Westside Estate Agency, Inc. v. Randall

• Decision Date: 01 December 2016
• Docket Number: B268455
• Citation: 6 Cal.App.5th 317,211 Cal.Rptr.3d 119
• Court: California Court of Appeals Court of Appeals
• Parties: WESTSIDE ESTATE AGENCY, INC. Plaintiff and Appellant, v. James RANDALL et al., Defendants and Respondents.

6 Cal.App.5th 317

211 Cal.Rptr.3d 119

WESTSIDE ESTATE AGENCY, INC. Plaintiff and Appellant,

v.James RANDALL et al., Defendants and Respondents.

B268455

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

Filed December 1, 2016

Freedman + Taitelman, Michael A. Taitelman and Bradley H. Kreshek, Los Angeles, for Plaintiff and Appellant.

Alston & Bird, James R. Evans, Jr. and Cassandra E. Hooks, Los Angeles, for Defendants and Respondents.

HOFFSTADT, J.

We are all familiar with the phrase, "caveat emptor": Buyer beware. This case deals with its less renowned cousin, "caveat sectorem": Broker beware. California's statute of frauds declares invalid any "agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate" unless that agreement is in writing and signed by the broker's client. (Civ. Code, § 1624, subd. (a)(4).)¹ This is a nearly absolute rule, with only a few very narrow exceptions. The broker in this case missed out on a $925,000 commission because he agreed to help a friend buy a $45 million Bel Air estate, but the deal was ultimately closed by another broker on different terms. Critically, the first broker's agreement was not in writing. The first broker sued his friend/client for the commission, and the trial court dismissed the lawsuit for noncompliance with the statute of frauds. After examining in detail the statute of frauds and its exceptions, we conclude the trial court was right and affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

We draw the facts set forth below from the allegations in the operative, first amended complaint (FAC), which we assume to be true for purposes of evaluating the demurrer on appeal before us now. (Coker v. JPMorgan Chase Bank, N.A. (2016) 62 Cal.4th 667, 671, 197 Cal.Rptr.3d 131, 364 P.3d 176.)

In early 2014, defendants James and Eleanor Randall (the Randalls) told their long-time friend and business acquaintance Stephen Shapiro (Shapiro) that they were looking to buy a home in Los Angeles. Shapiro was a licensed real estate broker and the principal of plaintiff Westside Estate Agency, Inc. (Westside). Shapiro agreed to represent them, but their agreement was never put in writing.

In October 2014, Shapiro identified a potential property for the Randalls to buy—namely, a $65 million estate in the Bel Air neighborhood of Los Angeles. The listing for the property included an offer by the seller's broker "to pay" "to the buyer's broker" "a cooperating broker's fee" of 2 percent of the sale price. The Randalls asked Shapiro to apply any broker's fee Westside would receive and let them use it toward the purchase price; Shapiro refused. On October 24, 2014, Shapiro nevertheless made a $42 million offer on the property on behalf of the Randalls. Over the next month, Shapiro and the seller volleyed offers and counteroffers back and forth. On November 24, 2014, Shapiro presented a new written offer to buy the estate for $45 million. The seller indicated that it was "agreeable" to the offer, but only if the Randalls agreed to (1) an "as is" clause, and (2) a transfer of warranty clause. The Randalls reached out to their attorney, Richard Meaglia (Meaglia), for his advice. In the meantime, Shapiro "worked with [the] Seller's Broker through the night to finalize the terms of" an agreement. However, the following day, James Randall e-mailed Shapiro and instructed him to "cancel [the] offer" because they were "turned off on [the property]."²

Three months later, in February 2015, the Randalls made a $47 million offer on the property with Meaglia acting as their broker. Escrow closed a month later for a final purchase price of $46.25 million, $1.25 million more than the Randalls' final November 2014 offer. Meaglia applied the $925,000 cooperating broker's fee against the purchase price.

II. Procedural History

In April 2015, Westside sued the Randalls and Meaglia (collectively, defendants). In the FAC, Westside sued the Randalls for breach of an implied contract and sued Meaglia for intentional interference with an implied contract.³ Westside prayed for compensatory damages of $925,000, the same amount as the broker's fee Meaglia eventually collected.

Defendants demurred to the FAC.

The trial court sustained the demurrer as to both counts, without leave to amend as to the Randalls and with leave to amend as to Meaglia. The court reasoned that Westside was trying to collect a broker's commission from the Randalls without any written agreement evidencing the broker-client relationship, that this claim fell "squarely within" the statute of frauds, fell outside any of the exceptions to the statute, and that any unwritten agreement was consequently unenforceable as a matter of law. Given the absence of any enforceable contract, the court went on to rule, Meaglia could not have interfered with a valid contract; however, the court opined that Westside "may ... be able to amend to assert a viable tort cause of action" against Meaglia.

