# FILED September 23, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF APPEALS OF TENNESSEE,

AT JACKSON

_______________________________________________________ ) CRYE-LEIKE REALTORS, INC. , ) Shelby County Chancery Court A Tennessee Corporation , ) No. 104720-3 R.D. ) Plaintiff/Appella

nt. ) ) VS. ) C.A. No. 02A01-9711-CH-00287 ) WDM, INC., a subsidiary of DERLAN , ) INDUSTRIES LIMITED, and ) GEORGE C. RICHERT , TRAMMELL ) CROW SE, INC. and SCOTT ) PAHLOW
. ) ) Defendants/App

ellees. ) )

______________________________________________________________________________ From the Chancer

y Court of She

lby County

at Memphis. Honorable D. J. Alissandratos, Chancellor
Roger A. Stone , STONE, HIGGS & DREXLER, Memphis, Tennessee Attorney fo

r Plaintiff/Appell

ant. Anthony Sammons , BRANSON & BEARMAN, PLLC, Memphis, Tennessee Attorney fo

r Defendants/Ap

pellees WDM, I

nc. and George

C. Richert. William L. Hendricks, Jr. , GLANKLER BROWN, PLL C, Memphis, Tennessee Attorney for Defendant/Appellee Trammell Crow SE, I nc.
OPINION FIL

ED: REVERSED AND REMAN DED FARMER, J. CRAWFORD, P.

J.,W.S. : (Concurs) LILLARD, J. : (Concurs)In this action for breach of contract and procurement of breach of contract, Plaintiff Crye-Leike

Realtors, Inc., appeals the trial court’s final order entering summary judgment in favor of Defenda nts/Appel lees WD M, Inc., Georg

e C. Richert, Tram

mell Crow SE, In

c., and Scott Pahlow. We reverse the tr ia l court’s j udgment because we conclude that the record reveals the existence of gen

uine issues of mate

rial fact which p

reclude summary

judgment on these

claims.

On November 10, 1993, George C. Richert and Colman Borowsky executed a Bu y er’s/Tenant’s Agreement unde r which Richert a

ppointed Borowsk

y, a real e state broker with Crye-Leike

Realtors, Inc., as his sole and exclusive real estate broker to aid him in the leasing and/or acquisition of i ndu str ial pro pert y. In executing the agreement, Richert agree d to informBorowsky of any property of which he became aware in orde r for Borowsky to contact the owner or the owner’ s broker. Ric hert als o agr eed t hat , if he en ter ed i nto any l ease or p urch ase a gree men t wi thi n tw ent yfour months aft

er the per iod of the a

greemen t, Richer t would re

cognize and provide for

Borowsky
as the broker in the t

ransaction. The

agreement p

rovided for an initial term of twelve months but could be terminated by either party upon thirty days written notice.

At the time they executed the agreement, the parties understood that Richert wa s representing a company called Derlan Industrie s and that they wo

uld be relyi

ng on Derlan’s c

redit report to secure a lease. They also understood, howeve r, that Richertwould be forming a new corporationwhi ch w oul d act ual ly ac qui re t he p rop ert y. Richert inf orm ed Bo row sky t hat the new lyformedcompany would use the space to assemble and distribute pumps. To this end, the agreeme nt providedthat the purpose of the industrial property was “to manufacture, test and distribute pumping equipment.” Richert represe nted that he would

be the chief executive officer of the new company andthat he would have the authority to execute agreements on its behalf. Because the corporation
was not yet in existence, however, Richert signed the agre eme nt i n hi s in div idu al c apac ity. Borowsky signed the agreement on beha lf of Crye-Leike.

In accordance with the

agre ement, Borowsky

began attemptin

g to locate suita

ble space for Richert ’s business. Based upon specifications provided by Richert, Borowsky prepared
somesketches of

the type of space Richert desired. Borowsky then sent out a request for

proposals to prospective bidde

rs. Borowsky

kept a list of about fifty

to sixty commer

cial real estate

industrialbrokers whom he regu l arly conta cted, and he cont

acted many

of these brokers

by telephon

e to discuss Richert’s space

needs. In late November or early De cember 1993, Borowsky learned that the name of Richert’s new company would be WDM, Inc
.

On December 7, 1993, Richert formed WDM, Inc. Initially, Riche rt and two other peop le ow ned all of WDM’s stock. They later sold the stock to E.G. Corporacion. The principal stockholder

of E.G. Co

rpor acion was Derlan Industries. Richert became WDM’s president and chief executive officer.

