Phillippe v. Shapell Industries, Inc.

• Citation: 207 Cal.Rptr. 483,161 Cal.App.3d 293
• Parties: David E. PHILLIPPE, doing business under the firm name and style of Management Trend Company, Plaintiff, Respondent and Cross-Appellant, v. SHAPELL INDUSTRIES, INC., a corporation, Defendant, Appellant and Cross-Respondent. Civ. 70078.
• Decision Date: 26 October 1984
• Court: California Court of Appeals

Page 483

207 Cal.Rptr. 483

161 Cal.App.3d 293

David E. PHILLIPPE, doing business under the firm name and style of Management Trend Company, Plaintiff, Respondent and Cross-Appellant, v. SHAPELL INDUSTRIES, INC., a corporation, Defendant, Appellant and Cross-Respondent.

Civ. 70078.

Court of Appeal, Second District, Division 7, California.

Oct. 26, 1984.

Hearing Granted Jan. 31, 1985.

Cox, Castle & Nicholson, and Kenneth B. Bley, Los Angeles, for defendant, appellant and cross-respondent.

Fleischman & Rigdon, and Robert N. Rigdon, Los Angeles, for plaintiff, respondent and cross-appellant.

THOMPSON, Associate Justice.

Defendant, Shapell Industries, Inc., (hereafter Shapell), appeals from a judgment of $125,000 in favor of plaintiff, David E. Phillippe, doing business as Management Trend Company (hereafter Phillippe), entered after a jury verdict which found Shapell liable for breach of an agreement to pay a real estate broker's commission, one of three theories of recovery presented. The other two theories, which were rejected by the jury in special findings, were (1) an oral agreement to pay a finder's fee, and (2) an oral agreement to share a real estate broker's commission.

Shapell contends on appeal that: (1) enforcement of the oral agreement between Shapell and Phillippe is barred by the statute of frauds in that, (a) Phillippe acted as a real estate broker in the instant case to assist in the purchase of the Great Lakes property, (b) the statute of frauds applies in the instant case even though Shapell was a buyer rather than a seller, and was also a licensed real estate broker, and (c) the written correspondence between Shapell and Phillippe, taken as a whole, does not establish Phillippe's employment to act as a real estate broker in connection with the Great Lakes property; (2) under the circumstances of this case, Shapell is not estopped from asserting the statute of frauds; and (3) the trial court erroneously instructed the jury on estoppel. ¹

Phillippe cross-appeals from the judgment, claiming that the jury failed to award him all the damages to which he is entitled. ²

We have concluded that the contentions of Shapell have merit and will accordingly reverse the judgment with directions.

Statement of the Facts

Viewed in a light most favorable to Phillippe, who prevailed, the evidence at trial established the following:

Shapell is a corporation engaged in the construction of housing tracts and is constantly in the market to buy land for such construction. Shapell is also licensed as a real estate broker.

In early 1972, Shapell first came in contact with Phillippe in its efforts to acquire 78 acres of land located in the San Diego area and owned by a limited partnership in which Phillippe had an interest. Tom Sifferman of Shapell dealt with Phillippe who was acting as the real estate broker for the limited partnership in the sale of this land. Later, Ron Prince, an employee in the land acquisition department of Shapell, helped Sifferman in connection with the purchase of this land from the limited partnership.

Escrow on this purchase closed in December 1972. Shapell paid Phillippe $153,100 for his services.

In January 1973, Shapell through Prince orally employed Phillippe to assist it in locating and purchasing property on the Palos Verdes Peninsula. At the time, Phillippe explained to Prince that he had no listings on the Peninsula and that, if he were to accept the employment, his commission was to be paid by Shapell as buyer. Prince orally promised Phillippe that Shapell would pay him a commission of 6 percent of the total cost of any land submitted by Phillippe and purchased by Shapell, and that his commission would be included in any written offer made by Shapell.

In April 1973, Phillippe wrote to Prince about a parcel of land owned by Filiorum Company. He informed Prince that he was "waiting for a price quote on the property" and suggested that Prince take a look at the property. In connection with his commission, Phillippe stated: "We present the property to Shapell with the understanding that Buyer will pay our firm a commission, which, when added to the net price of the land, will equal 6% of the total consideration." Thereafter, Shapell submitted to Phillippe a written offer in letter form dated May 4, 1973, to purchase the Filiorum property and stated in connection with Phillippe's commission that "Buyer agrees to pay the Management Trend Company a commission when added to the net price of the land will equal 6% of the total consideration. This commission should be paid at the close of escrow." However, the sale fell through because of geology problems and no commission was paid to Phillippe.

