Opinion
C080462
01-19-2018
CHARLES WEINBERGER et al., as Trustees, etc., Plaintiffs and Appellants, v. INTERO REAL ESTATE SERVICES, INC., Defendant and Respondent.
NOT TO BE PUBLISHED California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. TCV0001512)
This appeal involves a fractional interest (commonly known as a timeshare) in a condominium located in a ski resort development in North Lake Tahoe that appellants Charles and Deanne Weinberger, as trustees of the Weinberger Family 2003 Trust (the Weinbergers) bought as an investment. Not long after their purchase, the Weinbergers entered into a listing agreement with respondent Intero Real Estate Services, Inc. (Intero) in order to sell the timeshare. The listing agreement incorporated the resale agreement between the Weinbergers and the developer of the project, 8050 Tahoe, LLC (8050 Tahoe). The resale agreement provided rules on timeshare resales that governed the priority of sales when multiple owners sought to sell their timeshares.
In their operative complaint, the Weinbergers allege 8050 Tahoe and Intero breached the resale and listing agreements by allowing other owners to cut in line to sell their fractional interests before the Weinbergers. Based on damages alleged to have been sustained as a result of the delay in selling their fractional interest, the Weinbergers filed this action. As pertinent to this appeal, Intero moved for and the trial court granted summary judgment on grounds Intero was not a party to the resale agreement. Thus, the trial court entered a judgment of dismissal in favor of Intero.
On appeal, the Weinbergers contend (1) the trial court erred by dismissing their cause of action for breach of contract for the listing agreement by considering only the resale agreement, (2) the claim for breach of the covenant of good faith and fair dealing is viable because the claim is based on Intero's duty under the listing agreement, (3) the cause of action for breach of fiduciary duty was based on duties arising under the listing agreement so that the claim should not have been dismissed based on the terms of the resale agreement, (4) the cause of action for negligent supervision should not have been dismissed because the Weinbergers demonstrated triable issues of fact regarding whether Intero properly supervised its agents in listing the Weinberger's timeshare for sale, (5) the claim for negligent interference with prospective economic relations should not have been dismissed because Intero had a duty to comply with the resale agreement terms so that other owners should not have been allowed to sell before the Weinbergers, and (6) the trial court erroneously dismissed the cause of action for breach of contract of the resale agreement because the Weinbergers showed Intero and its agents actively managed the resale list for all of the development's owners who sought to sell their interests.
On our own motion, we directed the parties to submit supplemental briefs regarding (1) whether the trial court's dismissal of the Weinbergers' claim for negligent supervision should be affirmed on grounds they neither alleged in the operative complaint nor asserted any facts showing Intero knew or should have known its agents would mismanage the resale list, and (2) whether the dismissal of the Weinbergers' claim for negligent interference with prospective economic advantage should be affirmed on grounds this cause of action focuses on a contract for sale of their fractional interest with a prospective buyer. We have received and considered the supplemental briefing from the Weinbergers and Intero.
We conclude the trial court erred in ignoring the obligations arising under the listing agreement to which Intero and the Weinbergers were parties. Thus, the trial court erroneously dismissed the Weinberger's causes of action against Intero that were based on the listing agreement or duties Intero assumed in its capacity as the Weinberger's real estate agent. Thus, we reverse the dismissal of the Weinbergers claims against Intero, Anita Noble, and Truckee River Homes for breach of contract for the listing agreement, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty.
However, we affirm the trial court's dismissal of the Weinbergers claims against Intero, Noble, and Truckee River Homes for negligent supervision, negligent interference with prospective economic advantage, and breach of contract of the resale agreement. In their supplemental brief, the Weinbergers acknowledge they neither alleged in the operative complaint nor asserted any facts showing Intero knew or should have known its agents would mismanage the resale list as alleged. Thus, the Weinbergers' claim for negligent supervision lacks an essential element of the cause of action. Careful review of the Weinbergers' claim for negligent interference with prospective economic advantage shows this cause of action focuses on a contract for sale of their fractional interest with a prospective buyer. California, however, does not recognize a cause of action for negligent interference with a contract. The Weinbergers do not dispute this cause of action was based on a contract for "the reasonably probable future purchase of [their] fractional interest." Finally, it is undisputed that Intero was not a signatory to the resale agreement. It has long been recognized that a contract for sale of real property cannot be enforced against a defendant who has not signed the document.
Accordingly, we affirm in part and reverse in part.
FACTUAL AND PROCEDURAL HISTORY
The Weinberger's Operative Complaint
The Weinbergers' third amended complaint is the operative complaint in this case. The operative complaint alleges: In August 2006, the Weinbergers signed a purchase agreement with 8050 Tahoe to buy a fractional interest in a three-bedroom condominium unit at 9001 Northstar Drive in Truckee, California. 8050 Tahoe was the developer of the condominium project. Anita Noble of Truckee River Homes was the licensed real estate broker who represented the Weinbergers in their purchase of the fractional interest. The Weinbergers purchased the fractional interest primarily as an investment.
