FYBEL, J.
Plaintiffs Jeffrey Frieden and Lori Frieden, as trustees of The Jeffrey and Lori Frieden Family Trust (the Frieden Trust),
The parties argue at length the nature and scope of the duties owed by a seller's real estate agent to third parties, such as Plaintiffs, and whether Defendants breached those duties. We need not resolve whether the Complaint alleged facts sufficient to establish that Defendants breached duties owed to Plaintiffs because we conclude the Complaint does not, and cannot, allege actual damages. In addition, we conclude the Complaint failed to state causes of action for breach of warranty of authority, negligent performance of a contract, and interference with prospective economic advantage. We therefore affirm.
The Complaint made the following allegations.
Plaintiffs are the trustees of the Frieden Trust. The Robert and Alison Davis Family Trust (the Davis Trust) owned real property located at 157, 158, and 159 Emerald Bay in Laguna Beach.
In April 2009, the Davis Trust entered into an exclusive authorization and right to sell residential listing agreement with CB pertaining to the sale of 157 and 159 Emerald Bay. High was designated as the listing agent. The listed price for 157 Emerald Bay was $9.1 million, and the listed price for 159 Emerald Bay was $4.5 million. If escrow was entered into within 45 days, the commission paid would be 4.5 percent of the sales price, with 2.5 percent paid to the selling broker and 2 percent to CB. Otherwise, the commission paid to CB would be 5 percent of the listing price, of which 2.5 percent would be paid to a multiple listing service broker representing the buyer. If High represented both the buyer and seller in a successful closed escrow, then the commission paid to CB would be 4 percent of the sales price.
The Davis Trust advised CB that 159 Emerald Bay would not be sold without an accepted contract on 157 Emerald Bay, unless the Davis Trust consented otherwise.
In May 2009, the Davis Trust entered into an exclusive authorization and right to sell residential listing agreement with CB and Altera Real Estate, pertaining to the sale of 158 Emerald Bay. High and Dolby were designated as colisting agents. The listed price for 158 Emerald Bay was $11.95 million. If escrow was entered into within 45 days, the commission paid would be 4.5 percent of the sales price, with 2.5 percent paid to the selling broker and 2 percent to CB. Otherwise, the commission paid to CB and Altera Real Estate would be 5 percent of the listing price.
Plaintiffs hired Harold Noriega, a licensed real estate salesperson, as their special agent to locate suitable property and to handle all negotiations with the listing agent or seller. Plaintiffs initially expressed interest in 157 and 159 Emerald Bay and found the properties especially appealing due to their location and because the properties offered a "lifetime home." Plaintiffs needed a short escrow because their current residence had a water intrusion problem.
When Plaintiffs toured the properties with Noriega in late May 2009, High told them the Davis Trust also wanted to sell 158 Emerald Bay. High told them that if they really wanted to buy 157 and 159 Emerald Bay, they should make an offer on all three properties. On May 29, 2009, in reliance on High's statement, Plaintiffs, through Noriega, submitted an offer to High to purchase all three properties for $19 million, furniture included. High told Noriega that Alison Davis, a trustee of the Davis Trust, was in Michigan and would not be back in town until June 1, 2009, at which time she would review the offer with her financial advisors and High.
On June 1, 2009, Noriega contacted High to learn the status of the Frieden Trust's offer. High assured Noriega that a response would be provided as soon as possible.
Also on June 1, another prospective buyer, Douglas Hodge, made an offer to purchase 157 and 159 Emerald Bay (the Hodge Offer). Rod Daley, another CB salesperson, represented Hodge. The Hodge Offer included the following salient deal points: (1) purchase price of $11.8 million; (2) escrow to close within 35 days; and (3) Hodge required financing for the purchase.
Plaintiffs had no means to obtain information about the Hodge Offer unless High, Daley, or another CB salesperson advised them of it. It was "vitally . . . important" for the Plaintiffs to know about the Hodge Offer because it materially affected the value and desirability of 157 and 159 Emerald Bay. The presence of another prospective buyer meant "this was `hot property,'" Plaintiffs needed to be more competitive, a "bidding war" was likely, and time "was even more of the essence."
