Plaintiffs appeal as of right from the trial court's order of summary disposition entered June 12, 1985, on their claims for tortious interference with contractual relations or prospective business relationships and conspiracy to injure plaintiffs in their business relations. We reverse the decision of the trial court and remand for further proceedings on plaintiffs' claims.
Defendants' motion for summary disposition was brought under MCR 2.116(C)(8), failure to state a claim upon which relief may be granted. We review a trial court's order of summary disposition under that subrule by a familiar standard:
Turning to the complaint, then, we find the following factual allegations.
Plaintiffs, Woodrow Woody and Anna Woody (the Woodys), were sole owners of the Hillcrest Country Club (club) located in the City of Mt. Clemens. On or about December 1, 1980, the Woodys sold the club to defendants James and Kathleen Tamer and Mae Ellen George on a land contract.
The Tamers and George obtained both the real and personal property of the club for a total purchase price of $6,500,000. A $1,000,000 down payment was made by the defendant-purchasers, leaving a balance due of $5,500,000 under the land contract. The land contract additionally provided that the purchasers, the Tamers and George, were to bear no personal liability with respect to performance and that the property would be the sole source of security for the transaction.
The balance due on the land contract was to be paid in monthly installments of $50,000. That amount was to be paid to the Woodys' account with defendant First National Bank In Mt. Clemens (First National). Disbursements from the account were to be made by First National to
At the time of sale, December 1, 1980, the balance due on the Woodys' mortgage account with First National was $1,290,000. That amount was secured not only with a mortgage on the club, but also with a mortgage on a second piece of Florida property owned by the Woodys. Plaintiffs were personally liable for any deficiencies in the event of default and sale of the two properties.
The Woodys were dependent upon the payments made by defendants under the land contract on the club to satisfy their monthly obligations on the first and second mortgages. Defendants Tamer and George were well aware of the contractual and financial relationships between the Woodys, First National and Metropolitan Savings & Loan. Defendant First National was well aware of the Woodys' financial relationship with defendants Tamer and George.
Monthly payments of $50,000 were made under the land contract on the club until August 1, 1982. At that time, defendants Tamer and George defaulted on the land contract. They continued in default through March 2, 1983. As a result of the default of defendants Tamer and George, the Woodys were forced to default on their mortgage payments to First National and Metropolitan Savings & Loan. As of January, 1983, the balance due on the land contract was $4,700,000. As of the same date, approximately $1,800,000 was due on the Woodys' first mortgage with Metropolitan Savings & Loan. There is no allegation as to the amount due at that time on the Woodys' second mortgage with First National.
As a result of the meetings and communications between defendants, First National embarked upon a course of conduct which included threats of foreclosure on the property and the establishment of personal liability on the part of the Woodys. First National encouraged defendants Tamer and George to continue in default on the land contract, despite their ability to make payments. First National simultaneously offered to extend new credit to defendants Tamer and George on the club property, contingent upon the Woodys' relinquishment of $1,400,000 in equity on the property.
The defendants ultimately succeeded in their plan to force relinquishment of the Woodys' equity. A tripartite agreement, entered by the parties on February 2, 1983, transferred all of the Woodys' interest in the property to defendants Tamer and George in exchange for a complex restructuring of the Woodys' indebtedness on the property. The tripartite agreement made no reference to a settlement of legal actions.
Ten months after the signing of the tripartite agreement, on December 16, 1983, the Woodys brought suit in Macomb Circuit Court, alleging tortious interference with contractual relations and a conspiracy to injure business relations.
A. THE BREACH OF CONTRACT
It is well established in Michigan law that a prerequisite to an action for tortious interference with contractual relations is a breach of contract. Thus, a discharge from employment under a contract for employment at will has been held to be an insufficient basis upon which to state a claim for tortious interference with a contractual relation. See Dzierwa v Michigan Oil Co, 152 Mich.App. 281, 287; 393 N.W.2d 610 (1986), and cases cited therein.
In an action based upon a contract, the court may examine the contract in conjunction with a motion for summary judgment for failure to state a claim. Second Benton Harbor Corp v St Paul Title Ins Corp, 126 Mich.App. 580, 585; 337 N.W.2d 585 (1982). Here, the land contract between the Woodys and defendants Tamer and George precluded personal liability on the part of the defendant-purchasers. Paragraph 13.A of the Agreement of Sale, incorporated by reference into the land contract, specified:
Based upon this contractual provision, the trial court concluded that there was no breach of contract
We believe that this analysis foreshortens the actual provisions of the contract by equating the purchasers' obligation to perform with the extent of their personal liability in the event of a breach of the contract.
The Restatement of Contracts 2d provides:
As the comments to this section explain:
See also, 3 Corbin On Contracts, § 570, p 344 (If a purchaser of a business promises to pay therefor out of profits yet to be made, there is an implied promise to keep the business going in good faith).
It should be noted that the above-quoted passage does not provide that performance may not be due because the obligor is not liable for damages. In fact, the duty to perform is distinct from the duty to pay damages for nonperformance or breach:
The trial court's analysis in this case assumes that the contract provided for alternative methods of performance. Thus, under the trial court's analysis,
We believe that the land contract in this case is clearly distinguishable from the employment at will contract in Dzierwa. Discharge could not constitute a breach in the employment at will contract, since there was no obligation due to provide continuing employment. Here there was an obligation to make monthly payments of $50,000 until the entire balance due of $5,500,000 had been paid.
