Livoti v. Elston

Shapiro, J. On this appeal the defendant seeks reversal of [445] that part of a judgment of the Supreme Court, Suffolk County, entered September 17, 1975, which, in effect, determined that he was liable for maliciously inducing the breach of a contract for the sale of real property and which ordered him to convey the property in question to the plaintiffs, or, if that could not be done, awarded a money judgment to the plaintiffs. We reverse the judgment insofar as it is appealed from and dismiss the complaint. On April 6, 1974 the plaintiffs entered into negotiations with one Robert Rorech for the purchase of a parcel of real estate owned by him. During the course of the negotiations Mr. Rorech was represented by the defendant, an attorney who had worked for him in the past. Although the plaintiffs and Mr. Rorech reached an oral agreement for the sale of the property, no contract was ever signed and no binder was given. Thereafter the plaintiffs ordered and obtained a title report and April 17 was set as the closing date. The signing of a formal contract was to take place at the time of the closing. On April 16 the defendant prepared a bond and purchase-money mortgage and mailed those documents to the plaintiffs’ attorney. On April 17 Mr. Rorech sought to change the terms of the agreement by converting the purchase into an all cash deal. The plaintiffs agreed to this alteration of the agreement and the closing was thereupon moved back to the evening of April 18. The closing never took place because on the morning of April 18 the defendant and Mr. Rorech met to discuss the closing and, at that meeting, Mr. Rorech sold the property to the defendant for a price slightly higher than the price which he had agreed upon with the plaintiffs. The plaintiffs then brought this action against Mr. Rorech for breach of contract and against defendant for inducing the breach. As a remedy, the plaintiffs sought specific performance of the oral agreement, or, in the alternative, damages. The Special Term dismissed the action as to Mr. Rorech because the agreement was not in writing as required by section 5-703 of the General Obligations Law. The defendant, however, was found liable for inducing the breach of the agreement. He was ordered to convey the property to plaintiffs, or, if this was not possible, to pay damages. That finding of liability is the subject of this appeal. The question thus presented is whether a third party may be found liable for inducing the breach of a contract for the sale of real property, [446] otherwise unenforceable because it is not in writing, by offering the seller a higher price, when it is clear that the terms of the contract would have been fulfilled absent the interference of the third party. The essential elements to be established in an action for inducing the breach of a contract are: (1) that a valid contract was entered into between the plaintiff and another; (2) defendant’s knowledge of such contract; (3) defendant’s wrongful, intentional procuring of the breach of that contract; and (4) damages (Israel v Wood Dolson Co., 1 NY2d 116, 120; Lamb v Cheney & Son, 227 NY 418). The oral contract between the plaintiffs and Mr. Rorech was not void since it is "the settled New York rule that our Statute of Frauds * * * makes oral agreements not void but unenforcible” (see Rubin v Irving Trust Co., 305 NY 288, 307). Absent interference by the defendant here, there is ample evidence that the sale would have been consummated. Ten days of negotiations had passed, a title search had been completed, a bond and mortgage had been prepared, a price had been agreed upon and a date for the closing and the signing of a written contract had been set. Where there is proof establishing that the parties to a contract, unenforceable because it is not in writing, would have abided by the terms of the contract, it has been held that the fraudulent inducement of the breach of such a contract results in liability (Rice v Manley, 66 NY 82; Warner Bros. Pictures v Simon, 21 AD2d 863, affd 15 NY2d 836; Cohen v Brunswick Record Corp., 31 Misc 2d 525). The Rice case (supra), decided 100 years ago, gave the following pertinent example of when there may be a recovery for inducing a breach of contract (66 NY, at p 85): "Suppose A made a parol contract with B for the purchase of land, and B is ready and willing to convey, but is prevented from so doing by the fraudulent representations of C as to A, by which B is deceived and induced to convey to C; in such case, although A could not have compelled B to give him the conveyance, it would be a reproach to the law to hold that C would not be liable to A for the damage caused by the fraud.” Thus, even when a contract is voidable, one may not procure its breach by engaging in fraud or misrepresentation. Here, however, although the defendant induced Mr. Rorech to sell the land to him by offering him more money, he engaged in no misrepresentation or fraud in inducing his own client, Mr. Rorech, to [447] sell the real estate to him. He owed no duty to the plaintiffs to refrain from offering Mr. Rorech a higher price than they had agreed to pay, although the ethical propriety of his conduct is open to question in view of his role in the negotiations. Until a binding contract was entered into, Mr. Rorech had the right to make any disposition of his land which he saw fit to do and, so long as his change of heart was not induced by any fraud or misrepresentation, no cause of action for inducing a breach of contract became resident in the plaintiffs. "Where a contract is terminable at will or upon notice, no cause of action lies for inducing a termination of the contract, as long as the termination was not accomplished by the defendant’s fraud, misrepresentation, or other unfair conduct” (32 NY Jur, Interference, § 22). In principle, the parties here are in the same position. The contract here was terminable at will because it was not in writing and so did not bind Mr. Rorech. Absent "fraud, misrepresentation, or other unfair conduct”, the defendant was free to induce Mr. Rorech to sell the property to him. The judgment should therefore be reversed insofar as it is appealed from, without costs or disbursements, and judgment should be entered in favor of the defendant.