Alyeska Pipeline Service Co. v. Aurora Air Service, Inc.

• Decision Date: 28 December 1979
• Docket Number: No. 3953,3953
• Citation: 604 P.2d 1090
• Parties: ALYESKA PIPELINE SERVICE COMPANY, Clyde F. Klick, and Leslie Warren Bays, Appellants, v. AURORA AIR SERVICE, INC., Appellee.
• Court: Alaska Supreme Court

Page 1090

604 P.2d 1090

ALYESKA PIPELINE SERVICE COMPANY, Clyde F. Klick, and Leslie Warren Bays, Appellants, v. AURORA AIR SERVICE, INC., Appellee.

No. 3953.

Supreme Court of Alaska.

Dec. 28, 1979.

Max N. Peabody, Shimek & Peabody, Anchorage, for appellants.

Joseph W. Sheehan, Fairbanks, for appellee.

OPINION

Before RABINOWITZ, C. J., CONNOR, BOOCHEVER and MATTHEWS, JJ., and DIMOND, Senior Justice.

CONNOR, Justice.

Appellants Alyeska Pipeline Service Company, Clyde F. Klick and Leslie Warren Bays (hereinafter referred to for convenience as Alyeska) appeal from the judgment of the superior court finding them liable in tort, in the sum of $362,901, for intentionally interfering in the contractual relationship of appellee Aurora Air Service, Inc., with Radio Corporation of America, and inducing a breach of contract without acting in good faith. Appellants' main claim in this appeal is that the trial court erred in ruling that, although the appellants did possess a unilateral contractual right to terminate the Aurora-RCA agreement by changing the scope of transportation services to be rendered to it by the Alyeska-RCA cost-reimbursable contract, such action must be in accord with principles of good faith.

Thus, appellants challenge the trial court's denial of the motion for summary judgment, and the denial of the motion for judgment n. o. v. Appellants also raise the following issues on appeal, contending that they constitute reversible error: that the jury instructions pertaining to the tort of interference with contract were erroneous, that it was error not to instruct the jury to disregard the testimony of R. A. French, that it was error to admit into evidence the use permits for pipeline camp airstrips, that it was error not to exclude the testimony of William D. Fowler, that it was error to permit the jury to consider punitive damages, and that it was error to deny the motion for remittitur.

I.

On May 14, 1974, Alyeska and RCA executed a contract which provided that RCA would construct, operate, and maintain a communications system along the Trans-Alaska Pipeline. The contract set forth that RCA would furnish all supervision, engineering, labor, and transportation necessary to perform the contract. In fulfilling the transportation requirements of the Alyeska-RCA contract, RCA executed a contract on October 3, 1974, with Aurora.

The Aurora-RCA contract, in part, provided:

Contractor hereby agrees to furnish one (1) Cessna 207 aircraft with pilot, parts, and accessories to provide aircraft service to transport RCA-Alascom equipment, supplies, and personnel along the pipeline route as designated by RCA-Alascom.

Article 13 of the contract, "Optional Termination," provided that the contract could be terminated at RCA's option. ¹

Prior to the execution of the Aurora-RCA and Alyeska-RCA contracts, Aurora and Alyeska had a contractual relationship under which it was agreed that Aurora would provide non-exclusive air service to Alyeska. In the spring of 1975 a payment dispute arose under this contract between Aurora and Alyeska. Shortly after Aurora commenced a suit seeking recovery, Alyeska paid Aurora the sum it claimed was due.

In October, 1975 Alyeska took over the transportation requirements of its contract with RCA pursuant to a provision in the contract which provided:

Engineer shall have the right at any time, to make changes in Work. To the extent that these affect the contractor price, and scheduled completion date, appropriate adjustments will be made. Engineer shall prepare all changes in writing and shall have the option of requiring contractor to suspend any affected work pending preparation by CONTRACTOR and valuation by ALYESKA of the effect of the proposed CHANGES on cost and schedule.

Shortly thereafter RCA, prompted by Alyeska's election to take over the air transportation service, exercised its option to terminate its contract with Aurora.

The present controversy centers around the intentions of Alyeska in interfering with the Aurora-RCA contract. Alyeska claims that it had an absolute right under its contract with RCA to take over the air transportation function. Alternatively, it argues that it was justified in doing so by economic and safety considerations. Aurora contends that Alyeska was motivated by spite, resulting from the earlier dispute between Aurora and Alyeska.

In the superior court, Alyeska filed a motion for summary judgment, asserting that the Alyeska-RCA contract gave it the right to change the scope of that contract unilaterally and to perform the air transportation for RCA's work under the contract. Alyeska argued that it was the exercise of its rights to take over the transportation function that caused RCA to sever its relationship with Aurora, and that it should not be held liable for that result. The court agreed that Alyeska could change the transportation requirements under the Alyeska-RCA contract, ² but it held that a jury question was presented as to whether Alyeska had done so in good faith. Therefore, the motion for summary judgment was denied. Alyeska challenges this ruling.

