### IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON May 20 , 2004 Ses sion

PRIME COMPANY AND 

### JERRY SALEMI V 

### . WILKINSON & SNOWDEN, INC., AND 

### EUGENE WOODS
An Appeal from the Chancery Court for Shelby County No. 99-0047-2 Arnold B. Goldin, Chancellor

No. W2003-00696-COA-R3-CV - Filed Septem ber 30, 2004

This caseinvolves a claim for procurement of breac h of contract. The plaintiff real estate firm sue d the defenda

nt real e state firm for

procure ment of br

each of a real e state listi

ng cont ract. A bench trial
was conducted. At the clo se of the plaintiff s’ proof , the def endants m

oved to dismiss the pla

intiffs’ claims. The trial court noted that, in order to prove procureme nt of breach of contract, the plaintiffs
were required to prove that the defendants acted w ith “malice.” In order

to prove “malice,” the trial court held that the plaintiffs were re quired to prove tha t the def endants were “mo tivated by ill will, hatred or spite. ” The trial court found that the plaintiffs had not submitted evidence that the defenda nts were mot

ivated by ill will, ha

tred or s pite, and theref ore held that the plaintiffs could not prove that element of

their cla im. The pla

intiffs’ claim for procurement of breach was dismissed. The plaintiffs now appeal. We reverse, finding that in orde r to prove malice in thi s co ntext, the plaintiffs were not required to prove ill will, hatred or spite.
Tenn. R. App.P. 3 Appe al as of Right ; Judgme nt of the Cha ncery Co urt is Reversed and Remanded

H OLLY M. K IRBY , J., delivered the opinion of the c ourt, in which A LAN E. H IGHERS , J., and D AV ID R. F ARMER , J., joined.

Edward M. Bear man, Memphis, Tennessee, f or the ap pellants, Prime Compa

ny a nd Jerry Salemi.

Dawn Davis Carson, Memph

is, Tenne ssee, for the app ellees, Wilk inson & Sno wden and Eugene Woods.

OPINION

Three sisters, Marcia DeVore, Tina Gregor y, and Louise Wright (collectively , “Sellers”) inherited from their mother a 68-acre piece of valuable realpr op er ty i n S he lb y Co un ty, Tennessee. OnJuly 26, 1994, the Sellers entered into a L isting Agreem ent (“Agr eement” ) with-2-

Plaint iff/A

ppellant Jerry Salemi (“Salemi”), d/b/a Prime Company real estate company , giving Salemithe exclusive right to sell the property. As is ty pical with such agreements, the Ag reement inthis case provided for

a one-ye ar (or 365-day

) protective period

from the date of termination of the contract by e ither party. Unde r that provision, if the prop ert y was sold during the protective period to someone

to whom Sale

mi had ide

ntified the proper

ty w hile he wa s u nder contract, then Salemi would be entitled to a full commission of 7%.

O nJune 4, 199 5, th e Sell ers wro te Sal emi a l etter termi natin g the Agr eement. Th e termi nationwas to be

effec tive thirt

y da ys f rom the da

te of the letter. A fter the

letter w as writte n terminating the contr

act, th e Selle rs asked Salemi for a list of all the parties he had contacted regarding the property. Salemi considere d this req uest to be onerous, and cons equently refuse d to
co mp ly. He instead

told the Sellers that, when they sold the property

, they should call him and if he believed that he wa s entitled

to a commission, he would provide pr oof of his contact with the bu

ye rs. The Sellers were dissatisfied with Salemi’s response, and told him that they considered the whole deal closed.

InNovembe

r 1995, De fendant

/Appelle e Euge

ne Woods (“

Woods”), a

partner in Defendant/Appellee Wilkinson & Snowden r

eal est ate agency, approached the Sellers with a proposed tr an sa ct io n t ha t u lt im at el y re su lt ed in th e s al e o f t he pr op er ty. On March 20, 1996, during the protective period under Salemi’s listing contract, the Sellers sold the property for

$1,360,000 to Corpora te Estates, whose principal is Jack Vanvalkenberg (“Vanvalkenberg”) . The Sellers did not inform Salemi of the sale.

