Daugherty v. Kessler

• Citation: 286 A.2d 95,264 Md. 281
• Decision Date: 19 January 1972
• Docket Number: No. 147,147
• Parties: John T. DAUGHERTY v. Elwood W. KESSLER et ux. Elwood W. KESSLER et ux. v. Lewis C. MERCHANT et al.
• Court: Maryland Court of Appeals

Page 281

264 Md. 281

286 A.2d 95

John T. DAUGHERTY v. Elwood W. KESSLER et ux.

Elwood W. KESSLER et ux. v. Lewis C. MERCHANT et al.

No. 147.

Court of Appeals of Maryland.

Jan. 19, 1972.

Charles E. Hogg, Elicott City, for John T. Daugherty and Lewis C. merchant.

David M. Williams, Chestertown, for Elwood W. Kessler et ux.

Ernest N. Cory, Jr., Laurel, for Citizens National Bank of Southern Md.

Argued before HAMMOND, C. J., and McWILLIAMS, FINAN, SINGLEY and DIGGES, JJ.

HAMMOND, Chief Judge.

The essential question posed to the jury in this case was whether the successful effort of an owner of a store building in economically burgeoning St. Mary's County to bring the tenants in another store building to his building was an exercise of fair or unfair competition. Unfair was the answer of the jury.

To be precise, the jury found on issues that the plaintiffs-appellees and cross-appellants, Elwood Kessler and his wife (Kessler), had orally leased a store building to Steven Pratt and Paul Griffith, defendants (but not appellants), for ten years at a rental of $350 a month; that John T. Daugherty, another defendant and the appellant, had wrongfully induced Pratt and Griffith to break this lease; that Daugherty owed Kessler $9,500 in actual damages and $7,000 in punitive damages; that Pratt, Griffith and Daugherty had wrongfully conspired to bring about the breaking of the lease and owed Kessler actual damages of $28,350 and punitive damages of $15,000. Judge Mayfield entered judgment against Daugherty for one cent actual damages and $7,000 punitive damages on the theory that malicious interference with property rights and conspiracy to so interfere overlap, and the award of $9,500 against Daugherty for actual damages was approximately one-third of the $28,350 for actual damages against the three defendants for conspiring to interfere. He entered judgment against the three for $28,350 actual and $15,000 punitive damages.

At the conclusion of the plaintiffs' testimony, Judge Mayfield directed verdicts for the cross-appellees, The Citizens National Bank of Southern Maryland (of which Daugherty was president and a director) and Lewis Cato Merchant, chairman of the board of the bank and a friend and business associate of Daugherty, who had also been sued by Kessler for compensatory and punitive damages for interfering with the business relations between Kessler and Pratt and Griffith. We think Judge Mayfield was accurate in concluding that the evidence was insufficient to permit the jury to find the bank and Merchant guilty of the torts charged to them, and will affirm the judgments in their favor. We find further that the evidence against Daugherty, Pratt and Griffith was insufficient to support a finding of actual malice, the prerequisite to liability for punitive damages in cases of this nature. Damazo v. Wahby, 259 Md. 627, 270 A.2d 814; St. Paul at Chase Corp. v. Manufacturers L. I. Co., 262 Md. 192, 278 A.2d 12, which are indistinguishable on the point, require this holding. The judgments for actual damages against Daugherty for one cent and against Daugherty, Pratt and Griffith for $28,350 will be affirmed.

Appellant's substantial arguments are that (1) the oral lease or agreement to lease for ten years was 'void' under the strictures of Code (1957), Art. 21, § 1 ('No Estate (in land) above seven years, shall pass or take effect unless the deed conveying the same shall be executed, acknowledged and recorded * * *' and therefore is not susceptible of interference by a third party; (2) there was no evidence that Kessler on the one hand and Pratt and Griffith on the other had made an agreement to lease or to make a lease; (3) there was not sufficient evidence to show a conspiracy to interfere with any lease or agreement to lease; (4) if Kessler was entitled to any recovery the correct measure of damages would be one year's rent. In our view none of the arguments will hold water.

