Rite Aid Corp. v. Lake Shore Investors

• Decision Date: 01 September 1983
• Docket Number: No. 86,86
• Citation: 471 A.2d 735,298 Md. 611
• Parties: , 44 A.L.R.4th 1063 RITE AID CORPORATION et al. v. LAKE SHORE INVESTORS. ,
• Court: Maryland Court of Appeals

Page 611

298 Md. 611

471 A.2d 735, 44 A.L.R.4th 1063

RITE AID CORPORATION et al. v. LAKE SHORE INVESTORS.

No. 86, Sept. Term, 1983.

Court of Appeals of Maryland.

March 7, 1984.

Steven K. Fedder, Baltimore (Judith E. Norton and Goldman & Fedder, P.A., Baltimore, on brief), for appellants.

Shale D. Stiller, Baltimore (Robert B. Levin and Frank, Bernstein, Conaway & Goldman, Baltimore, on brief), for appellee.

Argued before MURPHY, C.J., ELDRIDGE, COLE, DAVIDSON and COUCH, JJ., and CHARLES E. ORTH, Jr. and JAMES C. MORTON, Jr., Retired, Specially Assigned Judges.

CHARLES E. ORTH, Jr., Retired, Specially Assigned Judge.

The only concern of this appeal is the measure of damages recoverable in an action for the tort of interference with a contract and for the tort of injurious falsehood as it pertains to slander of title or disparagement of real property. ¹

I

Lake Shore Investors (Lake Shore) instituted an action in the Court of Common Pleas of Baltimore City, now the Circuit Court for Baltimore City, against Rite Aid Corporation and Rite Aid of Maryland, Inc. (Rite Aid) seeking damages for "False and Fraudulent Claim of Lease" and for "Wrongful Interference with Contracts." ² The claim of injurious falsehood arose from Rite Aid's representations that a valid lease agreement on certain property existed between it and Lake Shore. The claim of wrongful interference with a contract arose from the cancellation by BTR Realty, Inc. of an agreement whereby it was to purchase certain property from Lake Shore. Rite Aid claimed that a portion of this property was subject to its alleged lease with Lake Shore. Because of Rite Aid's claim, BTR Realty, Inc. insisted on a clause in the purchase agreement to the effect that it could withdraw from the agreement if Lake Shore did not furnish a written release from Rite Aid. When the release was not forthcoming, BTR Realty, Inc. withdrew from the contract.

The grant of a pre-trial motion for a partial summary judgment made by Lake Shore and the denial of such a motion by Rite Aid resulted in a judgment as a matter of law that there was no valid lease between Lake Shore and Rite Aid. In that posture, trial commenced before a jury. During the presentation of Lake Shore's case, the trial judge ruled that damages must be measured under the contractual "benefit of the bargain" rule which he defined to mean the difference between the fair market value of property at the time of a tortious interference with a contract and the contractual price for the purchase of the property. He noted that he would sustain the objection to the admissibility of evidence regarding any interim expenses. "Specifically mortgage interest, real estate tax, insurance premiums and engineering expenses." He explained later:

"It seems to me that all we are talking about would be the contract price of the sale. The property, the total package was sold, or was under contract of sale for x hundred thousand dollars. Then the only other evidence that is admissible on damages would be testimony bearing on the actual value of the property sold under that contract at the time of the tort."

Lake Shore did not offer evidence of damages under the limitations imposed by the judge. When the court refused to admit evidence of damages measured under a tort standard, Lake Shore abided by a proffer of the amount of damages calculated under that standard. At the conclusion of Lake Shore's case the trial judge granted the request of Rite Aid for a directed verdict as to both injurious falsehood and interference with a contract. ³

The Court of Special Appeals believed that "the trial court erred in limiting the evidence of damages to the 'benefit of bargain.' [Lake Shore] should have been permitted to prove such damages as would reasonably flow from the tortious contractual interference by Rite Aid." Lake Shore Inv. v. Rite Aid Corp., 55 Md.App. 171, 182, 461 A.2d 725 (1983). It reversed the judgment in favor of Rite Aid and remanded the case for a new trial. ⁴ Id. at 184, 461 A.2d 725.

