Shapoff v. Scull

• Decision Date: 20 August 1990
• Docket Number: No. D009456,D009456
• Citation: 222 Cal.App.3d 1457,272 Cal.Rptr. 480
• Court: California Court of Appeals Court of Appeals
• Parties: Stanley N. SHAPOFF, Plaintiff and Respondent, v. John SCULL, et al., Defendants and Appellants.

Page 480

272 Cal.Rptr. 480

222 Cal.App.3d 1457

Stanley N. SHAPOFF, Plaintiff and Respondent, v. John SCULL, et al., Defendants and Appellants.

No. D009456.

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

Aug. 20, 1990.

Review Denied Nov. 15, 1990.

David E. Lundin, Michael R. Thorp and Lorez, Alhadeff, Lundin & Oggel, for appellants and defendants.

Margaret Kathryn Maas and R. Richard Farnell, for plaintiff and respondent.

BENKE, Acting Presiding Justice.

SUMMARY

Defendants and appellants John Scull, Christopher Boomis and SERJ Corporation (SERJ) appeal from a judgment entered against them. The judgment, consisting of $55,000 for breach of contract, $50,000 in compensatory damages for intentional interference with contractual relations and $300,000 in exemplary damages, was in favor of plaintiff and respondent Stanley N. Shapoff. The judgment was based on jury findings SERJ had breached a development agreement with Shapoff and that the breach was caused by Boomis's tortious interference.

Prior to submission of the legal claims to the jury, the trial court had determined Scull and Boomis were in fact alter egos of SERJ. The trial court found that the corporation had no capital and that the nature of its development project was controlled by Boomis. ¹

After the jury returned its verdict the trial court entered judgment for Shapoff and against Scull, Boomis and SERJ. As against Boomis the judgment awarded Shapoff $55,000 in contract damages, $50,000 in tort damages and $300,000 in punitive damages.

The defendants made a timely motion for a new trial and for a judgment notwithstanding the verdict. They argued the judgment was inconsistent in that it made Boomis liable both for breach of, and interference with, the same contract. They asked the court to enter judgment in Boomis's favor on the interference claim because they believed the court's alter ego finding, as a matter of law, precluded Boomis's tort liability.

At the hearing on the posttrial motions, the trial court agreed Boomis could not be held liable both for breach of and interference with a contract. However the court declined to find that its alter ego determination relieved Boomis of tort liability as a matter of law. Rather the court allowed Shapoff to elect between his claims against Boomis. As one might expect Shapoff chose to proceed on the tort claim. Accordingly the trial court amended its judgment to delete its determination Boomis was an alter ego of SERJ.

The defendants filed a timely notice of appeal from the amended judgment.

ISSUES ON APPEAL

On appeal the defendants argue the trial court had no power to delete its alter ego determination from the original judgment, that the alter ego finding bars Shapoff's tort claim as a matter of law and that even in the absence of the alter ego finding Boomis cannot be held liable for interference with contractual relations.

Like the trial court, we do not believe the alter ego finding is, as a matter of law, a defense to the tort claim. Moreover we find nothing in the record before us which establishes such a defense. Accordingly, we affirm the judgment.

DISCUSSION

I Evidence of the Parties

1. Shapoff's Claims

At trial Shapoff testified that in the early part of November 1985 he was introduced to Boomis and Scull by a real estate broker. The broker told Shapoff that Boomis and Scull needed assistance in finding financing for a real estate development project in downtown San Diego. During a series of three meetings Shapoff learned SERJ opened an escrow which would permit it to acquire a parcel of property on K Street between 6th and 7th and that SERJ planned to construct a highrise office building on the property. Construction of the building would be handled by Boomis who had an interest in various construction companies.

At the time Shapoff met Boomis and Scull, the escrow on the property was due to expire in a few weeks. Because SERJ had been capitalized with only $500, unless equity financing was obtained promptly Boomis and Scull would incur additional expense in order to extend the escrow.

According to Shapoff, Boomis and Scull offered him a 25 percent interest in SERJ if he would agree to assist them in finding financing. Shapoff accepted this offer and terminated his relationship with Schoemacher Development Company where he had been a principal and president.

In the middle of November 1985 Shapoff began working at offices leased by a company owned by Boomis. In preparing materials for distribution to potential investors, Shapoff learned that under the terms of the pending escrow SERJ would pay $925,000 for the K Street property. By the middle of December Shapoff had attracted the interest of two investors, Milton Sirokin and Michael Saywitz (S & S). On January 6, 1986, S & S sent SERJ a written proposal which suggested a joint venture between SERJ and S & S. Instead of an office building, S & S suggested constructing a hotel on the K Street property. Significantly S & S's proposal required that SERJ contribute the property to the joint venture at SERJ's cost.

