Donald G. Culp Co. v. Reliable Stores Corp.

• Decision Date: 22 December 1983
• Citation: 470 N.E.2d 193,14 Ohio App.3d 161,14 OBR 178
• Parties: , 14 O.B.R. 178 DONALD G. CULP COMPANY et al., Appellees, v. RELIABLE STORES CORP. et al., Appellants.
• Court: Ohio Court of Appeals

Page 161

14 Ohio App.3d 161

470 N.E.2d 193, 14 O.B.R. 178

DONALD G. CULP COMPANY et al., Appellees, v. RELIABLE STORES CORP. et al., Appellants.

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

Dec. 22, 1983.

Syllabus by the Court

One is privileged to purposely cause another not to perform a contract with a third person where he in good faith is asserting a legally protected interest of his own, which he believes will be impaired or destroyed by the performance of the contract. Hence, where a tenant wishes to sublease commercial premises and obtains a real estate broker for that purpose, the landlord is not precluded from requiring the sublessee to meet certain reasonable requirements, such as providing a restoration bond.

Baker & Hostetler and Daniel J. Gunsett, Columbus, for appellees.

Folkerth, Webster, Maurer & O'Brien and Glenn B. Redick, Columbus, for appellant Swarb Realty Co.

Krupman & Bownas Co., L.P.A., and Victor S. Krupman, Columbus, for appellant Reliable Stores Corp.

MOYER, Judge.

This case is before us on the appeal of defendants-appellants, Reliable Stores Corporation ("Reliable") and Swarb Realty Company ("Swarb"), from a judgment of the Court of Common Pleas of Franklin County rendered in favor of plaintiffs-appellees, Donald G. Culp Company ("Culp") and Hadler Realty Company ("Hadler"), on their claim for real estate commissions.

The testimony and exhibits show that Swarb leased a building in downtown Columbus to Reliable in 1972. The lease was for a period of ten years with options to renew for two additional seven-year terms. The lease also provided that Reliable could not sublet the premises without obtaining Swarb's consent and that Swarb's consent would not be unreasonably withheld.

In 1979, Reliable, which had been using the premises as a jewelry store, decided to close the store and offered to give Swarb early possession of the property. When Swarb rejected Reliable's offer, Reliable sought the aid of Culp, a commercial real estate broker, in procuring a subtenant for the two and one-half years remaining on the lease.

After Mr. Culp reviewed the lease, he wrote to Reliable and suggested listing the property at a rental of $5,000 per month. Culp enclosed an exclusive listing agreement with his October 24, 1979 letter and Reliable signed the listing agreement on November 9, 1979. The listing agreement covered the period from November 9, 1979 to July 8, 1980, and provided that it would continue in effect thereafter until canceled by Reliable or Culp. Swarb, the owner of the property, received notice of the exclusive listing agreement between Reliable and Culp on November 15, 1979.

During the spring of 1980, Big Bite, Inc., a fast-food restaurant, offered, through Culp, to sublease the premises from Reliable. Swarb, Reliable and Culp were all involved in the Big Bite negotiations until they terminated in early May of 1980.

Meanwhile, Reliable wrote to Swarb on March 25, 1980 and again offered to terminate the lease and give Swarb early possession of the property.

On April 7, 1980, Don Feibel, a realtor whose offices were in the same building as Swarb's and whose father, Troy Feibel, was Swarb's attorney, received a call from White Castle Systems, Inc. ("White Castle"), another fast-food restaurant, which was interested in acquiring a downtown location. Don Feibel called Raymond Kahn, the president of Swarb, to inform him of White Castle's interest.

On April 14, 1980, another real estate broker, Paul Howald, who eventually provided information about the building to Don Feibel who relayed it to White Castle, called Kahn and asked whether he should contact Reliable and Culp about the property. Kahn told Howald not to contact Culp or Reliable.

On April 15, 1980, Kahn, Don Feibel and two other people showed a group of people from White Castle through the premises.

Then, on May 1, 1980, Sam Jackson, Jr., for himself and a corporation to be formed, submitted to Culp an offer to sublease the premises. The same day, Culp forwarded the Jackson proposal to Reliable and urged Reliable to accept it. Jackson also wanted to use the premises for a restaurant. Swarb learned of the Jackson offer on May 6, 1980.

On May 8, 1980, Kahn met with Troy Feibel, Swarb's attorney, and Don Feibel, White Castle's real estate broker, to draft a response to Reliable's offer to terminate the lease. In its response, which was sent to Reliable on May 9, 1980, Swarb offered to cancel the lease with Reliable, or to split the profits which would accrue on the Jackson sublease since Jackson's rent would exceed the rent being paid by Reliable.