Sometime

i n Decembe r 1993, Borowsky showed Richert a potential space at Interstate Ind us trial Park off of Brooks Road in Memphis. Borowsky subsequently prepared a written offer to

lease the space

and submitted it to B elz Enterprises. The offer was made

on behalf of WDM, Inc., and Ric

hert signed the o

ffer as WDM’s pre

sident. Borowsky

and Belz employees proceeded

to negotiate the terms of the proposed lease agreement. Borowsky believedthat a lease agreement

with Belz was “a done deal.” When the deal was not consummated as planned, however, Borowsky

became concer

ned th at Rich ert and WDM were “ bailing out” on him

. At some point, Borowsky began to suspect that Richert was instead dealing with Trammell Crow SE, Inc
. Acco rdi ngly, Borowsky t elephoned his con

tact at Trammell Cr

ow, Brad Korna

gey, and r emi nde d him that Crye-Leike had an

exclusive agree

ment with Richert. B orowsky pre viously had contacted Kornagey in an effort to find suitable space for Riche rt and WDM.

Richert i ndeed ha d contacted Tra mmell Crow to inquire

about space in a f

acility namedBellbrook Busin

ess Park. Borows

ky had sugg

ested showing thi

s s p ace to Richert in e

arly Dece mber

1993, but Richert c

laimed not to be inte

rested in the spac

e at that ti

me. When h e contacted Trammell Crow, Richert

informed its leasing agent, Scott Pahlow, that Richert and WDM
were being represe

nted by Bor

owsky and Cr

ye-Le ike. Pahlow did not in

quire a s to the details of Borowsky’s

representation

, however, and, s

pecifically

, he did notask if a contract existed between Richert and Borowsky, although he knew that brokers attempted to g et their clients to sign such contracts. Pahlow also was not informed by his coworker, Brad Kornagey , about the existence of such a contract, despite the fact that they both attended weekl y sa les meetings at w

hich agents discussed what deals they were working on.On February 22, 1994, Richert,

on behalf of

WDM, executed a lea

se agreement w

ith Memphis Zane May Associates for space in the Be llbrook Business Park on Fleetbrook Drive. The lease agreement de

scribed WDM as a wh

olly-owned

subsidiary o

f Derlan Ind

ust ri es. Neither Borowsky

nor Crye-Leike receive

d a commission from the lease transaction. According to Ric hert, Pahlow advised him

that Borowsky did not need to be involved in the transaction because Borowsky neither had shown Richert the Bellbrook property nor had contacte d Pahlow about the property.
By letter dated February 23,

1994, Richert terminated his agreement with Crye-Leike andBorowsky. Rich ert wrote the letter on WDM stationary, and he signed the letter on behalf of WDM as its president and chief executive officer. Some time after receiving the termination letter, Borowsky

learned about the lease transaction handled b y Pah low for the Bell bro ok p rop ert y. Con seq uen tly, Crye-L

eike filed this ac

tion for breach o

f contract aga

inst WDM and Richert.CryeLeike later amended its

complaint to asser

t a claim for procureme

nt of breach of c

ontract agains

t Pahlow and Trammell Crow. All of the Defe ndants filed motions for summary judgment, which were granted by the trial court. This appeal followed.

Summary judgment is appropriate on ly when the p

arties’ “plead

ings, depositions,
answers to interrogatories, and admissions on file, t

ogether with the

affidavits, if

any, show that there is no genuine issue as to any material fac t an d that the moving pa

rty is entitle

d to a judgment as a matter of law.” T.R.C.P. 56 .04. In deter mining whether o

r not a genuine i

ssue of material f

act exists for purposes of summar

y judgment,

the trial court is r

equired to conside

r the question in

the same
manner as a motion for directed

verdict made at the close of the plaintiff’s proof. Byrd v. Hall, 847 S.W.2d 208, 210 (Tenn. 1993). That is, “the trial court must take the strongest legitimate view of the evidence in

favor of the nonmo

ving party

, allow all reason

able inf eren ces i n fav or o f th at p art y, and discard all countervailing evidence.” Id . at 210-11.