8050 Tahoe subsequently changed its name to One Village Place LLC. For the sake of consistency with the agreements at issue in this case, we refer to the developer as 8050 Tahoe.
Under the purchase agreement, the Weinbergers were not allowed to resell their fractional interest for five years except by participating in the 8050 Tahoe resale program. To comply with the resale agreement, an owner who wished to sell a fractional interest would be required to sign a resale agreement and be placed on a resale list. For every specified number of previously unsold fractional interests sold by 8050 Tahoe, the owner at the top of the resale list would be allowed to sell a fractional interest. The order in which owners could sell was determined by who closed escrow on their fractional interest first. If more than one owner closed escrow on the same day the first person to fund the escrow would receive priority.
In December 2006, the Weinbergers signed a resale agreement with 8050 Tahoe. The resale agreement required the Weinbergers to use Intero for the resale of their fractional interest. Noble and Truckee River Homes acted as agents of Intero under the resale program. The Weinbergers were informed by 8050 Tahoe and Intero that for every four fractional ownership interests in a three-bedroom unit that 8050 Tahoe sold, one owner would be allowed to sell a fractional interest in a three-bedroom unit. The Weinbergers later discovered that not all owners were held to the same ratio.
The resale program and resale list were managed by 8050 Tahoe, Truckee River Homes, Noble, and two other real estate salespersons: Christina Soloski and Karri Lyman. The Weinbergers were the first owners of a three-bedroom fractional interest to close escrow, execute the resale agreement, and fund the escrow account. Accordingly, they believed they would be at the highest priority of three-bedroom fractional interest on the resale list. On February 2007, Noble created a resale list that showed the Weinbergers at the top. However, in March 2007, Noble sent an e-mail to Charles Weinberger that stated the Weinbergers were third on the three-bedroom resale list. The owner at the top of the new list, Sarah Rogers, was already in contract to sell her fractional interest. Rogers was allowed to sell her fractional interest without entering into the resale agreement.
Sales of fractional interests in the development slowed dramatically in 2007 and there were no additional sales of fractional interests on the resale list. In November or December 2007, 8050 Tahoe surrendered ownership of the development to an informal group of investors created by Robert Chrisman. Thereafter, 8050 Tahoe made minimal effort to sell any owners' fractional interests.
The Weinbergers filed this action against 8050 Tahoe, Intero, Truckee River Homes, Noble, Soloski, Lyman, Rogers, and Chrisman. Relating to Intero, Truckee River Homes, and Noble, the operative complaint set forth causes of action for breach of contract of the purchase agreement and resale agreement; breach of the covenant of good faith and fair dealing; negligent interference with prospective economic relations; breach of fiduciary duty; negligent supervision; and breach of contract for the listing agreement.
Intero's Motion for Summary Judgment
Intero moved for summary judgment. Intero denied Noble acted as its agent, but for purposes of summary judgment assumed Noble and Truckee River Homes were acting as its agent at all relevant times. Intero argued that its only duties arose under the listing agreement because it was not a signatory to the resale agreement. Thus, Intero asserted it had no obligation to manage the resale list, supervise any agents in the operation of the resale program, or any other duty alleged in the operative complaint. Based on this reasoning, Intero argued it was also not liable for negligence relating to the implementation of the resale program.
The Weinberger's Opposition to Motion for Summary Judgment
The Weinbergers opposed the motion for summary judgment. The Weinbergers asserted Noble "actually undertook the duty to administer the Resale Program," to advise the Weinbergers on the resale process, and to track developer sales and resales. The Weinbergers also reiterated that the listing agreement fully incorporated the terms of the resale agreement. On this basis, the Weinbergers argued Intero assumed the obligations set forth in the resale agreement.
The Trial Court Granted Summary Judgment in Favor of Intero
The trial court granted Intero's motion for summary judgment. The trial court determined Intero had met its initial burden of demonstrating the Weinbergers claims had no merit. The trial court reasoned: "In reviewing the language of the resale agreement . . . , the agreement cannot be interpreted as making Intero a party to the agreement. [The Weinbergers] appointed the developer as its agent. The developer, in turn, designated Intero as an authorized listing agent to facilitate any sale. The contractual obligation was made between [the Weinbergers] and the developer. There was no relationship between [the Weinbergers] and Intero." In so reasoning, the trial court omitted any mention of the listing agreement to which Intero and the Weinbergers were signatories. Instead, the trial court concluded that "[w]ithout a contractual relationship, which is the underpinning of each of [the Weinbergers'] six causes of action against Intero, there is no duty owed by Intero to [the Weinbergers]. Thus, Intero has met its initial burden."
