Buckaloo v. Johnson

• Decision Date: 24 July 1975
• Citation: 14 Cal.3d 815,122 Cal.Rptr. 745,537 P.2d 865
• Parties: , 537 P.2d 865 William BUCKALOO, Plaintiff and Appellant, v. Cecil M. JOHNSON et al., Defendants and Respondents. L.A. 30400.
• Court: California Supreme Court

Page 745

122 Cal.Rptr. 745

14 Cal.3d 815, 537 P.2d 865

William BUCKALOO, Plaintiff and Appellant, v. Cecil M. JOHNSON et al., Defendants and Respondents.

L.A. 30400.

Supreme Court of California In Bank.

July 24, 1975.

Arata, Misuraca & Clement, and James L. Beyers, Santa Rosa, for plaintiff and appellant.

Herbert Manasse, Hollywood, for defendants and respondents.

MOSK, Justice.

A real estate broker denied his commission alleged to be due and owing on the sale of certain real property brought this action against defendants, the vendor and vendee of the property and members of the vendee group. Plaintiff's principal allegation is that the acts of defendants constituted the tort of intentional interference with prospective economic advantage. Defendants' demurrer to the complaint was sustained, and after plaintiff declined to amend the action was dismissed. (Code Civ.Proc., § 581, subd. 3.) We reverse in part and affirm in part.

The facts alleged in the complaint are as follows: Plaintiff Buckaloo is a licensed real estate broker doing business in Little River, California. Defendant Mildred Benioff was the owner of certain undeveloped beach property in Mendocino County, known as Dark Gulch. In 1967 and 1968 plaintiff had an exclusive right to sell the Dark Gulch parcel. No sale was consummated during this period and the exclusive listing expired in 1968.

In 1972, Benioff erected a sign on the property which read: 'For Sale--Contact Your Local Broker.' The complaint alleged that Benioff intended her sign to constitute an 'open listing' with brokers local to the Mendocino coast, who would then negotiate with prospective buyers towards sale of the property on terms satisfactory to the vendor. ¹

On May 3, 1972, plaintiff was approached at his place of business by defendants Virginia Arness, her daughter, and Cecil Johnson, the latter a real estate salesman in the employ of defendant Ferne Goodwin. The potential buyers indicated an interest in coastal investment property and a general discussion followed. Johnson then asked plaintiff if he 'cooperated with other brokers' and Buckaloo replied that he did. Arness then inquired about that 'property with the sign' and the conversation specifically revolved about Dark Gulch.

Plaintiff was well aware of the merits of the property from his prior association with Benioff and was able to inform the Arness group of its assets and liabilities. Plaintiff advised that the asking price was high for investment purposes but the parcel might be attractive to an owner-user. The conversation then progressed to a discussion of other properties but eventually returned to the Dark Gulch parcel when Arness showed continuing interest. At the end of the day plaintiff found accommodations for the group and they left, promising to return the next day.

The group never returned. Plaintiff sent Benioff a note informing her that he was the 'procuring cause' of the Arness group and asking her to refer them to him should the group contact Benioff directly. ² Some weeks later plaintiff learned that a sale had been made to the Arness group without his participation. He contacted Benioff requesting a commission but was informed by her attorney that he would not share in any commissions paid.

Plaintiff sued Arness (buyer), Benioff (seller), Johnson (salesman), Goodwin (Johnson's superior), and six unnamed defendants as members of the Arness group. The complaint requested declaratory relief, damages for breach of an implied contract and intentional interference with prospective advantage, and an injunction against the escrow holder. All defendants except Benioff demurred, and their demurrer was sustained; as noted, when plaintiff failed to amend the complaint the action was dismissed as to those defendants. The action against Benioff is pending. ³

Any action against either the vendor or the vendee group based on contract or implied contract must fail for want of compliance with the statute of frauds. Civil Code section 1624, subdivision 5, requires a writing subscribed by the party to be charged for 'An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate, . . . or to procure, introduce, or find a purchaser or seller of real estate . . . for compensation or a commission.'

Here it is certain from the face of the complaint that there was no writing authorizing plaintiff to negotiate the purchase or sale of Dark Gulch. Even accepting that the Benioff sign constituted an open listing to area brokers, it is clear that this alone would not suffice to satisfy the statute if for no other reason than that there was no subscription by the purported principal. In short, while there are many types of informal documents and memoranda which will satisfy the requirements of the statute of frauds (see generally, 1 Miller & Starr, Current Law of Cal. Real Estate (1965) pp. 223--225; Seck v. Foulks (1972) 25 Cal.App.3d 556, 102 Cal.Rptr. 170), no case has held that a sign such as here posted would so qualify. Accordingly, plaintiff does not contend there was compliance with the statute.

