Summary
denying dismissal of tortious interference claim where it was alleged that officer purposely converted corporate assets so that corporation could not fulfill orders and prevent plaintiff from earning commissions under employment contract
Summary of this case from Zohar CDO 2003-1, Ltd. v. Patriarch Partners, LLC (In re Zohar III, Corp.)Opinion
June 14, 1946.
Appeal from Supreme Court, New York County, PECORA, J.
Harold W. Bissell for appellant.
David W. Kahn for respondent.
The complaint alleges that plaintiff had an employment contract with a corporation, Federal Razor Blade Company, entitling him to commissions on all export orders obtained by him for razor blades made by the company payable when the orders were accepted and shipped by the company; that defendant had full knowledge of the arrangement and as general manager was in sole charge of shipments made against export orders obtained by plaintiff; that in 1942, and 1943, plaintiff procured export orders for over twenty million blades and the orders for such shipments were approved; that thereafter defendant, maliciously designing to interfere with plaintiff's contract and deprive him of his commissions, wrongfully removed from the company's warehouse nineteen million razor blades transported there for use in filling export orders, including orders obtained by plaintiff, and converted the nineteen million blades to his own use, disposing of them without the company's knowledge and without accounting for the proceeds; that the inability of the company to make shipments on the export orders obtained by plaintiff was due entirely to defendant's conversion for his own use of the nineteen million blades; and that in converting the blades and preventing their shipment on plaintiff's export orders, defendant well knew that he was preventing plaintiff from earning and receiving his commissions.
On trial, if plaintiff fails to establish the truth of these allegations, defendant may be completely vindicated and exonerated. But for the purpose of this appeal on a motion to dismiss the complaint for insufficiency appearing on the face thereof, the allegations of the complaint must be deemed to be true, every intendment and fair inference is in favor of the pleading, and if "in any aspect upon the facts stated the plaintiff is entitled to a recovery, the motion should be denied." ( Dyer v. Broadway Central Bank, 252 N.Y. 430, 432-433.)
Applying that rule, we think the complaint sufficiently states a cause of action for malicious interference with plaintiff's contract. The well-recognized and sensible rule that an officer of a corporation will not be held liable for interference with contracts of his own corporation is based on the assumption that the officer is acting as such in the course of his employment. But in converting corporate property to his own use, the officer clearly is not acting as such for the corporation but in his own interest against the corporation. Such action is a wrong to the corporation. But that is not all that plaintiff alleges. He also alleges that the predatory act was perpetrated with full knowledge of plaintiff's contract, with the malicious design of interfering therewith, and was in fact the sole inducing cause of the corporation's inability to fulfill plaintiff's export orders. That alleges a wrong to plaintiff as well as to the corporation.
For such wrong, plaintiff has no right of action against the company, since by the terms of his contract his right to commissions accrued only if and when orders were approved and accepted, and it is alleged that by defendant's malicious action and with the design and ulterior purpose of accomplishing that result, the corporation never approved or accepted the orders. Accordingly, if this plaintiff has no cause of action against defendant, he is without remedy.
In Greyhound Corp. v. Commercial Casualty Ins. Co. ( 259 App. Div. 317), this court held that an officer of a corporation may not be held liable when he induces the corporation to violate a contractual obligation except in such cases "as involve individual and separate torts on the part of an agent such as assault, trespass, fraud, conversion, etc.". It is true we said that the wrong, if any, was against the principal, not the plaintiff in that action, but we also pointed out that there were no allegations in that case that the defendants profited by the alleged deceit upon their principal. The question we answered in the negative was thus formulated in the court's opinion: "Is an agent who, acting generally within the scope of his authority, induces his principal to breach a contract, liable in damages to the other party to the contract?" (Italics mine.) A corporate officer engaged in converting corporate assets is not "acting generally within the scope of his authority", and if his action wrongs not merely his principal but also a third party, the third party should be entitled to a remedy.