Westside subsequently dismissed its case against Meaglia, and the trial court entered a final judgment dismissing the FAC against all defendants.

Westside filed this timely appeal.

DISCUSSION

Westside challenges the trial court's dismissal of its breach-of-implied-contract claim and its denial of leave to amend. In assessing whether a demurrer was properly sustained, we independently ask " ‘whether the [operative] complaint states facts sufficient to constitute a cause of action.’ " (Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100, 171 Cal.Rptr.3d 189, 324 P.3d 50, quoting City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865, 62 Cal.Rptr.3d 614, 161 P.3d 1168 ; see also Lee v. Hanley (2015) 61 Cal.4th 1225, 1230, 191 Cal.Rptr.3d 536, 354 P.3d 334 [de novo review].) In answering this question, we " ‘assume the truth of the complaint's properly pleaded or implied factual allegations.’ " (Loeffler , at p. 1100, 171 Cal.Rptr.3d 189, 324 P.3d 50, quoting Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569.) A demurrer may be sustained when an alleged contract falls "within the statute of frauds and does not comply with its requirements." (Parker v. Solomon (1959) 171 Cal.App.2d 125, 136, 340 P.2d 353 ; Deeter v. Angus (1986) 179 Cal.App.3d 241, 247–248, 224 Cal.Rptr. 801.) In assessing whether leave to amend was properly denied, we review for an abuse of discretion by asking " ‘whether there is a reasonable possibility that the defect can be cured by amendment.’ " (Loeffler , at p. 1100, 171 Cal.Rptr.3d 189, 324 P.3d 50.)

I. Sustaining the Demurrer

The statute of frauds declares several types of agreements "invalid" unless "they, or some note or memorandum thereof, are in writing and subscribed by the party to be charged or by the party's agent." (§ 1624, subd. (a).) As pertinent to this case, the statute applies to "[a]n 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." (Id. subd. (a)(4).) A court applying the statute of frauds is accordingly presented with two questions: (1) does the statute apply to the contract at issue?; and if so, (2) are the statute's requirements of a properly subscribed writing met?

A. Does the statute of frauds apply?

The portion of the statute of frauds applicable here can apply to licensed brokers and anyone else who aids and assists them or who otherwise engages in acts covered by the statute. (§ 1624, subd. (a)(4) [reaching "any other person"]; Duckworth v. Schumacher (1933) 135 Cal.App. 661, 666, 27 P.2d 919 [reaching those who "aid and assist in the purchase or sale"]; Marks v. Walter G. McCarty Corp. (1949) 33 Cal.2d 814, 819–820, 205 P.2d 1025 (Marks ) [noting how statute reaches persons who are not licensed brokers].) However, the statute only reaches agreements for "compensation or a commission" owing to the "purchase or [sale of] real estate, ... or ... procur [ing], introduc[ing], or find[ing] a purchaser or seller of real estate." (§ 1624, subd. (a)(4).) It does not reach contracts employing persons, even brokers, merely to provide information about real estate or to search for suitable locations to purchase, except when those functions are "incidental" to one of the purposes otherwise covered by the statute of frauds. (Owen v. National Container Corp. (1952) 115 Cal.App.2d 21, 25–26, 251 P.2d 765 (Owen ) [statute of frauds does not apply to agreements for conducting surveys, furnishing plans or "merely giv[ing] ... information as to available factory sites"]; see generally Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1256, 241 Cal.Rptr. 22, 743 P.2d 1279 (Phillippe ) [other services that are "incidental to [a broker's] efforts to bring about a sale of ... property" are covered by the statute of frauds]; see generally id. at p. 1255, 241 Cal.Rptr. 22, 743 P.2d 1279 ["[a] licensed broker may be able under appropriate circumstances to recover under an oral agreement or in quantum meruit for certain services other than the purchase, sale, or leasing of property"].)

Once the statute of frauds applies, its bar against relief is absolute and applies no matter how the unhappy broker styles his or her claim to recover compensation or a commission. (Phillippe , supra , 43 Cal.3d at pp. 1263–1264, 241 Cal.Rptr. 22, 743 P.2d 1279 [generally no recovery on a theory of quantum meruit, unjust enrichment or equitable estoppel]; Beazell v. Schrader (1963) 59 Cal.2d 577, 582, 30 Cal.Rptr. 534, 381 P.2d 390 (Beazell ) [same, as to quantum meruit].) Were the bar not absolute, the bar would be easily evaded, and the "primary purpose" for making such contracts subject to the statute of frauds—to serve as a "consumer protection" mechanism "to protect real estate sellers and purchasers from the assertion of false claims by brokers for commissions"—would go unserved. (Phillippe , at pp....