PACIFIC SOUTHWEST DEVELOPMENT CORPORATION v. WESTERN PACIFIC RAILROAD COMPANY

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District Court of Appeal, Second District, Division 1, California.

PACIFIC SOUTHWEST DEVELOPMENT CORPORATION, a corporation, Plaintiff and Appellant, v. WESTERN PACIFIC RAILROAD COMPANY, a corporation, Defendant and Respondent.*

Civ. 20894.

Decided: February 27, 1956

Gregory M. Creutz, Los Angeles, for appellant. Smith, Van Dyke & Hildreth, Los Angeles, for respondent.

This is an action in which plaintiff seek to recover compensation for services rendered in connection with defendant's procuring an option to purchase certain real property. Defendant objected to the introduction of any evidence upon the ground that the agreement sued upon was within the statute of frauds. Plaintiff thereupon made an offer of proof and it was stipulated that the documents pleaded in the amended complaint were deemed to have been offered in evidence, that an objection was made thereto and that the court sustained the objection.

Plaintiff further offered to prove, subject to the same objections, that the negotiations for the purchase of the property in question had from the beginning been conducted by one Cliff A. Nelson, who was then an employee of the Fortune Realty Company in San Jose, California; that Mr. Nelson became an employee of plaintiff on August 15, 1950, at which time these negotiations were still pending; that certain offers were made in connection with the purchase of said property prior to August 15, 1950; that Mr. Nelson, subsequent to his employ by plaintiff, continued to correspond with F. B. Stratton, representing the defendant and that Mr. Stratton met with Gregory M. Creutz, president of plaintiff at the Biltmore Hotel on or about September 6, 1950, at which time Mr. Creutz examined a proposed option agreement and subsequently redrafted the option and mailed it to Mr. Stratton; thereafter Mr. Nelson and Mr. Creutz went to San Francisco and met with Mr. Stratton and a few days later Mr. Creutz and Mr. Nelson conferred with Mr. Lenfest, the owner of the property, and his attorney at San Jose concerning the option agreement; at that time Mr. Lenfest objected to the price of $2,500 per acre contained in the option agreement and subsequently, on or about October 3, 1950, through his attorney declined the offer; the option agreement for the purchase of the property was obtained by Mr. Stratton on December 15, 1950, for the price of $2,750 an acre.

The court rendered judgment in favor of the defendant, from which plaintiff appeals.

The only questions for determination are: (1) Whether an agreement employing a broker to obtain an option to purchase real property falls within the provisions of Subdivision 5, Section 1624 of the Civil Code and Subdivision 5, Section 1973 of the Code of Civil Procedure, and (2) if such an agreement does fall within the statute of frauds, whether there was a note or memorandum thereof sufficient to comply with the statute.

That part of Section 1624 of the Civil Code which is pertinent to the instant action reads as follows: ‘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 same provision is contained in Section 1973, subdivision 5, of the Code of Civil Procedure.

An option to purchase real property is a contract containing an irrevocable and continuing offer to sell at a specified price within a specified time. It conveys no interest in land to the optionee, but vests in him only a right in personam to buy at his election. Hence, an option contract relating to the slae of land is not a sale of property but of a right to purchase. Hicks v. Christeson, 174 Cal. 712, 716, 164 P. 395; Warner Bros. Pictures v. Brodel, 31 Cal.2d 766, 772, 192 P.2d 949, 3 A.L.R.2d 691; Seeburg v. El Royale Corp., 54 Cal.App.2d 1, 4, 128 P.2d 362; Kritt v. Athens Hills Development Co., 109 Cal.App.2d 642, 646, 241 P.2d 606. It follows that an option contract not being a contract for the purchase or sale of real estate, a contract employing a broker to obtain the option does not fall within the provisions of Section 1624, subdivision 5, of the Civil Code, or Section 1973, subdivision 5 of the Code of Civil Procedure.

In view of our conclusion that the alleged agreement does not fall within the statute of frauds, it is unnecessary for us to consider whether there was a sufficient memorandum thereof in writing.

The judgment is reversed and the cause remanded for trial on the merits.

FOURT, Justice.

WHITE, P. J., and DORAN, J., concur.