The trial court also denied 8050 Tahoe's motion for summary judgment. This aspect of the trial court's ruling, however, is not germane to this appeal.
The trial court next determined the Weinbergers had not met their burden to establish triable issues of material fact. The trial court elaborated: "Intero was not contractually responsible for administering the developer's resale program. It was also not responsible for determining who would sell their fractional interests first. It was also the developer who could change the resale method, not Intero. The developer also handled sales and reselling of the fractional interests. [The Weinbergers] have not sufficiently established triable issues of material fact since they cannot dispute it was the developer, and not Intero, that had control and responsibility over the resale program. Based on the foregoing, the motion for summary judgment is granted."
Joint Stipulation Regarding Defendants Truckee River Homes and Anita Noble
In May 2014, the Weinbergers, Noble, and Truckee River Homes entered into a joint stipulation to set aside the default of Noble and enter judgment for Truckee River Homes and Noble. In the stipulation, the Weinbergers, Noble, and Truckee River Homes agreed the default against Noble should be set aside; the judgment entered on Intero's motion for summary judgment should apply equally to Truckee River Homes and Noble; and the result of any appeal from the judgment of dismissal in favor of Intero should apply equally to Truckee River Homes and Noble. The trial court entered the stipulation as an order in August 2014. Thereafter, the Weinbergers timely filed their notice of appeal from the judgment of dismissal.
Consequently, the disposition of this appeal applies equally to Intero, Noble, and Truckee River Homes. Nonetheless, for the sake of convenience, we refer to Intero, Noble, and Truckee River Homes collectively as Intero from this point.
DISCUSSION
I
Review of Orders Granting Summary Judgment
Code of Civil Procedure section 437c, subdivision (c), provides for the granting of a motion for summary judgment when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Consequently, our review focuses on determining whether the defendants have met their burden of showing that "one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to that cause of action." (Code Civ. Proc., § 437c, subd. (p)(2).) The burden then shifts to the plaintiff to present evidence showing a triable issue of fact. (Code Civ. Proc., § 437c, subd. (p)(2).) A triable issue of material fact exists if the evidence and its reasonable inferences would allow a reasonable juror to resolve the factual contention in favor of the party opposing summary judgment. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 856.)
We review an order granting summary judgment under the de novo standard of review, considering "all the evidence set forth in the moving and opposition papers except that to which objections have been made and sustained." (Guz v. Bechtel Nat., Inc. (2000) 24 Cal.4th 317, 334.) "In performing our de novo review, we must view the evidence in a light favorable to plaintiff as the losing party [citation], liberally construing her [or his] evidentiary submission while strictly scrutinizing defendants' own showing, and resolving any evidentiary doubts or ambiguities in plaintiff's favor." (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 768.)
II
Breach of Contract for the Listing Agreement (Eighth Cause of Action)
The Weinbergers contend the trial court erred in dismissing their cause of action against Intero for breach of contract of the listing agreement. They argue that there are triable issues of material fact regarding whether Intero violated the listing agreement by manipulating the resale program. Their argument has merit.
A.
The Listing Agreement
In March 2007, the Weinbergers entered into a listing agreement with Intero. Noble signed the listing agreement on behalf of Intero. The purpose of the agreement was to sell the Weinbergers' fractional interest in the development. Reflecting the development's rules for sales of fractional interests, the listing agreement expressly incorporated the resale agreement by reference. In pertinent part, the resale agreement provided that the Weinbergers, as owner of a fractional interest, "appoint 8050 [Tahoe] as its sole agent to administer the sale of Owner's Interest through the Resale Program and grants to 8050 [Tahoe] the exclusive right, through a licensed California real estate broker, to sell Owner's Interest in accordance with the terms and conditions of this Agreement. Owner agrees to engage a listing broker designated by 8050 [Tahoe] (the 'Listing Broker') to facilitate the sale of Owner's Interest and, if necessary, to enter into a listing agreement with such Listing Broker. The initial Listing Broker shall be Intero Real Estate Services." The listing agreement also stated that "Broker agrees to exercise reasonable effort and due diligence to achieve the purposes of this Agreement."
The Weinbergers' operative complaint alleges Intero breached the listing agreement because the incorporated resale agreement established the priority of sales among fractional interest owners wishing to sell. Specifically, the Weinbergers alleged Intero wrongfully placed other owners ahead of the Weinbergers on the resale list. By allowing other owners to cut in front of the Weinbergers, Intero allegedly breached its contractual duties to sell the Weinbergers' fractional interests.