Prior to the sale, the Sellers became uncertain ab out their obligation to Salemi under the Agree ment. Th er ef

or e, th ey a sk ed Wo od s w he th er Sa le mi wa s e nt it le d t o a ny c ommission. On March 6, 1996, Woods wrote the Sellers a letter telling them that they were under no such obligation to Salemi. I

n accor dance w ith Woods’ r

ecommen dation, th e Sell e rs did not p ay Salemi a commission on t he s ale of t he p rop ert y. In stead, Wilki nson & Snowden re ceived t he full commission. Salemi learned of the sale by seeing the transaction in a local newspape r . Thro ugh further investigation, he discovered Wilkinson & Snowden’s role in the sale

. OnJanuary 21, 1999, Salemi, d/b/a Prime Company , filed a la wsuit ag ainst

th e Seller s, alleging that they breached the Ag

reemen t by failing to pay him a full commission on the sale of the pr op er ty. Sa le mi al so na me d a s d ef en da nt s W il ki ns on & S no wd en an d W oo ds (c ol le ct iv el y, “Wilkinson & Snowden”), alleging that Wilkinson & Snowden neg ligently or willfully

procured the Sellers’ breach of the Agre ement. The trial was scheduled for January 15 and 16, 2003.

Prior to the tria

l, the tria l court a ddresse d the issue

of malice , noting t

hat “ malic e” is an essential element in a claim for procurement of brea ch of contract. Salemi argued that the ter m “malice” should be defined as the “inten tional co mmis sion of a harmful act without legal cause,” consistent with the definition of

malice used in In re AM

Int’l, Inc. (AM Int’l, I

nc. v. TV A) , 46 B.R. 566 (1985), which involved a procurement of brea ch o f contract claim. The trial court rejected Salemi’s proposed definition, and determined instead that it would define “ malice” as that te rm is1 The trial court determined that Salemi would have shared the commission with Wilkinson & Snowden, and it t herefore awarded Salemi only half of the contracted commission.

-3- define d in t he Tenne ssee Patt ern Jury Instr uctions ( “T.P.I .”) for

punitive d

amage s, which is “motivated

by il l wi ll , ha tre d or spi te. ” T. P. I. 14.15. The trial cou rt then c ommence d with

the trial

. At the close of Salemi’s proof, Wilkinson & Snowden moved for dismissal o f Salemi’ s claim of procurement of beach. The trial cour t determined that Wilkinson & Snowden was aware of Salemi’s past representation of the Sellers, and that Wilkinson & Snowde

n did nothin

g to inve stigate the ter ms of t he Agreement before in e ffect advising the Sellers to breach the A greement by

not pa yi ng Sal emi the commission. The trial court observed that Wilkinson & Snowden should have looked into the terms of the Agree ment bef ore so ad vising th e Seller s. The trial court held, however, “[t]his may have be en bad business, this may have been negligenc e, but I don’t think it is malice.” Thus, after d

etermini ng that Sa

lemi had not submitte d evidenc e that Wil kinso n & Snowden’s conductros e to the level of “malice,” the trial court enter ed judgment in favor of Wilkinson & Snowden.

The trial pro ceeded

agains t the Selle

rs. At the con

clusion of the trial , the tria

l court he ld in favor of Salemi o

n the bre ach of c ontract

claim ag ainst the Sellers a nd awar ded him $47 ,600 in commission plus inter

est. 1 OnFebruary

11, 2003, the trial court entered an order consistent with its oral ruling. Salemi appealed the judgmen t as to both

the Selle rs and Wilki

nson & Snowden. While
onappeal, Salemi’s claim against the Sellers was settled. Ther efore, this appeal continues only as to the procurement of breach claim ag ainst Wilkinson & Snowden. On appeal, Salemi argues that the trial court erred in dismissing his claim for procurement of breach of contract ag ainst Wilkinson & Snowden, because the trial court em ployed the w

rong definition of “mal ice” in

reaching its conclusion. Whether the trial court applied the correct legal standard in making its decision is a question of law, which we review de novo , with no presumption of correctness. Burlew v. Burlew , 40 S.W.3d 465, 470 (Tenn. 2001).

To est ablish a claim for procurement of breac h of contract, a plaintiff must pro ve seve n elements : (1) ther

e must be a

legal c ontract ; ( 2) the wr ongdoer must have knowledge of the existence of the contract; ( 3) there must be an intent

ion to induc e its brea

ch; (4) the wrong doer must have acted with malice; (5) there must bea breach of the contr act; (6)the act c omplaine d of must be the proximate cause of the breach of contrac t; and (7 ) theremust

have been damages re sulting fromthe breach

of the contract. Buddy Lee Attractions, Inc. v. William Morris Agency, Inc. , 13 S.W.3d 343, 354- 55 (Tenn . Ct. App. 1999 ); see Tenn. Code Ann. § 47-50-109 (2003). The pivotal element in this appeal is the fourth one, the requirement that the plaintiff prove “malice.” As noted above, the trial court

