Developers Three v. Nationwide Ins. Co.

• Decision Date: 13 March 1990
• Docket Number: No. 89AP-364,89AP-364
• Citation: 64 Ohio App.3d 794,582 N.E.2d 1130
• Parties: DEVELOPERS THREE, A Partnership, Appellant; Margulies et al., Appellees, v. NATIONWIDE INSURANCE COMPANY et al., Appellees. *
• Court: Ohio Court of Appeals

Page 794

64 Ohio App.3d 794

582 N.E.2d 1130

DEVELOPERS THREE, A Partnership, Appellant; Margulies et al., Appellees, v. NATIONWIDE INSURANCE COMPANY et al., Appellees. ^*

No. 89AP-364.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided March 13, 1990.

Charles E. Taylor, Columbus, Inscore, Rinehardt, Whitney & Enderle Co., L.P.A., and Larry L. Inscore, Mansfield, for appellant.

Wesp & Osterkamp and Kevin J. Osterkamp, Columbus, for appellees.

PEGGY L. BRYANT, Judge.

Plaintiff-appellant, Developers Three, appeals from a judgment of the Franklin County Common Pleas Court, while defendants-appellees conditionally cross-appeal from a directed verdict on the issue of liability. Defendants' cross-appeal is "conditional" in the sense that they will waive the cross-appeal if this court overrules plaintiff's assignments of error and affirms the judgment of the trial court.

In 1980, plaintiff, Developers Three, was a general partnership consisting of at least three partners. As detailed in our previous opinion in this case, Developers Three v. Nationwide Ins. Co. (Jan. 15, 1985), Franklin App. Nos. 83AP-476 and 83AP-718, unreported, 1985 WL 9817, plaintiff owned options to purchase a parcel of land in downtown Columbus. Plaintiff had until August 14, 1980 to exercise the options, after which plaintiff had sixty days in which to finance purchase of the property. On August 14, two of plaintiff's partners, James Foley and Stephen Harris, voted to sell the options to defendant Nationwide Development Company, through Nationwide's agent John W. Galbreath & Company. Nationwide Development agreed to purchase the options for $650,000 and purchase the underlying property for $1,928,796, for a total purchase price of $2,578,796.

On November 12, 1980, Foley and Harris consummated the sale to Nationwide Development, despite the fact that partner Julius Margulies and Philip Bradley, an attorney associated with the partnership who claimed a partnership interest, disapproved of the transaction. Margulies and Bradley subsequently brought suit in plaintiff's name against various defendants, primarily seeking rescission of the conveyance. In 1983, the Franklin County Common Pleas Court found in favor of defendants. Plaintiff appealed to this court, which found that plaintiff, having ratified the transaction, could not rescind the conveyance or challenge Nationwide Development's title. We did, however, remand the case for trial of plaintiff's tort claims against defendant Nationwide Development and defendant Nationwide Mutual Insurance Company.

The trial court on remand granted a directed verdict in favor of plaintiff on the issue of liability in a trial conducted in December 1988. The jury, though, found that defendants owed plaintiff no damages. Plaintiff appeals to this court, assigning the following seven errors:

"1. The trial court erred and abused its discretion in denying leave to plaintiffs to file their tendered Supplemental Amended Complaint setting forth defendants' post-conveyance conduct and events affecting damages recoverable by plaintiffs.

"2. The trial court erred in excluding evidence of Nationwide's unjust enrichment represented by its exploitation of the property as evidence of damage.

"3. The trial court erred in refusing as to compensatory damages to instruct the jury as requested by plaintiffs and in overruling plaintiffs' objections to the charge.

"4. The trial court erred and abused its discretion in refusing to enforce its order in limine precluding defendants from commenting or offering evidence pertaining to specified irrelevant matters.

"5. The trial court erred in not granting partial judgment notwithstanding the verdict for the minimum benefits accruing to defendants from their tortious acquisition of plaintiffs' property.

"6. The judgment in favor of Nationwide is against the manifest weight of the evidence.

"7. The trial court erred and abused its discretion in refusing as to punitive damages to instruct the jury as requested by plaintiffs."

Plaintiff's primary contention in its first, second, third, fifth, and sixth assignments of error is that, irrespective of the amount of plaintiff's actual loss, plaintiff may recover under an unjust enrichment theory the amount of defendants' profits from commission of the tort in issue. Plaintiff explicitly disclaims a measure of damages based upon its lost profits or lost expectancy. Defendants, on the other hand, contend that plaintiff's recovery of defendants' profits would not be appropriate because plaintiff's actual loss is much less than defendants' gain. Specifically, defendants argue that plaintiff did not have defendants' ability to develop the property in question.