In sum, our reading of the land contract, incorporated by reference in the complaint, indicates that the failure of the defendant-purchasers to make monthly payments constituted nonperformance of an obligation due. Nonperformance of an obligation due is a breach of contract even though the liability of the nonperforming party is limited or nonexistent. The Woodys have therefore properly pled a breach of contract by defendants Tamer and George.
B. THE TORT
The elements of the tort of interference with an
Addressing the Woodys' claim against defendants Tamer and George first, we note that the Dassance elements for tortious interference with existing contractual relations were taken from 4 Restatement Torts, § 766. Comment d discusses precisely the factual context presented by the Woodys' pleadings:
Here the Woodys have pled that performance of their mortgage agreement with First National necessarily depended upon performance by defendants Tamer and George on their land contract. The Woodys have further pled that defendants Tamer and George breached the land contract in order to disable the Woodys from performing on their mortgage with First National. Thus, according to the Restatement,
We agree with the authors of the Restatement and Restatement 2d that such acts should state a cause of action. Although what constitutes "improper" conduct of a quality which would be without justification is not clearly defined, 4 Restatement Torts, 2d, § 767, pp 26-28, it is readily apparent that several of the Restatement 2d factors addressing "improper" conduct are applicable to these pleadings. We are therefore inclined to allow a full development of the plaintiffs' case, rather
The result is the same where the Woodys' claim against First National is analyzed under the Northern Plumbing elements. The Woodys have pled: (1) the existence of a contract, this time the land contract on the club; (2) a breach of the land contract by defendants Tamer and George; and (3) that the breach was instigated by defendant First National without justification. See also 4 Restatement Torts, 2d, § 766, pp 7-17. Again we are inclined to believe that an inducement or instigation by First National of a breach of the land contract between the Woodys and defendants Tamer and George would fall under several of the factors suggested in 4 Restatement Torts, 2d, § 767, pp 26-28. The trial court's order of summary disposition on the pleadings as to plaintiffs' claim for tortious interference with contractual relations must be reversed. Northern Plumbing, supra, p 94.
II. TORTIOUS INTERFERENCE WITH A BUSINESS RELATIONSHIP
The elements of a claim for tortious interference with a business relationship were also set forth in Northern Plumbing:
See also Weitting v McFeeters, 104 Mich. 188, 197; 304 N.W.2d 525 (1981)(quoting 4 Restatement Torts, 2d, § 766B, p 20 for the elements of the tort).
It is apparent that an advantageous contractual relationship is sufficient, but not necessary, to state a cause of action in accordance with this tort. Here the Woodys had an advantageous contractual relationship with First National, in that continuation of their performance under the mortgage would enable them to secure 1.4 million dollars in equity on the club. It is also clear that the Woodys had an advantageous contractual relationship with defendants Tamer and George in that continued performance of those defendants' obligations under the land contract would enable the Woodys to secure the same 1.4 million dollars stake in the club. Indeed, the Woodys allege that the defendants' combined activities were designed to force the Woodys into default on the underlying First National mortgage in order to allow the defendants to renegotiate both instruments and obtain, through a complex of financial arrangements, the Woodys' 1.4 million dollars in equity.
The trial court reasoned, however, that the prospective business relationship was not a reasonable expectancy. Citing Shipani v Ford Motor Co, 102 Mich.App. 606, 622; 302 N.W.2d 307 (1981),
Furthermore, even if it is assumed that the terms of the mortgage were in accordance with the trial court's speculation, it is not at all clear that the Woodys' expectations were unreasonable. Defendants Tamer and George were contractually bound to make payments under the land contract which were adequate to cover the Woodys' underlying mortgages. While it is true that defendants Tamer and George were not personally liable under the land contract, it is by no means clear that the Woodys would have obtained greater assurance of payment if those defendants had been personally liable. Just as a business may fail, and there is no allegation here that the club was failing, personal assets may dissipate. The fact remains that defendants Tamer and George were contractually bound to the business relationship. Leaving aside the factual question of liquidity, there can be no more reasonable expectation of business advantage than that based upon a valid contract.
Again assuming that the mortgage terms allowed First National to threaten foreclosure and refuse further credit, we note that those actions are not the gravamen of the Woodys' pleadings.
The trial court's opinion does not address the Woodys' claim against defendants Tamer and George under the same theory. However, it is clear to us that the Woodys have alleged that those defendants interfered with the plaintiffs' business relationship with First National by deliberately breaching and remaining in default on their land contract, thus forcing the Woodys into default on the underlying mortgage. As noted in Part IA, supra, that breach was a violation of the duty of defendants Tamer and George under the land contract. Since continued performance by the Woodys under their mortgage would have precluded foreclosure and obviated the need for a further extension of credit, we would conclude that the Woodys' expectation of business advantage was reasonable.
We therefore hold that the trial court erred in granting summary judgment to the defendants under MCR 2.116(C)(8) on the Woodys' claim for tortious interference with a business relationship.
III. CIVIL CONSPIRACY
Finally, the trial court held that defendants had
Reversed and remanded. We do not retain jurisdiction.