In support of this claim, the Weinbergers introduced evidence Intero was the exclusive broker for the developer's sales of new inventory and the owners' resales of fractional interests. Although Intero denied it had any role in monitoring or controlling the resale list, the Weinbergers introduced evidence Intero allowed Rogers to sell her fractional ownership interest outside the restrictions of the resale agreement and ahead of the Weinbergers. The Weinbergers noted Noble's denial she tracked the resale list at all, but argued her contractual duty was to ensure the Weinbergers' interest was sold according to their priority on the resale list. The Weinbergers introduced evidence that a copy of the resale list bore the words, "From Anita Noble" at the top of the document. And the Weinbergers introduced statements from the developer that "Noble managed the resale list."
B.
Review of Breach of Contract Claims
Because it is a "settled principle that the existence and scope of a [contractual] duty is a question of law for the court," the "determination of such duty is a matter of law appropriate for summary adjudication." (Linden Partners v. Wilshire Linden Associates (1998) 62 Cal.App.4th 508, 519.) In determining the nature and scope of contractual duties, we apply the de novo standard of review. (Wolf v. Walt Disney Pictures and Television (2008) 162 Cal.App.4th 1107, 1135.) "The rules governing the role of the court in interpreting a written instrument are well established. The interpretation of a contract is a judicial function. (Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging (1968) 69 Cal.2d 33, 39-40 (Pacific Gas & Electric).) In engaging in this function, the trial court 'give[s] effect to the mutual intention of the parties as it existed' at the time the contract was executed. (Civ. Code, § 1636.) Ordinarily, the objective intent of the contracting parties is a legal question determined solely by reference to the contract's terms. (Civ. Code, § 1639['[w]hen a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible . . .']; Civ. Code, § 1638 [the 'language of a contract is to govern its interpretation . . . '].)" (Wolf, supra, at pp. 1125-1126.)
C.
Triable Issues of Fact Regarding the Claim for Breach of the Listing Agreement
The trial court erred in ruling that "[t]he basis for all six causes of action stem from the contractual language primarily found in paragraphs 2, 9, and 11 of the Exclusive Resale Agreement . . . ." Thus, the trial court entirely omitted any analysis of the contractual duties assumed by Intero in its listing agreement with the Weinbergers. The Weinbergers' operative complaint expressly alleged a claim for breach of contract for the listing agreement. Regardless of whether Intero was a signatory to or assumed duties under the resale agreement, Intero had contractual duties to the Weinbergers under the listing agreement. Thus, the trial court erred in concluding that "[t]here was no contractual relationship established between plaintiffs and Intero."
In support of their breach of contract claim arising out of the listing agreement, the Weinbergers introduced sufficient evidence to create triable issues of material fact. The evidence that Intero allowed another seller to cut in front of the Weinbergers creates a triable issue of fact regarding whether Intero breached its contractual duty to exercise reasonable diligence in selling the Weinbergers' fractional interest. And, if proven, Intero's sale of Rogers's fractional interest before that of the Weinbergers would establish a breach of contract for the listing agreement based on its incorporation of the rules of the resale program. Accordingly, the trial court erred in dismissing the Weinbergers' eighth cause of action for breach of contract for the listing agreement.
III
Breach of Fiduciary Duty (Sixth Cause of Action)
The Weinbergers contend the trial court erroneously dismissed their cause of action against Intero for breach of fiduciary duty. We agree.
A.
The Weinbergers' Claim
The Weinbergers' sixth cause of action asserted a claim for breach of fiduciary duty against Intero. The Weinbergers' complaint highlighted the "fiduciary duty that arises between a real estate licensee and their clients requires real estate licensees to share material information with [their] clients." Thus, the Weinbergers asserted Intero and its agents "breached their fiduciary duties to the Weinbergers when they failed to share the material information that other fractional ownership interest owners were improperly moving ahead of the Weinbergers on the Resale List, and that other fractional interest owners were selling their units outside of the Resale Program, and when they failed to disclose that not all fractional interest owners were held to the same resale ratio."
In opposing summary judgment, the Weinbergers introduced evidence that a resale priority list bore the handwritten note that it was "from Anita Noble." Another Intero agent, Karri Lyman, recalled that "it was very important to [Charles Weinberger] to be on the resale list." On March 9, 2007, Noble informed the Weinbergers they were third on the three-bedroom resale list and demand for three-bedroom interests was strong. Lyman informed Charles Weinberger: "I spoke to my listing broker Anita Noble and she wanted me to assure you that we will make sure that you are one of the 1st contracts to close so that you can be on top of the list." In deposition testimony, the developer denied ever creating a resale list. Instead, he believed that was a task handled by the real estate broker. Another fractional interest owner testified in a deposition that he participated in conference calls where he learned the resale list was "developed and maintained by Anita" Noble.
B.
