Lien v. Northwestern Engineering Co.

• Citation: 39 N.W.2d 483,73 S.D. 84
• Decision Date: 21 October 1949
• Docket Number: No. 9011,9011
• Parties: LIEN v. NORTHWESTERN ENGINEERING CO. et al.
• Court: South Dakota Supreme Court

Page 483

39 N.W.2d 483

73 S.D. 84

LIEN v. NORTHWESTERN ENGINEERING CO. et al.

No. 9011.

Supreme Court of South Dakota.

Oct. 21, 1949.

Rehearing Denied Dec. 15, 1949.

Bellamy & Eastman, Rapid City, for plaintiff and respondent.

H. F. Fellows, Rapid City, Percy H. Helm, Sturgis, for defendants and appellants.

ROBERTS, Judge.

This action was commenced November 15, 1947, by Pete Lien against the two corporate defendants and Blair Brothers, a partnership.

It is alleged in the complaint that on or about April 27, 1946, the defendant Blair Brothers, the owner of contiguous tracts in Meade county containing valuable deposits of lime rock suitable for use in highway construction work, entered into a contract with plaintiff to continue in force for a period of three years wherein the partnership granted to plaintiff the exclusive right and privilege to remove lime rock from a described quarter section; that plaintiff was to pay four cents per cubic yard for materials removed and that the contract contained the following restrictive clause: 'In addition to the premises herein demised, the first party agrees that they will not lease or demise any contiguous or adjacent acreage owned by them to third parties for the production of sand and gravel, rock or other similar material during the term of this agreement.'

It is further alleged that plaintiff made exploratory tests on the leased premises for the purpose of ascertaining the quantity and quality of lime rock deposits and the economical availability of such rock for highway construction work then about to be commenced by the state on U.S. Highway No. 14 which is in close proximity to the land described in the contract and found that such lime rock was of sufficient quality to meet the required engineering standards for such proposed construction work and that there was sufficient quantity capable of economical removal to supply the construction work on this highway; that defendant Blair Brothers had full knowledge of these facts prior to entering into the agreement and knew that plaintiff's purpose in leasing the premises was to produce material for sale to the state or its contractors and that said defendant also knew that the leased premises contained the only known supply of economically available lime rock of acceptable quality for such highway construction work.

It is further alleged that thereafter Blair Brothers conveyed all their lands to the defendant Black Hills Hereford Ranches, Inc., and that the four brothers are the sole owners and stockholders of such corporation.

It is further alleged that the defendant Northwestern Engineering Company was awarded by the state a contract for paving a portion of the highway mentioned and that said defendant obtained from plaintiff quotations for crushed rock and these were used by the company in making its estimate and bid.

It is further alleged that defendant Northwestern Engineering Company, having at all times full knowledge of the above mentioned contract and its contents and over the objections of the plaintiff, entered upon contiguous or adjacent acreage owned by Blair Brothers and removed in violation of the restrictive clause of the above contract approximately 24,000 tons of lime rock.

Defendants by their answer denied the material allegations of the complaint; asserted that plaintiff's contract is unlawful and void in that it is against public policy and in restraint of trade; that it is unilateral and lacks mutuality and is without consideration; and that plaintiff's contract did not include any area of the Blair Brothers ranch aside from the quarter section described therein and sufficient acreage only for ingress and egress.

This action, based on the theory that the right to perform a contract and to reap the benefits therefrom and the right of performance by the other party are property rights and that defendants interfered with and brought about a breach of the contract of April 27, 1946, was instituted to recover the resulting damage to plaintiff. The amount of tonnage involved was admitted to be approximately 24,000 tons. There was evidence that the crushed rock was worth 75 cents per ton after deducting production costs. The jury returned a verdict of $17,280.