High e-mailed the Hodge Offer to Davis and her financial advisor on June 1, 2009 at about 8:35 p.m. At 9:12 p.m. on the same day, Davis sent a counteroffer to Plaintiffs.
On the morning of June 2, 2009, Davis submitted a counteroffer to the Hodge Offer. Later the same day, Plaintiffs, without knowing of the Hodge Offer, submitted a second offer, increasing the purchase price from $19 million to $20 million in cash. Plaintiffs made this second offer with the understanding it was open to another counteroffer from the Davis Trust. At 1:34 p.m. on June 2, High e-mailed Plaintiffs' second offer to Davis, her financial advisor, and Dolby.
On June 2, High advised Noriega the Davis Trust had received an offer on 158 Emerald Bay and a separate offer on 159 Emerald Bay. High told Noriega the offer on 158 Emerald Bay would be countered, but the offer on 159 Emerald Bay would not be countered because the Davis Trust wanted to sell 159 Emerald Bay either as a package with 157 Emerald Bay or not until 157 Emerald Bay sold first. High did not tell Noriega about the Hodge Offer.
On June 2 at 5:36 p.m., High e-mailed to Davis the Davis Trust's counteroffer to Plaintiffs' initial offer and supporting documents that High had already presented to Plaintiffs. High asked Davis to sign the counteroffer and supporting documents. At 9:05 p.m. on the same day, Davis faxed to High a signed copy of the counteroffer with an addendum.
On June 3 at 8:25 a.m., Hodge submitted a counteroffer increasing the purchase price to $12 million, half of which was to be in cash and the other half financed. High promptly e-mailed this counteroffer to Davis and her financial advisor. Later the same day, High faxed to Davis a proposed counteroffer to Hodge's counteroffer. Davis signed the proposed counteroffer and faxed it back to High within seven minutes. High then faxed the counteroffer to Daley. The Davis Trust's counteroffer had a sales price of $12.2 million and expired on June 7, 2009.
Noriega spoke with High several times on June 3. During one conversation, High told Noriega the major issue the Davis Trust had with Plaintiffs' two offers was the inclusion of all furnishings and electronics at 157 and 159 Emerald Bay. While Plaintiffs wanted to buy the properties "completely turnkey," Davis believed the furnishings were worth more than $1 million.
After Noriega related this conversation to Plaintiffs, Lori Frieden advised him to remove the furniture from the offer. Noriega contacted High and told him "the furniture was out of the deal" but the amount of Plaintiffs' counteroffer remained the same—$20 million cash. This $20 million cash offer without furnishings is referred to as the Revised Offer. After speaking with Davis, High called Noriega and told him the removal of the furniture "helped" and the "deal looked favorable." When Noriega asked if the Davis Trust had a response to the Revised Offer, High replied, "not yet." High did not mention the Hodge Offer.
On June 4, Noriega contacted High to learn whether Davis had responded to the Revised Offer. High told Noriega he had been unable to reach Davis but a response would be forthcoming. During a later conversation the same day, High told Noriega that Davis "had gone `MIA,'" he had not been able to review with Davis any of the offers made on the separate properties because she would not return his calls, Davis was in a "terrible emotional state" due to her husband's medical condition, Davis's financial advisors were having to "try to `talk her down from the ledge,'" High had advised Davis that sale of all three properties was highly desirable, High had recommended that Davis accept the Revised Offer, and the Davis Trust was not countering any offers, including the Revised Offer. Noriega told High that, based on High's statements, Plaintiffs wanted to purchase all three properties, but if they could not get all three, they would submit an offer just on 157 and 159 Emerald Bay, the two properties they were primarily interested in buying. Noriega emphasized that Plaintiffs needed a response from Davis so that they could further negotiate for all three properties, or just for 157 and 159 Emerald Bay. High did not mention the Hodge Offer. Instead, he referred only to separate offers on 158 and 159 Emerald Bay. If High had mentioned the Hodge Offer, Plaintiffs would have immediately submitted an offer to purchase just 157 and 159 Emerald Bay.
