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Tortious Interference with a Contract
Contract, Tortious Interference with

Excerpts from Bismarck Realty Co. v. Folden, 354 N.W.2d 636 (N.D. 1984)

This case involves an action brought by a realty company (Bismarck Realty Company): (1) against a property owner (Gaylord Folden) for the breach of an "exclusive" listing agreement; and (2) against a competing realty company (Pioneer Realty & Land Company) and its agent (Kenneth Austin) for tortious interference with the "exclusive" listing agreement. The trial court determined that Folden had breached his contract with Bismarck Realty and entered judgment against him for $50,110.94, plus interest. The trial court found that Pioneer Realty had tortiously interfered with the contract and awarded Bismarck Realty $10,417.18 in punitive damages and costs. The trial court dismissed all claims against Austin. We dismiss Austin's appeal; affirm, but remand for modification, the judgment against Folden; and affirm in part and reverse in part the judgment against Pioneer Realty.

On a preprinted form labeled "Exclusive Listing Agreement" and bearing the Bismarck Realty Company logo and the statement "This form approved by N.D. Real Estate Commission and N.D. State Board of Realtors", Folden and Bismarck Realty agreed that for a six-month period from August 9, 1980, to February 9, 1981, Bismarck Realty would have the "exclusive right to sell or exchange" five eight-unit apartment buildings owned by Folden in Bismarck. As a "Special Condition" of the contract, Folden was given an option to withdraw the listing after three months reasonable promotion and activity" had not taken place. The contract also contains the following provision:

"2. I (we) hereby agree to pay you or any other broker working in cooperation with you, in cash for your services a commission of [7%, less $1,000 per building] of the total selling price, in the event you shall find a buyer, ready and willing to purchase exchange, option, or lease, with an option to purchase where said option is exercised, said property for the price and terms stated, or such terms as I may accept, during the period of this agreement or within six months after the termination of the agreement or any renewal thereof should a sale be completed to any person or to anyone acting for said person, with whom the broker or any of his agents personally exhibited by showing said property prior to the expiration of this contract, and in either case whose name the broker has submitted to the seller in writing not later than twenty-four (24) hours after the expiration on (sic] this contract."

Following execution of the contract, Bismarck Realty began marketing the property. Bismarck Realty prepared prospecti on the property, advertised the property, and showed the property to several potential buyers. During November, Doug Moore, an agent of Bergquist-Walker Real Estate, with the knowledge and consent of Bismarck Realty, showed the property to Cornelius and Anna Heppner. Moore, who had handled several prior real estate transactions with the Heppners, also provided them with copies of the Bismarck Realty prospecti. Folden contacted Bismarck Realty on several occasions to inquire about the property and was informed of prospective purchasers.

On December 16, 1980, Folden visited with Austin, a real estate broker and part owner of Pioneer Realty. Folden and Austin had engaged in numerous real estate transactions together in the past and they were close friends. Folden, who at one time had been a real estate agent in Minot and was an experienced and knowledgeable real estate owner, had purchased the apartment complex through Austin several years earlier. Folden allegedly told Austin that he had "withdrawn" the listing with Bismarck Realty. Austin offered to attempt to sell the property at only a six-percent commission.

The Heppners contacted Austin later the same day. When Austin showed the apartment complex to the Heppners, they informed him that another broker or salesman had previously shown them the complex. Anna Heppner and Austin later signed an earnest money agreement to purchase the property. Austin made no effort to contact Bismarck Realty to verify Folden's claimed withdrawal from the contract or to inquire as to any prospective purchasers.

On December 19, 1980, the Heppners contacted Bismarck Realty. Bismarck Realty showed the Heppners the same apartment complex again and the Heppners stated that they had already made an offer through Austin. Bismarck Realty did not contact Austin or Folden at that time, but waited to see if the financing by the Heppners on their offer was successful. Several days later Bismarck Realty discovered that the sale was to be completed. The Heppners purchased three of the apartment buildings for $604,500. Bismarck Realty contacted Austin, who refused to pay or split the commission with Bismarck Realty. This lawsuit followed. The defendants chose not to file cross-claims.

On December 15, 1983, we filed an opinion in this case, in effect holding that certain letters of understanding regularly exchanged among Bismarck area realty companies offering to split the commission fees automatically became part of the contract between Folden and Bismarck Realty and, therefore, the sale of the property by Pioneer Realty did not breach that exclusive contract. We also held that the failure of Pioneer Realty to split the commission with Bismarck Realty was a breach of contract.

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TORTIOUS INTERFERENCE

Pioneer Realty contends that the trial court erred in concluding that Austin, as its agent, tortiously interfered with the listing contract between Folden and Bismarck Realty. This Court has previously recognized the existence of such a tort in this jurisdiction … In order to establish a prima facie case of tortious interference with contractual relations, the plaintiff must show that: (1) a contract existed; (2) the contract was breached;(3) the defendant instigated the breach; and (4) the defendant did so without justification … Where interference with contractual rights is done for the indirect purpose of injuring the plaintiff or benefiting the defendant at the plaintiff's expense, it is unjustifiable.

In its findings of fact, conclusions of law, and order for judgment, the trial court stated:

"A contract existed between Bismarck Realty and Folden. This contract was enforceable as an exclusive right-to-sell contract. Mr. Austin was an employee of Pioneer Realty, a corporation Bismarck Realty knew, through its agents and employees, that Austin was an employee of Pioneer Realty. Austin knew of the existence of the contract between Bismarck Realty and Folden which provideda commission of seven percent. Austin offered to Mr. Folden to sell the same property at a commission of six percent. Austin knew of the efforts of Bismarck Realty to market the property and knew that Bismarck Realty had been in contact with prospective purchasers. Austin made no effort to contact Bismarck Realty to verify the claimed withdrawal of the contract by Folden, nor did he make inquiry as to any prospective purchasers, nor did he make inquiry as to whether Bismarck Realty had reserved any prospective purchasers if the contract was in fact withdrawn. Austin knew at the time he was with Mr. and Mrs. Heppner looking at the property that another broker or salesman had previously shown the property to the Heppners. Austin was familiar with the reserve provision in listing agreements. Austin's actions in selling the property in spite of his knowledge of Bismarck Realty's contract was willful and intentional and his purpose was to gain a financial advantage over Bismarck Realty and to exclude Bismarck Realty or any other broker from being paid a commission. Folden breached his contract with Bismarck Realty by paying a six percent commission to Pioneer Realty. Austin was the cause of the breach by Folden of his contract with Bismarck Realty."

We have reviewed the entire record and are not left with a definite and firm conviction that the trial court made a mistake in its findings concerning Austin's conduct in this matter. The trial court did not err in concluding that Pioneer Realty, through Austin, tortiously interfered with the contractual relationship between Folden and Bismarck Realty.

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