Missouri law: Howard v. Youngman

David A. Szwak

Missouri law: Howard v. Youngman

Postby David A. Szwak » Mon Jan 23, 2006 10:01 pm

Howard v. Youngman
81 S.W.3d 101
Mo.App. E.D.,2002.
Apr 16, 2002

Tortious Interference--Elements and Analysis
[18] The cause of action for intentional interference with performance of a contract by a third person is described as follows:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.
Restatement (Second) Torts Section 766 (1979), quoted with approval in Birdsong v. Bydalek, 953 S.W.2d 103, 111 (Mo.App.1997).
[19] The elements of a claim of tortious interference with contract are: (1) a contract; (2) defendant's knowledge of the contract; (3) intentional interference by *113 the defendant inducing or causing a breach of the contract; (4) absence of justification; and (5) damages resulting from defendant's conduct. Davis v. Board of Educ. of City of St. Louis, 963 S.W.2d 679, 691 (Mo.App.1998). In analyzing the elements of this tort, Missouri courts have been guided by the Restatement (Second) Torts, Sections 766-774. See also Briner Elec. Co. v. Sachs Elec. Co., 680 S.W.2d 737, 741-43 (Mo.App.1984).
In the context of this appeal, we first review to determine if Coldwell Banker and Waelter made a prima facie case, that is, if they showed undisputed facts negating any one of these elements or showed that Howard was unable to produce evidence sufficient to allow the trier of fact to find the existence of any one of these elements.
a. Contract
Coldwell Banker and Waelter argue that there was no contract because the real estate contract which is the subject of this claim terminated on July 24, 1998. This argument is no longer viable in light of our holding that the contract did not terminate.
b. Knowledge of the Contract
There was no dispute that Coldwell Banker, the seller's listing agency, and Waelter, the seller's listing agent, knew that the contract had been entered into. They argue that they did not have knowledge of an "existing" contract because Waelter believed the contract had terminated on July 24 and Waelter did not know the facts that gave rise to Howard's theory that his contract was still in existence.
[20] [21] [22] A plaintiff "must show either that the interfering party had actual knowledge of the existence of the contract and of plaintiff's interest in it, or that the interfering party had knowledge of such facts and circumstances that would lead a reasonable person to believe in the existence of the contract and plaintiff's interest in it." 86 C.J.S. Torts Section 62 b (1997). The tort of intentional interference with a contract "presupposes knowledge of the plaintiff's contract or interest, or at least facts which would lead a reasonable person to believe that such interest exists. Without such knowledge, there can be no intent and no liability." W. PAGE KEETON et al., PROSSER AND KEETON ON THE LAW OF TORTS Section 129 at 982 (5th ed.1984), quoted with approval in Bell v. May Dept. Stores Co., 6 S.W.3d 871, 878 (Mo. banc 1999). "It is enough to show that defendant had knowledge of facts, which, if followed by reasonable inquiry, would have led to a complete disclosure of the contractual relations and rights of the parties." 45 AM.JUR. 2d Interference Section 11 (1969). In a claim for interference with an express contract, it is not necessary for the defendant to appreciate the legal significance of the facts that give rise to the contractual duty. Property Tax Representatives, Inc. v. Chatam, 891 S.W.2d 153, 160 (Mo.App.1995) (quoting Restatement (Second) Torts Section 766, cmt. i). Property Tax further quoted the Restatement: "If he knows those facts, he is subject to liability even though he is mistaken as to their legal significance and believes that the agreement is not legally binding or has a different legal effect from what it is judicially held to have." Id.
[23] Coldwell Banker and Waelter argue that Waelter did not know facts from which she could conclude that Howard had waived the financing contingency. This is not the knowledge required by this element. She had actual knowledge that a valid contract had been entered into. She has not claimed that she made any inquiry about Howard's loan application or waiver. Under these circumstances, she could not reasonably rely on her lack of knowledge *114 or her incomplete knowledge to conclude that the contract had terminated. Further, even under Coldwell Banker and Waelter's theory of lack of knowledge, they were not entitled to summary judgment because Waelter's lack of knowledge was a matter of disputed fact. In his motion for summary judgment Howard alleged, based on his deposition testimony, that he had told Waelter of his waiver on July 18, 1998.
c. Intentional Interference
