Daily Development for
Thursday, January 5, 2000
By: Patrick A. Randolph,
Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
randolphp@umkc.edu
LANDLORD/TENANT; TORTIOUS
INTERFERENCE: As with other contracts, in order to establish a cause of action
for tortious interference with a lease, the landlord must show that the
defendant acted improperly, without privilege, purposefully and maliciously,
inducing the tenant to breach or discontinue the lease, but otherwise innocent
acts can be acts of malice when the prohibited intent exists, and malice can be
proven by circumstantial evidence.
Sowell v. Blackman, 512
S.E.2d 713 (Ga. App. 1999).
The Tenants originally
owned a building in which they operated their gymnastics business. They
defaulted on their mortgage loan, and the lender foreclosed. The Tenants
located a rental property in which to continue the conduct of their business,
entered into a written lease with the Landlord, and took possession.
Meanwhile, the Defendant,
a former president of the parent's booster club for the old gym, got wind of
the Tenant's problems, and acquired the old gym building at auction. Defendant
also contracted with Tenants to acquire the business assets of the Tenants'
company (without assuming the Tenants' lease or other obligations) in exchange
for a promissory note and arranged to hire one of the Tenants to work in a
gymnastics business to be conducted in the old gym building, tying the
continued validity of the purchase of the assets to continued employment.
Communicating with the
Landlord through the leasing agent, the Defendant encouraged the Landlord to
refund the Tenants' deposit and rent money. In a meeting with the Landlord, the
Defendant asserted that the Tenants' lease with the Landlord was invalid. Once,
when the Landlord arrived to pick up rent from the Tenants, the Defendant was present
and handed the Landlord an envelope containing less than the full amount of
past due rent. This was the first time that Tenants had defaulted on the terms
of the lease.
The Landlord sued the
Defendant alleging tortious interference. The court noted that one has the
absolute right to exercise his business judgment so long as his decisions don't
violate law or public policy. The Defendant's decisions to purchase the old gym
building and the assets of the Tenants' company, to move those assets back into
the old gym building, and to hire one of the Tenants to work there, by
themselves, did not constitute improper or wrongful action. But, such decisions
might not be considered benign when viewed in the context of Defendant's overall
motives. These motives were suggested, at least circumstantially, by
Defendant's actions in asserting (apparently wrongly) the invalidity of the
lease, in persuading the leasing agent to intervene with the Landlord to
request the return of the Tenants' deposit and rent payments, and in handing
the partial rent payment to the Landlord. These latter actions all suggested
that Defendant's scheme was to induce Tenants to break their lease with
Landlord.
Comment 1: Undoubtedly the
Defendant viewed himself as a "good guy," trying to help the Tenants
get out of a bad deal and into a better deal in which he was involved. He was
lending what he thought was his own business sophistication in encouraging them
to play hardball with their new Landlord. They could have done it all
themselves, of course, but when "Mr. Good Guy" did it, it was
tortious.
Comment 2: Jurisdictions
vary on the tortious interference issue. Some require specific animus a desire
to injure the plaintiff's business. Merely inducing tenants to move to your
property will not be sufficient if you do not specifically urge them to breach
their existing leases. See, e.g. Charles C. Chapman Building Co. v. California
Mart, 82 Cal. Rptr. 830 (Cal. App. 1969). Others will find behavior tortious
when the purpose is competitive but the impact is interference with existing contracts.
See, e.g. Daughtery v. Kessler, 286
A.2d 95 (Md. App. 1972), finding a tortious conspiracy between the defendant
landlord and the breaching tenant. But compare Olson v. Scholes, 563 P.2d 1275 (Wash.
App. 1977) (finding that one cannot conspire to breach one's one contract). Also
see Wells Fund v. The Shoe Show of Rocky Mount, Inc., 863 S.W.2d 731 (Tenn.
App. 1997) where the competitor landlord was held liable for inducing the
breach of a lease containing a continuous operation clause when it induced the
tenant to relocate. The competitor in this case made payments on the old lease
for the balance of its term in excess of the highest percentage rent the tenant
had paid under that lease. In response to the defendant's claim that it had no
knowledge of the existence of such a clause, the court held that the landlord
had a duty to discover the terms of the existing lease with the plaintiff
landlord and assess the impact of its efforts to induce the tenant to move. This
case is all the more extraordinary because the defendant had actually requested
a copy of the existing lease and the tenant had indicated that it could not provide
a copy because the lease was not recorded.
For a summary of cases on
the point, see Liability For Interference With Lease, 96 A.L.R.3d 862, (1980)
(as updated.)
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development or the editor's comments about it.
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