II

It is firmly established that both injurious falsehood (sometimes known as disparagement or slander of title) and wrongful interference with contractual relations are actionable torts. W.L. Prosser, Handbook of the Law of Torts, § 128 (injurious falsehood) and § 129 (interference with contractual relations) (4th ed. 1971). They have long been so recognized in Maryland. Gent v. Lynch, 23 Md. 58, 63 (1865) (injurious falsehood); Knickerbocker Co. v. Gardiner Co., 107 Md. 556, 566, 69 A. 405 (1908) (interference with contractual relations). Opinions of this Court concerning interference with a contract have been relatively numerous. See Sumwalt Co. v. Knickerbocker, 114 Md. 403, 413-416, 80 A. 48 (1911); Cumberland Glass Mnf'g. Co. v. DeWitt, 120 Md. 381, 392, 87 A. 927 (1913), aff'd. 237 U.S. 447, 35 S.Ct. 636, 59 L.Ed. 1042 (1915); Goldman v. Building Assn., 150 Md. 677, 681-683, 133 A. 843 (1926); Stannard v. McCool, 198 Md. 609, 616-617, 84 A.2d 862 (1951); Horn v. Seth, 201 Md. 589, 593, 95 A.2d 312 (1953); McGinnis v. Chance, 247 Md. 393, 401, 231 A.2d 63 (1967); Rinaldi v. Tana, 252 Md. 544, 545, 250 A.2d 533 (1969); Daugherty v. Kessler, 264 Md. 281, 285-287, 286 A.2d 95 (1972). On the other hand, injurious falsehood in the form of slander of title to real property did not come before this Court again until 107 years after Gent when we decided Beane v. McMullen, 265 Md. 585, 607-610, 291 A.2d 37 (1972). ⁵ The tort has not been before us since. Cf. Hopkins C. Co. v. Read Drug & C. Co., 124 Md. 210, 92 A. 478 (1914) (slander of personal property). The Court of Special Appeals has had the opportunity to deal with the tort on two occasions before the instant case--in Horning v. Hardy, 36 Md.App. 419, 424-431, 373 A.2d 1273, cert. denied, 281 Md. 739 (1977) and in Dixon v. Process Corp., 46 Md.App. 198, 203-209, 416 A.2d 1295 (1980). In each of these cases the focus was on "conditional privilege."

None of the opinions of the two appellate courts has expressly addressed or definitively answered the question now before us, namely, how the damages recoverable under the two torts are to be measured. In the case at hand the parties, at trial, before the intermediate appellate court and before us, the trial judge, and the Court of Special Appeals in its opinion, made no distinction between the two torts with respect to the measure of damages. Apparently they proceeded on the assumption that liability for damages under each tort was measured by the same test. We do not find this to be so. ⁶

III

We first consider how damages are to be measured for interference with a contract. The test has not been firmly established by judicial opinions. As the Court of Special Appeals pointed out, 55 Md.App. at 179, 461 A.2d 725, Professor Prosser found that there were three lines of cases. He described them:

"[O]ne line of cases tends to adopt the contract measure of damages, limiting recovery to those damages which were within the contemplation of the parties when the original contract was made. Another, apparently somewhat more uncertain of its ground, has applied a tort measure, but has limited the damages to those which are sufficiently 'proximate,' with some analogy to the rules as to negligent torts. A third, perhaps the most numerous, has treated the tort as an intentional one, and has allowed recovery for unforeseen expenses, as well as for mental suffering, damage to reputation, and punitive damages, by analogy to the cases of intentional injury to person or property." Prosser, § 129, pp. 948-949 (footnotes omitted).

Professor Prosser left no doubt that he thought that the third line of cases was the most persuasive: "In the light of the intent and the lack of justification necessary to the tort, this seems the most consistent result." Id., § 129, p. 949.

Professor D.B. Dobbs also found that "[t]he authorities are both divided and uncertain" as to whether the interference with a contract tortfeasor is liable under tort or contract tests. D. Dobbs, Handbook on the Law of Remedies, § 6.4, p. 461 (1973). He thought that the ultimate weight of the cases on each side is difficult to evaluate. He observed:

"[T]he more liberal authority on the issue is just about as ambiguous as the more restrictive, and it is difficult to feel that the issue has been completely foreclosed by either group of cases." Id. at 462.

But he declared that "[t]here is a good deal to be said for the view that the tortfeasor is liable under tort rather than contract tests." Id.

Restatement, Second, Torts, § 774A (1979) reflects Professor Prosser's preference and Professor Dobbs' inclination. Comment d to the section states flatly: "The action for interference with contract is one in tort and damages are not based on the contract rules, and it is not required that the loss incurred be one within the contemplation of the parties to the contract itself at the time it was made."

Section 774A reduces Prosser's view to specifics. It provides:

"(1) One who is liable to another for interference with a contract or prospective contractual relation is liable for damages for

(a) the pecuniary loss of the benefits of the contract or the prospective relation;

(b) consequential losses for which the interference is a legal cause; and

(c) emotional distress or actual harm to reputation, if they are reasonably to be expected to result from the interference.

(2) In an action for interference with a contract by inducing or causing a third person to break the contract with the other, the fact that the third person is liable for the breach does not affect the amount of damages awardable against the actor; but any damages in fact paid by the third person will reduce the damages actually recoverable on the judgment."

Comment a points out that "[T]his Section states only the rules applicable to the recovery of compensatory damages. Since the tort is an intentional one, punitive damages...