In Remy Beverages, Inc., v. Myer ( 269 App. Div. 1013), the first cause of action sustained by our affirmance alleged that the individual defendants took the contract for themselves for the ulterior purpose of destroying plaintiff's business. On such allegations the cause of action was sustained.
In Bostelmann v. Rheinstein ( 268 App. Div. 1041, affd. 294 N.Y. 822), the defendant's acts were performed as treasurer of the corporation and were, therefore, held to be justified and privileged; there was no charge that the defendant in that case stole the assets for if he had his acts could not have been justified or performed in his capacity as treasurer of the corporation.
The allegations in this complaint, that defendant maliciously interfered with plaintiff's contract, are not merely general conclusory allegations of malice without factual support. Plaintiff alleges that defendant removed the nineteen million blades from the warehouse to which they had been transferred for use in filling export orders, including plaintiff's, with the design of maliciously interfering with plaintiff's contract and depriving him of his commissions from export orders he had already procured, and that this conversion was the sole cause of the company's inability to fill plaintiff's orders, although defendant falsely and fraudulently represented otherwise. These are allegations that defendant's predatory acts were intentionally directed against plaintiff to prevent him from earning $22,325, in commissions on orders already procured.
Intentional interference is an essential element of this type of action. From the decision in Lumley v. Gye (2 El. Bl. 216) in 1853, "malicious" procurement was the basis of the action. Actual malice is not necessarily required but "the intentional doing of a wrongful act without legal or social justification." ( Campbell v. Gates, 236 N.Y. 457, 460.) As the Court of Appeals said in Hornstein v. Podwitz ( 254 N.Y. 443, 448), "The action is predicated on the intentional interference without justification with contractual rights, with knowledge thereof. Such interference constitutes a legal wrong, and if damages result therefrom a valid cause of action exists therefor."
This court has recently held that unlawful intentional interference by the president of a corporation with a third person in performance of his contract with the corporation is a legal wrong, as is unlawful inducement of a breach of a contract. ( Morris v. Blume, 55 N.Y.S.2d 196, affd. 269 App. Div. 832 [First Dept., June, 1945].)
In Vassardakis v. Parish ( 36 F. Supp. 1002, 1005), the United States District Court for the Southern District of New York reviewed the New York cases with regard to the immunity of a corporate officer in inducing a breach of a third person's contract with the corporation by commission of numerous tortious acts and properly concluded that "it would be unconscionable to allow such a defendant to cloak himself with immunity merely because he was an employee or officer of the corporation."
Discussing privilege in connection with the inducement of a third person not to perform a contract with another, the Restatement of the Law of Torts (Vol. 4, § 766, comment b, p. 53) says: "Where the defendant's conduct is predatory the scale on his side may weigh very lightly, but where his conduct is not predatory it may weigh heavily. The issue is whether in the given circumstances his interest and the social interest in allowing the freedom claimed by him are sufficient to outweigh the harm that his conduct is designed to produce. In deciding this issue, the nature of his conduct is an important factor".
Under comment d of section 766 (p. 55), the Restatement continues: "The rule stated in this Section applies to any purposeful causation whether by inducement or otherwise. The essential thing is the purpose to cause the result. If the actor does not have this purpose, his conduct does not subject him to liability under this rule even if it has the unintended effect of deterring the third person from dealing with the other. It is not necessary, however, that the purpose to cause the breach of contract or failure to deal be the actor's sole or paramount purpose. It is sufficient that he designs this result * * *."
Whether plaintiff's charges can be proved will be determined by the evidence adduced at trial. The complaint is sufficient and, accordingly, the order appealed from should be affirmed, with $20 costs and disbursements to the plaintiff.