On August 9, 1973, Phillippe again wrote to Prince informing him about the location of four properties on the Palos Verdes Peninsula and their owners, including a 94-acre parcel owned by Great Lakes Properties (hereafter Great Lakes property). He also stated in this letter that "[i]n the event properties are purchased from any of the above companies, these properties are presented with the understanding that Buyer agrees to pay Management Trend Company, or assignee, a commission which when added to the net purchase price of the land will equal 6% of the total consideration to be paid at close of escrow." However, Shapell did not go forward with the purchase of the Great Lakes property at that time because the zoning on the property was too restrictive for Shapell's construction purposes.

However, throughout the late 1973 and early 1974 period, Phillippe continued in his efforts to structure a deal between Shapell and the owner of Great Lakes property. He continued to negotiate with M.J. Steponovich, the owner of the Great Lakes property, by suggesting prices which would be acceptable to Shapell and by pointing out the strength of Shapell to close a deal. He also wrote several letters to Shapell, the last of which was on April 30, 1974, and addressed to Joe Aaron, Vice-President of Shapell. In this April letter, Phillippe reviewed his efforts to assist Shapell in its attempt to locate and purchase land on the Peninsula, including the Great Lakes property, and, in connection with his commission, stated: "The commission arrangement on these properties between our firm and Shapell is spelled out in the August 9, 1973 letter." Also, in February 1974, the Great Lakes property was rezoned from one dwelling unit per two acres to two dwelling units per acre.

Nothing more happened until the end of 1975, when Aaron telephoned Steponovich and learned that 63 acres of the Great Lakes property were available. After some discussions and negotiations, in March 1976, Shapell signed a purchase and sale agreement for 63 of the 94 acres. This sale closed on August 27, 1976, for $2,718,750.

When Phillippe learned that Shapell had agreed to purchase 63 acres of the Great Lakes property, he wrote to Aaron on June 9, 1976, requesting his commission. In this letter, he reminded Aaron that he had agreed to work for Shapell "with the understanding that our firm was working The case went to the jury on three theories of recovery. First, Phillippe sought recovery of a 6% commission on the basis of either a written agreement of employment or memorandum thereof sufficient to satisfy the statute of frauds or an estoppel to bar Shapell from asserting the statute of frauds. Second, Phillippe sought to recover a 6% finder's fee based on an alleged agreement. Third, Phillippe sought to recover a 6% commission based on an alleged agreement between brokers to share a commission.

                for and represented Shapell, the buyer, as brokers and would be paid a brokerage commission from buyer of 6% of the total consideration paid for the acquired property."   He also reviewed the efforts his firm had made.  Thereafter, on June 16, 1976, Aaron responded by letter in which he informed Phillippe that Shapell would not pay him a commission.  Nor did Shapell include Phillippe's commission in its written offer to purchase the 63 acres
                

The jury by special verdict found in favor of Phillippe on the first theory of recovery, but rejected the other two theories of recovery and awarded him $125,000.

Thereafter, the trial court denied Shapell's motion for a new trial and these appeals followed.

DISCUSSION

I ENFORCEMENT OF THE ORAL AGREEMENT BETWEEN SHAPELL AND PHILLIPPE IS BARRED BY THE STATUTE OF FRAUDS

An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a longer period than one year, 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, is invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged. (Civ.Code, § 1624, subd. 5; see, e.g., Pac. etc. Dev. Corp. v. Western Pac. R.R. Co. (1956) 47 Cal.2d 62, 301 P.2d 825.)

With this principle in mind, we will now consider Shapell's first contention that its agreement to pay Phillippe a commission is barred by the statute of frauds.

A. Phillippe Acted as a Real Estate Broker in the Instant Case to Assist in the Purchase of the Great Lakes Property

Phillippe argues that Shapell did not employ him to negotiate or to assist in effecting a purchase of real property for a commission. Rather, he argues, he was retained by Shapell essentially as a professional consultant in the field of subdivision land acquisition to locate a suitable site on the Palos Verdes Peninsula for residential subdivision and thus he can recover even on an oral agreement, citing Owen v. National Container Corp. of Cal. (1952) 115 Cal.App.2d 21, 251 P.2d 765.

However, Phillippe's reliance on Owen is misplaced. There the court held that a broker could recover under an oral agreement or in quantum meruit for services, such as making...