Leonard Duckworth, Inc. v. Michael L. Field & Co.

• Decision Date: 01 August 1975
• Docket Number: No. 74-3108,74-3108
• Citation: 516 F.2d 952
• Parties: LEONARD DUCKWORTH, INC., and Kofender, Snoddy & Associates, Plaintiffs-Appellees, v. MICHAEL L. FIELD AND COMPANY, and Michael L. Field, Individually, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 952

516 F.2d 952

LEONARD DUCKWORTH, INC., and Kofender, Snoddy & Associates, Plaintiffs-Appellees, v. MICHAEL L. FIELD AND COMPANY, and Michael L. Field, Individually, Defendants-Appellants.

No. 74-3108.

United States Court of Appeals, Fifth Circuit.

Aug. 1, 1975.

Michael L. Field, pro se, William M. Ravkind, Dallas, Tex., for defendants-appellants.

John H. McElhaney, Dallas, Tex., for plaintiffs-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before GODBOLD, Circuit Judge, SKELTON, Associate Judge, ^* and GEE, Circuit Judge.

SKELTON, Judge:

This case deals with the question of whether the defendants-appellants tortiously interfered with plaintiffs'-appellees' reasonable expectancy of a real estate commission resulting from the sale of certain real property. In May 1972, Leonard Duckworth, Inc., a Texas corporation specializing in real estate sales, and Jack Kofender and Raymond Snoddy, both licensed real estate agents working at the time for the Duckworth Company (hereinafter plaintiffs), contacted the Chase Manhattan Bank in New York City (hereinafter Chase) to inquire as to Chase's willingness to sell certain property called the Lands End Apartment Project (Lands End) in Dallas, Texas. After receiving operating information from the Chase, plaintiffs first submitted to the bank an offer for the purchase of the property from a David Kitzinger. After this was refused, plaintiffs initiated negotiations with Chase for the sale of Lands End to defendant company, Michael L. Field & Co. (Field Co.). These negotiations consisted of two written drafts of a sale contract submitted to Chase by plaintiffs and substantial oral communications by plaintiffs to the bank. In each of the draft contracts, to be signed by all three parties, the seller was required to pay a brokerage commission to the plaintiffs. Throughout the negotiations for the prospective purchase of the property, plaintiffs' contact with the defendant was predominately through co-defendant Michael L. Field (Field), at all times material here, president of Field Co.

In September 1972, the plaintiffs and defendants were notified by William Schwartz, the bank's real estate officer responsible for this property, that the defendants' second offer was rejected but that Chase might accept it if it were resubmitted at the first of the year after a certain change in Chase's personnel occurred. Plaintiffs did in fact contact Chase on January 2, 1973, with respect to the sale of Lands End, and in addition attempted to help secure financing for the project.

Sometime in February 1973, Field initiated direct negotiations with Schwartz of the Chase without going through the plaintiff-broker, as had been done with his first two offers. These private negotiations ultimately led to an offer of $3,425,000 for the property, which was subsequently accepted by the Chase. Prior to execution of this last offer, plaintiff Kofender asserted to the Chase and defendants that plaintiffs would be due a commission on the completion of the sale inasmuch as they brought the parties together and the final contract was merely the culmination of negotiations initiated by plaintiffs. Field, however, denied that plaintiffs represented him as a broker during these final negotiations, and, at Chase's urging, inserted an indemnity clause into the finally executed contract in which Field and Field Co. agreed to indemnify Chase for any brokerage commissions that might be asserted against it. The sales contract was signed by Chase on June 1, 1973, although for reasons not clearly stated, the sale was never consummated.

Plaintiffs brought suit against Field Co. and Michael Field individually in federal district court for damages for the tortious interference with their reasonable expectation of a brokerage commission on the sale of Lands End. A jury, in response to special interrogatories found: (1) that Field and Field Co. induced Chase not to enter into an agreement with plaintiffs for the sale of Lands End to Field Co. in order to avoid payment of a brokerage fee; (2) that this was done by defendants with malice; (3) that, but for the interference there was a reasonable probability that Chase and plaintiffs would have entered into the contract; and (4) that $113,250 was a reasonable brokerage fee under the circumstances. The trial judge entered judgment against both defendants jointly and severally for $113,250 and defendants timely appealed to this court.