High asked Noriega if Plaintiffs had provided their "final and best offer" for the properties. Noriega stated he did not know, and reemphasized that Plaintiffs needed Davis's response to the Revised Offer because they did not want to negotiate against themselves.
High told Noriega that he would convey the Revised Offer to Davis when he was able to reach her. High stated that Plaintiffs would be the first to hear if the Davis Trust made any counteroffers or wanted to sell only 157 and 159 Emerald Bay, and would be given the opportunity to present additional counteroffers or present the Revised Offer in writing. High's comments throughout his discussions with Noriega led Plaintiffs to believe High was advocating their interests when he presented Plaintiffs' offer, counteroffer, and the Revised Offer to the Davis Trust. In particular, High commented he had advised Davis to sell all three properties and had recommended the Davis Trust accept Plaintiffs' offer.
The Revised Offer expired on June 4, 2009. High spoke with Davis on June 4 but did not convey the Revised Offer.
Not knowing of the Revised Offer, Davis accepted the Hodge counteroffer. On June 6, 2009, High faxed Davis's written acceptance of the Hodge Offer to Hodge's agent. On the same day, High informed Noriega that the Davis Trust, at the advice of its financial advisors, had accepted the Hodge Offer. When Noriega expressed shock and asked why the Davis Trust would accept the Hodge Offer without giving Plaintiffs a chance to make a higher offer, High did not provide a response.
Nonetheless, Noriega informed High that Plaintiffs would purchase all three properties for an all cash price of $23.5 million or would purchase just 157 and 159 Emerald Bay for $13.25 million (the New Revised Offer). High told Noriega not to submit the New Revised Offer.
At Plaintiffs' instruction, Noriega submitted the New Revised Offer directly to CB. Plaintiffs suspected that High had failed to convey the Revised Offer and other pertinent information to the Davis Trust. High told Noriega that the New Revised Offer would not be reviewed until June 8, 2009.
Out of growing frustration, and suspicious of High's honesty, Lori Frieden spoke directly with Davis and conveyed to her the New Revised Offer. "Davis'[s] mouth dropped when Lori Frieden told her about the Revised Offer and the ultimate amount of the New Revised Written Offer[]. Davis then said, `I have some phone calls to make.'" Davis's conduct and comments led Plaintiffs to believe (1) this was the first time Davis had been advised of the Revised Offer and the New Revised Offer, and (2) the Davis Trust would have accepted the Revised Offer or the New Revised Offer if Davis had received either of them before accepting the Hodge Offer.
Lori Frieden informed Davis that High had repeatedly told Noriega that High was unable to reach Davis to discuss the Revised Offer. Davis denied that assertion and said she had repeatedly been in contact with High or was available to be reached by him. Davis told Lori Frieden that 158 Emerald Bay was still on the market.
Based on Lori Frieden's conversation with Davis, Plaintiffs submitted an offer to purchase 158 Emerald Bay on June 7, 2009. The offer was for an all cash price of $11.95 million, with no conditions. Shortly thereafter, High told Noriega that Davis had rejected the Revised Offer, the New Revised Offer, and the offer on 158 Emerald Bay.
The Complaint alleged that High and CB acted with ulterior motives and purpose by failing to communicate the Revised Offer, the New Revised Offer, and other information to Davis. The Complaint alleged that Defendants' failure to disclose the Hodge Offer deprived Plaintiffs of the opportunity to make "a like offer" on 157 and 159 Emerald Bay. Plaintiffs relied on High's representations and duty as a licensed real estate professional that High would communicate information and offers to Davis. If Plaintiffs had known that High had not communicated "essential deal points and offers" to Davis, they would have communicated directly with High's supervisor or Davis. "It was also foreseeable that Defendants' failure to convey offers to the Davis . . . Trust would harm the [Frieden] Trust in that the [Frieden] Trust's offers were not considered by the Davis . . . Trust. Defendants' misconduct excluded the [Frieden] Trust's offers from consideration."
