Nesler v. Fisher and Co., Inc.

• Decision Date: 21 February 1990
• Docket Number: No. 88-858,88-858
• Citation: 452 N.W.2d 191
• Parties: Ferd NESLER, Appellant, v. FISHER AND COMPANY, INC., and Plastic Center, Inc., Appellees.
• Court: Iowa Supreme Court

Page 191

452 N.W.2d 191

Ferd NESLER, Appellant, v. FISHER AND COMPANY, INC., and Plastic Center, Inc., Appellees.

No. 88-858.

Supreme Court of Iowa.

Feb. 21, 1990.

Tom Riley, Cedar Rapids, for appellant.

Patrick M. Roby and Diane Kutzko of Shuttleworth & Ingersoll, P.C., Cedar Rapids, and Alfred E. Hughes, Dubuque, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, LAVORATO, and NEUMAN, JJ.

LARSON, Justice.

Ferd Nesler sued Fisher and Company, Inc., and Plastic Center, Inc., for interference with existing and potential business contracts (or advantages) based on Restatement (Second) of Torts sections 766A and 766B (1979). He recovered compensatory damages of $576,476 and punitive damages of $100,000; however, the district court granted the defendants' motion for judgment notwithstanding the verdict on the ground of insufficient evidence on the key elements of his claims. We reverse and remand.

In our review of a trial court ruling on a motion for judgment notwithstanding the verdict, the question is whether the evidence, when viewed in the light most favorable to the plaintiff, was sufficient to generate a jury question. Watson v. Lewis, 272 N.W.2d 459, 461 (Iowa 1978).

When viewed in that light, the evidence reveals the following events. In 1981, Nesler purchased a building in downtown Dubuque for the purpose of renovation and leasing to commercial and governmental tenants. His plan was to syndicate the building by selling shares to investors at a profit and to later manage the building for a fee. Within a year, Nesler received tentative commitments from several county agencies to relocate their offices to the refurbished building, which was to be called Nesler Centre. These commitments were subject to the approval of the Dubuque County Board of Supervisors.

Louis Pfohl, an attorney in New York City and an owner of substantial property in Dubuque, was president of the defendant corporations, which owned space previously leased to the county. After learning that the board of supervisors was considering the approval of relocation of the county offices to the Nesler Centre, Pfohl dropped his rental to a figure below what Nesler had offered.

The board of supervisors, in October 1982, approved the proposed move. Twelve county agencies, all of which had either been occupants of buildings owned by the defendants or interested in leasing from them, decided to locate at the Nesler Centre. Pfohl, angry at the action by the board of supervisors, predicted that Nesler would not complete his renovation on time and offered to bet each of the supervisors $1000 on it. Pfohl also stated that Nesler would "pay" for taking his tenants.

Shortly after the board's approval of the office relocations, Pfohl sued the board, claiming that it was required by law to accept his rental bid, which was slightly lower than Nesler's. The action was summarily dismissed by the trial court, and Pfohl's corporations appealed. We ruled that the statutory requirements for accepting low bids did not apply to rentals. Fischer and Co. v. Hayes, 364 N.W.2d 237, 239-40 (Iowa 1985).

There was substantial evidence that Pfohl began a strategy of repeated trips to the Nesler Centre, then under reconstruction, and to the city building department for the purpose of pressuring the building inspector to take action against the project. The effect was to impede the progress of the restoration of Nesler Centre.

There was also evidence that Pfohl persuaded one of his tenants, Handicapped Persons, Inc., to file a lawsuit against Nesler and several government agencies to challenge the failure of the Nesler Centre to provide adequate handicapped access. Pfohl's attorney brought the action on behalf of Handicapped Persons without charge to it. This case, which was the only work that Pfohl's attorney had ever done for Handicapped Persons, was dismissed on the pleadings. The jury could infer that the suit was encouraged, and paid for, by the defendants.

Throughout all of this time, local news media reported on the inspections and the alleged building code violations. People in the community began to express doubts about the Nesler Centre and about the problems Nesler was having in completing the project. Nesler claims the effect of this was to undermine confidence in his project, leading to his failure to finance it through a bank loan or syndication.

