Howard L. BEAZELL, Plaintiff and Appellant, v. Eugene SCHRADER, Defendant and Respondent.
Plaintiff is seeking a judgment of $10,000 in this action for services rendered as a licensed real estate broker. In the original complaint plaintiff alleged: That he and defendant entered into an oral contract wherein defendant employed plaintiff to sell ‘a 19 unit apartment building’; that the agreement provided defendant would pay plaintiff as commission 5% of the selling price; that plaintiff obtained a purchaser to whom defendant sold the property for $200,000; that in connection with the sale defendant and the vendee entered into escrow instructions, one of which ‘provided for payment of the sum of $2,500 by defendant to plaintiff in connection with the aforementioned oral agreement.’ The first cause of action of the complaint concluded with the allegation: ‘Defendant has not paid plaintiff, and there is now due, owing and unpaid from defendant to plaintiff the sum of $10,000.’ A second cause of action, in the form of a common count in assumpsit for the reasonable value of the services rendered, concluded the complaint.
Defendant demurred to the complaint ‘on the ground that said Complaint fails to state a cause of action in that it appears that the said action is based upon an oral agreement required to be in writing by the statute of frauds.’ The demurrer was sustained, the minute entry reciting: ‘No cause of action stated for $10,000.’
An amended complaint was filed, differing from the first in substance only by the addition of an allegation that after becoming aware of the escrow instruction referred to, plaintiff informed defendant that he ‘did not consent or acquiesce in that portion of the escrow instructions which purported to reduce plaintiff's commission from $10,000 to $2,500.’ A demurrer such as that first filed was interposed and it was sustained without leave to amend with these words concluding the order: ‘for failure to state cause of action within jurisdiction of this court.’
An appeal from this nonappealable order was dismissed by this court. (See Beazell v. Schrader, 1962, 205 A.C.A. 740, 23 Cal.Rptr. 189.) Thereupon the trial court on August 29 signed and filed a document entitled ‘Order Sustaining Demurrer Without Leave To Amend,’ which stated: ‘IT IS ORDERED that the demurrer to the first amended complaint of plaintiff is sustained without leave to amend; and that plaintiff take nothing from defendant.’ Again plaintiff appealed, this time from ‘Order of Honorable ROBERT H. PATTON sustaining demurrer to first amended complaint of plaintiff without leave to amend, which said Order is dated August 29, 1962.’
We interpret the writing signed by the trial judge not only as an order sustaining a demurrer, as it is labeled, but also as a judgment from which an appeal may be taken; and we interpret plaintiff's notice of appeal as applying to that judgment, not only to the nonappealable order to which it refers. That judgment is, however, not the judgment that should have been rendered under the circumstances. As stated in Stafford v. Ballinger, 199 Cal.App.2d 289, 298, 18 Cal.Rptr. 568, 573: ‘When a demurrer to a complaint has been sustained without leave to amend, the only judgment which properly may be entered is a dismissal of the action.’ See also Berri v. Superior Court, 43 Cal.2d 856, 860, 279 P.2d 8.
With respect to the ruling on the demurrer as to the second cause of action we have concluded it was sound. Plaintiff on appeal places no reliance upon his second cause of action and inasmuch as it fails to state a cause of action under subdivision 5 of section 1624 of the Civil Code, and subdivision 5 of section 1973 of the Code of Civil Procedure, we need not give it further attention. The above-numbered sections of the codes require ‘[A]n agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation or a commission’ or some note or memorandum thereof in writing and subscribed by the party to be charged or by his agent. Plaintiff concedes that if the only agreement between defendant and him was the oral one pleaded in his complaint he would be precluded by the statute of frauds from any recovery whatsoever. However, he asserts that, as set forth in his first cause of action, the acknowledgment of his agency in the escrow instructions signed by defendant met the requirement of the statute of frauds that there be a memorandum of his employment as agent for the defendant and that he should be permitted to supply by means of the oral agreement the details of the terms of his employment, even though such terms would modify the provision of the written memorandum with respect to the amount of the commission to be paid to him. In the early case of Moore v. Borgfeldt, 96 Cal.App. 306, 311, 273 P. 1114, the court points out that the first element of the statute of frauds is the requirement that there be some written evidence of the fact of employment of the agent; in other words, of his authority to act, and that unless some written memorandum exists a claim for a commission cannot be maintained.
In Kennedy v. Merickel, 8 Cal.App. 378, 381, 97 P. 81, 83, the court declared that ‘* * * it is sufficient if it be shown that the party to be charged has recognized the broker as his agent by a writing subscribed by him.’
In the Moore case, supra, 96 Cal.App. 306, 310, 273 P. 1114, 1116, the court stated: ‘The statute does not require a complete written contract, but a mere note or memorandum showing authorization is enough.’ It was contended in the Moore case, supra, 96 Cal.App. 306, 273 P. 1114, that the memorandum relied upon must be complete in itself and it cannot be enlarged or modified by parol, but the court held to the contrary, stating that it need not be a complete contract but only a note or memorandum provided it shows authority to act. The court stated at page 311, at page 1117 of 273 P.: ‘When this requirement is met in connection with a definite piece of property, the other terms may be shown by parol. The amount of compensation, and even the agreement to pay a commission, may be so shown. [Citation.]’
The Moore case is to be distinguished from the case at hand in that in the former the method prescribed for the fixing of the amount of the commission was necessarily changed by alterations made in the terms of sale of the property, and consequently the court upheld a judgment basing the amount of the commission upon the reasonable value of the services rendered. The court pointed out in the Moore decision (96 Cal.App. 306, 313, 273 P. 1114, 1118): ‘The purpose of this statute is to protect the owner of real property, not from every claim of a commission for selling the same, but from claims from persons never by him employed or authorized to act. It is equally the policy of the law to protect a broker who has been so employed or authorized, and who, in good faith, has acted.’
