Plaintiff broker appealed from the Superior Court of Los Angeles County (California), which dismissed a third amended complaint against defendant sellers and buyers upon the sustaining of a demurrer. The trial court also dismissed the broker's action on the ground that the amended complaint, claiming breach of contract and fraudulent misrepresentation with respect to an allegedly owed finder's fee, was a sham and frivolous.

Nakase Law Firm explains constructive fraud

A broker filed a third amended complaint, without leave to amend, against certain sellers and buyers for breach of contract and fraudulent misrepresentation with respect to a finder's fee allegedly owed to the broker. In response, the sellers and buyers filed motions for demurrer and dismissal. The trial court entered a judgment of dismissal upon sustaining the demurrer and also dismissed the action against the sellers and buyers on the ground that each count of the complaint was a sham and frivolous. On appeal, the court reversed. Specifically, the court held that the second count of the complaint alleged facts sufficient to show that a release by the broker had been obtained through the buyers' misrepresentations about their noninterest in purchasing the seller's business. Thus, the court concluded that the second count sufficiently stated a cause of action for fraudulent misrepresentation. Moreover, the court ruled that if the allegations of the second count were imported into the first count, then the first count sufficiently stated a cause of action for breach of contract.

The court reversed the dismissal of the broker's complaint against the buyers and sellers for breach of contract and fraudulent misrepresentation with respect to a finder's fee. In particular, the court found that the complaint alleged sufficient facts to sustain the causes of action, and thus the trial court erred in entering a dismissal upon the sustaining of a demurrer.