Battista v. Lebanon Trotting Ass'n

• Decision Date: 29 June 1976
• Docket Number: Nos. 75-2129,75-2130,s. 75-2129
• Parties: Peter L. BATTISTA, Jr., Plaintiff-Appellee, v. LEBANON TROTTING ASSOCIATION, Defendant, and John J. Carlo, Defendant-Appellant. Peter L. BATTISTA, Jr., Plaintiff-Appellant, v. LEBANON TROTTING ASSOCIATION, Defendant-Appellee, and John J. Carlo, Defendant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 111

538 F.2d 111

Peter L. BATTISTA, Jr., Plaintiff-Appellee, v. LEBANON TROTTING ASSOCIATION, Defendant, and John J. Carlo, Defendant-Appellant.

Peter L. BATTISTA, Jr., Plaintiff-Appellant, v. LEBANON TROTTING ASSOCIATION, Defendant-Appellee, and John J. Carlo, Defendant.

Nos. 75-2129, 75-2130.

United States Court of Appeals, Sixth Circuit.

Argued April 12, 1976.

Decided June 29, 1976.

Arnold Morelli, Bauer, Morelli & Heyd, Cincinnati, Ohio, for appellant in No. 75-2129.

Harry M. Hoffheimer, Wood, Lamping, Slutz & Reckman, Cincinnati, Ohio, for Peter L. Battista, Jr.

Louis F. Gilligan, Keating, Muething & Klekamp, Richard L. Creighton, Jr., Cincinnati, Ohio, for appellee in No. 75-2130.

Before WEICK, LIVELY and ENGEL, Circuit Judges.

WEICK, Circuit Judge.

In this diversity case, governed by Ohio law, the principal question of law for us to decide is whether a partner can be held individually liable for the alleged tortious breach of a partnership contract when the partnership itself was held not liable for the breach of such contract.

The partnership, Lebanon Trotting Association (Lebanon), had entered into a written contract with Peter L. Battista, Jr. (Battista) in 1967, whereby it granted to Battista the concession to compile, produce, and sell programs for the racing events held at the harness horse racing meets conducted by Lebanon at the Warren County, Ohio Fairgrounds. The agreement was signed in behalf of the partnership by Corwin Nixon, its operational manager. The contract was to run for a period of three years, with programs "to be as per 1966 format." Prior to the written contract Battista had operated the concession under an oral agreement from 1960 to 1966. Under the contract he sold the programs for thirty-five cents each, and paid Lebanon ten cents for each program sold. The price was printed on the face of the program.

Battista conducted his business under the name of National Racing Publications; he also produced programs for two other race tracks.

Lebanon operated under a written partnership agreement executed in 1951, which agreement purported to form a limited partnership with John J. Carlo (Carlo) as the sole general partner. The District Court held, however, that it was a general partnership because it had failed to file until 1969 a Certificate of Limited Partnership with the Clerk of the Common Pleas Court of the County in which its principal office and place of business was located, as required by Ohio Rev.Code §§ 1781.02(A)(2) and 1781.27(B). Thus, at the time when plaintiff's claim arose Lebanon was a general partnership.

In late 1967 relations between Carlo on one side and Battista and his father on the other, became strained; Battista's father apparently had accused Carlo of mishandling partnership assets, and Battista had sued Carlo over a transaction involving the interest of a deceased partner in another partnership. On December 29, 1967 Lebanon addressed a letter to Battista which read:

Take Notice, that effective for the year of 1968 and thereafter, you or your concern will not produce the programs for the Lebanon Trotting Association, irrespective of any contract signed by any person, other than the undersigned.

Very truly yours,

Lebanon Trotting Association

By /s/ John J. Carlo

By /s/ John J. Carlo

By /s/ General Partner

Battista's office was located at the Fairgrounds, so Battista saw Nixon often. Nixon assured Battista that he would be producing the programs in spite of the letter. However, Battista recognized the legal effect of the letter, and he told Nixon that a retraction from Carlo was necessary before Battista could begin preparation for the April races. After being assured several times by Nixon that a retraction was "in the mail," but not having received one, Battista informed Nixon on March 19, 1968 that if a letter of retraction was not received by March 20th Battista would not be able to perform. On March 22d Battista cleaned out his office, informed his staff that their services were no longer required, and notified Lebanon that he would not produce the programs. He also told his printer that he would not be printing programs for Lebanon. The next day, March 23d, he instructed his attorney to file suit against Lebanon.