This appeal first requires us to determine whether the record contains

evidence to support Cr y e-Leike’s claim that WDM ratified or adopted the November 10, 1993, agre ement betweenRichert and Crye-Leike. A corporation may become liable on a preincorporation contract executedby its promoter

if the corporation subsequently ratifies or adopts the contract. Equitec Real Estate Investors Fund

XII v. Poplar Pike, Inc. , No. 02A01-9506-CH-00127, 1996 WL 460269, at1 Contrary to WD M’s and Richert’s

argument on app

eal, we conclude

that these effor

ts resulted in a direct, tangible benefit to WDM, despite the fact that the efforts did not result in the execution of a lea

se. Crye-L

eike, through B orowsky, co ntracted to provi

de its services a

nd did provide service

s. As a realtor, it

is in the business of

providing servic

es. *7 (Tenn. App. Aug. 15, 199 6) (citing Kemmons Wilson, Inc. v. Allied Bank of Texas , 836 S.W.2d 104, 109 (Tenn. App. 1992)); 18 C.J.S. Corporations § 71b (1990). Ratification is the express or implied adoption andconfirmation by the corporation of a contract entered into on the cor poration’s behalf by a promoter who purported to have t he authority to act as the corporation’s agent. Bells BankingCo. v. Jackson Centre, Inc. , 938 S.W.2d 421, 4 27 (Tenn. Ap p. 1996). In order for a ratification to occur, the corporation, ha ving full knowled

ge of the facts , must accept the b enefitsof the promoter’s contrac t. Id . (citing 2A C.J.S. Agency § 71 (1972)). Moreover, the corporation, either by the circumstances or by its aff irmative election, must indicate an intention to adopt the contract as its own. Id
.

Applying the foregoing standard, we conclude that a genuine issue of material fact
ex ists as to whether WDM ratified or adopted the preincorporation contract entered into be twee n Richert andCrye-Leike. The record contains evidence that, after it was incorporated on December 7, 1993, WDM began to

receive the benefits of Richert’s contract with Crye-L eike. For purposes of these summary judg

ment proceeding

s, it was undis

puted that Borowsky continued to search for suitable property f

or WDM to conduct its b usiness. These ef

forts included co

ntacting vario

u s landlords and other broker s, showing diffe

rent properties

to WDM, and, on at l

east one o ccasion, preparing an offer

to lease space on

behalf of WDM. 1 The corporation also had full

knowledge of the facts in this case because Richert, WDM’s president and chie f executive offic er, had full knowledge of the contract executed by Richert and of Borowsky ’s subsequent efforts to find sui

table space for WDM. Finally, the record contains evidence that the corporation intended to adopt the contract. Pursuant to the contract, in January 1994 Borowsky submitted an offer to Belz Enterprises
on behalf of WDM for t

he lease of indust

rial space. Riche

rt signed the off

er on behalf of WD

M, Inc., as the corporation’s president. This evidence supports Crye-L eike’s claim that

WDM ratified
or ado pte d th e con tra ct a fte r it s in corp orat ion and tha t, i n act ual ity, Boro wsk y was representing WDM, and not Richert

.

In defending the trial court’s summary judgment, WDM and Richert contend thatRichert’s knowledge of th e factscould not be imputed to WDM and that, upon becoming a corporate officer, Richert could not ratify his prior actions a

s a promoter. We co

nclude that this ar

gument is withoutmerit. Although, as a general rule, the knowledge of a

single promoter cannot be imputed to the corporation, exceptions to this rule have been found “where the promoters become directors andsto ckhold ers in the corporation or are the sole or controlling stockholders.” 18 Am. Jur. 2d Corporations § 127 (1985) (footnotes omitted). Moreover, we can find no suggestion in the record that anyone in authority at WDM was unaware of the pertinent

facts in this case. The only evidence in the record indicates that, during all times relevant hereto, Richert had aut hority to act on the corporation’s behalf and to bind the corporation.

