Ramona Manor Convalescent Hospital v. Care Enterprises

• Court: California Court of Appeals
• Writing for the Court: KAUFMAN
• Citation: 225 Cal.Rptr. 120,177 Cal.App.3d 1120
• Parties: RAMONA MANOR CONVALESCENT HOSPITAL, etc., Plaintiff and Respondent, v. CARE ENTERPRISES, etc., et al., Defendants and Appellants. E000636.
• Decision Date: 06 February 1986

Page 120

225 Cal.Rptr. 120

177 Cal.App.3d 1120

RAMONA MANOR CONVALESCENT HOSPITAL, etc., Plaintiff and Respondent, v. CARE ENTERPRISES, etc., et al., Defendants and Appellants.

E000636.

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

Feb. 6, 1986.

As Modified on Denial of Rehearing

March 5, 1986.

Review Denied April 30, 1986.

Okazaki & Coontz, M. Stephen Coontz, San Juan Capistrano, Reid, Babbage & Coil, Reid & Hellyer, Donald F. Powell and Alexandra S. Ward, Riverside, for defendants and appellants.

Hopper, Kanouff, Smith, Peryam, Terry & Duncan, Stephen M. Duncan, Denver, Colo., Swarner & Fitzgerald and Lewis F. Jacobsen, Riverside, for plaintiff and respondent.

KAUFMAN, Acting Presiding Justice.

Plaintiff Ramona Manor Convalescent Hospital (Ramona), the prospective operating lessee of a nursing home, sued defendants Care Enterprises, et al. (Care), the holdover operating lessee of the same facility, for damages on three legal theories: (1) intentional interference with the contractual relations between it and the owner of the property, J & S Medical Group, Inc. (J & S), (2) intentional interference with Ramona's prospective economic advantage, and (3) disgorgement under the doctrine of unjust enrichment of profits Care realized as holdover lessee. J & S, the owner, also filed suit against Care seeking damages for interference with its contractual relations with Ramona, interference with prospective economic advantage and indemnification for any liability J & S might have had to its lessee Ramona. Ramona's action against Care was consolidated for trial with J & S's lawsuit. In the Ramona case, a jury found in favor of Ramona on all three of its theories, and the trial court entered judgment against Care for $404,153 compensatory damages and $2.5 million punitive damages. Care appeals from that judgment. A judgment in the J & S action awarding J & S $18,299 in damages against Care was fully satisfied, and J & S is not a party to this appeal.

Facts

In 1969, J & S purchased real property in Hemet, California, and by 1970 had constructed a 99-bed skilled nursing facility thereon. J & S leased the facility to Geriatrics, Inc., not a party to these proceedings, to operate for a period of 10 years ending June 30, 1980. The lease also included two five-year options to renew.

On January 26, 1973, Geriatrics, Inc. subleased the facility to Care, reserving the two five-year options to renew. ¹ Care operated the facility for the remainder of the lease period. Care intermittently informed the owner, J & S, that it was interested in negotiating an extension of the lease beyond June 30, 1980, but J & S was not altogether satisfied with Care as a tenant and greeted these overtures with mixed responses, never agreeing to renew or extend the lease.

By early 1980, J & S had definitely decided not to renew the lease, and J & S's president, Phillip Jensen, initiated negotiations for a new lease arrangement with several other parties. Out of these negotiations was born plaintiff Ramona, a partnership in which J & S itself became a one-third partner.

On April 28, 1980, before Ramona was officially in existence, J & S notified Care by telephone that its lease would not be renewed and that J & S was negotiating a new operating lease with an unnamed third party, who would take possession on July 1, 1980. J & S confirmed this communication by letter dated April 29, 1980. Care responded by letter of May 9, 1980, declaring its intent to remain in possession after the lease expiration on June 30, 1980. This response was apparently based on Care's asserted belief that communications between it and J & S over the preceding several months constituted an enforceable oral contract to renew the lease.

The Ramona partnership was officially created, and the lease agreement between it and J & S executed, on June 12, 1980. On June 30, 1980, the last day of its sublease, Care filed an action against J & S seeking a declaration of its right to remain in possession and an injunction to prevent any interference by J & S with its possession. The following day, July 1, 1980, J & S cross-complained for unlawful detainer, including a request for damages caused by Care's continued possession. Pursuant to court order, Care retained possession and paid J & S for use of the facility throughout the pendency of that litigation (the unlawful detainer litigation), including an appeal to this court.

