Zimmerman v. Bank of America Nat. Trust and Savings Ass'n

Decision Date10 April 1961
Citation12 Cal.Rptr. 319,191 Cal.App.2d 55
PartiesAllan ZIMMERMAN, doing business under the fictitious name of Zimmerman Realty, Plaintiff and Appellant, v. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a corporation, Defendant and Respondent. Civ. 19258.
CourtCalifornia Court of Appeals Court of Appeals

David B. Birenbaum, David M. Glickman, San Francisco, for appellant.

Samuel B. Stewart, Robert T. Shinkle, Theodore Sachsman, San Francisco, for respondent.

TOBRINER, Justice.

We face the question here whether a respondent, who allegedly maliciously induced the breach of appellant's oral contract, may successfully invoke the defense that the statute of frauds renders appellant's contract unenforceable and as a consequence relieves respondent of any liability. As we shall point out, we do not believe respondent may properly invoke such a defense.

Appellant's complaint alleges that he entered into one oral contract with the defendants Tony and Hazel Gaetani and another oral contract with defendants Israel and Tetiana Smiliansky (not involved as respondents in this appeal), 'whereby said defendants agreed to employ * * * [appellant] as a real estate broker to obtain and procure a purchaser for said defendants' real property' for a commission based upon fixed percentages of the respective selling prices of the properties. On or about August 28, 1958, through appellant's efforts, the Gaetanis and Smilianskys agreed to exchange properties and to pay appellant a brokerage commission in the sum of $3,060.

According to the complaint, respondent, then, through its agents and employees acting within the scope of their employment, 'stated to defendant Israel Smiliansky that there was a way to save money * * *, that the way in mind was to deprive * * * [appellant] * * * of his rightful and agreed upon commission'; that respondent's employee arranged a meeting between the defendants, who 'were unacquainted with each other' prior to the meeting, and advised them to pay appellant only $1,000 rather than $3,060; that respondent 'thereby knowingly, wilfully, intentionally, deliberately and maliciously induced defendants * * * to breach their contract with * * * [appellant]'; that defendants, 'relying on and as a direct and proximate result of the above-mentioned inducements, did in fact breach their contract * * * thereby depriving * * * [appellant] of his rightful gain and profit * * *.' Appellant's complaint likewise set out causes of action against the Smilianskys and Gaetanis for conspiring with respondent to accomplish the foregoing objectives, but appellant did not join respondent as a defendant in those counts.

To the first count of this complaint, respondent demurred, alleging that the stated facts did not constitute a cause of action. The trial court sustained the demurrer without leave to amend. The court thereafter rendered judgment that appellant take nothing from respondent. Appellant has appealed from the judgment.

We must explore two conflicting doctrines and then determine which prevails here. 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?

Since the instant agreement falls within the statute, it constitutes, without doubt, a voidable contract. Section 1624 of the Civil Code provides: 'The following contracts are invalid, unless the same, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or by his agent: * * * 5. An agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation or a commission * * *.' The courts have held that the word 'invalid' as used in the statute means voidable. Buckley v. Savage, 1960, 184 Cal.App.2d 18, 7 Cal.Rptr. 328; Peyton v. Cly, 1960, 184 Cal.App.2d 193, 7 Cal.Rptr. 504. Once a defendant raises the defense of the statute against the contract, the broker cannot recover upon it. Lane v. Davis, 1959, 172 Cal.App.2d 302, 306, 342 P.2d 267; Augustine v. Trucco, 1954, 124 Cal.App.2d 229, 237-238, 268 P.2d 780; Colburn v. Sessin, 1949, 94 Cal.App.2d 4, 6, 209 P.2d 989.

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.

The history of the tort discloses its essence. It contemplates, basically, a disruption of a relationship, not necessarily the breach of a contract. One of the roots of the action reaches back to the penalty provided in the Ordinance of Labourers, (23 Edw. III (1349), st. 1) for receiving and retaining any laborer who had run away from his employer. Concomitant with the ordinance and the ensuing statute there developed a statutory action for enticing or harboring a servant of another, but such action did not depend upon a binding agreement for service between the master and the laborer. (Sayre, Inducing Breach of Contract (1923), 36 Harv.L.Rev., pp. 663, 666.) Without tracing the history of the doctrine, and omitting discussion of its flowering in Lumley v. Gye (1853), 2 El. & Bl. 216, 118 Eng.Rep. 749, we emphasize that the illegal interference went to a breach of the advantageous relationship; the presence of the contract was not conditional to the suit. We quote Prosser, Law of Torts: 'The subsequent development of the law has extended the principle to interference with advantageous economic relations even where they have not been cemented by contract; and the liability for inducing breach of contract now is regarded as merely one instance of protection against such unjustified interference.' (2nd Ed. (1955), p. 725; footnotes omitted.)

If, then, the action did not originally require the relationship to be held together by the mortar of a contract at all, it surely does not currently demand the stronger mixture of an enforceable contract. Again we quote the learned Prosser: 'Accordingly, it usually is held that contracts 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 tort action when the defendant interferes with their performance.' (P. 726; footnotes omitted.)

It is, therefore, not surprising that many cases, embracing early as well as later pronouncements, hold that the action does not fail because the subject contract is not enforceable under the statute of frauds.

The first of these cases which we have discovered is Rice et al. v. Manley, 1876, 66 N.Y. 82. There plaintiffs 'made an agreement' with a seller to purchase 'a large quantity of cheese,' but the agreement was not in 'compliance with the statute of frauds so as to make the agreement binding upon either party * * *.' At page 83. Defendant fraudulently induced the seller to 'deliver the cheese to him' (at page 84) instead of to plaintiff. In holding plaintiff could recover for the inducement of the breach of the contract in spite of its nonenforceability, the court compares the case to an analogous situation: 'Suppose A made a parol contract with B for the purchase of land, and B is ready and willing to convey, but is prevented from so doing by the fraudulent representations of C as to A, by which B is deceived and induced to convey to C; in such case, although A could not have compelled B to give him the conveyance, it would be a reproach to the law to hold that C would not be liable to A for the damage caused by the fraud.' At page 85.

In the succeeding years there have been a series of decisions reaching the same result. Thus in Vaught v. Jonathan L. Petyjohn & Co., 1919, 104 Kan. 174, 178 P. 623, the court sustained an action by real estate brokers both to recover commissions upon an oral contract to exchange real property, as well as a demand by the brokers that defendants discharge a pretended mortgage which was urged in order to block the transaction. The court said: 'A third party cannot make the statute of frauds available as an excuse for his wrongful conduct which interferes with and prevents the consummation of a transaction between other persons.' 178 P. at page 624. Ringler v. Ruby, 1926, 117 Or. 455, 244 P. 509, 46 A.L.R. 245, although...

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