Richardson v. La Rancherita

• Decision Date: 25 October 1979
• Citation: 159 Cal.Rptr. 285,98 Cal.App.3d 73
• Court: California Court of Appeals Court of Appeals
• Parties: Burton R. RICHARDSON et al., Plaintiffs and Respondents, v. LA RANCHERITA LA JOLLA, INC., et al., Defendants and Appellants. Civ. 16809.

Page 285

159 Cal.Rptr. 285

98 Cal.App.3d 73

Burton R. RICHARDSON et al., Plaintiffs and Respondents, v. LA RANCHERITA LA JOLLA, INC., et al., Defendants and Appellants.

Civ. 16809.

Court of Appeal, Fourth District, Division 1, California.

Oct. 25, 1979.

Hearing Denied Jan. 27, 1980.

Fred U. Hammett, Jr., San Diego, for defendants and appellants.

Turney & Turney and Margaret V. Turney, National City, for plaintiffs and respondents.

WIENER, Associate Justice.

Defendants La Rancherita of La Jolla, Inc. (La Rancherita) and Louis Martinez (Martinez) appeal from the judgment awarding damages to plaintiffs based on the tort of intentional interference with a contractual relationship. The factual setting of this case the commercial dealings between a landlord and tenant requires the drawing of the line between sophisticated negotiations necessary to strike a better deal and economic constraints on those negotiations imposed by the tort of inducing breach of contract. We affirm the judgment.

Factual and Procedural Background

The facts presented at trial are stated in the manner most favorable to the judgment. The factual issues raised in plaintiffs' motion for partial summary judgment are discussed separately.

In 1971, plaintiff Breg, a California corporation (Breg), negotiated for the purchase of all fixtures, equipment and liquor license of a restaurant in La Jolla. Through Basilio Martinez acting on behalf of the lessor, La Rancherita, the former tenants' interest in the original lease dated April 1, 1954, was assigned to Breg on terms contained in an addendum dated April 6, 1971. Breg lost money every year. In mid-December 1973, with shareholder approval, Breg signed escrow instructions for the sale of the assets of its restaurant to Norman Bomze (Bomze). The contract was contingent upon Breg obtaining the consent of the lessor to the assignment of the lease. The transaction between Breg and Bomze had been carefully structured as a sale of assets for, among other reasons, Breg's shareholders wished to retain the carry-forward tax loss of their subchapter "S" corporation. La Rancherita refused to consent to assignment of a lease to Bomze, relying on the paragraph of the lease which provided:

"That the Lessees shall pay the Lessors said rent in the manner hereinbefore specified, and shall not let or underlet the whole or any part of said premises, nor sell or assign this lease, either voluntarily or by operation of law, nor allow said property to be occupied by anyone contrary to the terms hereof, without the written consent of the Lessors."

La Rancherita indicated through counsel and Martinez they were not attempting to "kill the deal," but only wanted to renegotiate the lease on terms which would include increased rent, shared use of an adjoining parking lot, and a cost of living escalation provision. Bomze rejected the proposed terms. Bomze and Breg decided to revise their agreement to by-pass the need for La Rancherita's consent to the assignment. The shareholders of Breg agreed to sell their corporate stock to Bomze; Breg would continue as tenant under the lease and addendum.

La Rancherita, upon being informed of the new agreement, continued its position that its consent was still necessary. In a letter to Breg's lawyer, counsel for La Rancherita stated the sale of stock, after a refusal to consent to a sale of assets, was merely a change of form to circumvent the consent provision of the lease. Counsel for both parties had reviewed and analyzed Ser-Bye Corp. v. C.P. & G. Markets (1947) 78 Cal.App.2d 915, 179 P.2d 342, which involved a similar legal question and had reached different conclusions. The sale of the stock originally set to close on January 31, 1974, was postponed solely as a result of La Rancherita's actions in threatening a forfeiture of the lease. The sale finally closed on March 3, 1974.

The complaint filed by Breg and its shareholders on February 21, 1974, sought declaratory relief to determine whether a transfer of the Breg stock constituted an assignment of Breg's lease, thereby necessitating La Rancherita's consent plus damages for intentional interference with the contract between Breg and Bomze for the sale of stock. Before trial, plaintiffs' motion for partial summary judgment was granted on their first cause of action the court finding the lessor's consent was not required. After a court trial, damages of $7,233.06 were awarded for the losses plaintiffs sustained during the period from January 31 to March 3, 1974.

