SHV Coal, Inc. v. Continental Grain Co.

• Decision Date: 27 June 1988
• Citation: 376 Pa.Super. 241,545 A.2d 917
• Parties: SHV COAL, INC. v. CONTINENTAL GRAIN CO., and Conticoal, a/k/a Conticoal Co., Conticoal, Inc., and Conticarriers & Terminals, Inc. and R. Stephen Kasey. Appeal of: R. Stephen KASEY and Ralph L. Wingrove. Appeal of: CONTINENTAL GRAIN CO., Conticoal and Conti Carriers & Terminals, Inc. SHV COAL, INC. v. Ralph L. WINGROVE. Appeal of: R. Stephen KASEY and Ralph L. Wingrove. Appeal of: CONTINENTAL GRAIN CO., Conticoal and Conti Carriers & Terminals, Inc. SHV COAL, INC., Appellant, v. CONTINENTAL GRAIN CO., and Conticoal, a/k/a Conticoal Co., Conticoal, Inc., and Conticarriers & Terminals, Inc. and R. Stephen Kasey, Appellees. SHV COAL, INC., Appellant, v. Ralph L. WINGROVE, Appellee.
• Court: Pennsylvania Superior Court

Page 917

545 A.2d 917

376 Pa.Super. 241

SHV COAL, INC. v. CONTINENTAL GRAIN CO., and Conticoal, a/k/a Conticoal Co.,

Conticoal, Inc., and Conticarriers & Terminals,

Inc. and R. Stephen Kasey.

Appeal of: R. Stephen KASEY and Ralph L. Wingrove.

Appeal of: CONTINENTAL GRAIN CO., Conticoal and Conti

Carriers & Terminals, Inc.

SHV COAL, INC. v. Ralph L. WINGROVE.

Appeal of: R. Stephen KASEY and Ralph L. Wingrove.

Appeal of: CONTINENTAL GRAIN CO., Conticoal and Conti

Carriers & Terminals, Inc.

SHV COAL, INC., Appellant, v. CONTINENTAL GRAIN CO., and Conticoal, a/k/a Conticoal Co.,

Conticoal, Inc., and Conticarriers & Terminals,

Inc. and R. Stephen Kasey, Appellees.

SHV COAL, INC., Appellant, v. Ralph L. WINGROVE, Appellee.

Superior Court of Pennsylvania.

Argued Jan. 28, 1988.

Filed June 27, 1988.

Errol S. Miller, Pittsburgh, for appellants in No. 858 and appellees in No. 905.

William W. Blessing, Indiana, for appellees in No. 858 and appellants in No. 905.

Before BROSKY, WIEAND and DEL SOLE, JJ.

WIEAND, Judge:

In this action to recover damages for breach of an agent's fiduciary duties, tortious interference with a prospective business relationship, and conspiracy, the trial court, sitting in equity, found that Ralph L. Wingrove, an employee of SHV Coal, Inc. (SHV), had diverted a coal contract to ContiCoal, a division of Continental Grain Company (hereinafter referred to as "Continental"), a competitor of SHV, and that Continental had been part of an unlawful conspiracy to accomplish this result. Therefore, the trial court awarded both compensatory and punitive damages to SHV against Wingrove and Continental. The trial court also denied Wingrove's counterclaim for a realtor's commission which SHV had agreed to pay when it requested Wingrove to move from Cincinnati, Ohio, to Indiana, Pennsylvania. Post-trial motions were denied, and cross-appeals were filed by all parties. They have raised numerous issues which we will review seriatim. First, however, an examination of the facts found by the trial court is essential to an understanding of the issues raised on appeal.

I. The Facts

SHV, a division of SSM Coal of the Netherlands, is engaged in the coal brokerage business, with headquarters in Cincinnati, Ohio. In 1982, SHV made plans to open an office in Indiana, Pennsylvania, to serve as a regional base from which to serve its customers in the northeastern United States. Wingrove, who had joined SHV in 1980, was persuaded to move from Cincinnati to Indiana and become sales manager for its northeastern regional office. In addition to a substantial increase in salary, SHV promised Wingrove that it would pay the realtor's commission which he would incur upon the sale of his home in Cincinnati and would reimburse him for his moving expenses.

The regional office in Indiana, Pennsylvania, appeared to be a success. Wingrove, who had been engaged in the coal brokerage business in Indiana before joining SHV in 1980, had developed prior business contacts which he was able to utilize, and these contacts, together with the acquisition of new customers, contributed to the success of SHV's regional office in Pennsylvania. After he began his duties in Pennsylvania, Wingrove entered into negotiations with representatives of Eastman-Kodak Company (Kodak), a longstanding customer of SHV, regarding Kodak's coal needs for its plant at Rochester, New York. As negotiations proceeded, Wingrove advised his superiors that a contract would be concluded shortly. On April 6 and 7, 1983, Wingrove met with Kodak's purchasing agent in Rochester, New York, to finalize the agreement. Kodak's purchasing agent was prepared to issue to SHV a purchase order for the coal needed by Kodak at its plant in Rochester. Wingrove then told Kodak's agent that he, Wingrove, intended to leave SHV's employ and take a position with Continental. Wingrove also implied that SHV was planning to close its regional office in Pennsylvania. He told Kodak that he would not accept Kodak's purchase order on behalf of SHV but that, if it were satisfactory to Kodak, he would accept it on behalf of Continental.

