpitude is "innately a relative concept depending upon both contemporary moral values and the degree of its inimical quality." Rice v. Alcoholic Beverage Control Appeals Board (1979) 89 Cal.App. 3d 30, 36.

Certain criminal offenses, such as intentional fraud and theft, are considered by their very nature to involve moral turpitude per se (or inherently). Other crimes, such as a simple assault and battery, and involuntary manslaughter, are not viewed as inherently involving moral turpitude, but the facts and circumstances under which they are committed might involve moral turpitude. Moreover, different courts and Administrative Law Judges have varying ideas of what constitutes moral turpitude.

For example, some Administrative Law Judges have found that certain drunk driving crimes do not involve moral turpitude, while others have concluded that such crimes (based on almost identical facts) are offenses involving moral turpitude. The same sorts of disparate conclusions and findings have been reached in many decisions, including cases dealing with the misdemeanor crimes of false/fraudulent tax returns, child endangerment, resisting arrest, and hit-and-run with property damage.

In February 2007, California Assembly Member Emmerson introduced Assembly Bill 840 (AB 840) to amend the Code to give the Commissioner the ability to suspend, revoke or deny the issuance of a real estate license (see section 10177 (b) of the Code), or a mineral, oil and gas license (see section 10562 (a) of the Code), based on a substantially related misdemeanor, whether or not the misdemeanor involved moral turpitude. The legislation was intended to address the effects of the Petropoulos decision, and was supported by DRE, the California Association of Realtors, and the California Association of Mortgage Brokers.

The bill was passed without any opposition by the Senate and the Assembly, and sent to the California Governor’s Office on July 20, 2007. On July 27, 2007, the Governor signed AB 840.

This statutory change, which will go into effect on January 1, 2008, reverses the deleterious impact of the Petropoulos case, and restores the Commissioner’s authority to take appropriate licensing actions, without any showing, proof or finding of moral turpitude, where the applicant for licensure or a current licensee has been convicted or found guilty of, or entered a plea of guilty or nolo contendere to, a felony, or a crime that is substantially related to the qualifications, functions, or duties of a licensee.

Published: August 9, 2007

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