Meanwhile, Carlo, when informed by Nixon of Battista's attitude, mailed an air mail special delivery letter of retraction, dated March 20, 1968, from Northville, Michigan, to Battista in Lebanon, Ohio, which letter offered Battista the opportunity to produce programs for the 1968 season on the same terms as those for the 1967 season; no mention was made of the 1969 season. The letter also purported to require acceptance of the offer by March 27, 1968. This letter did not reach Battista's home until Sunday, March 24th, when Battista was out of town. He first read the letter on March 25th, the day his attorney filed suit against Lebanon. ¹

The present action was commenced by the filing of a four-count complaint. The last two counts were dismissed at trial for lack of proof, and are not in issue here. The first count sought compensatory damages in the amount of $58,000 against Lebanon for breach of contract. The second count sought compensatory and punitive damages from Carlo in the amount of $358,000 for tortiously inducing the partnership to breach its contract with Battista.

The case was tried before a jury. At the trial the District Court gave the jury three verdict forms and instructed the jurors to use just one of the forms to return their verdict. The first form was a finding in favor of both defendants; the second form was a finding against Carlo only, with spaces for entry of compensatory damages, punitive damages, and attorney's fees; the third form was a finding against Lebanon only, with a space for entry of compensatory damages. Battista's objections to those forms were met with the District Court's insistence that it would not permit a recovery against both Carlo and Lebanon.

The jury returned a verdict, using the second verdict form and awarding $38,000 compensatory damages, no punitive damages, and $10,000 for attorney's fees, all against Carlo. ² The District Court entered judgment on the verdict against Carlo alone, in the amount of $48,000, and costs.

Both Carlo and Battista appealed. The appeals were consolidated for oral argument. Carlo contends that the District Court committed a number of errors during the trial; however, the most significant issue in this appeal is raised by Carlo's contention that he cannot be held individually liable for inducing a breach of a contract by a partnership in which he was a partner. Battista raises the corollary issue in his claim that the District Court erred in refusing to submit to the jury verdict forms whereby the jury could make findings for or against Lebanon for breach of contract, as well as against Carlo for causing the same breach.

The District Court instructed the jury that the contract had been repudiated, but that if it found that the repudiation had been effectively retracted it should find in favor of both defendants and should return the first form of verdict; however, if it found that no retraction had occurred it must determine whether the repudiation had been malicious; and if it found the repudiation had been motivated solely by malice the jury was to return the second form of verdict against Carlo only; ³ if the repudiation was not motivated solely by malice the jury was to return the third verdict form against Lebanon only.

Thus the District Court held that a partner who maliciously repudiates a contract on behalf of his own partnership is individually liable in tort for doing so, but that the partnership is not liable. Carlo contends that in such a situation only the partnership is liable, since Carlo was acting in the partnership name and in its behalf, and that he would be liable personally only in his status as a partner. Battista contends that the partnership is liable for breach of the contract and that the partner is liable additionally in tort for maliciously causing the breach. On this basis Carlo could be held liable with the other partners for compensatory damages and for additional compensatory damages and punitive damages for his tortious conduct.

As before stated, the original partnership agreement of Lebanon executed in 1951 named Carlo as the sole general partner. Regardless of whether Lebanon was a general or a limited partnership in 1967, it is clear that the partners gave Carlo authority to make, and therefore authority to repudiate or breach, contracts on behalf of the partnership. We find no authority for the proposition that the motive of a partner in repudiating a partnership contract can alter the binding effect of his act in behalf of the partnership if the partner has actual or apparent authority to repudiate or breach the contract.

When Carlo repudiated the contract on behalf of Lebanon he bound the partnership, and the partnership became liable for any resulting compensatory damages caused by the repudiation. The jury's verdict indicated that it found that the repudiation was malicious and was not retracted. Such findings would require a verdict against Lebanon, since the motive of the partner could not alter his legal power and authority to bind the partnership. ⁴

We therefore hold that the District Court erred in refusing to submit to the jury the case against Lebanon for a breach of contract caused by the repudiation of the contract by Carlo.

The corollary problem here is whether Carlo can also be held liable individually to Battista for causing the repudiation. Count II of the complaint attempts to state a claim for tortiously inducing a breach of contract. Battista is apparently attempting to state a claim based upon the tort of interference, which is recognized in Ohio. Such a claim arises when one party to a contract is induced to breach the contract by the malicious acts of a third person who is not...