The complaint alleges that plaintiff was employed by Federal Razor Blade Company as sales export manager, to receive a commission upon all export orders obtained by him, if and when said orders were accepted and shipped by the corporation; that defendant was vice-president and general manager of the corporation, in control of shipments against export orders; that plaintiff obtained export orders for twenty million blades and defendant approved said orders for shipment, but thereafter, maliciously designing to interfere with plaintiff's contract with the corporation and to deprive plaintiff of the commissions which would become payable to him upon the shipment of said orders, wrongfully and stealthily removed from the warehouse of the corporation nineteen million blades which were held there for export, and converted the same to his own use and disposed of them without the knowledge or consent of the corporation and without accounting to the corporation for the proceeds; that the inability of the corporation to make shipments on the orders obtained by plaintiff was due entirely to defendant's conversion; that in converting said blades and preventing their shipment on export orders obtained by plaintiff, defendant well knew that he was preventing plaintiff from earning and receiving commissions in the sum of $22,325, for which amount plaintiff seeks judgment in this action.
While plaintiff labels his cause of action one for malicious interference with contract, it is obvious that he complains not of malice toward him but of defendant's appropriation of corporate property for his own use rather than for a corporate use in connection with which plaintiff would have earned a commission. The question, therefore, is whether plaintiff can take advantage of defendant's wrong to the corporation and turn it into a cause of action in his favor.
On the allegations of the complaint, that defendant converted the corporation's property, it could not be said that he was acting for the corporation, and defendant is thus deprived on a motion to dismiss the complaint for insufficiency of the immunity he might otherwise have for acting in a corporate capacity. His liability for the alleged conversion, however, is to the corporation alone. Plaintiff concedes that much and does not contend that he can sue merely because of the consequence of the conversion to him. He recognizes that he must show an independent tort committed against him and seeks to turn the consequences of the conversion to him into a cause of action in his favor by characterizing it as "maliciously" designed by the defendant.
A single act may give rise to different causes of action in different persons, and a complaint would be sufficient that made a factual showing of malicious interference with contract rights, i.e., action directed against the plaintiff with the ulterior purpose of injuring him. ( Remy Beverages, Inc., v. Myer, 269 App. Div. 1013, supra.) Apart from such a showing, however, plaintiff could not take advantage of a wrong to another because of the incidental consequence to him.
A complaint must be read with every intendment and fair inference to the pleading, but it must also be read with realism. This complaint cannot fairly and with reality be read as charging defendant with a malicious or ulterior purpose toward plaintiff in converting corporate property or that the conversion was aimed or directed at plaintiff in any way. A conclusory allegation of malice without factual support will not alter the facts or enlarge their legal consequence. All this complaint alleges factually is that defendant converted corporate property, knowing that the incidence to plaintiff would be a loss of commissions. That the complaint really alleges nothing more than that is revealed by plaintiff's own explanation of his cause of action in his brief — "The plaintiff is merely seeking to collect the commissions which he would have earned had the orders procured by him for the converted blades been filled — as they could and would have been but for the defendant's wrongful conversion and consequent malicious interference with plaintiff's contract." Interference with plaintiff's contract may well be a consequence but malice is not a consequence. Malice is the moving spirit with which an act is done and malice, affirmatively and purposely directed against plaintiff, would necessarily be the gist of any cause of action in his favor. Otherwise his complaint is only of the incidental effect on him of defendant's wrong to the corporation, and that could not be a cause of action in plaintiff's favor. ( Greyhound Corp. v. Commercial Casualty Ins. Co., 259 App. Div. 317, supra.)
The fatal defect in the complaint is that, giving it the benefit of every fair inference, it does not allege in fact any malice or ulterior act of defendant against plaintiff. It alleges only an incidental effect on plaintiff of defendant's wrong to the corporation, and that is not a cause of action in plaintiff's favor or made so by the characterization "malicious" applied to it.
The order appealed from should be reversed and the motion to dismiss the complaint granted.
COHN and PECK, JJ., concur with DORE, J.; TOWNLEY, J., dissents in opinion in which MARTIN, P.J., concurs.
Order affirmed, with $20 costs and disbursements, with leave to the defendant to answer within ten days after service of order with notice of entry, on payment of said costs. [See 270 App. Div. 101 5.]