Realpro, Inc. v. Smith Residual Co.

• Decision Date: 28 February 2012
• Docket Number: No. E052369.,E052369.
• Citation: 203 Cal.App.4th 1215,2012 Daily Journal D.A.R. 2655,12 Cal. Daily Op. Serv. 2371,138 Cal.Rptr.3d 255
• Court: California Court of Appeals Court of Appeals
• Parties: REALPRO, INC., Plaintiff and Appellant, v. SMITH RESIDUAL COMPANY, LLC, et al., Defendants and Respondents.

12 Cal. Daily Op. Serv. 2371

138 Cal.Rptr.3d 255

2012 Daily Journal D.A.R. 2655

203 Cal.App.4th 1215

REALPRO, INC., Plaintiff and Appellant,

v.SMITH RESIDUAL COMPANY, LLC, et al., Defendants and Respondents.

No. E052369.

Court of Appeal, Fourth District, Division 2, California.

Feb. 28, 2012.

Lieberg Oberhansley Strohmeyer & Garn, Temecula, Jon H. Lieberg, and William H. Strohmeyer for Plaintiff and Appellant.

Reid & Hellyer, Riverside, James J. Manning, Jr., Steven G. Lee, and Jenna L. Acuff for Defendants and Respondents.

OPINION

HOLLENHORST, J.

Plaintiff and appellant RealPro Inc. (RealPro) appeals from a judgment in favor of defendants Smith Residual Company, LLC and J & A Gonzales, LLC (hereafter referred to collectively as Sellers), entered after the trial court sustained without leave to amend the demurrer of Sellers to RealPro's complaint to recover a real estate commission. The trial court found that RealPro “failed to allege facts giving rise to the existence of an enforceable written contract for the payment of a real estate commission....” RealPro challenges the trial court's ruling.

I. PROCEDURAL BACKGROUND

A demurrer admits all the truth of all material facts properly pleaded. ( Aubry v. Tri–City Hospital Dist. (1992) 2 Cal.4th 962, 966–967, 9 Cal.Rptr.2d 92, 831 P.2d 317.) Accordingly, we will refer to the allegations in the complaint for the chronology of this matter. (See Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 954, fn. 4, 102 Cal.Rptr.3d 343.)

RealPro is a real estate broker conducting business under the fictitious business name of Landpro Network Realty. Sellers own 46.8 acres of vacant land in Riverside County (the Property). On or about September 21, 2005, Sellers retained the services of MGR Services, Inc. (MGR), a real estate broker, to act as their exclusive agent for the sale of the Property. Sellers entered into a “Standard Owner–Agency Agreement for Sale or Lease of Real Property” (the Listing Agreement) with MGR. The Listing Agreement was for a term from September 21, 2005, to April 1, 2006. It set forth the following sale price and terms: “ ‘$17,000,000 cash or such other price and terms acceptable to [Sellers], and other additional standard terms reasonably similar to those contained in the “STANDARD OFFER AGREEMENT AND ESCROW INSTRUCTIONS FOR THE PURCHASE OF REAL ESTATE,” published by the AIR Commercial Real Estate Association (‘AIR’) or f[o]r such other price and terms agreeable to [Sellers].' ” The Listing Agreement authorized MGR to list the Property in the appropriate local commercial multiple listing services, including AIR, and “ ‘at [MGR's] election, cooperate with other real estate brokers (collectively “Cooperative Broker”). A Cooperative Broker may, as a third party beneficiary hereof, enforce the terms of this [Listing] Agreement against the [Sellers] or [MGR].’ ”

On or about November 21, 2005, RealPro contacted MGR regarding the Property. The next day, RealPro delivered to MGR a written offer to purchase the Property for all cash at the full listing price of $17,000,000 (Offer). The buyer was “ready, willing, and able to purchase the Property ... on all material terms contained in the Loopnet listing as represented by MGR to be in the Listing Agreement....”

On December 22, 2005, RealPro received an acknowledgement from MGR that it had received the Offer and indicated that the listing price was being increased to $19,500,000 (Counteroffer). Except for the increased price, Sellers indicated that the terms of buyer's offer to purchase were acceptable. Both MGR and Sellers confirmed in writing the brokerage fee of 4 percent split 50/50 between RealPro and MGR. On March 16, 2006, RealPro, as third party beneficiary of the Listing Agreement, demanded its 2 percent brokerage fee, along with copies of the Listing Agreement and amendments.