S & S's proposal was acceptable to SERJ. However on January 29, 1986, at a meeting between Shapoff, Scull and Boomis, Boomis told Shapoff he did not want SERJ to contribute the property at its cost. Rather Boomis wanted Shapoff to represent to S & S that the acquisition cost was higher than the $925,000 purchase price. Boomis told Shapoff he wanted to recoup approximately $85,000 in losses he had incurred on other projects. Shapoff refused to make any misrepresentations to S & S and left the meeting.

Another meeting between Shapoff, Scull and Boomis on the following day ended after Shapoff told Boomis he had already disclosed the terms of the escrow to S & S. Boomis told Shapoff to get out of the office and to take his belongings with him.

Shapoff told S & S what had transpired between Boomis and him. S & S then abandoned its efforts to provide financing for SERJ's project.

Ultimately SERJ formed a partnership with the seller of the property, one of Boomis's construction companies, and others and successfully completed construction of a Ramada Hotel on the K Street property.

2. Boomis's Defense

In defense of the claims made against him, Boomis testified he had no control over SERJ and all the corporation's business decisions were made by Scull and Zaida Boomis. With respect to Shapoff's departure on January 30, 1986, Boomis testified he never asked Shapoff to misrepresent SERJ's acquisition costs. Rather, according to Boomis, he told Shapoff to leave his corporation's office space because Shapoff had agreed to allow another developer to participate in a commercial project in Santee. Boomis felt he should have been given the opportunity to participate in the Santee project. According to Boomis, Shapoff's continued participation in SERJ was entirely Scull's business.

II Intentional Interference With Contract By Alter Egos

The defendants assert there is no California authority which discusses the effect that an alter ego finding has on a defendant's liability for intentional interference with contractual relations. This view of the law, while accurate in a very narrow sense, is incomplete.

The tort of interference with contract is a species of the broader tort of interference with prospective economic advantage. (Dryden v. Tri-Valley Growers (1977) 65 Cal.App.3d 990, 994, 135 Cal.Rptr. 720.) In order to establish a claim for interference with contract, a plaintiff must plead and prove: (1) a valid and existing contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126, 270 Cal.Rptr. 1, 791 P.2d 587; Dryden v. Tri-Valley Growers, supra, 65 Cal.App.3d at p. 994, 135 Cal.Rptr. 720; Contemporary Investments, Inc. v. Safeco Title Ins. Co. (1983) 145 Cal.App.3d 999, 1002, 193 Cal.Rptr. 822; Mayes v. Sturdy Northern Sales, Inc. (1979) 91 Cal.App.3d 69, 78, 154 Cal.Rptr. 43.)

Contrary to the defendants' argument, a party to a contract may under some circumstances be held liable in tort for inducing its breach. (See Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 224, 194 Cal.Rptr. 180 (Cohen); Olivet v. Frischling (1980) 104 Cal.App.3d 831, 838, 164 Cal.Rptr. 87 (Olivet ); Wise v. Southern Pacific Co. (1963) 223 Cal.App.2d 50, 64, 35 Cal.Rptr. 652 (Wise), see also California Auto Court Assn. v. Cohn (1950) 98 Cal.App.2d 145, 150, 219 P.2d 511 (California Auto Court ); James v. Herbert (1957) 149 Cal.App.2d 741, 746-747, 309 P.2d 91 (James).) In particular Cohen, Olivet and Wise hold that where a party to a contract has conspired with a third party to breach the contract, the contracting party may be held liable in tort as a coconspirator. In reaching its holding, the court in Wise stated: "We think that the better reasoned cases hold that an action for conspiracy to induce a breach of contract will lie against a party to the contract who is included among the defendant-conspirators. Such cases, in our view, rest solidly on the principle that all who are involved in the common scheme are jointly and severally responsible for the ensuing wrong....

".... To hold the contracting party along with his confederates liable in tort seems to us not only to be within the compass of the above principle but also consonant with good morals. We perceive no fatal anomaly in the circumstance that the plaintiff may, as he does here, seek relief in an independent cause of action on the contract. It happens frequently that the wrongful act at the center of the controversy may partake of the nature of both tort and contract and in such event the wronged plaintiff may sue in tort for the wrongful invasion of...