Dryden v. Tri-Valley Growers

• Decision Date: 18 January 1977
• Docket Number: TRI-VALLEY
• Court: California Court of Appeals Court of Appeals
• Parties: James DRYDEN et al., Plaintiffs and Appellants, v.GROWERS, Defendant and Respondent. Civ. 39050.

Page 720

135 Cal.Rptr. 720

65 Cal.App.3d 990

James DRYDEN et al., Plaintiffs and Appellants, v. TRI-VALLEY GROWERS, Defendant and Respondent.

Civ. 39050.

Court of Appeal, First District, Division 2, California.

Jan. 18, 1977.

As Modified on Denial of Rehearings Feb. 17, 1977.

Hearing Denied March 17, 1977.

Minasian, Minasian, Minasian, Spruance & Baber, Oroville, for plaintiffs and appellants.

Francis Kerner, Alexander R. Imlay, Kerner, Colangelo & Imlay, San Francisco, for defendant and respondent.

KANE, Associate Justice.

Plaintiffs, James Dryden, individually, and with Paul R. Minasian and Malcolm R. Minasian acting as a partnership of Dryden, Minasian & Minasian, appeal from the trial court's judgment dismissing the action against respondent Tri-Valley Growers after the demurrer to the third, fourth, fifth and sixth causes of action of the first amended complaint ('complant') was sustained without leave to amend.

The background facts appearing in the complaint reveal that commencing in 1970 appellants entered into a series of contracts with Henry and Margaret Irving ('Irvings'), the owners of Villa D'Oro Olive Oil Company, an olive oil processing plant located in Butte County, California. The contracts, which by incorporation became a part of the complaint, provided for the sale of certain waste products of olive oil production, including cracked, dried and deoiled olive pits, olive pumice (the skin and meat of the olive), and olive oil soap stock (hereinafter: 'by-products' or 'materials') to appellants. For the purpose of utilizing and selling such materials, appellants installed conveyors, wooden sideboards and building supports on the premises of Villa D'Oro. While some of the materials were subject to immediate sale and delivery, others were to be produced and delivered in the future. With regard to the purchase of future products, appellants were granted a right of option extending until July 15, 1982. The contracts provided that the provisions contained therein would bind not only Irvings, the original sellers, but also the successor owners of the Villa D'Oro Olive Oil Company.

The facts further disclose that following the execution of the subject contracts a legal dispute arose between the parties. As a result, in letters dated June 16 and September 11, 1973, the Irvings advised appellants that they intended to rescind and cancel the subject contracts on grounds of material breach and fraudulent representations on the part of appellants. An action filed in Butte County followed, in which appellants sought declaratory and related relief against the Irvings.

While the Butte County action was pending, by a contract concluded on or about May 23, 1974, the Irvings transferred the ownership of the plant to respondent Tri-Valley Growers. Thereupon, appellants brought the present action against respondent and several unnamed persons. The complaint purported to state causes of action on tort theories of intentional interference with contractual and/or advantageous economic and business relationships. General damages were sought in the sum of $1,000,000; special damages in the sum of $1,000,000; and exemplary damages in the sum of $5,000,000. Respondent filed a general demurrer to the original complaint which was sustained with leave to amend. Upon the filing of the first amended complaint, respondent again demurred, claiming that the third, fourth, fifth and sixth causes of action failed to state facts sufficient to constitute a cause of action. This time the trial court sustained the demurrer without leave to amend and dismissed the case against respondent.

Appellants insist that the facts stated in the third, fourth, fifth and sixth counts of the complaint are sufficient to support a cause of action based on the tort theory of intentional interference with contractual relations and/or on the broader concept of interference with prospective economic advantage (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 122 Cal.Rptr. 745, 537 P.2d 865; Zimmerman v. Bank of America (1961) 191 Cal.App.2d 55, 12 Cal.Rptr. 319; Freed v. Manchester Service, Inc. (1958) 165 Cal.App.2d 186, 331 P.2d 689; Romano v. Wilbur Ellis & Co. (1947) 82 Cal.App.2d 670, 186 P.2d 1012). A review of the governing legal principles along with an examination of the factual allegations of the complaint has led us to the conclusion that the judgment of the trial court must be affirmed.