As a general proposition, wrongful or malicious interference with the performance or the formation of a contract or the right to pursue a lawful business calling, trade, or occupation constitutes a tort for which damages may be recovered. See 86 C.J.S. Torts § 43 (1954); Restatement of Torts § 766 (1939). In addition, the common law has long held that the reasonable expectancy of a prospective contract is a property right to be protected from wrongful interference in the same sense as an existing contract is protected. Keeble v. Hickeningill, 103 Eng.Rep. 1127 (Q.B.1706); Brennan v. United Hatters of North America, 73 N.J.L. 729, 65 A. 165 (1906); Jersey City Printing Co. v. Cassidy, 63 N.J.Eq. 759, 53 A. 230 (1902). In the Restatement of Torts, recognition is given of the existence of liability for interference with prospective contracts or other business relationships as follows:

Except as stated in Section 698, one who without a privilege to do so, induces or otherwise purposely causes a third person not to * * * b) enter into or continue a business relation with another is liable to the other for the harm caused thereby. (Restatement of Torts, § 766 (1939).)

Moreover, where negotiations are under way and appear likely to succeed, interference with them has been considered to be a tort.

* * * Any intentional interference with negotiations reasonably certain to result in an advantageous contract on the part of the plaintiff is, unless privileged, an actionable wrong. (1 Harper & James, Torts § 6.12 (1956).)

Texas law, which must be followed in this diversity action, similarly permits a cause of action for interference with reasonably probable future contractual relations. This law was expressed as follows:

Texas courts recognize a cause of action for improper interference with contractual relationships, and the unenforceability of the contract is usually no defense to an action for tortious interference with its performance. Clements v. Withers, 437 S.W.2d 818, (Tex.), where recovery was allowed for tortious inducement of breach of an existing contract; Raymond v. Yarrington, (96 Tex. 443), 73 S.W. 800 (Tex.Sup.). Our courts have also recognized a cause of action for tortious and wrongful interference with advantageous business relationships. Cooper v. Steen, 318 S.W.2d 750, 757, (Tex.Civ.App.), no writ. hist., and cases there cited. And see Pope v. Garrett, 147 Tex. 18, 211 S.W.2d 559. It need not be absolutely certain that the prospective contract would have been made were it not for such interference. A reasonable assurance thereof in view of all the circumstances, is generally sufficient. 86 C.J.S. Torts § 43, p. 959. But where there is no contract, as here, a party does not have a right to be free from competition, but instead merely has the right to be free from malicious interference with the right to conduct negotiations that have a reasonable probability of resulting in a contract. (Emphasis supplied.) (Martin v. Phillips Petroleum Co., 455 S.W.2d 429, 435 (Tex.Civ.App.1970) reh. denied.)

Recovery for malicious or tortious interference with contractual relations has been permitted specifically in real estate situations such as the instant case. See Myers v. Arcadia, 73 N.J.Super. 493, 180 A.2d 329 (1962). In Myers, a real estate broker brought suit against a buyer of property for the loss of his commission after the buyer secretly negotiated with the property owner for the sale of certain real estate. When the buyer and seller subsequently entered into a contract of sale, the broker claimed that he brought the parties together and was therefore entitled to his commission. The court in agreeing with the plaintiff's position stated:

We hold that the rule to be applied in a case such as the one at bar is that the broker may recover when the jury is satisfied that but for the wrongful acts of the defendant it is reasonably probable that the plaintiff would have effected the sale of the property and received a commission. * * * (Emphasis supplied.) (180 A.2d at 331.)

In the case of Glenn v. Point Park College, 441 Pa. 474, 272 A.2d 895 (1971) the elements of the tort of wrongful interference with a prospective contract right are clearly enumerated. For a plaintiff, such as in the instant case, to prevail, he must show that (1) there was a "reasonable probability" that he would have entered into a contractual relationship; (2) defendant acted maliciously by intentionally preventing the relationship from occurring with the purpose of harming plaintiff; (3) the defendant was not privileged or justified, and (4) actual harm or damage occurred as a result. Cf. Light v. Transport Insurance Co., 469 S.W.2d 433 (Tex.Civ.App.1971) reh. den.

We believe that given the particular circumstances of this case there was sufficient evidence for the jury to have found that defendants committed the alleged tort, and, therefore, the judgment should be affirmed. It is apparent that at the time the alleged interference occurred there was a reasonable certainty that Chase would have entered into a three party contract with the plaintiffs and defendants for the sale of Lands End under which plaintiffs would have been due a broker's commission. It is undisputed that the parties to the final sales contract were brought together as a result of the efforts of the plaintiffs. During the first few months, all negotiations were handled through the plaintiffs' offices and at all times plaintiffs were...