Within the next week, the Jackson offer expired, Howald called Kahn to let him know he was still interested in the property, Reliable's attorney sent Reliable her revisions of the Jackson proposal, and one of Don Feibel's employees took White Castle's engineers through the building.

After Reliable sent its revisions of the Jackson proposal to Culp, White Castle, through its broker, presented to Swarb an offer to sublease the premises. This offer was not accepted; however, White Castle's second offer to sublease, which was made contingent upon Swarb's release from its lease with Reliable, was accepted by Swarb on June 3, 1980.

On June 12, 1980, Reliable sent the revised Jackson proposal and Jackson's financial statement and credit report, which had been requested by Swarb, to Swarb, and asked for Swarb's consent to the Jackson sublease.

Kahn discussed the Jackson proposal with Troy Feibel and Don Feibel on June 19, 1980, and then requested, by letter, that Reliable provide him with plans for Jackson's proposed alterations to the building and that a bond guaranteeing restoration of the premises be provided. Reliable forwarded this letter to Culp on June 26.

On July 1, 1980, Mr. Culp called Troy Feibel and questioned the reasonableness of the request for a restoration bond. During the next two weeks, Troy Feibel, Culp, Hadler (Jackson's broker who was to split the commission with Culp), Reliable and Jackson's architect held various meetings and telephone conversations and exchanged correspondence in an attempt to satisfy Swarb's concerns and to reach an agreement to sublease the property to Jackson. At a July 8 meeting between Culp and Troy Feibel, Culp was assured by Feibel that there was no reason to provide a restoration bond. Then, on July 11, 1980, in the midst of these ongoing negotiations, Swarb and Reliable apparently reached an agreement to terminate their lease. A July 11, 1980 letter from Reliable to Swarb confirmed Reliable's understanding of their agreement. At this point, Swarb and Reliable had not yet agreed which of them would be liable for Culp's commission; but all of the terms of their agreement to cancel were agreed to at the latest by July 20, 1980, and a cancellation agreement was signed by both Reliable and Swarb on July 28, 1980.

Although the original term of Culp's exclusive listing agreement expired July 8, 1980, since the agreement continued until it was canceled by Culp or Reliable, Reliable wrote to Culp and canceled the listing agreement on July 22, 1980.

The lease between White Castle and Swarb was signed on July 28, 1980.

Swarb and Reliable both denied responsibility for Culp's commission and the trial court found them jointly and severally liable to Culp and Hadler in the amount of $51,840.

Swarb raises the following four assignments of error in support of its appeal from that judgment:

"1. The judgment rendered by the trial court is against the manifest weight of the evidence.

"2. The trial court erred in finding that Swarb Realty had tortiously interfered with the business relationship between Donald G. Culp Company and Reliable Stores.

"3. The trial court erred in finding that Swarb Realty Company failed to have a privilege when interacting with Reliable Stores.

"4. The trial court erred in finding that the acts of Swarb Realty were a proximate cause of the final sublease failing to be signed between Reliable Stores and Sam Jackson."

Swarb's four assignments of error all concern the trial court's finding that Swarb, without being privileged to do so, tortiously interfered with the contractual relationship between Reliable and Culp.

The applicable law is found in 4 Restatement of the Law 2d, Torts (1979) 7, 17, 26-27, 52, Sections 766, 766A, 767, 773. Sections 766 and 766A provide that one who intentionally and improperly interferes with the performance of a contract between two other persons is liable for the pecuniary loss resulting to one of the other two persons as a result of the wrongful interference with their contract. See, also, Ross v. Woyan (1980), 1 Ohio App.3d 39, 40, 439 N.E.2d 428; Pearse v. McDonald's Systems of Ohio, Inc. (1975), 47 Ohio App.2d 20, 22-23, 351 N.E.2d 788 .

However, Section 773 of the Restatement contains an exception to the general rule. As this court held, in Pearse, supra, at 25, 351 N.E.2d 788:

"Pursuant to the provisions of Section 773, IV Restatement of Torts * * * one is privileged to purposely cause another not to perform a contract with a third person where he in good faith is asserting a legally protected interest of his own, which he believes will be impaired or destroyed by the performance of the contract. * * * "

In the present case, Kahn and Troy Feibel testified that, since the property had been used for years for retail purposes, Swarb wished to insure that, if the property was transformed into a restaurant, the tenant would return the property at the end of the lease in its original condition and ready to be used again for retail sales. Troy Feibel also expressed concern that a new sign would damage the marble on the front of the building.

Culp argues that, since Swarb had not required a bond from Reliable and since Swarb leased the premises to White Castle without a bond, the demand for a bond was merely a delaying tactic and was not designed to...