It is, of course, a well established general rule that one who, without a privilege to do so, induces a third person not to perform a contract with another is liable to the other for the harm caused thereby (Herron v. State Farm Mutual Ins. Co. (1961) 56 Cal.2d 202, 205, 14 Cal.Rptr. 294, 363 P.2d 310; Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 35, 112 P.2d 631; Augustine v. Trucco (1954) 124 Cal.App.2d 229, 244, 268 P.2d 780; Rest., Torts, § 766). It is likewise settled that the tort of interference with contract is merely a species of the broader tort of interference with prospective economic advantage; and while the elements of the two actions are similar, the existence of a legally binding agreement is not a Sine qua non to the maintenance of a suit based on the more inclusive wrong (Buckaloo v. Johnson, supra, 14 Cal.3d at p. 823, 122 Cal.Rptr. 745, 537 P.2d 865; Builders Corporation of America v. United States (N.D.Cal.1957) 148 F.Supp. 482, 484).

In proceeding to analyze the precise issue presented for determination, we initially observe that despite the broad language of the complaint purporting to state a cause of action for interference with 'advantageous relationships, procedures and business,' the gist of appellants' grievance is that, by buying the Villa D'Oro Olive Oil Plant from Irvings, respondent unjustifiably interfered with and induced the breach of the existing contracts between appellants and Irvings. The vital issue awaiting adjudication, therefore, is whether the disputed counts stated sufficient facts to support a cause of action under the theory of interference with contractual relations.

The elements of a cause of action predicated on interference with contract are well defined. Accordingly, in order to plead an actionable wrong under this theory, plaintiff must allege that (1) he had a valid and existing contract; (2) The defendant had knowledge of the contract and intended to induce its breach; (3) the contract was in fact breached by the contracting party; (4) The breach was caused by the defendant's unjustified or wrongful conduct; and (5) the plaintiff has suffered damage (Springer v. Singleton (1967) 256 Cal.App.2d 184, 187--188, 63 Cal.Rptr. 770; see also Abrams & Fox, Inc. v. Briney (1974) 39 Cal.App.3d 604, 608, 114 Cal.Rptr. 328; Greenberg v. Hollywood Turf Club (1970) 7 Cal.App.3d 968, 975, 86 Cal.Rptr. 885; Freed v. Manchester Service, Inc., supra, 165 Cal.App.2d at p. 189, 331 P.2d 689).

When tested by the foregoing standards, the challenged causes of action display blatant deficiencies on their face, rendering them vulnerable to a general demurrer.

Thus, the third and fifth causes of action allege that respondent acquired knowledge of the contracts entered into between appellants and Irvings only on May 24, 1974, one day After the execution of the purchase contract with the Irvings. ¹ It is elementary that interference with contractual rights and economic advantage is an intentional tort. Accordingly, it has been held that an action for interference with contractual rights lies only if the defendant's act Induced the breach of contract between the plaintiff and the third party or if the defendant Purposely caused a third person not to perform the contract with another (Springer v. Singleton; Freed v. Manchester Service, Inc.; Buckaloo v. Johnson, all supra; Rest., Torts, § 766 ²). Since the third and fifth causes of action not only fail to indicate that respondent induced or otherwise purposely caused the breach of the contract, but also fail to allege that at the time of purchasing the plant respondent was even aware of the existence of previous contracts between appellants and Irvings, such causes of action are fatally defective.

Appellants' novel proposition that in the counts at dispute a cause of action for tortious interference with contractual rights was stated, because it is alleged that after having learned about the previous contracts between appellants and Irvings respondent failed to rescind or cancel the purchase contract of the plant, is supported by neither reason nor law. While the law rightly prohibits an intentional interference with contractual rights or beneficial economic relations existing between others, there is no equivalent duty to rescind a contract lawfully entered into on the ground that it might offend the legal rights of others (cf. Rest., Torts, § 766, comment c.). On the contrary, it is well settled that no actionable wrong is committed where, as here, the defendant's conduct consists of something which he had an absolute right to do (Caldwell v. Gem Packing Co. (1942) 52 Cal.App.2d 80, 125 P.2d 901; Sweeley v. Gordon (1941) 47 Cal.App.2d 385, 118 P.2d 16; Augustine v. Trucco, supra).

Turning to the fourth and sixth causes of action, we observe that they contain alternative allegations that the olive oil processing plant was obtained by respondent with prior knowledge of the contracts between appellants and Irvings. Furthermore, it is alleged that respondent interfered with said contracts by inducing the Irvings to sell the plant and by refusing thereafter to perform the terms and provisions of the contracts; that said acts of respondent were undertaken knowingly and intentionally for the purpose of preventing the performance of said contracts and that as a direct result of respondent's conduct appellants incurred sizeable damages. While the aforestated allegations seemingly support a cause of action based on interference with contractual rights, when read in...