However, plaintiff included in his complaint a cause of action not dependent on compliance with the statute of frauds: intentional interference with prospective economic advantage. This is a tort theory of recovery rather than contract, and is based on interference with a 'relationship' between parties irrespective of the enforceability of the underlying agreement. ⁴ As stated in the leading California case of Zimmerman v. Bank of America (1961), 191 Cal.App.2d 55, 57, 12 Cal.Rptr. 319, 320: 'The tort of interference with an advantageous relationship, or with a contract, does not, however, disintegrate because it relates to a contract not written Or an advantageous relation not articulated into a contract. The nature of the tort does not vary with the legal strength, or enforceability, of the relation disrupted. The actionable wrong lies in the inducement to break the contract or to sever the relationship, not in the kind of contract or relationship so disrupted, whether it is written or oral, enforceable or not enforceable.' (Italics added.)

This tort, although infrequently invoked, is not new to the law. Interference with contractual relations was recognized as an actionable wrong over a century ago in the celebrated English case of Lumley v. Gye (Q.B.1853) 118 Eng.Rep. 749. With respect to the related tort of interference with prospective advantage, Prosser teaches that 'The real source of the modern law . . . may be said to be the case of Temperton v. Russell (1893), in which the Court of Queen's Bench declared that the principles of liability for interference with contract extended beyond existing contractual relations, and that a similar action would lie for interference with relations which are merely prospective or potential.' (Fn. omitted.) (Prosser, Torts (4th ed.1971) p. 949.) ⁵

The great weight of authority is that the tort of interference with contract is merely a species of the broader tort of interference with prospective economic advantage. (1 Harper & James, Torts (1956) pp. 510--514; 4 Witkin, Summary of Cal. Law (8th ed.1974) Torts, § 386, pp. 2638--2639; Prosser, Torts (4th ed.1971) p. 929; Note, Developments in the Law--Competitive Torts (1964) 77 Harv.L.Rev. 888, 961--962; Bernhardt, Cal. Real Estate Transactions Supp. (Cont.Ed.Bar 1974) § 5.81.) Thus while the elements of the two actions are similar, the existence of a legally binding agreement is not a Sine qua non to the maintenance of a suit based on the more inclusive wrong. ⁶

California courts have on numerous occasions applied these principles in the context of real estate transactions. In Zimmerman, the plaintiff broker entered into an oral agreement with the defendant vendors whereby the broker would procure a purchaser for the defendant's real property. The broker obtained a buyer willing to exchange properties and both parties to the exchange orally agreed to pay the broker a commission. The plaintiff alleged that thereafter employees of defendant bank maliciously induced the parties to breach this oral agreement.

The Court of Appeal began by exploring the 'two conflicting doctrines' at work: 'One doctrine requires certain kinds of contracts to be in writing and finds expression in the statute of frauds. The other doctrine holds that a party who suffers the loss of an advantageous relationship or of a contract should recover his damages from a malicious interloper. Can one so damaged through the loss of an oral contract prevail despite noncompliance with the statute of frauds?' (191 Cal.App.2d at p. 57, 12 Cal.Rptr. at p. 320.) The court concluded that the complaint stated a cause of action notwithstanding the lack of a valid contract, because the essence of the tort 'contemplates, basically, the disruption of a relationship, not necessarily the breach of a contract.' (Ibid.)

Since Zimmerman was decided California courts have continued to apply this rationale in brokerage situations. In Golden v. Anderson (1967), 256 Cal.App.2d 714, 64 Cal.Rptr. 404, the plaintiff broker received an oral, open listing from the vendor. The broker then embarked on an extensive series of negotiations with a potential buyer, a cemetery operator. However, in an effort to deprive the broker of his commission the cemetery had a third party purchase the property directly from the vendor and later retransfer it to the cemetery. When the vendor learned the identity of the true principal, he notified the broker, who brought an action for intentional interference with the 'brokerage agreement.' The court held that a cause of action existed against all individual defendants who knew of the oral agreement, because "(C) ontracts which are voidable by reason of the statute of frauds, formal defects, lack of consideration, lack of mutuality, or even uncertainty of terms, still afford a basis for a...