[24] [25] A defendant induces a breach of contract if he actively and affirmatively takes steps to induce the breach and the contract would have been performed absent interference from the defendant. Tri-Continental Leasing Co. v. Neidhardt, 540 S.W.2d 210, 216-17 (Mo.App.1976). Whether a defendant has played a material and substantial part in causing the plaintiff's loss of the benefits of the contract is normally a question of fact for the jury. WILLIAM L. PROSSER, HANDBOOK OF THE LAW OF TORTS Section 129 at 935 (4th ed.1971); see also Neidhardt, 540 S.W.2d at 219 (question of proximate cause is ordinarily for jury determination). In his petition Howard alleged that he fulfilled all of his obligations under the contract and was ready to close, but that Coldwell Banker and Waelter advised the Youngmans that the contract was void, that they should disregard it, and that they should enter into the contract with Goings for a higher sales price. He further alleged that the Youngmans did so and did not close on Howard's contract.
In their motion for summary judgment, Coldwell Banker and Waelter alleged, based on Mr. Youngman's deposition, that they did not urge the Youngmans to sign the Goings contract, but told them that Howard was "out of contract" and the Youngmans could do whatever they wanted to do. They further alleged that the Youngmans acted on advice of counsel in entering the Goings contract and that the Youngmans' attorney prepared the letter the Youngmans sent to Howard notifying him that they were terminating the contract.
In response to the summary judgment motion, Howard set out as additional facts, citing the Goings deposition, that on July 26, 1998, Waelter or Doorack contacted Goings and set up an appointment for Goings to inspect the property on July 28, 1998 and told Goings that he needed to arrive early on July 28 in order to work out a deal with the Youngmans. Howard also alleged, citing multiple depositions, that Coldwell Banker and Waelter told the Youngmans that Howard was out of contract, that the contract between them and Howard was no longer valid, and that it was legal for them to enter into a contract with Goings. Howard further alleged, citing to both of the Youngmans' depositions, that the Youngmans would not have entered the Goings contract and would have sold the property to Howard, even on July 28, if Coldwell Banker and Waelter had not represented that Howard was "out of contract." Howard specifically alleged that Coldwell Banker and Waelter did not advise the Youngmans to speak with an attorney until after they had already entered into the Goings contract. The Youngmans testified that they did not consult with an attorney until after they signed the Goings contract. In her brief Waelter acknowledges that Mr. Youngman recanted his earlier testimony and testified in a later deposition that he did not contact his attorney until after he signed the Goings contract.
Coldwell Banker and Waelter also argue that they did not induce the Youngmans to breach the Howard contract because the Youngmans' breach of the Howard contract occurred when the Youngmans failed *115 to close under the Howard contract, not when they signed the Goings contract, and the Youngmans acted upon advice of their counsel in deciding not to close.
In response, Howard argues that the Youngmans' entry into the Goings contract on July 28 constituted an anticipatory breach of the Howard contract because, by entering into the Goings contract, the Youngmans manifested their intention not to perform under the Howard contract. See Carmel v. Dieckmann, 617 S.W.2d 459, 460-61 (Mo.App.1981). Further, Howard argues, the Youngmans did not consult an attorney or act upon the advice of an attorney when they signed the Goings contract and did not seek legal advice until after they signed the Goings contract.
[26] The facts on this issue were disputed. There were insufficient undisputed facts on which the trial court could make its finding that the Youngmans acted on advice of counsel. Whether Waelter's advice to the Youngmans was the proximate cause of the Youngmans' breach of the Howard contract is a matter of disputed fact which precludes summary judgment with respect to this element.
d. Absence of Justification
[27] "Absence of justification" means the absence of any legal right on a defendant's part to take the actions about which plaintiff complains. SSM Health Care, Inc. v. Deen, 890 S.W.2d 343, 346 (Mo.App.1994). In his petition Howard alleged lack of justification in that Coldwell Banker and Waelter's advice to the Youngmans was false and constituted improper legal advice and that the advice was given to obtain a larger commission. Coldwell Banker and Waelter alleged in their motion that they would receive a commission upon the sale of the Youngmans' house. They argue that Waelter was privileged to interfere in the Howard contract to protect her own economic interest in the higher commission. They specifically argue:
Furthermore, one who has a present existing economic interest is privileged to interfere with another's business expectancy to protect one's own economic interest. Community Title Co. v. Roosevelt Federal S & L, 796 S.W.2d 369, 372 (Mo. en banc 1990). Competitive conduct which is neither illegal nor independently actionable does not become actionable because it interferes with another's prospective contractual relationship. Briner Elec. Co. v. Sachs Electric Co., 680 S.W.2d 737, 741 (Mo.App.1984).