We also reject the Defendants’ contention that WDM cou l d not ratify or adopt the contract with Crye-Leike because Richert sig ned the contract in his individual capacity and not on behalf of the corporati

on. This argumen

t was rejected by

the court in In re Dynamic Enterprises, In c. , 32 B.R. 509 (M.D. Tenn. 1983). In that case, the plaintiff and the individual de fendant , Martin J. Bloeman, signed an agreement which granted Bloeman an exclusive franch

ise to operate
a fitness c enter in

Jackson, Michigan, under the trade name “Fitness World.” The agreement containedsignature lines for the plaintiff and for the Fitness World franchisee. Bloeman signed the agreement

as the guarantor of Fitness World’s obligations, but the Fitness World sign ature line
rem ainedblank because B loeman’s corpor ation, Fitness Worl

d of Jackson, In

c., had not y

et bee n formedon the date

the agreement was finalized. After its incorporation, Fitness World of Jackson, Inc., pr oceeded t o operate Fitne ss World in accorda

nce with the provi

sions of the franc

hise agreement. In re Dynamic Enters. , 32 B.R. at 513-15.

Applying Michigan law, th

e court first disc

ussed the concep

t of ratification

in deciding whether the franchise agreement was enforc eable against the corporation:
Subseq uentl y

formed corporations are not automatically and irreversibly

bound, . . . by

the acts of promot

ers and incorpor

ators. Individuals

risk that their actions will not be ratified and that personal liability will ensue. The court must scrutinize the actions of the corporate entity following incorporation to determine w hether that corporationshould be held liable on the particular contract. The Mi ch iganSupreme Court noted in Johnson & Carlson v. Montreuil’s Estate :Americancourts gen erall y hold that a contract made by the promoters of a corporation on its behalf may be adopted, accepted

or ratified

by the corporation when organized, and that the corporation is then liable, both at law and in equity, on the contract itself, and not merely for the benefits which it has received. 291 Mich. 582, 289 N .W. 262, 264 (1939). If the corporation recognizes the existence of the contract an d accepts the ben efits bestowedunder the contract, equity demands that the corpo ra tion also share the liabilit

ies.

Id . at 515-16.

The court then held that, despite the absence of the corporate signature on the franchise agre em ent, Fitness World of Jackson, Inc., was bound by the agre ement. The court reasoned:
Postincorporation, Fitness W orld of Jackson, Inc. affirmed and

ratifiedthe franchise agreement. Fitness World operat ed under the guidel ines established in the franchise agreement. Fitness Wor l d tendered payments and license fees by checks drawn on a corpo rate account, accepted goods, advertising and other services and substantially

complied with other terms of the franchise a gre ement. Fitness World never sought to reject the contract and instead operated consistent withthe agreement. These acts constitute ratification and adoption of the preincorporation contract. . . . Despite the absence of the corporate signature on the franchise agreement, Fitness World of Jackson, Inc. i

s bound by the

agreement.

Id . at 516 (citations omitted).

The record in

the present case

contains evidenc

e that WDM accepte

d the benefits

of the contract between Richert and Crye-L eike. As previously discussed, these benefits consisted of Borowsky’s

continued efforts to locate suitable space for WDM to conduct its business. The record contains no eviden ce that WDM ev er sought to reject the contract or the benefits it received thereunder. When Borowsky submitted a lease p

roposal to Belz Ent

erprises, Richer

t signed the proposal on behalf of WDM as the corporation’s president. Even when Richert sent the letter to Borowsky

notifyin g hi m that the agreement was being terminated, Richert used WDM stationery and signed the letter as WDM’s president and chief executive officer . Weconclude that this evidence of W DM’s ratif

ication of the contract was sufficient to withstand the Defendants’ motions forsummary

judgment on Crye-Leike’s brea ch of contract

claim, despite the fact that Richert signed the contract in his individual ca

pacity rat her than in his cap

acity as an

offic erof the to be formed corporation.
Having concluded t hat a ge nuine issue of material fact exists as to whether WDM ratifiedthe preincorporation agreement signed by Richert, we next must determine whether the trial court erred in granting summary judgment in favor of

Trammell Crow and Pahlow on Crye-Leike’s claim for procurement of breach of contract. In order to recover for procu rement of a breach of contract,Crye-Leike was

required to provethe following elements: (1) that a legal contract existed betweenCrye-L

eike and a third pa

rty , such as Richert or WDM; (2) that Pahlow knew of the contract’s existence; (3) th at P ahlow intended to induce a breach of the contract; (4) that Pahlow acted maliciously; (5) that the contract was breached; (6) that Pahlow’s conduct c ausedthe breach; and(7) that Crye-Leike suffere d damages as a result of

the breach. Myers v. Pickerin g Firm , 959 S.W.2d 152, 158 (Tenn. App. 1997).