The argument that the oral agreement of lease or to lease was void and therefore there was nothing with which to interfere was rejected on demurrer, correctly we think, by Judge Macgill. It is true that it has been held that a contract to create a leasehold interest that does not comply with § 1 of Art. 21 of the Code will pass no estate and that an oral agreement to transfer a leasehold interest is not only within the statute of frauds-in the instant case the allegations indicate that actually the fourth section of the statute rather than the registry laws was relied on-but is ineffectual under the registry laws. This, however, does not make the oral agreement 'void' in the sense the appellant contends. Courts have used the words 'void,' 'voidable,' 'invalid' and 'unenforceable' imprecisely, and when they say an oral contract is void, usually do not mean it except to a limited extent. An oral contract, like that before us, may be unenforceable as between the parties but between them and as to third parties may in various aspects have life, force and effect. 2 Corbin on Contracts, § 279. The Legal Operation of the Statute of Frauds, pp. 20-21, says: 'A contract where the parties have not complied with the requirements of the statute is neither void nor voidable; it has much effect upon the legal relations of the contracting parties with each other and with third persons.' There are set out in the succeeding pages nine explicit ways in which an oral agreement that violates the statute may be valid and operative. See also Corbin op. cit. § 284, in which his analysis of the law and the cases shows that usually the word void means no more than unenforceable between the parties.

In Prosser, Law of Torts, Ch. 26, Economic Relations, § 123, Interference with Contractual Relations, pp. 955-956, it is said:

'Virtually any type of contract is sufficient as the foundation of an action for procuring its breach. It must of course be in force and effect, and not illegal as in restraint of trade, or otherwise opposed to public policy, so that the law will not aid in upholding it. * * *

'The agreement need not, however, be enforceable by the plaintiff as a contract. * * * Accordingly, it usually is held that contracts which are voidable by reason of the statute of frauds, formal defects, lack of consideration, lack of mutuality, or even uncertainty of terms, or harsh and unconscionable provisions, or conditions precedent to the existence of the obligation, can still afford a basis for a tort action when the defendant interferes with their performance.'

This Court has several times indicated that it agrees with Professor Prosser's views. See Cumberland Glass Mfg. Co. v. De Witt, 120 Md. 381, 388, 87 A. 927, 930, a suit for wrongful interference with a contract, where it was held that:

'The cause of action is the tortious act of the defendant in procuring or causing the breach of the plaintiff's contracts with the Mallard Company * * *. Nor does the fact that one of these contracts was oral affect the sufficiency of the narr. The contract is not void, although it might not have been enforceable against the Mallard Company. But this circumstance cannot avail the defendant. This was decided in Knickerbocker Ice Company v. Gardiner Dairy Co., 107 Md. 556, 69 A. 405.'

In Horn v. Seth, 201 Md. 589, 593, 95 A.2d 312, 314, Judge Henderson (later Chief Judge) for the Court said:

'It is perfectly clear under the Maryland authorities that intentional and unlawful interference with obligations created by a contract to purchase real estate, if known to the interferer, may give rise to a cause of action in tort * * *. In the language of the Restatement, Torts, § 768(i): 'When B is legally free to deal either with C or with A, the privilege of competition implies a privilege on the part of A to induce B to deal with him rather than with C. But when B is legally obligated to deal with C, A is not privileged, by the mere fact of competition, to induce B to commit a breach of his legal duty.' § 766(c) makes it clear that interference with a contract may be beyond the scope of the privilege of lawful competition even though the contract may be unenforceable because of non-compliance with the Statute of Frauds. This principle appears to have been recognized in Cumberland Glass Mfg. Co. v. De Witt, 120 Md. 381, 388, 87 A. 927 * * *.'

See, too, Chapman v. Ford, 246 Md. 42, 52, 227 A.2d 26, and for authority out of State, Kamm, Inc. v. Flink, 113 N.J.L. 582, 175 A. 62 and Ringler v. Ruby, 117 Or. 455, 244 P. 509.

The declaration alleged and the proof showed that Daugherty knew that Pratt and Griffith were tenants of Kessler-although there was testimony that he thought there was no written binding lease as well as testimony to the contrary-and his knowledge of the fact of their occupancy as tenants brings him within the requirement that an interferer, to be liable, must know of the contract which is interfered with. In Stannard v. McCool, 198 Md. 609, 617-618, 84 A.2d 862, 867, § 766, of Restatement, Torts, is quoted with approval to this extent:

"To be subject to liability * * * the actor must have knowledge of the business expectancy with which he is interfering * * * But it is not necessary that the actor appreciate the legal significance of the facts which give rise to the contractual duty. If the knows those facts, he is subject to liability even though he is mistaken as to their legal significance and believes that there is no contract or that the contract means something other than what it is judicially held to mean."

There was testimony that Kessler as a property owner and Pratt and Griffith as prospective tenants had a meeting of the minds and agreed to a lease on explicit terms. There was also evidence (a) that Pratt, Griffith and Daugherty conspired to bring about a...