The Complaint alleged Plaintiffs suffered damages including "the cost to rent . . . another home until another substitute residence could be found. In addition, whereas purchase of the Property would have been a `lifetime home[,'] the [Frieden] Trust now faces a situation where it purchased a short-term substitute residence while it waits for another illusive `lifetime home' to materialize. Said damages exceed $6,000,000.00."
The Complaint asserted ten causes of action: (1) breach of duty to be honest and truthful; (2) breach of duty to exercise reasonable care; (3) breach of duty to disclose all material facts; (4) breach of warranty of authority; (5) negligent performance of a contract; (6) interference with prospective economic advantage; (7) intentional misrepresentation; (8) negligent misrepresentation; (9) fraud by concealment; and (10) negligence (against CB only).
The trial court sustained without leave to amend Defendants' demurrer to the Complaint. A judgment of dismissal was entered on January 22, 2010, and Plaintiffs timely appealed.
"On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, . . . [w]e give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] Further, we treat the demurrer as admitting all material facts properly pleaded, but do not assume the truth of contentions, deductions or conclusions of law." (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865.) We independently review a ruling on a demurrer and determine de novo whether the pleading alleges facts sufficient to state a cause of action. (McCall v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) "We affirm the judgment if it is correct on any ground stated in the demurrer, regardless of the trial court's stated reasons. [Citation.]" (Las Lomas Land Co., LLC v. City of Los Angeles (2009) 177 Cal.App.4th 837, 848.) When a demurrer is sustained without leave to amend, we reverse if "there is a reasonable possibility that the defect can be cured by amendment." (City of Dinuba v. County of Tulare, supra, 41 Cal.4th at p. 865.)
The Complaint alleged Plaintiffs suffered the following damages: "the cost to rent . . . another home until another substitute residence could be found. In addition, whereas purchase of the Property would have been a `lifetime home[,'] the [Frieden] Trust now faces a situation where it purchased a short-term substitute residence while it waits for another illusive `lifetime home' to materialize. Said damages exceed $6,000,000.00." These allegations do not set forth actual, recoverable damages. All of Plaintiffs' causes of action fail for that reason.
The trial court ruled, and Defendants argue, Plaintiffs are limited to out-of-pocket damages pursuant to Civil Code section 3343 (section 3343). Plaintiffs argue they are entitled to recover all proximately caused damages pursuant to Civil Code section 3333 (section 3333). As we explain, Plaintiffs have no damages under either measure.
Under section 3343, subdivision (a)(1), "[o]ne defrauded in the purchase, sale or exchange of property is entitled to recover the difference between the actual value of that with which the defrauded person parted and the actual value of that which he received, together with any additional damage arising from the particular transaction," including any amount spent in actual and reasonable reliance on the fraud.
Section 3333 provides: "For the breach of an obligation not arising from contract, the measure of damages, except where otherwise expressly provided by this Code, is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not." Civil Code section 1709 provides: "One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers." The purpose of tort damages is to fully compensate the victims for the injury he or she suffered. (Santa Barbara Pistachio Ranch v. Chowchilla Water Dist. (2001) 88 Cal.App.4th 439, 446.) "There is no fixed rule for the measure of tort damages under Civil Code section 3333. The measure that most appropriately compensates the injured party for the loss sustained should be adopted." (Id. at pp. 446-447.)
"In fraud cases involving the `purchase, sale or exchange of property,' the Legislature has expressly provided that the `out-of-pocket' rather than the `benefit-of-the-bargain' measure of damages should apply. (§ 3343, subds. (a), (b)(1).) This section does not apply, however, when a victim is defrauded by its fiduciaries. In this situation, the `broader' measure of damages provided by [Civil Code] section 1709 and 3333 applies." (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1240-1241, fns. omitted.)
