Southern Contracting, Inc. v. H.C. Brown Const. Co., Inc.

• Citation: 450 S.E.2d 602,317 S.C. 95
• Decision Date: 07 September 1994
• Docket Number: No. 2237,2237
• Court: Court of Appeals of South Carolina
• Parties: SOUTHERN CONTRACTING, INC., Appellant, v. H.C. BROWN CONSTRUCTION COMPANY, INC. and Great American Insurance Company, of whom Great American Insurance Company is Respondent. . Heard

Page 602

450 S.E.2d 602

317 S.C. 95

SOUTHERN CONTRACTING, INC., Appellant, v. H.C. BROWN CONSTRUCTION COMPANY, INC. and Great American Insurance Company, of whom Great American Insurance Company is Respondent.

No. 2237.

Court of Appeals of South Carolina.

Heard Sept. 7, 1994.

Decided Oct. 10, 1994.

Rehearing Denied Nov. 29, 1994.

Appeal Dismissed Feb. 3, 1995.

Henry P. Wall, Haynsworth, Marion, McKay & Guerard, Columbia, for appellant.

Marvin D. Infinger, Sinkler & Boyd, Charleston, for respondent.

HOWARD, Acting Judge.

This is an appeal from the grant of partial summary judgment to Great American Insurance Company on tort claims by Southern Contracting, Inc. (SoCon) for interference with contractual relations and interference with prospective business advantage. We affirm. ¹

In early 1991, H.C. Brown Construction Company (Brown) was awarded a contract to perform a major renovation project at The Citadel for approximately five million dollars. The contract was awarded pursuant to the South Carolina Consolidated Procurement Code, S.C.Code Ann. §§ 11-35-10 to -5270 (1986). It required Brown to obtain a bond assuring 100% performance, as well as a bond to assure labor and material payment. Great American Insurance Company (Great American) provided these required bonds to the Citadel on behalf of Brown.

As a part of a contract to provide these bonds, Great American required Brown to obtain 100% performance bonds and payment bonds from major subcontractors to minimize potential losses to Great American. Brown agreed to obtain these bonds from those subcontractors having a subcontract of $75,000 or more on the project. Great American's contract also required an indemnity agreement from Brown and an assignment by Brown of its rights under the subcontracts and the subcontractors' bonds.

SoCon alleges it entered into a subcontract with Brown to perform the heating and air conditioning, plumbing, and electrical work on the project for approximately $1.7 million. The existence and extent of a contract between SoCon and Brown is in dispute. It is undisputed, however, that Brown forwarded a written subcontract to SoCon in April of 1991, which SoCon revised by deleting the requirement for 100% performance and payment bonds. According to an affidavit, SoCon could not provide a bond in April because it had temporarily depleted its "bond credit" on another project. However, SoCon asserts it would have been able to provide a bond in late August or early September of 1991 when it was scheduled to begin work on The Citadel project. Brown never executed the revised contract, although SoCon maintains it performed preliminary work in the amount of $39,576 with the consent of Brown, for which it has not been paid.

In June of 1991, SoCon received a letter from Brown containing a seventy-two hour deadline in which to provide the bonds or have the subcontract offer declared void. No bonds were forthcoming, and SoCon maintains Brown wrongfully terminated their agreement shortly thereafter.

In its complaint, SoCon alleged Great American directed and caused Brown to wrongfully terminate its agreement with SoCon by demanding Brown require the bonds from SoCon within seventy-two hours. SoCon pointed to Great American correspondence to bolster its position that Great American interfered with its contract and prospective business advantage with Brown. In an April 1991 memorandum to a local agent, Great American questioned SoCon's financial status. In another memorandum to this agent in June of 1991, the bond manager stated in his opinion Brown should not award all of the plumbing, HVAC, and electrical work to SoCon. According to SoCon, Great American singled it out because Great American did not pressure Brown to obtain bonds from other subcontractors until they were to begin work on the project.

Great American moved for summary judgment on the ground that, even if it did require Brown to terminate a contract with SoCon, the action was justified. The circuit court held Great American's insistence upon the subcontractor's bond was legally justified because Great American had a right to insist upon performance by Brown, even if to do so resulted in termination of Brown's relationship with SoCon. The court relied upon the recent decision of Webb v. Elrod, 308 S.C. 445, 418 S.E.2d 559 (Ct.App.1992). SoCon appeals, arguing that the issue of justification is a question of fact for the jury, and summary judgment was inappropriate. We disagree.

We begin our analysis by recognizing the basic principle that summary judgment is only appropriate when there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Cafe Assocs., Ltd. v. Gerngross, 305 S.C. 6, 406 S.E.2d 162 (1991). The evidence and inferences drawn therefrom should be viewed in the light most favorable to the nonmoving party. Id.

For SoCon to establish a cause of action for intentional interference with contractual relations, it must prove the following elements: 1) the existence of a contract; 2) Great American's knowledge of the contract; 3) the intentional procurement of its breach; 4) the absence of justification; and 5) resulting damages. Kinard v. Crosby, --- S.C. ----, 433 S.E.2d 835 (1993). The controversy on appeal involves the fourth element, the absence of justification. SoCon argues justification is a factual issue to be decided by a jury.

In the recent case of Webb v. Elrod, this court addressed the issue of good faith and motive in the exercise of a legal right under contract which results in the interference with a third party's contract. In that case the Webbs purchased land from the Elrods, giving a mortgage to the Elrods to secure the unpaid portion of the purchase price. Thereafter, the Webbs sold part of the land to third parties, each of which were likewise required to make installment payments. By agreement, the third party payments were made directly to the Elrods, for which the Webbs were to receive credit on their purchase money mortgage payments. When the Webbs became delinquent in their portion of the monthly payment, the Elrods notified the third parties they would no longer accept payments because they intended to foreclose on the Webbs. As a result, the third parties quit making their payments under their contractual obligations to the Webbs. 308 S.C. at 446-47, 418 S.E.2d at 560.

The Webbs sued the Elrods, claiming tortious interference with their contractual relations with third parties. Sustaining the trial court's grant of a directed verdict, this court recognized that "[t]he exercise in good faith of a legal right by a party to a contract affords no basis for an action by the second party for intentional interference with a contract even though the consequence of the exercise of the legal right by the first party is to cause a third party not to perform another contract with the second party." Id. at 448, 418 S.E.2d at 561.

The issue thus becomes whether the conduct of Great American in enforcing its contract and its motives in doing so present factual issues in this case. SoCon argues, viewing the evidence in a light most favorable to it, factual issues are presented regarding the good faith of Great American because of the selective manner in which Great American enforced the subcontractor bond provisions and the manner of enforcement. By essentially requiring its termination, SoCon asserts Great American somehow exceeded the scope of its rights under the bond contract with Brown. In other words, the Great American contract with Brown did not specifically give Great American control over who was hired to perform the work.

In the case of McMaster v. Ford Motor Co., 122 S.C. 244, 115 S.E. 244 (1921), our Supreme Court first recognized an act done in the exercise of a legal right cannot be treated as wrongful and actionable merely because a malicious motive prompted the exercise of that right. Even in the recognition of this principle, however, the court qualified this proposition as follows:

It has been suggested that some apparent conflicts of opinion can be reconciled by observing the difference between absolute and qualified rights, and by limiting the general proposition above stated to the exercise of absolute rights. (citation omitted). The suggestion is not without...