Nesler alleged that, had it not been for the interruptions caused by Pfohl, the project would have been substantially completed on time. He testified that, prior to the problems he experienced over the Nesler Centre, he had been a successful real estate developer and had never experienced problems with syndicating or financing similar projects.

Potential investors told Nesler that they were concerned about the lawsuit against the county board of supervisors and that if Nesler lost the lawsuit he would lose his tenants. Investors were also concerned about the Handicapped Persons suit, fearing that an adverse result might affect the income for the project.

The Dubuque Bank and Trust, which had loaned Nesler $450,000 for the project in March of 1983, refused to provide further financing when his plan to syndicate ran into problems. The bank told Nesler that it was because of the lawsuits. When potential investors and the bank withdrew from the project, Nesler had no alternative but to deed his equity in the Nesler Centre to the bank. As a result, he claims he lost a substantial amount of money that he would have obtained on its sale, that he lost potential management fees, and that he suffered severe emotional distress. The jury apparently agreed.

I. The Judgment Notwithstanding the Verdict.

In granting the defendants' motion for judgment notwithstanding the verdict, the district court stated: "The court has been most reluctant to grant this motion, because it is convinced, as was the jury, that the defendants, acting through their president [Pfohl], were clearly motivated by an intention to harm plaintiff in some way." Despite this reluctance, the judgment for the plaintiff was set aside.

A. Interference with existing contracts. We first address the judgment notwithstanding the verdict on Nesler's claim for interference with an existing contract under Restatement (Second) of Torts section 766A. Nesler had two types of existing contracts as to which he claimed interference: his contract to purchase the building and his lease agreements with future tenants. In setting aside Nesler's judgment on this claim, the court observed that Nesler had introduced no evidence of interference because the owners of the building which Nesler was buying on contract, and the potential tenants of the Nesler Centre were still willing to perform, even after the acts of the defendants had occurred.

Nesler contends that this was error because his claim was based on intentional interference with his ability to perform, not the ability of the other contract parties, i.e., the sellers under Nesler's land contract and the potential lessees of Nesler Centre. Nesler contends that the court's ruling shows that it confused Restatement section 766A, on which his claim was based, with section 766, which is not involved.

Restatement (Second) of Torts section 766 provides:

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.

(Emphasis added.) Section 766A of the Restatement applies to different parties. It provides:

One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person, by preventing the other [here Nesler] from performing the contract or causing his performance to be more expensive or burdensome, is subject to liability to the other for the pecuniary loss resulting to him.

(Emphasis added.)

The court apparently had section 766A in mind when it charged the jury, in Instruction 11, that "the interference [claimed] prevented Nesler from performing the contract to buy the Nesler Centre and caused Nesler to lose the benefit of the leases of space in the Nesler Centre." (Emphasis added.)

Also, Nesler's evidence was aimed at liability under section 766A, not section 766. His evidence was that, by reason of the actions of Pfohl and his corporations, Nesler was prevented from completing payment on the contract for the purchase of the building, on which he still owed a substantial amount, and from completing the contracts with his potential lessees. He did not show, or even contend, that the contract sellers or his potential lessees were prevented from performance.

In this case, there was substantial evidence that the defendants' actions, including the lawsuits, the building department inspections, the publicity, and the resulting loss of investor and bank confidence prevented Nesler's own performance of the contract and lease agreements. This is the gist of an action under section 766A. It is immaterial in a claim under section 766A whether other parties were prevented from performance. The Restatement explains the distinction:

This Section [766A] is concerned only with the actor's intentional interference with the plaintiff's performance of his own contract, either by preventing that performance or making it more expensive or burdensome. It is to be contrasted with § 766, which states the rule for the actor's intentional interference with a third person's performance of his existing contract with the plaintiff.

Restatement (Second) of Torts § 766A, comment a.

Because there was substantial evidence of interference with Nesler's own performance, it was error to enter a judgment notwithstanding the verdict.

B....