Rader Co. v. Stone

Citations: 178 Cal. App. 3d 10; 223 Cal. Rptr. 806; 1986 Cal. App. LEXIS 2630Docket: B004118

Court: California Court of Appeal; February 27, 1986; California; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Rader Company, Inc. (Rader) appeals from orders dismissing its claims against William F. Stone, Jr. and the Stone Family Trust (collectively, Stone) and Pacific Sierra Research Corporation (PSR), following the defendants' successful demurrers without leave to amend and the denial of Rader's motion for reconsideration. The complaint alleges that Rader, a licensed real estate broker, was engaged to find PSR as a tenant for Stone's property at 12340 Santa Monica Boulevard, Los Angeles. 

Rader's second amended complaint, filed on August 25, 1982, outlines that Rader attended an open house hosted by Stone to solicit tenants, during which Stone provided information regarding broker commissions. In December 1981, Rader communicated with Nancy Mueller, Stone's agent, who confirmed Rader’s entitlement to a commission if PSR leased the property. Rader brought PSR to view the property, and both parties executed an offer to lease that acknowledged Rader's role as the broker.

The lease agreement ultimately executed by Stone and PSR stipulated that the payment of any broker commission was solely Stone's obligation. Rader's complaint included six causes of action, the first against Stone for breach of contract, asserting that the promotional materials constituted a written agreement obligating Stone to pay Rader a commission of at least $144,384. The second cause of action was against PSR for breach of contract related to the lease offer. The appellate court determined that Rader's complaint sufficiently established claims for relief, leading to the vacating of the dismissal orders.

The third cause of action against PSR and Rader sought recovery for quantum meruit/unjust enrichment. The fourth cause alleged that PSR intentionally interfered with Rader's advantageous relationship and contract with Stone, benefiting from obtaining a lease on more favorable terms. Similarly, the fifth cause claimed that Stone intentionally interfered with Rader's advantageous relationship and contract with PSR. The sixth cause asserted that Rader was a third party beneficiary of the lease contract with Stone. Following hearings, the court sustained the demurrers of both defendants regarding the first four causes without leave to amend, while granting leave to amend for the fifth and sixth causes. Rader's motion for reconsideration was denied, resulting in a dismissal against PSR. A third amended complaint was filed against Stone, alleging intentional interference with prospective advantage, intentional interference with contract, and third-party beneficiary status. Stone's demurrer to these claims was also sustained without leave to amend, leading to a dismissal on March 26, 1984. Rader contends that the appended memoranda complied with the statute of frauds and that the trial court erred in sustaining the demurrers without leave to amend for the first four causes, as well as in its treatment of the third amended complaint causes and the denial of reconsideration. The discussion emphasizes the scope of appellate review, highlighting that a demurrer tests the sufficiency of a complaint's pleading, and that allegations must be accepted as true and liberally construed to achieve substantial justice. Absent a fundamental deficiency in the complaint, the denial of leave to amend may constitute an abuse of discretion. The appellate court independently assesses the pleadings, regardless of the trial court's interpretations.

The complaint is reviewed under the principles of the statute of frauds, specifically Civil Code section 1624, which mandates that certain contracts, including those involving brokers for real estate leases over one year, must be in writing and signed by the party to be charged or their agent. The statute aims to protect property owners from unauthorized claims for commissions. A memorandum does not need to contain all contract terms, but it must establish the broker's authority and be signed by the party to be charged. Parol evidence can clarify ambiguities and explain circumstances surrounding the writing.

In this case, Stone challenged the sufficiency of the writings on two grounds: they did not indicate Rader's employment and lacked a signature from the party to be charged. The complaint states that Rader completed a registration form during a property viewing, which included Nancy Mueller's signature as an agent of Stone. Despite Stone's claims of ignorance regarding Mueller, her agency is acknowledged as true within the complaint. A signed document does not need to be the sole formal agreement; if multiple related documents are signed, they can collectively fulfill the statute's requirements. The signature may not need to appear at the end of the document, and if intended as authentication, it can satisfy the subscription requirement.

The brochure, update, and registration form are interconnected, with the update serving as an enhancement to the initial brochure, which mentioned the registration of realtors for protection. Mueller's handwritten signature on the registration form satisfies the subscription requirement for these documents. The court does not need to determine if Stone Enterprises' imprint was for authentication or identification. Stone's argument that the signature requirement under the statute of frauds is unmet is dismissed.

Regarding authorization or employment, memoranda must demonstrate Rader's authority. In Franklin v. Hansen, the court found a telegram confirming a sale inadequate for establishing a broker's commission obligation. However, this case is not applicable here, as Rader’s memoranda support the inference that Rader was involved in facilitating the transaction. Stone's actions indicate engagement with brokers for leasing the property, suggesting an agreement with Rader for compensation upon securing a tenant.

For a memorandum to be adequate, it must clearly indicate the broker's employment to negotiate property sales. In this instance, Rader's role appears limited to tenant procurement. Thus, analysis focuses on whether the writings authorized Rader to find a tenant, consistent with section 1624, subdivision (d). This authority need not be confined to one document; surrounding materials can clarify Rader's authorization. A memorandum that reasonably implies authority suffices, as illustrated in Moore v. Borgfeldt, where a commission agreement implied authority to sell. The court concludes that authorization can be inferred from the language of the writings.

