Brief Fact Summary. Appellant Winternitz was a tenant of Appellee Summit Hills Joint Venture. Appellant entered into an agreement to sell his business under the belief that he could transfer his lease to the buyer. Appellee revoked permission to transfer the lease.
Synopsis of Rule of Law. Part performance applies when specific performance is sought, but not when the party is seeking damages.
Appellant operated a pharmacy. On January 31, 1983, Appellant’s six year lease expired. The lease provided that if Appellant remained in possession, Appellant would become a month-to-month tenant and the rent would continue to be $1,658. Either Appellant or Appellee could terminate the month-to-month tenancy with 30 days written notice.
In October of 1982, Appellant discussed renewal of the lease with a partner and officer of Appellee and asked if the lease could be transferred. Appellee agreed to renew the lease and indicated there would be no objection to assignment to a financially sound assignee. In mid-January of 1983, Appellee’s property manager delivered to Appellant a proposal for a two year lease with an eight year renewal conditioned on renovations to be made by Appellant.
After clarifying the conditions, Appellant asked when the lease could be signed. Appellant received a copy with the word SAMPLE printed on the first and last pages. Although both Appellant and Appellee’s property manager were authorized to sign the lease, the property manager told Appellant that the lease would be signed at some point. However, the property manager instructed Appellant to pay the new rent.
Believing that the lease had been renewed and could be assigned, Appellant began trying to sell his business. Appellant soon found a buyer and on February 2, 1983, sold the business to the Suh family for $70,000. The contract for the sale of the business mentioned the assumption of the lease. In addition, the contract included a provision making the contract contingent upon the seller procuring the lease.
The Suhs met with Appellee’s property manager to discuss their financial situation. The property manager stated that she did not foresee any problems. After a few days, Appellant contacted a partner and officer of Appellee. Later, the partner and officer contacted Appellant and told him that Appellee would negotiate their own lease and Appellant would no longer be able to transfer the lease. Appellant was informed that he would be refunded the difference in rent and Appellee gave him a thirty-day eviction notice. Because of this, Appellant had to renegotiate the contract with the Suhs for a new price of only $15,000.
Issue. Did the lower court err by nullifying the jury verdicts?
Did the lower court err by nullifying the jury verdict on the breach of contract claim?
Did the lower court err by nullifying the jury verdict on the malicious interference with contractual relationship claim?
Held. The court erred in nullifying the jury verdict on the malicious interference with contractual relationship claim, but did not err in nullifying the jury verdict on the breach of contract claim.
A lease for a term of one year or more falls under the statute of frauds and must be in writing and signed by the party against whom enforcement is sought. Appellant argues that part performance should excuse compliance with the statute of frauds. The Court rejects this argument because part performance applies when specific performance is sought, and in this case Appellant is seeking damages. Because the statute of frauds does apply and the renewal is not enforceable due to lack of a writing signed by Appellee, the lower court did not err in nullifying the jury’s verdict.
Malicious interference with contractual relationship requires improper interference with a contract between another and a third party by preventing or burdening performance of the contract. The Court finds that there is sufficient evidence of Appellee’s agreement to allow renewal and assignment of the lease, Appellee’s breach of that agreement, and that the breach of that agreement was malicious and intended to injure Appellant. In addition the Court notes that a malicious interference with contractual relationship claim may be based on a contract unenforceable under the statute of frauds. Therefore, the Court holds that the lower court erred by nullifying the jury verdict on the malicious interference with contractual relationship claim.
Discussion. Points of Law - for Law School Success
A third party who, without legal justification, intentionally interferes with the rights of a party to a contract, or induces a breach thereof, is liable in tort to the injured contracting party. View Full Point of Law
In the present case, the Court did not allow Appellant to use part performance to bring his breach of contract claim because he was seeking damages and not specific performance. However, the Court held that the lower court erred in nullifying the jury verdict on the malicious interference with contractual relationship claim because the claim could be brought even though the contract was unenforceable under the statute of frauds and Appellant had presented sufficient evidence to support the jury’s finding.