The section 3343 measure of damages applies when the victim was defrauded in the purchase, sale, or exchange of property. The section 3333 measure of damages applies when (1) the victim was defrauded by a fiduciary in the purchase, sale, or exchange of property, or (2) the fraud did not involve the purchase, sale, or exchange of property. (See Lazar v. Superior Court (1996) 12 Cal.4th 631, 649 [section 3333 applies to fraud in inducement of employment contract].)
Under section 3343, Plaintiffs suffered no damages because the Complaint did not allege they parted with or received anything, or expended money in reliance on the alleged fraud. Plaintiffs contend their recovery is measured by section 3333 instead of section 3343 because the alleged fraud did not result in their purchase of the properties. Even if section 3333 applied, Plaintiffs suffered no damages because the Complaint did not allege actual, nonspeculative damages.
"In California, `recovery in a tort action for fraud is limited to the actual damages suffered by the plaintiff. [Citations.]' [Citation.] `"Actual" is defined as "existing in fact or reality," as contrasted with "potential" or "hypothetical," and as distinguished from "apparent" or "nominal." [Citation.] It follows that "actual damages" are those which compensate someone for the harm from which he or she has been proven to currently suffer or from which the evidence shows he or she is certain to suffer in the future.' [Citation.]" (Small v. Fritz Companies, Inc. (2003) 30 Cal.4th 167, 195 (conc. opn. of Baxter, J.).) Actual damages "are to be distinguished from those which are nominal rather than substantial, exemplary or punitive rather than compensatory, and speculative rather than existing or certain." (Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1543-1544.) Actual damages are synonymous with compensatory damages. (Id. at p. 1545.)
"Whatever its measure in a given case, it is fundamental that `damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery. [Citations.]'" (Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 989.)
As damages, Plaintiffs alleged (1) loss of the properties, (2) the cost to rent another home until a substitute home could be found, and (3) "whereas purchase of the Property would have been a `lifetime home[,'] the [Frieden] Trust now faces a situation where it purchased a short-term substitute residence while it waits for another illusive `lifetime home' to materialize."
Item (1)—loss of the properties—is not recoverable as damages. If it could be proven the Davis Trust would have sold those properties to the Frieden Trust, then Plaintiffs would not have any actual damages because they would have paid for the properties. Plaintiffs do not allege they could have profited by reselling the properties at a higher price than what they paid.
Item (2) is not recoverable as damages because Plaintiffs would have to pay to live somewhere regardless of the alleged fraud. Plaintiffs did not allege they sold their home in anticipation of purchasing 157 and 159 Emerald Bay or in reliance on any of the alleged misrepresentations. If the Davis Trust had sold 157 and 159 Emerald Bay to Plaintiffs, they would have had to pay the sales price to have a place to live.
Item (3) is speculative and noncompensable. It appears to be an indirect way to recover emotional distress damages for Plaintiffs' inability to buy their dream house.
Plaintiffs argue the allegations of a complaint filed by the Davis Trust show their damages are not speculative. The Davis Trust sued High and CB, alleging they breached their fiduciary duties as real estate brokers and committed fraud by making misrepresentations about Plaintiffs and by failing to present the Revised Offer and the New Revised Offer. Many of the fraud allegations of the Davis Trust's complaint are the same as, or similar to, those of the Complaint in this case. As compensatory damages, the Davis Trust's complaint alleges the difference between the amount the Davis Trust received by selling the properties to Hodge and the amount the Davis Trust would have received if it had accepted Plaintiffs' offer. We granted Plaintiffs' request to take judicial notice of the Davis Trust's complaint.
Judicial notice of a pleading is permitted only to establish the existence of the pleading in a court file. (Day v. Sharp (1975) 50 Cal.App.3d 904, 914.) We cannot take judicial notice of the truth of any of the allegations. (Ibid.) Thus, by taking judicial notice of the Davis Trust's complaint, we are acknowledging only that it exists and has been filed in the trial court.
