Judge: Serena R. Murillo, Case: 21STCV40518, Date: 2023-07-21 Tentative Ruling
Case Number: 21STCV40518 Hearing Date: July 21, 2023 Dept: 31
TENTATIVE
Defendants’ demurrer to the SAC is
SUSTAINED with 30 days leave to amend. This will be the final opportunity for
Plaintiff to amend the complaint.
Legal Standard
A demurrer for sufficiency tests
whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)
When considering demurrers, courts read the allegations liberally and in
context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216,
1228.) The court “treat[s] the demurrer as admitting all material facts
properly pleaded, but not contentions, deductions or conclusions of fact or law
….” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525).) In a demurrer
proceeding, the defects must be apparent on the face of the pleading or via
proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994).)
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. (Code Civ. Proc., §§ 430.30, 430.70.) The
only issue involved in a demurrer hearing is whether the complaint, as it
stands, unconnected with extraneous matters, states a cause of action. (Hahn,
supra, 147 Cal.App.4th at 747.)
Meet and Confer
The demurrer and motion to strike are
accompanied by the declaration of Stephen Goldberg which satisfies the
meet and confer requirements. (Code Civ. Proc. § 430.41.)
Discussion
1.
First
Cause of Action for Fraud
To plead a cause of action for fraud, Plaintiff must plead
facts showing the following elements: (1) misrepresentation, (2) knowledge of
falsity, (3) intent to defraud, (4) justifiable reliance, and (5) resulting
damage. (Charnay v. Cobert (2006) 145 Cal. App.4th 170, 184.)
Defendant argues the SAC is barred
by the statute of frauds as there is no valid
written agreement entitling Plaintiff to a commission payable by Defendants.
Defendant also argues that Plaintiff’s
presumed knowledge of the Statute of Frauds precludes it from alleging the reasonable
reliance on an oral agreement that is necessary to assert equitable estoppel.
“The doctrine of
estoppel to plead the statute of frauds may be applied where necessary to
prevent either unconscionable injury or unjust enrichment.” (Tenzer v.
Superscope, Inc. (1985) 39 Cal.3d 18, 27.) However, a “licensed real
estate broker or salesperson cannot assert equitable estoppel against a statute
of frauds defense to an oral commission agreement that is subject to Civil Code
section 1624(d) unless there is a showing of actual fraud by the party to be
charged under the invalid oral agreement.” (Phillippe v. Shapell
Industries (1987) 43 Cal.3d 1247, 1264.)
Civil Code section 1624, provides, in part:
“(a) The following contracts are 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:
[ . . . ]
(4) An agreement authorizing or employing an agent, broker,
or any other person to purchase or sell real estate, or to lease real estate
for a longer period than one year, or to procure, introduce, or find a
purchaser or seller of real estate or a lessee or lessor of real estate where
the lease is for a longer period than one year, for compensation or a
commission.”
(Civ.
Code, § 1624 subd. (a)(4).)
The primary purpose of section
1624(d) is to protect real estate sellers and purchasers from the assertion of
false claims by brokers for commissions. (Pac. etc. Dev. Corp. v. Western
Pac. R. R. Co. (1956) 47 Cal. 2d 62, 67.)
Plaintiff alleges that Plaintiff is a Participant of the MLS
in which the two properties were offered for sale, thereby entitling it to
commissions. (SAC, ¶ 11.) The applicable RPAs provisions state:
D. COOPERATING (BUYER’S) BROKER
COMPENSATION: Seller's
Broker agrees to pay Buyer's Broker and Buyer's Broker agrees to accept, out of
Seller's Broker's proceeds in escrow, the amount specified in the MLS, provided
Buyer's Broker is a Participant of the MLS in which the Property is offered for
sale or of a reciprocal MLS. If Seller's Broker and Buyer's Broker are not both
Participants or the MLS, or a reciprocal MLS, in which the Property is offered
for sale, then compensation must be specified In a separate written agreement
(C.A.R. Form CBC). Declaration of License and Tax (C.A.R. Form DTL) may be used
to document the tax reporting will be required or that an exemption
exists.”
(SAC Ex. 1, 3 [at p. 10].)
“MLS” stands for “Multiple Listing Service” as represented in
paragraph 24 of the RPA.
However, the only writing that
relates to a commission is between the seller’s broker and buyers’ broker (Plaintiff). A broker's real estate commission agreement
is invalid under section 1624(d) unless the agreement "or some note or memorandum
thereof, is in writing and subscribed by the party to be charged or by the
party's agent." The writing must unequivocally show on its face the fact
of employment of the broker seeking to recover a real estate commission. (Franklin
v. Hansen (1963) 59 Cal. 2d 570, 573; Pac. etc. Dev. Corp. v. Western
Pac. R. R. Co., supra, 47 Cal. 2d 62, 68.) This agreement does not show on
its face that Defendants employed Plaintiff for real estate commissions, as
this is an agreement for commission between the seller of the properties’
broker and Plaintiff, and not between Defendants and Plaintiff.
Plaintiff argues the statute of frauds is
inapplicable because it is not suing Defendants for commissions for
representing them in the purchase of the two properties. Plaintiff earned and
received commissions from the sellers for representing Defendants in their
purchase. Plaintiff argues it alleges that after earning the commissions,
Defendant fraudulently induced Plaintiff to tender the commissions monies to
Defendants. Plaintiff argues it is suing to recover the commission money
fraudulently obtained by Defendants.
In the SAC, Plaintiff alleges that in reliance
on Defendants’ representations that if Plaintiff conveyed its commission
earned on the purchase of the property by Defendants, that upon completion of
the represented development, Defendants would list the five townhomes for sale
with Plaintiff. (SAC, ¶¶ 15, 17.)