Breach of Fiduciary Duty
It is well settled "that any broker acts in a fiduciary capacity and owes an affirmative duty of disclosure to his [or her] principal." (Fisher v. Losey (1947) 78 Cal.App.2d 121, 125.) "The law imposes on a real estate agent 'the same obligation of undivided service and loyalty that it imposes on a trustee in favor of his [or her] beneficiary.' [Citations.] This relationship not only imposes upon him [or her] the duty of acting in the highest good faith towards his [or her] principal but precludes the agent from obtaining any advantage over the principal in any transaction had by virtue of his [or her] agency. [Citation.] 'Such an agent is charged with the duty of fullest disclosure of all material facts concerning the transaction that might affect the principal's decision. [Citations.]' " (Batson v. Strehlow (1968) 68 Cal.2d 662, 674-675, quoting in part Rattray v. Scudder (1946) 28 Cal.2d 214, 223.)
Even when a broker is charged only with completing a sales transaction without discretion to set the price, the broker nonetheless owes his or her principal a fiduciary duty. (American Marine Paint Co. v. Nyno Line (1924) 70 Cal.App. 415, 422.) American Marine involved the sale of a ship by a broker, W.C. Lacambe. Lacambe undertook to sell the ship on behalf of its owner. (Id. at p. 419.) Lacambe found a buyer for the ship, but misrepresented to the owner that an unusually large sales commission was necessary to entice the buyer to complete the sale. (Id. at pp. 417, 419.) The owner reluctantly agreed and the ship was sold for the price set by the owner. (Id. at p. 419.) When the owner discovered Lacambe's self-dealing regarding the commission, the owner sued. From a judgment against him, Lacambe appealed and argued that because he did not have the right to set the amount of the sale he did not owe the seller any fiduciary duty. (Id. at p. 422.) The American Marine court rejected the contention, explaining: "The rights of the principal will not be changed nor the capacity of the agent enlarged by the fact that the agent is not invested with a discretion, but simply acts under an authority to purchase a particular article at a specified price, or to sell a particular article at the market price [citation]; nor does it matter whether or not his [or her] employment be called an agency." (Ibid.)
C.
Fiduciary Duties Arising Out of the Listing Agreement
The trial court ruled there is no duty of any kind owed by Intero to the Weinbergers. In so ruling, the trial court overlooked the undisputed fact Intero and the Weinbergers had a contractual relationship under the listing agreement. Because the trial court did not recognize the listing agreement, the trial court did not address the fiduciary duties Intero assumed as the Weinbergers' broker.
These fiduciary duties included Intero's duty to disclose material facts to the Weinbergers and to avoid self-dealing in a manner that would harm the Weinbergers. (Batson v. Strehlow, supra, 68 Cal.2d at pp. 674-675.) On this point, the operative complaint alleges that "[t]he fiduciary duty that arises between a real estate licensee and their clients requires real estate licensees to share material information with those clients." The Weinbergers' complaint further alleges a breach of fiduciary duty in failing to conduct "the transactions within the Resale Program and contemplated by the Resale Agreement." These fiduciary duties Intero owed to the Weinbergers arose under the listing agreement, regardless of whether Intero lacked control over the resale program. Intero's status as a nonsignatory to the resale agreement does not negate Intero's fiduciary duties under the listing agreement.
The Weinbergers demonstrated the existence of triable issues of material fact relating to their claims of Intero's breach of fiduciary duties. First, the Weinbergers introduced evidence Intero failed to disclose to the Weinbergers their priority on the resale list was adversely affected when Rogers was allowed to cut in front of the Weinbergers. Regardless of who controlled the resale list, this information regarding violation of the resale rules was material and should have been disclosed to the Weinbergers. Second, the Weinbergers introduced evidence indicating Noble controlled the resale list. If Noble controlled the resale list, her manipulation of the order of sales to allow another buyer without priority to sell constituted a breach of fiduciary duties to the Weinbergers. Third, the Weinbergers introduced evidence Intero engaged in self-dealing at the expense of the Weinbergers by allowing Rogers to sell and buy fractional interests before the Weinbergers were allowed to sell their interest. The Weinbergers point out, if they can prove this fact at trial, it establishes self-dealing by Intero because it stood to double its commissions on a sale and purchase by Rogers when compared to the single sale by the Weinbergers.
Intero reiterates the trial court's reasoning when it argues that "[b]ecause Intero had no duty to control [8050 Tahoe's] Resale Program (and the mechanics of that Program), Intero owed no fiduciary duty to [the Weinbergers] with respect to the Resale Program. Further the Listing Agreement did not impose any fiduciary duties on Intero to [the Weinbergers] regarding any duty to monitor [8050 Tahoe's] activities vis-a-vis the Resale List." We disagree. As we explained above, Intero had fiduciary duties to disclose material information about the resale program to the Weinbergers. There is a dispute about Intero's withholding of information about whether the resale list was manipulated in violation of the resale agreement and whether it was Intero itself that engaged in the manipulation. The existence of these triable issues of material fact require the reversal of the trial court's dismissal of the Weinbergers' claim for breach of fiduciary duty against Intero.
