Superior Court of California 

County of Los Angeles – West District  

Beverly Hills Courthouse / Department 205 

 

 

MOVING PARTY: Cross-Defendants The Brooks Myers, LLC, Maguire Properties, LLC, and Steven A. Brooks and Thomas J. Meyers, as trustees of the Brooks Myers Family Trust dated August 29, 2014 

 

RESPONDING PARTY: Plaintiffs Howard A. Miller and Linda S. Miller as trustees of the Howard A. Miller and Linda S. Miller Revocable Trust dated December 29, 2004 and Institutional Property Resources Inc. 

 

BACKGROUND 

This action arises from a dispute over the sale of a property located at 944 Tiverton Ave., Los Angeles (the “Property”).  The Property consists of 28 units in Westwood, primarily occupied by UCLA students.  The Property has been managed for decades by Cross-Complainants Howard Miller, his wife Linda Miller (collectively “the Millers”) through their property management company, Institutional Property Resources, Inc. (“IPR”).   

The Millers and/or their trusts (along with Howard’s brothers, Leonard and Michael) collectively owned a 50% undivided interest in the Property as tenants in common (“TIC”).  That interest was then conveyed to the Miller Tiverton Company, LLC (“MTC”) which is managed by Howard. 

The other TIC interests at the time of the sale were owned 25% by Cross-Defendant The Brooks Meyers LLC (“Brooks Myers”) and 25% by Cross-Defendant Maguire Properties LLC (“Maguire Properties”) (collectively, “Cross-Defendants”).    

As relevant to this demurrer, Cross-Complainants allege Cross-Defendants signed a written Residential Income Purchase Agreement and Joint Escrow Instructions (“RIPA”) wherein IPR was appointed as Cross-Defendants’ broker.  (Cross-Compl. ¶50.)  Cross-Defendants purportedly promised that IPR would receive a percentage of the gross sale proceeds of the Property.  (Cross-Compl. ¶43.)  IPR acted as the broker during the sale of the Property, and was purportedly instrumental in closing the sale of the Property.  (Cross-Compl. ¶44.)  Cross Defendants, however, refused to pay IPR the customary 3% of proceeds.  (Cross-Compl. ¶47.)   

The operative cross-complaint alleges claims for (1) breach of fiduciary duty, (2) quantum meruit, (3) promissory estoppel, (4) breach of contract, (5) breach of the implied covenant of good faith and fair dealing, and (6) unjust enrichment.         

This hearing is on Cross-Defendants’ demurrer to the third to sixth causes of action on grounds that the claims are barred by the statute of frauds which requires a broker’s commission agreement to be in writing.   

LEGAL STANDARD 

“[A] demurrer tests the legal sufficiency of the allegations in a complaint.” (Lewis v. Safeway, Inc. (2015) 235 Cal.App.4th 385, 388.)  A demurrer can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable.  (See Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994 (in ruling on a demurrer, a court may not consider declarations, matters not subject to judicial notice, or documents not accepted for the truth of their contents).)  For purposes of ruling on a demurrer, all facts pleaded in a complaint are assumed to be true, but the reviewing court does not assume the truth of conclusions of law. (Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 967.)  

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349 (court shall not “sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment”); Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1037 (“A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment.”).)  The burden is on the complainant to show the Court that a pleading can be amended successfully. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) 

DISCUSSION 

Breach of Contract 

Cross-Defendants argue that Cross-Complainants’ claim for breach of contract is barred by the statute of frauds.  The Court disagrees. 

Civ. Code §1624 requires a writing for an “agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate … or find a purchaser or seller of real estate … for compensation or a commission.”  The Cross-Complaint alleges Cross-Defendants signed a written agreement appointing IPR as a broker.  (Cross-Compl. ¶50.)  That is sufficient to satisfy the statute of frauds. 

Whether a writing is sufficient is a question of law.  (Sterling v. Taylor¿(2007) 40 Cal.4th 757, 772.)  To satisfy the statute of frauds, the writing must (1) state the employment of the broker and (2) be signed by the principal or its agent.  (Westside Estate Agency, Inc. v. Randall (2016) 6 Cal.App.5th 317, 330.)  The Cross-Complaint alleges both requirements.  The amount of compensation and a specific promise to pay the same need not be included in the writing (Id.; Beazell v. Schrader (1963) 59 Cal.2d 577, 580-581;¿Barcelon v. Cortese (1968) 263 Cal.App.2d 517, 526), and may be supplied by oral evidence or inferred from custom (Westside Estate, 6 Cal.App.5th at 330; Friddle v. Epstein (1993) 16 Cal.App.4th 1649, 1656-1657;¿Lathrop v. Gauger (1954) 127 Cal.App.2d 754, 765).¿ 

Cross-Defendants’ reliance on Philippe v. Shapell Indus. (1987) 43 Cal.3d 1247 is misplaced.  There, there was no evidence of a writing signed by the defendant showing the fact of plaintiff’s employment as a broker, and the appellate court concluded plaintiff’s claim of an oral broker agreement was barred by Cal. Civ. Code § 1624(d).  (Id. at 1258-59.)  The case did not address the issue here, where there is an alleged written agreement appointing the broker that is silent on the amount of commissions.   