Before addressing the merits of the parties' arguments, however, we will discuss the cause or causes of action under which plaintiff seeks to recover damages. In the course of directing a verdict in plaintiff's favor on the issue of liability, the trial court stated that "[p]laintiffs', the Developers Three's, cause of action is that Nationwide Development Company wrongfully induced Foley and Harris to breach their fiduciary duties to the Plaintiffs." Plaintiff, in its reply brief, argues that Foley and Harris breached their duty, and that defendants' inducing the breach was "constructively fraudulent," thereby rendering defendants liable as well. Plaintiff cites Hulett v. Fairbanks (1883), 40 Ohio St. 233, and Sterman v. Ziem (1936), 17 Cal.App.2d 414, 62 P.2d 160, in support. Plaintiff, however, also cites cases in which parties sued for conspiracy or for tortious interference with contract. See Minarik v. Nagy (1963), 8 Ohio App.2d 194, 26 O.O.2d 359, 193 N.E.2d 280 (conspiracy); Reichman v. Drake (1951), 89 Ohio App. 222, 226, 45 O.O. 444, 446, 100 N.E.2d 533, 536; Leibovitz v. Central National Bank (1944), 75 Ohio App. 25, 30 O.O. 288, 60 N.E.2d 727 (tortious interference with contract). Paragraph twenty-two of plaintiff's first amended complaint alleged that defendants "maliciously conspired to interfere with the valuable contractual rights and expectancies of plaintiffs * * *."

Ultimately, we conclude that we can best characterize plaintiff's claim as one for tortious interference, as this court did in the first appeal of this case. See Developers Three v. Nationwide Ins. Co., supra, at 5. Section 766 of the Second Restatement of Torts defines "Intentional Interference with Performance of Contract by Third Person" 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." 4 Restatement of the Law 2d, Torts (1979) 7, Section 766.

See, also, Donald G. Culp Co. v. Reliable Stores Corp. (1983), 14 Ohio App.3d 161, 163, 14 OBR 178, 180, 470 N.E.2d 193, 196 (citing Section 766 of the Restatement); Reichman, supra, 89 Ohio App. at 226, 45 O.O. at 446, 100 N.E.2d at 536 (citing First Restatement of Torts). A difficulty arising from application of Section 766 to the present case is the fact that the fiduciary duty that partners Foley and Harris allegedly breached did not derive from a specific provision of the partnership agreement but from R.C. 1775.08, which defines an individual partner's scope of authority. Nevertheless, we find that plaintiff's cause of action is sufficiently analogous to the cause of action stated in Section 766 of the Restatement to permit a court to analyze plaintiff's claims under tortious interference with contract principles, since the Restatement's definition of tortious interference substantially encompasses plaintiff's allegations of inducing a breach of a duty.

In regard to the unjust enrichment issue, the Ohio Supreme Court has stated that unjust enrichment occurs when a person "has and retains money and benefits which in justice and equity belong to another." Hummel v. Hummel (1938), 133 Ohio St. 520, 528, 11 O.O. 221, 224, 14 N.E.2d 923, 927. However, Ohio courts have apparently not yet addressed the issue of unjust enrichment in tortious interference cases. Similarly, the Restatement of Torts does not mention unjust enrichment in its section on damages for tortious interference. Restatement of Torts, supra, at 54, Section 774A. The Restatement of Restitution generally recognizes actions for the recovery of unjust enrichment in cases in which benefits have been tortiously acquired, Restatement of the Law, Restitution (1937) 522, Section 128 et seq; however, the Restatement of Restitution explicitly "takes no position as to a person's duty of restitution to another where the first person has made a profit by tortiously causing a third person to break his contract with the other." Restatement of Restitution, supra, at 549, Section 133.

In jurisdictions other than Ohio, several courts have not been as noncommittal as the American Law Institute's Restatements and have permitted an unjust enrichment recovery in a tortious interference action. See, e.g., Zippertubing Co. v. Teleflex Inc. (C.A.3, 1985), 757 F.2d 1401, 1411-1412; Second Natl. Bank v. M. Samuel & Sons, Inc. (C.A.2, 1926), 12 F.2d 963, 967- 968, certiorari denied (1926), 273 U.S. 720, 47 S.Ct. 110, 71 L.Ed. 857; Colorado Interstate Gas Co. v. Natural Gas Pipeline Co. (D.Wyo.1987), 661 F.Supp. 1448, 1478-1479, reversed on other grounds (C.A.10, 1989), 885 F.2d 683, 697; Federal Sugar Refining Co. v. United States Sugar Equalization Board (S.D.N.Y.1920), 268 F. 575, 582-583; National Merchandising Corp. v. Leyden (1976), 370 Mass. 425, 431-434, 348 N.E.2d 771, 775-776; Caskie v. Philadelphia Rapid Transit Co. (1936), 321 Pa. 157, 158-162, 184 A. 17, 18-19. Other courts have not permitted an unjust enrichment recovery. See, e.g., Marcus, Stowell...