IV
Breach of the Covenant of Good Faith and Fair Dealing (Second Cause of Action)
The Weinbergers contend the trial court erred in dismissing their claim for breach of the covenant of good faith and fair dealing against Intero. The contention is meritorious.
A.
Intero's Alleged Manipulation of the Resale List
The Weinbergers introduced deposition testimony that Noble was aware of the rules governing the resale program for fractional interests in the development. Another owner provided deposition testimony that the developer stated Noble created and maintained the resale list. That owner further testified Noble allowed a seller without priority to cut in front of him in sales priority. In her deposition testimony, Noble acknowledged hearing the developer would allow an owner, Rick Targett, to sell his fractional interest before all others if that owner also bought another three fractional interests. The Weinbergers also submitted deposition testimony by Noble indicating she observed the developer promise owners priority on the resale list "no matter what." Noble further testified that based on the closing dates for escrow, Rogers should have had a lower priority on the resale list than the Weinbergers. However, Noble did not inform the Weinbergers Targett and Rogers had advanced ahead of the Weinbergers in conflict with the resale rules and based on the developer's incentivizations.
B.
Implied Covenant of Good Faith and Fair Dealing
Causes of action for breach of the implied covenant of good faith and fair dealing rest on the "the well established principle that, 'In every contract there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract, which means that in every contract there exists an implied covenant of good faith and fair dealing. (Universal Sales Corp. v. Cal. etc. Mfg. Co., 20 Cal.2d 751, 771; Brown v. Superior Court, 34 Cal.2d 559, 564; Van Houten v. Whitaker, 169 Cal.App.2d 510, 516.) 'This covenant not only imposes upon each contracting party the duty to refrain from doing anything which would render performance of the contract impossible by any act of his [or her] own, but also the duty to do everything that the contract presupposes that he [or she] will do to accomplish its purpose. [Citations.]' (Harm v. Frasher, 181 Cal.App.2d 405, 417.)" (Colwell Co. v. Hubert (1967) 248 Cal.App.2d 567, 575 (Colwell).)
As this court has previously noted, " '[D]efining what is required by this covenant has not always proven an easy task.' (Carma Developers (Cal.), Inc. v. Marathon Development California, Inc., (1992) 2 Cal.4th 342, 372.) The term 'good faith' is applicable to a wide spectrum of conduct affecting obligations undertaken pursuant to contracts and its meaning is necessarily dependent on the context." (R.J. Kuhl Corp. v. Sullivan (1993) 13 Cal.App.4th 1589, 1601-1602.) For this reason, "[i]nstead of defining what is consistent with good faith and fair dealing, it is more meaningful to concentrate on what is prohibited." (Carma Developers (Cal.), Inc. v. Marathon Development California (1992) 2 Cal.4th 242, 372.) "However, 'bad faith' also has broad connotations. [¶] 'Subterfuges and evasions violate the obligation of good faith in performance even though the actor believes his [or her] conduct to be justified. But the obligation goes further: bad faith may be overt or may consist of inaction, and fair dealing may require more than honesty. A complete catalogue of types of bad faith is impossible, but the following types are among those which have been recognized in judicial decisions: evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering of imperfect performance, abuse of a power to specify terms, and interference with or failure to cooperate in the other party's performance.' (Rest.2d Contracts, § 205, com. d.)" (R.J. Kuhl, supra, at p. 1602.)
C.
Analysis
The trial court erred in dismissing the Weinbergers' claim against Intero for breach of the implied covenant of good faith and fair dealing. The listing agreement constitutes a contract for which the law implies a covenant of good faith and fair dealing. (Colwell, supra, 248 Cal.App.2d at p. 575; R. J. Kuhl, supra, 13 Cal.App.4th at pp. 1601-1602.) Because the trial court did not acknowledge any contractual obligation between Intero and the Weinbergers, it did not address the implied covenant of good faith and fair dealing. However, Intero had an obligation to avoid "subterfuges and evasions" in its capacity as the Weinbergers' real estate broker. (R. J. Kuhl, supra, 13 Cal.App.4th at p. 1602.)
The Weinbergers showed there are triable issues of material fact on their claim for breach of the implied covenant of good faith and fair dealing. The record shows the terms and conditions of the resale agreement were incorporated into the listing agreement signed by Intero. Accordingly, Intero was contractually bound to follow the rules of the resale agreement. The Weinbergers introduced deposition testimony that Intero, through Noble, violated the rules of the resale agreement by allowing other fractional interest owners to cut in front of the Weinbergers. Deposition testimony also indicated Noble was aware the developer had promised preferential treatment to another seller but did nothing to prevent the resale rules violation. The trial court erred in dismissing the Weinbergers' claim against Intero for breach of the implied covenant of good faith and fair dealing.