In fact, Wingrove had accepted, on April 6, an offer to join Continental and manage its regional office, also located in Indiana, Pennsylvania, effective April 11. He did not notify SHV of this until April 7, when he formally resigned his managerial position, effective April 15. On April 12, Kodak issued a purchase order for coal from Continental, which Wingrove accepted on Continental's behalf. Kodak had not previously done business with Continental.

The efforts by Continental to persuade Wingrove to change employment had been conducted over a period of approximately two months. They entailed numerous telephone conversations--Wingrove had been given a Continental credit card to use when calling Continental's offices--as well as face-to-face negotiations. During the same period, Continental was also attempting to recruit Stephen Kasey, another SHV employee. When SHV learned that Kasey had been engaged in negotiations with Continental, it terminated his employment. ¹

II. The Standard of Review

The scope of appellate review on appeal from an equity decree is limited, and is confined to a determination by the appellate court of such questions as (1) whether the findings of the trial judge are supported by sufficient evidence; (2) whether the factual inferences and legal conclusions based on the judge's findings are correct; (3) whether there was an abuse of discretion; and (4) whether there was an error of law.

16 Std.Pa.Prac.2d § 91:155. The test employed is not whether the judges of an appellate court would have reached the same result as the trial judge, who heard and saw the evidence, but whether a judicial mind, on due consideration of the evidence, could reasonably have reached the conclusion of the trial judge. See: Yuhas v. Schmidt, 434 Pa. 447, 454, 258 A.2d 616, 619-620 (1969); Masciantonio Will, 392 Pa. 362, 367, 141 A.2d 362, 365 (1958). See also: 16 Std.Pa.Prac.2d § 91:155. After a careful and thorough review of the extensive and voluminous record in the instant case, we are satisfied that the findings of fact and the inferences drawn therefrom are supported by competent evidence. We are also satisfied that the trial court did not err in determining that Wingrove had breached his duties of loyalty to SHV and that both Wingrove and Continental, as conspirators, were liable to SHV for interfering with SHV's prospective business relationship with Kodak.

III. SHV's Right to Recover

"There can be no doubt that an agent owes a duty of loyalty to his principal, and in all matters affecting the subject of his agency, he must act with the utmost good faith in the furtherance and advancement of the interests of his principal." Sylvester v. Beck, 406 Pa. 607, 610, 178 A.2d 755, 757 (1962). See also: 1 P.L.E. Agency § 32. Every agent "is subject to a duty not to act or to agree to act during the period of his agency for persons whose interests conflict with those of the principal in matters in which the agent is employed." Restatement (Second) of Agency § 394. He is "subject to a duty to his principal to act solely for the benefit of the principal in all matters connected with his agency." Restatement (Second) of Agency § 387. No man can serve two masters. Onorato v. Wissahickon Park, Inc., 430 Pa. 416, 422, 244 A.2d 22, 25 (1968), citing Matthew 6:24. An agent is a fiduciary with respect to matters within the scope of his agency and is required to act solely for the benefit of his principal in all matters concerned with the agency. Onorato v. Wissahickon Park, Inc., supra at 423, 244 A.2d at 26; 1 P.L.E. Agency § 32.

The trial court concluded that Wingrove had breached his duty of loyalty to SHV. We agree. While employed by SHV, Wingrove set out to divert business, which he was being paid to acquire for SHV, to a competitor with whom he had agreed to accept employment. This he did without any knowledge or consent by his employer, who was not even aware that he was contemplating other employment. This was a clear violation of Wingrove's duty of loyalty, for which he was liable in damages. See: Restatement (Second) of Agency §§ 400, 401.

Wingrove and Continental were also liable for interfering with SHV's prospective business relations with Kodak. It is well-settled that one who interferes with a prospective business relationship of another is liable for the harm caused thereby. In Glenn v. Point Park College, 441 Pa. 474, 272 A.2d 895 (1971), the Supreme Court observed:

Interference with a prospective contractual relation is a tort long recognized at common law. It is formulated thusly in the Restatement of Torts, § 766: "... one who, without a privilege to do so, induces or otherwise purposely causes a third person not to ... (b) enter into or continue a business relation with another is liable to the other for the harm caused thereby."

The courts of this Commonwealth have accepted and applied § 766 in a variety of situations, but apparently not heretofore in the area of prospective as distinguished from presently existing contractual or business relations. In Glazer v. Chandler, 414 Pa. 304, 307, 308, 200 A.2d 416 (1964), however, this Court indicated that recovery in tort would be allowed for interference with prospective contracts or business relations of third parties with a plaintiff. We see no reason whatever why an intentional interference with a prospective business relationship which results in economic loss is not as actionable as where the relation is presently existing, although we recognize that there well may be more difficult problems of proof in the latter situation.

Id. at 477-478, 272 A.2d at 897 (footnotes omitted). The four elements of a cause of action for intentional interference with prospective contractual relations are:

(1) a prospective contractual relation;

(2) the purpose or intent to harm the plaintiff by preventing...