The unilateral right to modify the Alyeska-RCA contract, accepting the superior court's ruling that there was no ambiguity in regard to the interpretation of "work," was vested in Alyeska, but it had to be exercised in good faith. We reject Alyeska's contention that a privilege arising from a contractual right is absolute and may be exercised regardless of motive. It is a recognized principle that a party to a contract has a cause of action against a third party who has intentionally procured the breach of that contract by the other party without justification or privilege. Long v. Newby, 488 P.2d 719, 722 (Alaska 1971). The weight of recent authority holds that even though a contract is terminable at will, a claim of unjustifiable interference can still be made, for "(t)he wrong for which the courts may give redress includes also the procurement of the termination of a contract which otherwise would have (been) continued in effect." Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E.2d 282 (1976). Accord, Island Air, Inc. v. LaBar, 18 Wash.App. 129, 566 P.2d 972 (1977); Mason v. Funderburk, 446 S.W.2d 543, 546 (Ark.1969). We choose to follow this trend and thus adopt the view espoused by Prosser:

"Since Lumley vs(v). Gye there has been general agreement that a purely 'malicious' motive, in the sense of spite and a desire to do harm to the plaintiff for its own sake, will make the defendant liable for interference with a contract. The same is true of mere officious intermeddling for no other reason than a desire to interfere. On the other hand, in the few cases in which the question has arisen, it has been held that where the defendant has a proper purpose in view, the addition of ill will toward the plaintiff will not defeat his privilege. It may be suggested that here, as in the case of mixed motives in the exercise of a privilege in defamation and malicious prosecution, The court may well look to the predominant purpose underlying the defendant's conduct." (citations omitted and emphasis added)

Prosser, Law of Torts, § 129, at 943 (4th ed. 1971).

Alternatively, Alyeska asserts that its overriding economic and safety interests constituted a sufficient privilege to require dismissal of Aurora's action as a matter of law. ³ One is privileged to invade the contractual interest of himself, others, or the public, if the interest advanced by him is superior in social importance to the interest invaded. 1 Harper & James, The Law of Torts, § 6.12, at 514 (1956); Restatement of the Law of Torts, § 733 (1939). However, if one does not act in a good faith attempt to protect his own interest or that of another but, rather, is motivated by a desire to injure the contract party, he forfeits the immunity afforded by the privilege. Smith v. Ford Motor Co., 221 S.E.2d at 296; Serafine v. Palm Terrace Apts., Inc., 343 So.2d 851, 852 (Fla.App.1976); Dunshee v. Standard Oil Co., 152 Iowa 618, 132 N.W. 371 (1911); Tuttle v. Buck, 107 Minn. 145, 119 N.W. 946 (1909). ⁴

The question of justification for invading the contractual interest of another is normally one for the trier of fact, particularly when the evidence is in conflict. American Surety Co. v. Schottenbauer, 257 F.2d 6, 12-13 (8th Cir. 1958); California Beverage & Supply Co. v. Distillers Distributing Corp., 158 Cal.App.2d 758, 323 P.2d 517, 524 (1958); Barlow v. International Harvester Co., 95 Idaho 881, 522 P.2d 1102 (1974); Owen v. Williams, 322 Mass. 356, 77 N.E.2d 318 (1948). In the case at bar, the central factual issue, as to which there was evidentiary conflict, was whether Alyeska was genuinely furthering its own economic and safety interests or was using them as a facade for inflicting injury upon Aurora. There was sufficient evidence upon which the jury could properly find that Alyeska was acting out of ill will towards Aurora, rather than to protect a legitimate business interest. ⁵ The trial judge correctly denied Alyeska's motion for summary judgment and submitted this issue to the jury.

Our holding as to the denial of summary judgment also largely disposes of Alyeska's contention that the trial court erred in denying Alyeska's motion for judgment notwithstanding the verdict. In reviewing the denial of that motion we will not weigh conflicting evidence or judge the credibility of witnesses. We must view the evidence in the light most favorable to the non-moving party. If, viewing the evidence in that manner, there is room for diversity of opinion among reasonable persons, the question is for the jury, and an appellate court will not interfere with the jury's verdict. Holiday Inns of America v. Peck, 520 P.2d 87, 92 (Alaska 1974); City of Fairbanks v. Nesbett, 432 P.2d 607, 609-10 (Alaska 1967). In the case at bar the evidence was susceptible to varying interpretations on the questions of good faith, justification, and...