When Sellers refused to pay the brokerage fee to RealPro, it filed a complaint on November 20, 2009, alleging breach of contract and breach of implied covenant of good faith and fair dealing. Although a copy of the Listing Agreement was attached to the complaint, RealPro failed to attach a copy of the Offer or Counteroffer. Sellers demurred to the complaint, and RealPro filed a first amended complaint (FAC), which alleged (1) declaratory relief, (2) breach of contract, and (3) breach of the implied covenant of good faith and fair dealing. Again, RealPro failed to attach a copy of the Offer or Counteroffer.

Sellers demurred to the FAC on the grounds that (1) declaratory relief “operates prospectively, and not for the redress of past wrongs,” (2) RealPro failed to provide the Offer and Counteroffer, which contradict the allegations in the FAC ¹; (3) conditions precedent (i.e., the listing price is “ ‘$17,000,000 cash or for such other price and terms acceptable to the owner,’ ” and that escrow must close prior to payment of any commission) were not met; and (4) there was no written agreement between MGR and RealPro.

In opposition, RealPro argued that (1) the Offer and Counteroffer are “extraneous documents” that may not be considered by the court; (2) no contract between MGR and RealPro was necessary because RealPro was the third party beneficiary of the Listing Agreement; (3) use of the word “or” means that RealPro could either procure an offer for $17 million or an offer for such other terms as the Sellers found acceptable; and (4) there was no requirement for escrow to close in order for RealPro to earn its commission.

Hearing on the demurrer was held on July 14, 2010. Following argument from counsel, the court took the matter under submission. On August 4, the court entered its order sustaining the demurrer without leave to amend. The court found that RealPro had “failed to allege facts giving rise to the existence of an enforceable written contract for the payment of a real estate commission....” Judgment was entered on September 30, 2010, and this appeal followed.

II. STANDARD OF REVIEW

“ ‘On review of an order sustaining a demurrer without leave to amend, our standard of review is de novo, “i.e., we exercise our independent judgment about whether the complaint states a cause of action as a matter of law.” [Citation.]’ [Citation.] ‘ “ ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.] We also consider matters which may be judicially noticed.’ [Citation.]” ' [Citation.] ‘We affirm if any ground offered in support of the demurrer was well taken but find error if the plaintiff has stated a cause of action under any possible legal theory. [Citations.] We are not bound by the trial court's stated reasons, if any, supporting its ruling; we review the ruling, not its rationale. [Citation.]’ [Citation.]” ( Walgreen Co. v. City and County of San Francisco (2010) 185 Cal.App.4th 424, 433, 110 Cal.Rptr.3d 498.)

III. DISCUSSION

In sustaining the demurrer without leave to amend, the trial court focused on specific language in the Listing Agreement, which defined the nature of the transaction concerning the Property for which MGR was employed, namely, “A sale for the following sale price and terms $17,000,000.00 cash or for such other price and terms acceptable to [Sellers].” In finding that RealPro had not earned a commission upon presenting an offer of $17,000,000 cash, the court stated: “This listing isn't just bringing an offer with numbers....”

In response, RealPro argued that the court was “ignoring plain English of what ‘or’ means,” and argued that if an agent brings in an offer of “17 million cash” then a commission is due. The court replied: “Let's say we were still in the very good market ... and there was a listing agreement of 17 million or other terms, and there were bidding wars. So you're telling me that the listing agent, if they brought in a full price offer and then it bid up from there, everybody would be entitled to a commission?” RealPro answered the question in the negative, stating that the first broker to procure “a full price offer on the terms and conditions, 17 million cash,” from a ready, willing and able buyer, is the broker entitled to the commission. It argued that whether or not Sellers countered the offer, RealPro was entitled to be paid its commission. Sellers argued that the $17,000,000 price was the listing price, not the “full price.” Agreeing with Sellers, the trial court found that the complaint could not state a claim for a commission earned.

On appeal, we conclude that the trial court correctly sustained Sellers' demurrer without leave to amend, because the FAC's allegations and relevant agreements establish as a matter of law that there was no enforceable written contract entitling RealPro to a commission.

Regardless of all the arguments raised by both parties, the outcome of this appeal is solely dependent upon the interpretation of the language in the Listing Agreement. Thus, we begin with an analysis of the conditions upon which RealPro was entitled to earn a commission. RealPro claims that by procuring a “ready, willing and able” buyer to purchase the Property for the list price of $17 million, it had earned its commission. As Sellers point out, RealPro “sees the $17 million in cash as the only...