The Granting of Plaintiffs' Motion for Partial Summary Judgment Was Proper

Code of Civil Procedure section 437c permits the granting of a partial summary judgment whereby affidavits, declarations or other admissible evidence and inferences reasonably deducible from such evidence, there is no triable issue of material fact on some but not all of the issues involved in the action. The rules on granting the motion are well known. (See, e. g., Corwin v. Los Angeles Newspaper Service Bureau, Inc. (1971) 4 Cal.3d 842, 851-852, 94 Cal.Rptr. 785, 484 P.2d 953.) "Summary judgment is proper only if the affidavits (declarations) in support of the moving party would be sufficient to sustain a judgment in his favor and his opponent does not by affidavit (declaration) show such facts as may be deemed by the judge hearing the motion sufficient to present a triable issue." (Stationers Corp. v. Dun & Bradstreet, Inc. (1965) 62 Cal.2d 412, 417, 42 Cal.Rptr. 449, 452, 398 P.2d 785, 788.) "The procedure for . . . summary judgment provides a method by which, if the pleadings are not defective, the court may determine whether the triable issues apparently raised by them are real or merely the product of adept pleading." (Coyne v. Krempels (1950) 36 Cal.2d 257, 262, 223 P.2d 244, 247.)

In the present case, the declaration of Louis Martinez in opposition to the motion and Burton R. Richardson, in support of the motion, contribute more fuel than facts to the conflict. Basilio Martinez, who participated in the transaction at its inception, did not file a declaration. Richardson declared in part that: "The lessors are simply using this sale as a lever, a financial blackmail if you will, to vitiate the terms of the lease and to attempt to get more money out of the Corporation." Louis Martinez responded: "Our position that sale of all corporate stock of Breg to strangers after our refusal to consent to an assignment to these same people, is violative of the 'occupancy' clause has been consistent in all of my personal discussions with Mr. Richardson and others and has been stressed by our previous counsel to the plaintiffs."

The strong legal conclusions expressed by the respective parties did not raise triable issues of material fact. The court was presented with a written lease without benefit of extrinsic evidence. Although theoretically many factual issues pertaining to the meaning of the subject lease provision could have been raised, the parties did not do so. No suggestion was made that Breg was the alter ego of any one or more of the principals or for other equitable reasons the corporation should be disregarded. The interpretation of the lease under these circumstances was left to the court as a matter of law.

The lease provision in dispute prohibits occupancy by anyone contrary to its terms without the written consent of the lessor. Other than the issue of consent to the assignment, neither party has argued that occupancy by Breg with new shareholders violated the lease in any other respect. The lease itself did not provide that an individual was responsible for rent or liable for the performance of any other provision. The parties, at the time of their negotiations, were apparently satisfied with a corporation as lessee, making no provision to the contrary. Thus the court was asked to bar the transfer of shares of common stock in a valid corporation, permissible under corporate law, solely because of a lease provision prohibiting assignment of the lease, but containing no restraints on transfer of stock ownership. The court, under these circumstances, declined to do so, recognizing the separateness of the corporate form and properly granted plaintiffs' motion for partial summary judgment. (See Ser-Bye Corp. v. C.P. & G. Markets, supra, 78 Cal.App.2d at pp. 920-921, 179 P.2d 342.)

Defendants' Conduct Was Not Justified; It Constituted the Intentional Tort of Inducing Breach of Contract

An action in tort "will lie for the intentional interference by a third person with a contractual relationship either by unlawful means or by means otherwise lawful when there is a lack of sufficient justification." (Herron v. State Farm Mutual Ins. Co. (1961) 56 Cal.2d 202, 205, 14 Cal.Rptr. 294, 296, 363 P.2d 310, 312; see also Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 35, 112 P.2d 631.) The tort is "a (specie) of the broader tort of interference with prospective economic advantage," involving similarity in elementary makeup and conduct while differing only in the existence of a legally binding contract. (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 823, 122 Cal.Rptr. 745, 749, 537 P.2d 865, 869.) To recover for inducing breach of contract, a plaintiff must establish (1) the existence of a valid contract; (2) the defendant had knowledge of the contract and intended to induce its breach; (3) the contract was in fact breached by the third party; (4) the breach was proximately caused by defendant's unjustified and wrongful conduct; and (5) that the foregoing resulted in damage to plaintiff. (Abrams & Fox, Inc. v. Briney (1974) 39 Cal.App.3d 604, 607-608, 114 Cal.Rptr. 328; see also Rest., 2d Torts, §§ 766, 766B.) Justification for the interference is an affirmative defense and not an element of plaintiff's cause of action. (Lowell v. Mother's Cake & Cookie Co. (1978) 79 Cal.App.3d 13, 19, 144 Cal.Rptr. 664; A. F. Arnold & Co. v. Pacific Professional Ins., Inc. (1972) 27 Cal.App.3d 710,...