VI
Negligent Supervision (Seventh Cause of Action)
In their original briefs, the Weinbergers argued the trial court erred in dismissing their cause of action against Intero for negligent supervision of its agents. In response to our supplemental briefing order, the Weinbergers "concede that the Court of Appeal may affirm the trial court's dismissal of the Seventh Cause of Action for Negligent Supervision only, based on the Weinbergers' failure to allege or assert facts showing Intero's knowledge of its agents' propensity to cause the harm suffered by the Weinbergers." We accept the concession because "[t]o establish negligent supervision, a plaintiff must show that a person in a supervisorial position over the actor had prior knowledge of the actor's propensity to do the bad act." (Z.V. v. County of Riverside (2015) 238 Cal.App.4th 889, 902.)
VII
Negligent Interference with Prospective Economic Relations (Fourth Cause of Action)
The Weinbergers argue the trial court erroneously dismissed their cause of action against Intero for negligent interference with prospective economic relations. We reject the argument.
A.
The Operative Complaint
In pleading their cause of action for negligent interference with prospective economic relations, the Weinbergers allege "[a]n economic relationship existed between the Weinbergers and potential purchasers of fractional ownership interests at [8050 Tahoe] which contained a reasonably provable future economic benefit . . . ." (Italics added.) The Weinbergers further alleged Intero was "aware of this economic relationship, or reasonably should have been aware of the relationship as they were responsible for the accurate and proper maintenance of the Resale Program and the sale of fractional interests." And the operative complaint alleges Intero was negligent in that it failed to follow the rules of the resale program.
B.
Elements of the Tort of Negligent Interference with Prospective Economic Relations
"The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship." (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.)
However, "[i]n California there is no cause of action for negligent interference with contractual relations. While there exists a cause of action for negligent interference with prospective economic advantage (J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799), the California Supreme Court in Fifield Manor v. Finston (1960) 54 Cal.2d 632, has rejected a cause of action for negligent interference with contract. [¶] 'In Fifield Manor v. Finston[, supra,] 54 Cal.2d 632, the California Supreme Court noted: "[W]ith the exception of an action by the master for tortious injuries to his servant, thus depriving the master of his [or her] servant's services, which traces back to medieval English law [citations], the courts have consistently refused to recognize a cause of action based on negligent, as opposed to intentional, conduct which interferes with the performance of a contract between third parties or renders its performance more expensive or burdensome. [Citations.]" (Id. at p. 636.)' (LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 349.) Although some may question the continuing validity of Fifield 'in light of the California Supreme Court's recognition in J'Aire [Corp. v. Gregory,] supra, 24 Cal.3d 799, of a cause of action for negligent interference with prospective economic advantage, the Supreme Court has yet to disapprove [Fifield].' (LiMandri v. Judkins, supra, at p. 349.) Because the Supreme Court has never overruled Fifield, we are bound by it. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)" (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 9-10 (Davis).)
C.
The Weinbergers' Claim Focuses on a Prospective Sales Contract
The gravamen of the Weinbergers' cause of action for negligent interference with prospective economic relations is the claim Intero tortiously interfered with a sales contract with a potential buyer of the Weinbergers' fractional interest. However, as the California Supreme Court has held, "Even when only injury to prospective economic advantage is claimed, recovery is not foreclosed. Where a special relationship exists between the parties, a plaintiff may recover for loss of expected economic advantage through the negligent performance of a contract although the parties were not in contractual privity." (J'Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804, italics added.) Because any sale by the Weinbergers of their fractional interest had to comply with the statute of frauds, the sale could be accomplished only in a written contract. (See Kaljian v. Menezes (1995) 36 Cal.App.4th 573, 583 [holding transfer of interest in real property between joint venturers was subject to statute of frauds].) Consequently, the Weinbergers' fourth cause of action necessarily rested on an allegation Intero was negligent with respect to a sales contract. Because there is no cause of action in California for negligent interference with contractual relations (Davis, supra, 174 Cal.App.4th at pp. 9-10), the trial court did not err in dismissing the Weinbergers' fourth cause of action.
In their supplemental brief, the Weinbergers argue their cause of action concerned "the relationship between [the Weinbergers] and a prospective buyer of [the] Weinbergers' fractional interest ('Interest') for which there never was a contract. Critically, the Weinbergers never entered into any contract with any prospective buyer of their Interest." We reject this argument. Regardless of whether the alleged interference occurred prior to or after contract formation with a prospective buyer, the Weinbergers do not deny the gravamen of their cause of action is on contract. As we have noted, the sale of real property can only be accomplished by a contract between the parties. As focused on interference with contractual relations, this cause of action was properly dismissed. (LiMandri v. Judkins, supra, 52 Cal.App.4th at p. 349.)