Cross-Defendants’ citation to Pacific Southwestern Development v. Wester Pacific Railroad Company (1956) 47 Cal.2d 62 is similarly unavailing.  There, there was no writing showing the plaintiff’s employment as the broker.  (Id. at 69.)  Moreover, the Court went on to state that to satisfy the statute of frauds, the writing need not reference the amount of compensation, “for a reasonable amount as a commission will be inferred.”  (Id. (citing¿Toomy¿v.¿Dunphy, (1890) 86 Cal. 639, 642-643;¿Caminetti¿v.¿National Guar. Life Co., 56 Cal.App.2d 92, 96).)¿  

Accordingly, the Court OVERRULES the demurrer to the breach of contract claim.   

Breach of Implied Covenant 

Cross-Defendants raise the same argument against the breach of implied covenant claim as they do against the breach of contract claim.  In California, it is recognized that there is an implied covenant¿¿of good faith and¿fair dealing in every contract that neither party will do anything which will injure the right of the other to receive the benefits of the agreement. (Kransco v. American Empire Surplus Lines Ins. Co.¿(2000) 23 Cal.4th 390, 400.) The prerequisite for any action based on the implied covenant of good faith and¿fair dealing is the existence of a contract between the parties.¿(Smith v. City & County of San Francisco¿(1990) 225 Cal.App.3d 38, 49.)  Thus, if the underlying contract is unenforceable under the statute of frauds, a cause of action based on breach of the covenant of good faith and¿fair dealing in that contract also fails. (Id.)  Here, however, the Court has concluded the breach of contract claim is not barred by the statute of frauds.  Accordingly, the Court OVERRULES the demurrer to the breach of the implied covenant of good faith and fair dealing claim.   

Promissory Estoppel 

Cross-Defendants argue that Cross-Complainants cannot allege a promissory estoppel claim to circumvent the statute of frauds.  The Court agrees.   

Licensed brokers may only invoke an estoppel-based theory of relief if they demonstrate “actual fraud.”  This makes sense.  Unlike everyone else, licensed brokers “obtain their license only after they demonstrate knowledge of laws relating to real estate transactions,” including the statute of frauds.  (Margolin v. Shemaria (2000) 85 Cal.App.4th 891, 900; see Phillippe, 43 Cal.3d at 1260–1263.)  For this reason, licensed brokers are “conclusively presumed” to know that their commission agreements must be in writing to be enforceable. (Phillippe, 43 Cal.3d 1262; Franklin v. Hansen (1963) 59 Cal.2d 570, 575, overruled in part on other grounds by Sterling v. Taylor (2007) 40 Cal.4th 757.)   

Courts consequently have “little sympathy” for licensed brokers who assume the risk of relying on unwritten agreements for a commission. (Phillippe, 43 Cal. 3d at 1261–1262.)  More to the point, it is unreasonable for them to do so, which precludes them from invoking the doctrine of promissory estoppel except in cases of actual fraud.  (Id. at p. 1262; see generally Flintco Pacific Inc. V. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734 (“reasonable reliance” required for promissory estoppel); Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal. App. 4th 1236, 1248 (same).) 

Here, Cross-Complainants have not alleged any fraud.  Accordingly, the Court SUSTAINS the demurrer with leave to amend as to the promissory estoppel claim.   

Unjust Enrichment 

Cross-Defendants argue that Cross-Complainants’ claim for unjust enrichment is also an attempt to plead around the statute of fraud.  But the unjust enrichment claim is based not only on the failure to pay a broker’s commission but also on the failure to pay for services performed by the Cross-Complainants as managers of the Property.  (Cross-Compl. ¶ 64.)  A demurrer cannot be made as to part of a claim.  (Kong, 108 Cal. App. 4th at 1047¿(“a demurrer cannot rightfully be sustained to¿part of a cause of action .. .”); accord Greese v. Sup. Ct.¿(1984) 157 Cal.App.3d 159, 163.)  The proper way to remove these allegations is through a motion to strike, which Cross-Defendants have not made.   

CONCLUSION 

Based on the foregoing, the Court SUSTAINS Cross-Defendants’ demurrer with leave to amend as to the third cause of action and OVERRULES the demurrer as to the fourth, fifth and sixth causes of action.  

 

IT IS SO ORDERED.