While Plaintiff attempts to
argue it does not seek to recover the commissions from selling the properties,
it still relies upon an oral commission agreement between
Plaintiff and Defendants for the allegation that it is owed its money back. Moreover,
Plaintiff cannot show it justifiably relied on Defendant’s representations. To
recover for fraud in any case the plaintiff must show that he reasonably relied
on the defendant's misrepresentations. The plaintiff cannot recover if his
reliance was not justified or reasonable. (Wagner v. Benson (1980) 101
Cal. App. 3d 27, 36; see generally 4 Witkin, Summary of Cal. Law (8th ed. 1974)
Torts, § 475, p. 2734; 3 Pomeroy, Equity Jurisprudence (5th ed. 1941) § 891,
pp. 505-510.) The Court in Phillippe
v. Shapell Industries stated that the broker's reliance on the oral contract was not reasonable in light
of the broker's presumed knowledge of the requirements of the statute of frauds. (Id., 1263.) A broker's
presumed knowledge of the statute of frauds precludes him from showing the
reasonable reliance on an oral agreement that is necessary to assert equitable
estoppel. (Phillippe v. Shapell Industries, supra, 43 Cal.3d 1270,
citing Pac. etc. Dev. Corp. v. Western Pac. R. R. Co., supra, 47
Cal.2d 62, 70; Marks v. Walter G. McCarty Corp., (1949) 33 Cal.2d 814,
823; Osborne v. Huntington Beach etc. School Dist. (1970) 5 Cal. App. 3d
510, 515.)
Additionally, fraud causes of
action must be pled with specificity. (Lazar v. Superior Court¿(1996) 12
Cal.4th 631, 645.) “The Lazar court explained that ‘[t]his particularity requirement necessitates pleading
facts which ‘show how, when, where, to whom, and by what means the
representations were tendered.’ [Citation omitted.]” (Charnay v. Cobert (2006)
145 Cal. App.4th 170, 185, fn. 14.) Here, Plaintiff fails to plead the fraud
cause of action with the required specificity.
The demurrer to the first cause of action for fraud is therefore
SUSTAINED with leave to amend.
2.
Second Cause of Action for Conversion
To plead
a cause of action for conversion, one must allege (1) the plaintiff’s ownership
or right to possession of personal property; (2) defendant’s disposition of the
property inconsistent with plaintiff’s rights; and (3) resulting damages. (Fremont
Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)¿“Money may be the subject of conversion if the
claim involves a specific, identifiable sum . . . .” (WelcoElectronics, Inc.
v. Mora (2014) 223 Cal.App.4th 202, 209.)
The Court in Philippe provided that allowing a broker
to recover on an oral contract under theories of unjust enrichment or estoppel
would eviscerate the purpose of the statute of frauds and the licensure scheme
for real estate brokers. Permitting a cause of action for conversion on an oral
contract of this nature would achieve the same result, and is, thus, barred.
3.
Cause
of Action for Violation of Penal Code Section 496
Penal Code section 496, subdivision (c), provides a civil
cause of action against anyone who is injured by a violation of subdivisions
(a) or (b). The elements required to show a violation of section 496,
subdivision (a), are simply that (i) property was stolen or obtained in a
manner constituting theft, (ii) the defendant knew the property was so stolen
or obtained, and (iii) the defendant received or had possession of the stolen
property. (Switzer v. Wood (2019) 35 Cal.App.5th 116, 126.) “[T]he issue
of whether a wrongdoer's conduct in any manner constituted a “theft” is
elucidated by other provisions of the Penal Code defining theft, such as Penal
Code section 484. (Id. at 126.) To generally summarize, Section 484
describes how one may misappropriate the property of another by fraud.
Here, the only allegations under which
Plaintiff might argue that the commission was stolen is by means of fraud, and
that argument fails for reasons described above. Fraud involves the reasonable
reliance of a party on a representation of another that turns out to be false.
Plaintiff cannot establish that he reasonably relied on an oral promise by
Defendants to re-sell the properties he brokered the sale of, because Plaintiff
is a licensed real estate broker and knew that such an agreement was
unenforceable. (Philippe, supra, at 1261 [“Plaintiff is a
licensed real estate broker and, as such, is presumed to know that contracted
for real estate commissions are invalid and unenforceable unless put in writing
and subscribed by the person to be charged”].)
4.
Fourth
Cause of Action for Restitution
Unjust enrichment is synonymous with restitution. (Rutherford
Holdings, LLC v. Plaza Del Rey¿(2014) 223 Cal.App.4th 221, 231.) Restitution may
be awarded in lieu of breach of contract damages when the parties had an
express contract, but the express contract is void because it was procured by
fraud or is unenforceable or ineffective for some reason. (Id.) “A claim for
restitution is permitted even if the party inconsistently pleads a breach of
contract claim that alleges the existence of an enforceable agreement.” (Id.)
Again, the Court in Philippe provided that allowing a
broker to recover on an oral contract under theories of unjust enrichment or
estoppel would eviscerate the purpose of the statute of frauds and the
licensure scheme for real estate brokers. Permitting a cause of action for
conversion on an oral contract of this nature would achieve the same result,
and is, thus, barred.
“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. (Citation). 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.
(Citations.)”
(Westside
Estate Agency, Inc. v. Randall¿(2016) 6 Cal.App.5th 317, 324.)
Therefore, this
cause of action is also subject to demurrer.
Conclusion
Accordingly,
Defendants’ demurrer to the SAC is SUSTAINED with 30 days leave to amend. This
will be the final opportunity for Plaintiff to amend the complaint.
Moving party is
ordered to give notice.