Plaintiffs argue they should have been granted leave to amend to allege moving expenses and to allege specific items of damages, such as the cost of gas and cell phone calls that are incidental to negotiating the purchase of a home. The former, damages for moving expenses, is the same as the cost to rent another home—Plaintiffs would have had those expenses even in the absence of the alleged fraudulent conduct. Plaintiffs did not allege they sold their home and moved into a rented home in reliance on any of the alleged misrepresentations. Similarly, in the absence of the alleged fraudulent conduct, Plaintiffs would have incurred the same incidental costs, such as those for gas and cell phone calls, in negotiating the purchase of 157 and 159 Emerald Bay.
Plaintiffs also argue they should have been granted leave to amend to allege damages for unjust enrichment and constructive trust. Plaintiffs cannot recover for unjust enrichment or constructive trust because Defendants did not enrich themselves at Plaintiffs' expense. "A person who has been unjustly enriched at the expense of another is required to make restitution to the other." (Rest., Restitution, § 1.) To recover restitution based on unjust enrichment, a plaintiff must have suffered damages; there must be something to restitute to the plaintiff. (Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593.) Here, Plaintiffs did not part with anything or suffer damages; there is nothing for Defendants to restore to them.
In the cause of action for breach of warranty of authority, Plaintiffs alleged, "[w]hen an agent acts without authority or in excess of the agent's authority, the agent may be held liable for resulting damages for having breached the agent's implied warranty of authority." Plaintiffs alleged that "Defendants acted without authority when they consciously, intentionally and knowingly failed to disclose the Hodge Offer to the [Frieden] Trust."
Breach of the warranty of authority is defined as making a contract or representation on behalf of another whom the purported agent has no power to bind. (Berryman v. Merit Property Management, Inc. (2007) 152 Cal.App.4th 1544, 1554.) "As the [Complaint] expressly alleges that [High] has an agent's authority in this matter, it fails to allege a violation of the breach of the warranty of authority." (Ibid.)
In the cause of action for negligent performance of a contract, Plaintiffs alleged High and CB negligently performed their duties under the listing agreements between the Davis Trust and CB and, if High and CB had properly performed their duties, "the Davis . . . Trust would have accepted the [Frieden] Trust's offer over the Hodge Offer." The cause of action for negligent performance of a contract was premised on the theory that Plaintiffs were intended beneficiaries of the listing agreements between the Davis Trust and CB. That theory fails as a matter of law.
"[W]here the `end and aim' of the contractual transaction between a defendant and the contracting party is the achievement or delivery of a benefit to a known third party or the protection of that party's interests, then liability will be imposed on the defendant for his or her negligent failure to carry out the obligations undertaken in the contract even though the third party is not a party thereto." (Adelman v. Associated Internat. Ins. Co. (2001) 90 Cal.App.4th 352, 363.)
Plaintiffs were not a "known third party" to the listing agreements between the Davis Trust and CB. Plaintiffs were but among many potential buyers, unknown at the time the listing agreements were made. The listing agreements were not intended to affect or benefit Plaintiffs, and it was not foreseeable that negligent performance of the agreements would harm them. (Biakanja v. Irving (1958) 49 Cal.2d 647, 650.)
Plaintiffs' cause of action for interference with prospective economic advantage failed to state a claim. A cause of action for interference with prospective economic advantage requires the existence of an economic relationship between the plaintiff and a third party having the probability of future economic benefit to the plaintiff. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153; see Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 525 ["a defendant's tortious conduct must have interfered with a specific existing relationship, not simply with the formation of one in the future"].)
The Complaint alleged, "[a] non-contractual relationship existed between the [Frieden] Trust and the Davis . . . Trust as evidenced by the submission of the [Frieden] Trust's original offer and the Davis . . . Trust's Counter Offer #1." That allegation is legally insufficient for interference with prospective economic advantage. An offer and counteroffer are part of the negotiation process and are not, without an acceptance, an existing economic relationship.
The judgment is affirmed. Respondents to recover costs incurred on appeal.
WE CONCUR:
ARONSON, ACTING P. J.
IKOLA, J.