The Weinbergers contend this cause of action should be remanded for "the opportunity to identify specific evidence and/or present additional evidence on this issue." However, they do not identify what that evidence might be. More importantly, it is too late for the Weinbergers to attempt to save their operative complaint with newly asserted facts. "[I]f a plaintiff wishes to introduce issues not encompassed in the original pleadings, the plaintiff must seek leave to amend the complaint at or prior to the hearing on the motion for summary judgment." (Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1257.) As the Laabs court noted, "To allow an issue that has not been pled to be raised in opposition to a motion for summary judgment in the absence of an amended pleading, allows nothing more than a moving target." (Id. at p. 1258.)
The trial court correctly dismissed the cause of action for negligent interference with prospective economic relations.
VII
Breach of Contract for the Purchase Agreement and Resale Agreement
(First Cause of Action)
The Weinbergers argue the trial court erroneously dismissed their cause of action for breach of contract of the resale agreement. We are not persuaded.
A.
The Resale Agreement
There is no dispute Intero was not a signatory to the resale agreement between 8050 Tahoe and the Weinbergers. However, as the Weinbergers point out, the terms of the resale agreement were incorporated into the listing agreement to which Intero was a signatory. The Weinbergers opposed summary judgment by arguing that (1) the resale agreement made Intero the exclusive resale agent, and (2) all terms of the resale agreement were incorporated into the listing agreement. The trial court rejected this reasoning on grounds that "there was no duty owed by Intero to" the Weinbergers under the resale agreement.
B.
Duties of Nonsignatories to Contracts
A cause of action for breach of contract, requires plaintiffs to plead the existence of the contract, plaintiffs' performance of the contract or excuse for nonperformance, defendant's breach, and resulting damage. (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458.) Implicit within this rule is the assumption the defendant in a breach of contract action is actually a party to the contract. Already in 1909, the California Supreme Court expressed "surprise" it was presented with an argument by a putative purchaser of real property that the seller of the property was bound to the terms of a sales contract the seller had not signed. (Harper v. Goldschmidt (1909) 156 Cal. 245, 247 (Harper).) The Harper court deemed the issue sufficiently well settled it "demand[ed] an exposition of it resolving all uncertainty." (Ibid.) Tracing the origin of oral and written contracts back to early common law, the California Supreme Court held the seller, as a nonsignatory to the contract, could not be bound by terms of the contract. (Id. at pp. 248-252.) Even though the seller in Harper had accepted $100 toward the purchase of the property from the buyer, the Supreme Court held nonetheless that the contract for the sale of real property was nonbinding on the seller. (Id. at p. 246.)
C.
Intero Assumed No Contractual Duties Under the Resale Agreement
As Intero points out, it was never a party to the resale agreement. Instead, the resale agreement was made between 8050 Tahoe and the Weinbergers. Consequently, the trial court correctly reasoned Intero did not have any contractual duty under an agreement to which it was not a signatory.
The Weinbergers counter that the terms of the resale agreement were expressly incorporated into the listing agreement to which Intero was a signatory. Thus, the Weinbergers reason Intero assumed a contractual duty to comply with the terms set forth in the resale agreement. This argument suffers a fatal flaw. The incorporation of the terms of the resale agreement into the listing agreement did not make Intero a party to the resale agreement. Nonetheless, a violation of the rules of the resale agreement supports a breach of contract action against Intero under the listing agreement insofar is it incorporated those rules. As explained above, the Weinbergers have demonstrated triable issues of material fact as to Intero's alleged breach of the listing agreement.
Under the California Supreme Court's long-standing guidance, we decline to hold Intero liable for breaching the resale agreement - a contract for the sale of an interest in real property to which it was not a party. (Harper, supra, 156 Cal. at p. 247.) Even if Intero wrongfully mismanaged the resale list, that fact becomes actionable as a breach of the listing agreement. Given that the listing agreement incorporates the terms of the resale agreement, violation of the terms of the resale agreement supports a breach of contract claim against Intero. But the action arises under the listing agreement - the agreement to which both the Weinbergers and Intero were parties. Accordingly, we conclude the trial court properly dismissed the first cause of action against Intero for breach of the resale agreement.
DISPOSITION
The judgment of dismissal is affirmed as to the causes of action brought by Charles and Deanne Weinberger, as trustees of the Weinberger Family 2003 Trust against Intero Real Estate Services, Inc., Anita Noble, and Truckee River Homes for negligent supervision, negligent interference with prospective economic advantage, and breach of contract of the resale agreement.
The judgment of dismissal is reversed as to the causes of action against Intero Real Estate Services, Inc., Anita Noble, and Truckee River Homes for breach of contract for the listing agreement, breach of the covenant of good faith and fair dealing, and breach of fiduciary duty that was based on duties arising under the listing agreement.
Each party shall bear its own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1) & (5).)
/s/_________
HOCH, J. We concur: /s/_________
HULL, Acting P. J. /s/_________
NICHOLSON, J.
Retired Associate Justice of the Court of Appeal, Third Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------