[28] This argument has no merit for a number of reasons. First, the two statements of law set out above are not only incomplete, but also deal with interference with a business expectancy or prospective contractual relationship, whereas the interference alleged was with an existing contract. This is an important distinction. The kind and amount of interference that may be justifiable with an expectancy is different from that with an existing contract. Downey v. United Weatherproofing, 363 Mo. 852, 253 S.W.2d 976, 980 (1953). An existing contract is entitled to greater protection than a mere expectancy of entering a contract. Juengel Const. Co., Inc. v. Mt. Etna, Inc., 622 S.W.2d 510, 516 (Mo.App.1981).
[29] Coldwell Banker and Waelter attempt to justify their conduct on the grounds that it was "competitive." This argument is misplaced. The qualified justification given to competition, which is set out in RESTATEMENT (SECOND) TORTSSS Section 768, has no application to the conduct in this case. There was no claim that Coldwell Banker and Waelter were "competing" with Howard for the Youngmans' business. In any event, the qualified justification for competitive conduct applies *116 only to a prospective contractual relation or the continuance of an existing contract terminable at will. Restatement (Second) Torts Section 768; Briner Elec., 680 S.W.2d at 741-742. It does not apply to existing contracts. Downey, 253 S.W.2d at 982.
Coldwell Banker and Waelter also claim a privilege under the rule set out in Community Title Co. The full statement of that rule is that one "who has a present existing economic interest, such as a prior contract of his own or a financial interest in the affairs of the person persuaded not to enter into a contract, is privileged to interfere with another's business expectancy to protect one's own economic interests." Community Title Co., 796 S.W.2d at 372. However, Coldwell Banker and Waelter did not show a present existing economic interest. They did not show a financial interest in the Youngmans' affairs or a prior contract of their own. The alleged financial interest, Waelter's interest in a larger commission, is not a "financial interest in the business of the person induced" that is, an investment. See RESTATEMENT (SECOND) TORTSSS Section 769. In addition, this rule specifically applies to interference with a prospective contractual relation, not an existing contract. Id. at Section 769, cmt. b. Likewise, Coldwell Banker and Waelter did not show that they had a prior contract of their own which they were lawfully entitled to enforce. See id. at Section 773.
If an existing contract is involved, we determine whether the actor's interference is improper by considering the factors set out in Section 767 of the RESTATEMENT (SECOND) TORTS. The actor's interest, including an economic interest, is one of these factors. Where the other party's interest is "consolidated into the binding legal obligation of a contract" as was Howard's, the other party's interest will normally outweigh the actor's own interest in taking that established right from him. Id., cmt. f. Interests which may take precedence over an existing contract are set out in Sections 770-773. None of these rules would include the prospect of a larger commission within the types of interest which allow the actor to interfere with an existing contract.
Coldwell Banker and Waelter's economic interest in getting a higher commission if the Youngmans sold their home to a different buyer does not give them a legal right to interfere with an existing contract for the sale of that home.
e. Damages
[30] The trial court found that Howard failed to meet his burden to show damages. In their summary judgment motion, Coldwell Banker and Waelter did not allege that Howard did not or could not satisfy this element of the claim. They therefore did not make a prima facie showing of a right to judgment on the grounds that Howard could not show damages. Accordingly, Howard was not required to provide evidence in his summary judgment response to support an element Coldwell Banker and Waelter did not challenge. See ITT Commercial Finance Corp., 854 S.W.2d at 381.
2. Agency
Coldwell Banker and Waelter argue that, even if they did not show undisputed facts negating one of the elements of Howard's claim, they cannot be liable because they were the Youngmans' agents. They base their argument on the rule that "[a] claim for tortious interference with contractual relations contemplates interference from a third party, not from a party to the contract itself," quoting Fields v. R.S.C.D.B., Inc., 865 S.W.2d 877, 879 (Mo.App.1993). Fields held that a corporate officer or agent acting for the corporation *117 is the corporation for purposes of a tortious interference cause of action. Id. This is because "[c]orporations can only act through their agents." Id. (emphasis added) Coldwell Banker and Waelter do not cite any authority extending this rule to the residential real estate client/agent relationship and we are aware of none. Coldwell Banker and Waelter did not establish a right to judgment under Fields.

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