Judge: Robert S. Draper, Case: 22STCV10183, Date: 2022-09-22 Tentative Ruling

Case Number: 22STCV10183    Hearing Date: September 22, 2022    Dept: 78

Superior Court of California 

County of Los Angeles 

Department 78 

Defendant Ivan J Vasilj’s Demurrer to the Complaint is OVERRULED.

Defendant has thirty days to answer.

FACTUAL BACKGROUND   

This is an action for breach of a real estate leasing agreement. The operative First Amended Complaint (“FAC”) alleges as follows.

In December 2019, Plaintiff D/AQ Corporation dba Daum Commercial Real Estate Services (“Plaintiff”) entered into an AIR CRE Exclusive Right to Represent for Sale or Lease of Real Property (Non-Residential) Agreement (the “Listing Agreement”) with Defendant Ivan J. Vasilj (“Defendant”) regarding the sale of two of Defendant’s properties (the “Properties”) in San Dimas, California. (FAC ¶ 8.) According to the Agreement, Defendant was to pay Plaintiff 6% of the sale proceeds of the Properties. (FAC ¶ 5.1.) Plaintiff’s agents, non-parties Tom Phelan (“Phelan”) and Lee Spence (“Spence”), worked primarily with Defendant’s son, Joe Vasilj (“Joe”) in facilitating the sale. (FAC ¶ 14.)

Initially, the Listing Agreement was set to terminate on June 17, 2020. (FAC ¶ 1.3.) However, on July 6, 2020, Defendant, through Joe, signed an extension to the Listing Agreement that made it operative through December 31, 2020. (FAC ¶ 13.) Plaintiff believed that Joe was given direct authority from his father to extend the Listing Agreement. (Ibid.)

In August 2020, Plaintiff received a viable offer on the Properties. (FAC ¶ 14.) When Plaintiff informed Defendant of this offer, Defendant told Plaintiff to keep negotiating for a higher purchase price. (FAC ¶ 15.)

After receipt of that offer, Plaintiff was made aware that another brokerage firm claimed to have a listing agreement for the Properties. (FAC ¶ 16.) Plaintiff told Defendant to disregard this claim, and to keep pursuing the sale. (Ibid.) Shortly thereafter, the initial prospective buyer raised the offered price such that Defendant chose to approve the transaction. (FAC ¶ 18.) Defendant closed the transaction for the sale through the third-party firm, in disregard of the Listing Agreement. (FAC ¶ 20.) Defendant never paid Plaintiff its due commission. (FAC ¶ 21.)

PROCEDURAL HISTORY 

On March 24, 2022, Plaintiff filed the Complaint asserting three causes of action:

1.    Breach of Written Contract;

2.    Common Count – Services Performed; and,

3.    Constructive Fraud

On July 1, 2022, Plaintiff filed the First Amended Complaint, replacing the third cause of action for Constructive Fraud with Actual Fraud.

On August 1, 2022, Defendant filed the instant Demurrer to the First Amended Complaint.

On September 9, 2022, Plaintiff filed an Opposition.

On September 15, 2022, Defendant filed a Reply.

DISCUSSION 

                         I.          DEMURRER

Defendant demurs to all causes of action pursuant to Code of Civil Procedure section 430.10.

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) As is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)  

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.”  (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.) 

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. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.) 

A.  Meet and Confer

Pursuant to CCP §§ 430.41, 435.5 and 439, before filing a demurrer, motion to strike or motion for judgment on the pleadings, the moving party must meet and confer in person or by telephone with the party who filed the pleading that is subject to the demurrer or motion to try to reach an agreement that resolves the claims to be raised in the demurrer or motion.  Additionally, the moving party must file a declaration stating either (a) the means by which the moving party met and conferred and that the parties did not reach an agreement, or (b) the other party failed to respond to the request to meet and confer in person or by telephone or otherwise failed to meet and confer in good faith.   

Here, Defendant’s Counsel Brad Snyder files a Declaration detailing his correspondence with Plaintiff’s Counsel, James Bates. (Snyder Decl., Exs. 1-2.) Accordingly, Defendant has fulfilled its meet and confer obligations.

B.  Statute of Frauds

First, Defendant argues that the First Amended Complaint fails, as the Listing Agreement had expired at the time of sale, and the purported extension to the Listing Agreement is precluded by the statute of frauds.

Civil Code section 1624(4) requires that an agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate is invalid unless it, or some note or memorandum thereof, is in writing and subscribed by the party to be charged or by the party’s agent.

