North Central Co. v. Phelps Aero, Inc.
| Decision Date | 26 November 1965 |
| Docket Number | No. 39735,39735 |
| Citation | 139 N.W.2d 258,272 Minn. 413 |
| Parties | NORTH CENTRAL COMPANY, Respondent, v. PHELPS AERO, INC., Appellant. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. One who enters into a contract by which he is required to perform an act or service for which a license or permit is required by statute does not forfeit his right of recovery on the contract by reason of his failure to have such permit or license unless it appears clearly that this result was intended by the legislative authority specifying such requirement for a license or permit.
2. One who claims that an interference with prospective business relationship constitutes breach of an implied covenant not to compete or a tort must show, if he is to prevail with respect to such claim, that were it not for the conduct of his adversary he would have been able to secure the business allegedly taken from him.
3. Record reviewed and evidence held insufficient to support a finding that defendant sustained loss of business which it would have obtained had it not been for plaintiff's competition.
L. L. Schroeder, Minneapolis, for appellant.
Eugene M. Warlich, St. Paul, for respondent.
Appeal from a judgment of the district court.
An action was instituted by The North Central Company, a corporation concerned with the operation of insurance and financial enterprises, against Phelps Aero, Inc., a firm engaged in the air transportation business, to recover sums due for plane rental by terms of a written lease and amendment both dated March 10, 1961. By answer defendant asserted that nonpayment was excused because plaintiff permitted others to rent the plane, and counterclaimed for damage on the theory that this conduct amounted to a tortious interference with its business.
The trial judge entered findings of fact and conclusions of law in favor of plaintiff ordering judgment in the amount of $5,501 with interest. It is from this judgment that the appeal was taken.
We summarize the amended findings of fact and conclusions of law which are to be reviewed:
The March 10, 1961, lease consists of an original agreement (and an amendment thereto) providing in part as follows:
'The North Central Company, a Minnesota corporation herein called the 'lessor', hereby agrees to lease to Phelps Aero, Inc., a Minnesota corporation herein called the 'lessee', and lessee hereby agrees to lease from lessor the following described aircraft, which is hereinafter called the 'aircraft':
'MODEL Aero Commander 500
'It is expressly understood and agreed that this is an agreement for leasing only and that lessee acquires no right, title, or interest other than as lessee in the aircraft under this agreement.
'In consideration of the mutual covenants herein contained, the lessor and lessee hereby agree as follows:
'1. TERM
'Subject to the provisions for termination hereinafter set forth, the initial term of the lease shall be two years, commencing on the date of this agreement; * * *
'2. USE OF THE AIRCRAFT
'It is understood and agreed by the parties that this lease shall not grant the right of exclusive use of the aircraft to the lessee. The lessee shall have the right to use the aircraft at such times as its use does not conflict with any scheduled use of the aircraft by lessor. * * *
'Lessee agrees that it shall not permit the aircraft to be used in violation of any federal, state, or municipal law or regulation and shall be solely responsible for any fine, penalty, or forfeiture occasioned by any violation thereof. * * *
'3. RENT
'During the first year of the lease, lessee agrees to pay to the lessor a minimum monthly rental of $720.00 and, in addition thereto, an hourly rent at the rate of $36.00 per hour for each hour the aircraft is used by lessee in excess of 20 hours during any one month.
'During the second and all subsequent years that the lease remains in effect, lessee agrees to pay to the lessor a minimum monthly rental of $1,080.00 and, in addition thereto, an hourly rent at the rate of $36.00 per hour for each hour the aircraft is used by lessee in excess of 30 hours during any one month.
'The minimum monthly rental provided for above contemplates that the aircraft will be available for use by lessee at least 50% Of the time during each month that this agreement remains in force. If, due to use of the aircraft by lessor, the aircraft is actually available for a lesser portion of such month, then lessee shall be liable only for the proportional hourly rental provided for above with respect to such month.
'6. TERMINATION OF LEASE
'(c) The lessor may terminate this lease at any time without notice to the lessee upon the happening of any of the following events:
'(1) A default in excess of 15 days in the payment of any rents or other moneys owed by the lessee to the lessor.'
The amendment to this lease, which is also dated March 10, 1961, provides:
Defendant made all required payments until February 10, 1962. It failed and refused to make payments due for rentals between that time and September 7, 1962, on which date the lease was terminated. The plane rent payable for this period (excluding $425 due for the services of a pilot made available pursuant to an oral agreement with which we are not now concerned) amounts to $5,076.
The findings of the trial court in effect reject the claim of the defendant that it sustained damage caused by plaintiff's illegal interference with a business relationship. It did find the March 10, 1961, lease to be 'illegal and voidable,' but rejected defendant's claim that illegality prevented recovery of the rentals due by the terms of the lease.
Upon appeal Phelps Aero, Inc., argues: (1) The evidence reasonably supports a finding that North Central effectively and intentionally prevented performance by Phelps when it knowingly, and in evasion of the law, rented the subject aircraft commanded by the same pilot at a lower rate than could be charged by Phelps; (2) the evidence reasonably supports a finding that North Central, with no legal interest to justify its conduct, with no pretense of legality, and with malicious intent, interfered with and meddled with the business activities of Phelps to the direct injury of its prospective contracts in air transportation and to its damage; (3) the trial court in its amended findings correctly declared the contract to be illegal but erred in permitting plaintiff to recover on a contract voidable by reason of its wrongdoing where the public safety and interest was involved; (4) the prohibition in the state licensing law and the Federal Aviation Act reflects the legislative intent for a plan or scheme to protect the public interest and the public safety and to protect those engaging in air transportation against unreasonable competition in the interest of the public safety, a contract in violation of the legislative intent being void.
The legal issues raised by these contentions are:
(1) Was the agreement of March 10, 1961, one forbidden by law and of such a nature as to bar an action to recover rentals due according to its terms?
(2) If the answer to the first question is in the negative, is it to be implied as a term of the agreement that plaintiff would refrain during the period of the lease from making use of the plane available to persons who would otherwise charter it from defendant?
(3) If the answer to the second question is in the affirmative, would the evidence in the record support a finding that plaintiff permitted persons to use the leased plane who, were it not for this fact, would have chartered it from defendant?
1. The most recent statement of this court with respect to recovery on a contract where a party to it has failed to obtain a license or certificate as required by law appears in Lew Bonn Co. v. Herman, 271 Minn. 105, 108, 135 N.W.2d 222, 225, in this language:
It is at least doubtful that the act of plaintiff in leasing its plane to defendant pursuant to the March 10, 1961, agreement (considered apart from any other uses of the plane subsequently permitted by plaintiff to others) made it subject to Federal law or regulations enacted pursuant thereto requiring an air carrier operating certificate; or to any law of the State of Minnesota requiring a commercial operator's license. 1
However, even though it be assumed that such a certificate or license became required by reason of the contract, recovery of rentals due was properly allowed by the trial court because there is no evidence to indicate that the performance of the...
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