It has been repeatedly stated that one who intentionally and without reasonable justification or excuse induces one of the parties to a contract to refuse to perform according to the terms thereof, with resulting damage to the other party to the contract, may be held liable in an action to recover such damage. 30 Am.Jur., Interference, Sec. 18 et seq.; Annotation 84 A.L.R. 43. The fact that a cause of action for a breach of contract exists in favor of plaintiff does not prevent his having a cause of action in tort. Liability is not predicated upon the breach of contract, but arises from intentional and wrongful interference with contractual relations. This is clearly demonstrated in Sorenson v. Chevrolet Motor Co., 171 Minn. 260, 214 N.W. 754, 756, 84 A.L.R. 35, wherein it appears that plaintiff had an agency contract which gave him exclusive territory as a dealer for defendant company. The court said: 'The contract between the plaintiff and defendant corporation imposed duties and rights. This contract and the benefits therefrom constituted a property right. An intentional interference therewith by one not having an equal or superior right is wrongful and precipitates liability. The intentional procurement of the breach of an existent contract, without just cause or excuse, makes him, who causes the breach, liable for resulting damages, and this is so even though he promoted his legitimate interests. When one has knowledge of the contract rights of another, his wrongful inducement of a breach thereof is a willful destruction of the property of another and cannot be justified on the theory that it enhances and advances the business interests of the wrongdoer. Fraud, misrepresentation, intimidation, coercion, obstruction, molestation, or the willful and intentional procurement of violation of contractual relations are practices which competition does not authorize.' And it has been held that the liability of the parties who unite to induce a breach of the contract or aid or participate therein knowing of the existence of the contract is joint and several. Hornstein v. Podwitz, 254 N.Y. 443, 173 N.E. 674, 84 A.L.R. 1; Husting Co. v. Coca-Cola Co., 194 Wis. 311, 216 N.W. 833.

Defendant contend that the contract for procuring the breach of which relief is sought tended to create a monopoly, was in restraint of trade and was contrary to the public policy of the state. The defendant were not liable if there was no valid contract. The statute, SDC 13.1802, which, it is claimed, prohibited this contract provides that it shall be unlawful for persons acting in combination 'to fix prices, limit production, or regulate the transportation of any product or commodity so as to obstruct, delay, or prevent competition within this state of the production, sale, purchase, distribution, or transportation of such product or commodity, or to make any combination, contract, or agreement for the purpose of doing any of said things.' This statute was originally enacted, Ch. 94, Laws 1897, in obedience to the requirements of Section 20 of Article 17 of the State Constitution. We are cited to no case which holds that a contract similar to the one in question is invalid as between the parties. In Miles Laboratories v. Owl Drug Co., 67 S.D. 523, 295 N.W. 292, 295, this court said: 'A monopoly such as is meant by Section 20 of Art. 17 of our Constitution exists only where all or so nearly all of a product or commodity within a community or district is brought into the hands of one man or set of men, as to practically bring the handling or production of the commodity within such single control, to the exclusion of competition or free traffic therein.' The contract here relied on did not relate to any other lime rock except that on the premises of Blair Brothers. It appears from the facts before us that this may have been the most economical source of supply, but the lime rock on the Blair land did not comprise all or any large portion of such material in the community. We cannot declare the contract to be illegal under this statute. Its necessary consequence was not to fix prices, limit production, or suppress competition.

Defendants do not claim that there was unfair dealing or mistake in entering into the contract. The parties were competent to contract and entered into the agreement of April 27, 1946, because its terms then were evidently satisfactory to them. Defendants seek to have the restriction which the owners of the premises voluntarily assumed avoided on the ground that the restriction is unreasonable and contrary to public policy. 'Generally, the tendency of the modern authorities is * * * to gauge the validity of the contract by the reasonableness of the restraint imposed as necessary to the protection of the covenantee, and as compatible with the public interest.' 17 C.J.S., Contracts, Sec. 246. In Restatement of Law of Contracts, Sec. 515, it is said that a restraint of trade by contract is generally unreasonable 'if it (a) is greater than is required for the protection of the person for whose benefit the restraint is imposed, or (b) imposes undue hardship upon the person restricted, or (c) tends to create, or has for its purpose to create, a monopoly, or to control prices or to limit production artificially, or (d) unreasonably restricts the alienation or use of anything that is a subject of property, or (e) is based on a promise to refrain from competition and is not ancillary either to a contract for the transfer of good-will or other subject of property or to an existing employment or contract of employment.' It is also stated, Sec. 516, that the following transactions unless forming part of a plan to effect a monopoly are not in...