Grant v. Marinell

• Decision Date: 25 November 1980
• Citation: 112 Cal.App.3d 617,169 Cal.Rptr. 414
• Court: California Court of Appeals Court of Appeals
• Parties: Henry J. GRANT, Plaintiff and Appellant, v. Larry R. MARINELL, Defendant and Respondent. Civ. 58390.

Page 414

169 Cal.Rptr. 414

112 Cal.App.3d 617

Henry J. GRANT, Plaintiff and Appellant, v. Larry R. MARINELL, Defendant and Respondent.

Civ. 58390.

Court of Appeal, Second District, Division 5, California.

Nov. 25, 1980.

Rodney T. Lewin, Beverly Hills, for plaintiff and appellant.

Alan M. Levenstein, Beverly Hills, for defendant and respondent.

KAUS, Presiding Judge.

Plaintiff appeals from an order dismissing his action after a demurrer to his first amended complaint was sustained without leave to amend. He contends that the trial court erred in holding that his complaint for breach of an oral contract was barred by the statute of frauds.

The facts alleged are these: In July, 1975, plaintiff entered into an oral agreement with defendant, a licensed real estate broker, under the terms of which plaintiff was to introduce defendant to parties interested in securing the services of a real estate broker. It was agreed that if defendant's employment as a broker should result from any such introductions, defendant would pay plaintiff, as a finder's fee, ten percent of any income defendant received. Plaintiff introduced defendant to two prospects and claimed that the introductions resulted in income to defendant totaling $63,800. When defendant refused to pay the promised finder's fee, plaintiff sued to enforce the alleged oral agreement. Defendant demurred on the ground that plaintiff's complaint was barred by the statute of frauds (Civ.Code, § 1624, subd. 5.) ¹ After affording plaintiff a chance to redraft his complaint, the trial court sustained defendant's demurrer without leave to amend.

On this appeal plaintiff contends that Civil Code section 1624 subdivision 5 does not apply to a simple finder's fee agreement such as was alleged in this case. Plaintiff asserts that the section only covers oral contracts for services within the ambit of a licensed real estate broker's regular duties. As plaintiff points out, one need not be a licensed real estate broker to act as a finder. (See Tyrone v. Kelley (1973) 9 Cal.3d 1, 8, 106 Cal.Rptr. 761, 507 P.2d 65.)

We agree with plaintiff that the judgment must be reversed, but base our decision on reasoning slightly different than his: we have concluded that the agreement as alleged did not fall within the purview of Civil Code section 1624, subdivision 5, because no principal, that is to say, no seller or buyer of real estate, was a party thereto.

The law is well settled that section 1624, subdivision 5 does not bar oral contracts between brokers or between brokers and salesmen to cooperate in procuring a sale or purchase of property and to share any commission earned as a result. (Wilson v. Anderson (1962) 208 Cal.App.2d 62, 64, 25 Cal.Rptr. 105; Iusi v. Chase (1959) 169 Cal.App.2d 83, 86, 337 P.2d 79; Holland v. Morgan Peacock Properties (1959) 168 Cal.App.2d 206, 210, 335 P.2d 769.) None of the recent changes to the subdivision have changed this basic rule.

Subdivision 5 then subdivision 6 of section 1624 originally barred an oral "agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation or a commission." (Stats.1937, ch. 316, § 2, pp. 695-696.) The purpose of the section was to protect buyers and sellers of property from unfounded claims by brokers. See Gorham v. Heiman (1891) 90 Cal. 346, 358, 27 P. 289; Goossen v. Adair (1960) 185 Cal.App.2d 810, 819, 8 Cal.Rptr. 855: "There is no doubt that real estate brokers may make valid and enforceable oral contracts for the division of commissions between themselves and that the provisions of Civil Code, section 1624, subdivisions 4 and 5, and Code of Civil Procedure, section 1973, subdivision 5, requiring agreements authorizing or employing an agent or broker to sell real estate to be reduced to writing, are for the protection of real estate owners against unfounded claims of brokers; and were never intended to be applied to contracts between brokers agreeing to share commissions...."

Before 1963, the so-called oral "finder's agreement," that is an agreement merely to introduce a seller of real estate to a prospective purchaser or a purchaser to a prospective buyer, was held not to be within the statute of frauds, whether such contract was made by a real estate broker or agent or by an unlicensed person. (See Heyn v. Philips (1869) 37 Cal. 529, 531; Palmer v. Wahler (1955) 133 Cal.App.2d 705, 710, 285 P.2d 8.)

In 1963, however, the Legislature amended subdivision 5 to add, inter alia, the italicized language: "An agreement authorizing or employing an agent or broker to purchase or sell real estate, ... or to procure, introduce, or find a purchaser or seller of real estate or a lessee or lessor of real estate where such lease is for a longer period than one year, for compensation or a commission." (Stats.1963, ch. 814, § 1 p. 1843.)

If by this amendment the Legislature intended all finder's fee agreements to come within the ambit of the statute of frauds, it failed, as was predicted in the State Bar...