In the unlawful detainer litigation the trial court decided in favor of J & S, finding that J & S never made an oral promise to Care to renew or extend the lease and that J & S was entitled to be restored to possession and to recover damages for Care's unlawful detention of the property. On February 18, 1983 in an unpublished opinion this court affirmed the judgment in the unlawful detainer litigation in all respects. (4 Civil 25788.)

The present action was tried in late August and early September of 1983, after all aspects of the unlawful detainer litigations were completed. Judgment was entered on special jury verdicts, which included the following seven findings:

1. Care intentionally interfered with a contract to which Ramona was a party;

2. The total amount of damages suffered by Ramona from Care's contractual interference was $27,194;

3. Care intentionally interfered with Ramona's prospective economic advantage;

4. The total amount of damages Ramona suffered from Care's interference with its prospective economic advantage was $2.5 million;

5. Care was unjustly enriched when it held over on its lease;

6. Care should be required to disgorge to Ramona all profits realized during the holdover period; and

7. The amount of such profits to be disgorged was $395,258.

The trial court's amended judgment purported to "clarify" the $2.5 million awarded by the jury for intentional interference with prospective economic advantage as actually being punitive damages. ²

Care's Contentions on Appeal

Care contends the special verdicts finding it liable for interference with contractual relations and advantageous economic relations (hereinafter the business torts) were not supported by substantial evidence because there was no evidence it intended to interfere with either the contractual or economically advantageous relationship between Ramona and J & S; indeed, it did not even know of Ramona's existence or name. Care separately but relatedly urges the trial court's instructions on the intent requisite to liability on the business torts were prejudicially erroneous under Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 206 Cal.Rptr. 354, 686 P.2d 1158.

Care also contends that in granting Ramona recovery on both the business torts and the unjust enrichment theory the jury failed to follow an express instruction of the court; that the unjust enrichment theory should not have been submitted to the jury, but rather was a question for the court; that this is not a proper case for recovery on the theory of unjust enrichment and that the amount awarded Care on that theory is not supported by substantial evidence.

In other contentions, Care assails the punitive damage award, arguing the requisite malice, fraud or oppression could not have been borne towards a party whose identity Care did not know. Alternatively, Care suggests the punitive damage award, even if substantively supported by the evidence, was excessive as a matter of law for want of proportionality to the compensatory damages. Care also asserts the punitive damage award was procedurally defective, because the same nine jurors failed to agree on both compensatory and punitive awards.

On other procedural grounds, Care argues that because inadequate discovery was afforded, Ramona's economic expert at trial, Carl Heintz, should not have been permitted to testify and that the trial court erred in denying Care's Evidence Code section 352 motion to exclude testimonial reference to the earlier unlawful detainer litigation and in permitting into the jury room an informal damage summary prepared for oral argument by Ramona's counsel which had not been introduced into evidence.

Care's final contentions focus upon J & S's status as one-third owner of the Ramona partnership. Because J & S recovered separately under unlawful detainer and business tort theories, Care urges the judgment in favor of Ramona must be reduced by one-third to reflect J & S's interest in Ramona and to prevent J & S from realizing a double recovery. It is also argued the prohibition against splitting a cause of action or the doctrine of res judicata should bar any recovery by J & S on the tort claims by Ramona in this action.

We have concluded the evidence is sufficient to support Care's liability on the tort theories, but that the unjust enrichment award was inappropriate and that because of that and other problems relating to damages, the judgment must be reversed as to damages.

1. Care's Business Tort Liability

a. Substantial Evidence--Intent to Interfere

To establish Care's liability for intentional interference with contractual relations [IIK] or intentional interference with prospective economic advantage [IIPEA], Ramona was required to show: (1) a valid and existing contract with J & S [for IIK] or an economic relationship with J & S likely to produce a future economic benefit [for IIPEA], (2) Care's knowledge of this contract or relationship, (3) Care's intentional acts intended or designed to disrupt this contractual or economically advantageous relationship, (4) actual disruption of the relationship, and (5) resulting damages. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 827, 122 Cal.Rptr. 745, 537 P.2d 865; Shamblin v. Berge (1985) 166 Cal.App.3d 118, 122-123, 212 Cal.Rptr. 313.)

Care is correct that proof of the requisite intent required more than a showing it intended the act which caused the interference; it required evidence that Care intended to cause the interference...