As with Crye-Leike’s breach of c ontract claim, we conclude that genuineissues of material fact precluded

an award of summa

ry judgmen

t in favor of Tram

mell Crow and Pahlow on Crye-Leike’s

claim for pro cureme nt of breach of contract. The record contains evidence (1) that Richert and Crye-Leike entered into a contract which

later was ratified by WDM; (2) that Pahlow knew Richert

was being represented by Borowsky of Crye-Leike; (3) that Pahlow informed Richert he would not have to involve Borowsky in the transaction because Pahlow, a nd not Boro wsk y, showedthe leased property to Richert; (4) that Richert and WDMbreached the contract with CryeLeike by executing

a lease agreement through Pahlow and Trammell Crow; and (5) that Borowsky and Crye-Leike were pa

id no commission for the transaction.

In asking this court to uphold the trial court’s grant of summary judgment

in its favor, Trammell Crow contends tha

t the record cont

ains no evidence

that Pahlo w had knowled ge that a contract e xisted betw een Richert and Crye-Leike. We note, howe ver, that Pahlow’s actual knowledge of the existence of a contract between Richert and Crye-Leike was notessential to CryeLeike’s claim for

procurement of breach of contract. In order to sa tisfy the kno

wledge requir

ement, Crye-Leike

only was required to show that Pahlow “had knowledge of such facts and circumstancesthat

wo uld lead areasonable person to believe in the existence of the contract and the plaintiff’s interest in it.” Exxon Corp. v. Allsup , 808 S.W.2d 648, 656 (Tex. Ct. App. 1991); 86 C.J.S. Torts § 62 (1997). In the present case, Pahlow was notified by Richer t thathe was being represented by Borowsky

of C rye-L eik e. In add iti on t o kn owi ng th at Bo row sky already represented Ri chert, Pahlow knew that brokers usually attempted to get their clients to sign agreements with them. Despite this knowledge, Pahlow did not inquire further as to the relationship between Richert and Borowsky or the possibility of an existing contract between Richert and Crye-L eike. Based on this evidence, we conclude that a

genuine issue of material fact exists as to whether Pahlow had knowledge of such facts and circumstances that would lead a reasonable person to believe in the existence of a contract between Richert and Crye-Leike
.

We likewise reject Trammell Crow’s argumen

t that Crye-

Leike’s evid

ence fails to support th e malice req uirement of the tor t of procurement

of breach of co

ntract. In thi

s context, “malice is ‘the wilful violation of a know n right .’” Dorsett Carpet Mills, Inc. v. Whitt Tile & Marble Distrib. Co. , 1986 WL 622, at *6 (Tenn. App. Jan. 2, 1986) (quoting 45 Am. Jur. 2d Interference § 3), modified on other grounds , 734 S.W.2d 322 (Tenn. 1987). Contrary

to Trammell Crow’s argument, Crye-Leike was not required to show that Pahlow felt ill will toward Borowsky andCrye-Leike. I

t was sufficient if the evidence showed that Pahlow’s conduct was intentional and withoutlegal justification. Hutton v. Watters , 179 S.W. 134, 135 (Tenn. 1915); 86 C.J.S. Torts § 62 (1997). Interference is without justification if it “is done for the indirect p urpose of injuring the plaintiff orbenefiting the defendant at the plaintiff’s expense.” Bismarck Realty Co. v. Folden , 354 N.W.2d 636, 642 (N.D. 1984) (emphasis added). Here, Crye-L eike presented

evidence that Pahlow knew R ichert wa s being represented by Borowsky and, thus, that Borowsky expected to earn a commission from Richert’s an d WDM’s future lease of property. Rather than inquiring into the nature and extent of this relationship, Pahlow advised Richert that Borowsky would not be involved in the transaction because Borowsky did not show t he subject pro perty to Richert. Pahlow then proceeded

to conduct a lease transaction which benefited himself and Trammell

Crow at the expense of Borowsky and Crye-L

eike. We conclude that this evidence was sufficient to withstand the motions for summary judgment filed by Trammell Crow and Pahlow.

The trial court’s judg

ment i s re versed, and this cause is remanded for furtherproceedings consistent with this opinion. Costs of this appeal are taxed to the De fendants, for which
exe cut ion may i ssu e if nece ssa ry.

____________________________________ FARMER

, J.

______________________________ CRAWFORD, P.J., W.S. (Conc urs)

______________________________ LILL ARD, J. (Concurs)