Here, Defendant argues, and Plaintiff does not deny, that the initial Listing Agreement expired on June 17, 2020. Defendant contends that the extension, which was signed by Joe, but not by Plaintiff, does not satisfy the Statute of Frauds as Joe was not authorized, in writing, to agree to an extension on behalf of Plaintiff.

In Opposition, Plaintiff argues that Defendant should be barred from using the statute of frauds as a defense due to equitable estoppel.

In Redke v. Silvertrust, (1971) 6 Cal.3d 94, 101 the Supreme Court explained that although the statute of frauds requires certain agreements be made in writing, “a party will be estopped from relying on the statute where fraud would result from refusal to enforce an oral contract [citation].”

The doctrine of estoppel has been applied where an unconscionable injury would result from denying enforcement after one party has been induced to make a serious change of position in reliance on the contract or where unjust enrichment would result if a party who has received the benefits of the other’s performance were allowed to invoke the statute.”

Here, there is ample evidence showing that Plaintiff reasonably believed that the extension to the Listing Agreement was effective, that it acted in reliance with this belief in continuing to market and facilitate the sale of Defendant’s Properties, and that Defendant would be unjustly enriched should estoppel not apply.

The First Amended Complaint states that Plaintiff introduced Joe to Defendant with the instruction that Defendant work with Joe “on any related real estate issues,” and that Defendant and Joe worked together on the sale. (FAC ¶ 11.)

Next, the First Amended Complaint alleges that Joe, “with full authority and control on behalf of [Plaintiff],” extended the Listing Agreement through December 31, 2020. (FAC ¶ 13.) Plaintiff alleges that Phelan met with Joe regarding the extension, and before Joe signed the extension, “Joe Vasilj left his office momentarily and went to his father [Plaintiff’s] office next door to get approval for the listing extension. (Ibid.) Attached to the First Amended Complaint is the Listing Agreement with Joe’s handwritten notice of extension on top. (FAC, Ex. 2.)

Next, the First Amended Complaint states that when Plaintiff conveyed the initial offer to Defendant, after the Listing Agreement purportedly expired, Plaintiff “instructed Phelan to keep working to negotiate a higher sales price from [the buyer].” (FAC ¶ 15.) Finally, the First Amended Complaint states that Plaintiff conveyed the final offer to Defendant, which Defendant accepted. (FAC ¶¶ 16-17.) Despite this, Defendant “losed the transaction of the Property through the third-party broker and that broker “received a commission of $256,710.00 in total disregard of the Listing Agreement between Plaintiff and [Defendant].” (FAC ¶ 20.) Plaintiff alleges that Defendant swapped brokerage firms at the last moment because the third-party firm required 1% less in commission, saving Defendant over $40,000. (Opposition at p. 11.)

The Court finds that, pursuant to the allegations in the First Amended Complaint, Defendant would be unjustly enriched if the statute of frauds precluded Plaintiff’s recovery, and therefore equitable estoppel bars Defendant from invoking the statute of frauds as a defense.

Additionally, as the absence of a valid contract forms the basis for Defendant’s Demurrer to the First and Second Causes of Action, the Demurrer to those causes is OVERRULED.

C.  Third Cause of Action - Fraud

Next, Defendant demurs to the Third Cause of Action for Fraud.

A claim for fraud must plead all of the following elements: (1) misrepresentation; (2) knowledge of falsity; (3) intent to induce reliance; (4) justifiable reliance; and (5) resulting damage. (Odorizzi v. Bloomfield School Dist. (1966) 246 Cal.App.2d 123, 128; Wilhelm v. Pray, Price, Williams & Russell (1986) 186 Cal.App.3d 1324, 1332.)

Here, Defendant argues that the First Amended Complaint does not state facts showing that Defendant made any misrepresentation, and that Plaintiff could not have reasonably relied on the Listing Agreement as it had already expired.

As the second argument was addressed above, the Court need not address it here.

As to the first argument, the First Amended Complaint states that when Plaintiff approached Defendant after hearing Defendant had hired the third-party brokerage firm despite the Listing Agreement, Defendant “told Phelan to disregard [the third-party firm] and continue working to sell the Property and to attempt to obtain a higher offer from [the buyer.]” (FAC ¶ 32.)

This allegation represents a misrepresentation of fact by Defendant that can form the basis for a fraud cause of action, and upon which Plaintiff reasonably relied to its detriment.

Accordingly, the Demurrer to the Third Cause of Action for Fraud is OVERRULED.

Defendant’s Demurrer to the First Amended Complaint is OVERRULED in its entirety.

Defendant has thirty days to answer.

DATED: September 22, 2022 

____________________________

Hon. Robert S. Draper 

Judge of the Superior Court