Rader's complaint alleges that Stone distributed a brochure in June 1981, which included a realtor's sheet detailing commission payments and assurances that realtors would be protected. Stone's agent, Nancy Mueller, signed a registration form on December 16, 1981, registering PSR as a prospective tenant, indicating that Rader was authorized to procure PSR as a tenant for the property. The documentation is deemed sufficient to establish a contractual relationship, allowing Rader to claim breach of contract against Stone and PSR. The lease offer attached to the complaint meets statutory requirements, being signed by PSR and indicating that PSR would use Rader exclusively for leasing negotiations for one year. PSR argues it has no obligation to Rader for commissions, citing a clause in the lease stating that payment of commissions is the Lessor's separate obligation. However, this clause only indemnifies PSR against commission liabilities, without naming Rader as the broker or providing for commission payment. Thus, if Rader is not an intended beneficiary of the lease, PSR has not fulfilled its obligations to Rader. The trial court's decision to grant PSR's demurrer to Rader's breach of contract claim is deemed erroneous.

The remaining causes of action in Rader's claim were adequately pleaded. The quantum meruit/unjust enrichment claim survived the demurrer, despite Stone and PSR's argument based on the statute of frauds, which typically bars a broker from recovering for services rendered without a written agreement. However, Rader's allegations included sufficient writings to satisfy this statute, allowing the claim to proceed. 

The claims for interference with prospective business advantage against Stone and PSR also passed demurrer scrutiny. The elements of this tort in the real estate context include: (1) an economic relationship with potential for future benefit, (2) the defendant's knowledge of this relationship, (3) intentional acts intended to disrupt it, (4) actual disruption, and (5) resultant damages. While Stone referenced Buckaloo v. Johnson to argue that the tort requires a valid written contract, this was misinterpreted. The wrong in Rader's claim is not Stone's failure to comply with a contract but rather Stone's interference with Rader's advantageous relationship with PSR. Rader specifically alleged that Stone disparaged it to PSR, conditioned a lease on nonpayment of Rader's commission, excluded Rader from negotiations, and refused to pay the commission, all with the intent to disrupt Rader's relationship with PSR.

PSR contended that Rader could not assert this tort against it due to the supposed necessity of a valid written contract. However, the existence of sufficient written memoranda countered this argument, and Buckaloo supports that interference with contract is a subset of interference with prospective economic advantage, meaning a valid agreement is not required for the broader claim. The actionable wrong lies in the inducement to disrupt the relationship, irrespective of whether the underlying contract is enforceable or not. Thus, Rader's claims against both Stone and PSR are valid.

Rader alleges that PSR interfered with his prospective business advantage by excluding him from lease negotiations with Stone, claiming damages equivalent to his commission. PSR contends that Rader's claim was fully realized when he procured PSR in January 1982 and that the claim does not rely on subsequent negotiations. However, since the lease was signed in March 1982, Rader was not entitled to a commission as early as January. Rader's complaint asserts an economic relationship with Stone, PSR's knowledge of that relationship, and intentional exclusion from negotiations, which sufficiently states a cause of action for interference with prospective business advantage.

Rader's ability to allege inconsistent claims in separate causes of action is upheld, allowing for alternative theories. To prove inducement of a breach of contract, Rader must demonstrate a valid contract, PSR's knowledge and intention to induce its breach, actual breach, wrongful conduct causing the breach, and resultant damages. Both Stone and PSR demurred, citing the statute of frauds as a basis for claiming no valid contract existed. However, Rader's allegations regarding memoranda were deemed sufficient to establish claims against both parties for interference with contract.

Stone argues that it fulfilled its contractual obligations to Rader by including a provision in the lease for commission payment, thus claiming Rader cannot maintain that Stone interfered with its contract with PSR. Nonetheless, the lease language does not specify the broker entitled to a commission and merely requires Stone to indemnify PSR if needed. Rader is also recognized as an intended third-party beneficiary of the Stone/PSR contract, as Civil Code section 1559 allows enforcement of contracts by third parties, even if not explicitly named, provided the intent to benefit that third party is evident.

The Supreme Court overruled prior cases that mandated clear intent from the promisor for a third party to bring a contract action. Rader claimed PSR intended to fulfill its obligation to pay his commission through the lease's paragraph 20, asserting that Stone was aware of this intention when presented with the lease offer, which did not require the lessor to make the payment. Rader's complaint adequately established him as an intended third-party beneficiary.

The statute of frauds, enacted in England in 1676, aims to prevent fraud, not facilitate it, and does not require specific phrases for compliance. The documents provided, including a brochure, update, registration form, and lease offer, sufficiently met the statute's requirements for both Stone and PSR. These documents implied that Stone authorized Rader to secure PSR as a tenant for a commission and indicated that PSR retained Rader's representation.

The dismissal orders were vacated, allowing Rader to recover costs on appeal. Additionally, the court noted an unrelated pending case involving another broker claiming a commission on the same transaction, which does not impact Rader's case. A lack of a formal listing agreement with Stone meant Rader relied on the appended documents. The court found no need to consider whether Stone could be estopped from using the statute of frauds as a defense, nor whether substantial performance could apply, since Rader could pursue all causes of action.