In Le Blond v. Wolfe, 83 Cal.App.2d 282, 286, 188 P.2d 278, 281, the court said: ‘The statute of frauds was enacted to prevent fraud. The courts will not permit it to become the instrument of fraud. The statute is to be used as a shield, not as a sword. [Citation.]’
It is quite clear that although an oral agreement to pay commissions to a real estate broker is barred by the statute of frauds subsequent escrow instructions may make it enforceable. (Coulter v. Howard, 203 Cal. 17, 262 P. 751; Martin v. Chernabaeff, 124 Cal.App.2d 648, 651, 269 P.2d 25; Devereux v. Sirkus, 105 Cal.App.2d 340, 344, 233 P.2d 644.)
Of particular significance is a 1961 case, Weber v. Dobyns, 193 Cal.App.2d 402, 408, 14 Cal.Rptr. 103, 107, wherein it was expressly held that the signed acceptance by the owner of real property of a contract of purchase and sale ‘* * * is a sufficient memorandum, signed by the party to be charged, to permit respondent [broker] to enforce an oral contract to pay his commission.’ Although performance of the contract failed it was held permissible to look behind the contract to the prior oral agreement to ascertain if the failure of the purchase and sale precluded recovery of commission under the terms of the prior oral agreement.
In Lipton v. Johansen, 105 Cal.App.2d 363, 233 P.2d 648, the real estate broker's right to a commission emanated from a preliminary deposit receipt signed by the party to be charged in which the authority of the broker was clearly established and the amount of his commission fixed. The seller and the purchaser ultimately entered into escrow instructions in which the right of the broker to a commission was made dependent on the successful closing of the escrow. The broker was not a party to the escrow agreement and was held not bound by the unilateral action of the seller of the property in thus attempting to limit their original agreement with respect to commission.
The case at hand differs from the Lipton case, supra, in that here the prior agreement was not in writing. The only writing is the memorandum in the escrow instructions upon which plaintiff relies to escape the effect of the statute of frauds, and the crucial question before this court is whether the oral agreement may be shown by plaintiff to modify the terms of the written memorandum of employment contained in the escrow instructions. We believe the basic purpose of the statute having been accomplished, namely the written acknowledgment of the authorization of the broker to act for the seller, the plaintiff should be permitted to resort to presentation of their oral agreement with respect to the actual compensation to be paid him, notwithstanding the fact that such proof may ontravene one of the items of the written memorandum.
It must be borne in mind that we do not have before us in this case a written memorandum of an agreement signed by both parties. The memorandum is signed only by the seller and not by the broker. It does not on its face purport to state the entire agreement of the parties While undoubtedly it is sufficient to accomplish the purpose of the statute of frauds the parties should be permitted to supplement the memorandum by parol evidence to show what their mutual agreement actually was. As is stated in Corbin on Contracts, volume 2, section 530, ‘As against the signer, the memorandum is a definite admission that the transaction has in fact occurred. If his memorandum contains incorrect statements justice requires their correction and performance as corrected. * * * Admitting, as he has done in writing, that a contract has been made, and having himself gone so far as to assert its terms, he should no longer have statutory protection with respect to the accuracy of his assertions.’ For these reasons we believe the demurrer should not have been sustained without leave to amend and that as to the first cause of action the complaint is sufficient.
In the cases of Irwin v. Klimper, 56 Cal.App. 434, 205 P. 714; Smith v. Frans Nelson & Sons, Inc., 214 Cal. 295, 5 P.2d 427 and Sanstrum v. Gonser, 140 Cal.App.2d 732, 295 P.2d 532, relied on by respondent, the memorandum in the escrow instructions considered in those cases clearly indicated that the commissions called for were to be paid upon completion of the escrow. Since in each instance the escrows failed for one reason or another the broker was held not to be entitled to recover his commission. These cases are to be distinguished from the case before us. Here the allegation is that the sale was actually consummated. The seller received the full benefit of the broker's services and he should not be permitted unilaterally to reduce the amount of the commission from that which the complaint alleges was previously agreed upon. For the purposes of the demurrer and of this appeal the allegations of the complaint must be assumed to be true.
In the Smith case, supra, 214 Cal. 295, 296, 5 P.2d 427, the Supreme Court stated: ‘It is not permissible for the broker to resort to the escrow document for a ratification of his employment and then, in contradiction of the other provisions thereof, establish by parol a different contract as to the conditions under which the commission is to become due. To permit such a course would be to defeat the very object the Statute of Frauds was designed to accomplish.’ Thus, defendant asserts, in the case at bench the broker should not be permitted to rely on the escrow instructions to escape the statute of frauds and then, in contradiction of the provision for a $2,500 commission be permitted to establish by parol a different contract calling for a $10,000 commission. But in saying that ‘the broker must accept the opposite burdens and conditions contained in the letter of authority which thus confirms his employment’ the Supreme Court in Smith, supra, 214 Cal. 295, 5 P.2d 427, qualified the statement by saying ‘unless overcome by some direct attack in equity.’ In Smith the sale failed. Here, the sale was completed. It would be very inequitable to permit an owner to subvert the purpose of the statute of frauds and turn it into an instrument of fraud under the protection of which he could, as it is claimed was done here, at his own whim, reduce the earned commissions by seventy-five per cent.
BURKE, Presiding Judge.
JEFFERSON and FORD,* JJ., concur.