below dism

issed Sale mi’s clai m of proc urement of brea ch aga inst Wilkinson & Snowden because he did not prove that Wilkinson & Snowde

n’s condu ct was “m otivated by i ll will, hatred or spite.” The crux of Salemi’s argument on appea l is his assertion that the trial court erred in using that definition.2 On the Co urt’s req uest, the p arties sub mitted supp leme ntal brie fs on the app lication o f Crye-Leike to this

case.
-4- A factually similar situation is presented in Crye-Leike Realtors, Inc. v. WDM, Inc. , No. 02A01-9711-CH-00287, 1998 WL 651623 (Tenn. Ct. App. Sept. 24, 1998). 2 In Crye-Leike , CryeLeike’s real es tate ag ent, Coleman Borowsky (“Borowsky

”), signed a

n exclusive

contract on behal f of Crye-L eike to r

eprese nt t he defendan t, WDM, Inc., to locate property to lease for WDM’s business. The contract included a two-y ear protective period, s tating that if WDM entered into any lease or purcha se agreeme nt within two ye ars afte r the per iod of the

agree ment, WDM w ould
reco gniz e Borowsky a s the broker in the transaction. Crye-Leike , 1998 WL 651623, at *1. During the contract

period, Borowsky

became suspicious that WDM was private ly d ealing with Tram

mell Crow SE, In

c. (“Tr ammell Crow”), whi ch Borowsky had prev iously contact ed about l easing

suitable space for WDM. Consequently, Borow sky cal l ed his contact at Trammell Crow, Brad Kornag ey (“Kornagey

”), and reminded

Kornagey

that Borowsky ha

d an exclusive agreement with WDM. Id. at *2. As it turned out, Borowsky’ s suspicion s were c orrect . On February 22, 1994, u

nbeknown st to Borowsky, WDM executed a lease agreement

for space being offered throug h Trammell Crow. WDM had infor

med Tram

me ll Cro w’s leasing agent, Scott Pahlow (“Pahlow”) , that WDM was
re presented

by Borow sky. Pahlow advised WDM that Borowsky did not need to be involved , because Borowsky ha

d neither shown WDM the property , nor had he contacted Pahlow

about the property. On

February 23, 1994, WDM terminated its agreement with Borowsky

. Id. Bo ro ws ky, of co ur se , w as no t c om pe ns at ed as th e b ro ke r f or WD M’ s l ea se of

th e T ra mm el Cr ow pr op er ty. Crye-Leike sued WDM and its principal for breach o f contract. It l ater ame

nded its complaint to add claims of procurement of breach of c ontract against Pahlow and Trammell Crow. All of the defendants filed motions for summa ry judgmen t, which w ere gr

anted by the trial court. Crye-Leike appealed. Id.

Onappeal, the Crye-Leike court addressed the trial court’s dismissal of Crye-L eike’s c laim of procure ment of br

each of contract again st Pahlow a nd Tramme l Crow. The

appella te court held that, in the con

text of a cl aim

for procurement of breach of a contract, “malice is ‘the wilful violation of a known right.’ ” Id. at *6 ( quot ing Dorsett Carpet Mills, Inc. v. Whitt Tile & Marble Distrib. Co. , 1986 WL 622, at

*6 (Tenn. Ct. App. Jan. 2, 1986) (quoting 45 Am. Jur. 2d Interference § 3), modified on other grounds , 734 S.W.2d 322 (Tenn. 1947)). The Crye-Leike court explained that the “ill will” definition of malice for punitive damages doe not apply to procurement of breach:
Contrary to Tramme ll Crow’s argument, Cry e-Leike was not re quired to show that Pahlow felt ill will toward Borow sky and Cry e-Leike. I

t was sufficient if the evidence showed that Pahlow ’s conduc t was inte

ntional a nd without l e g al justification. . . . Interfere nce is without justification if it “is done for the indirec t pu r pose of injuring the plaintiff or benefiting the defe ndant at the plaintiff’s expense.” Bismarck Realty Co. v. Folden , 354 N

. W.2d 636, 642 (N.D. 1984) (emphasis added).-5-

Id. The appellate c ourt then concluded that the facts were sufficie nt to establish the element of malice under that

definition. Pahlow knew of WDM’s contract with Cry e-Leike, but did not inquire into the e xtent and the n ature of the rela tionship. Ra

ther, he procee ded to con

clude the lease transaction, withoutregard for Borow sky or Cry e-Leike. I n doing so, Pahlow benefitted himself and Tramme ll Crow a t the expense of Borowsky and Crye-L

eike. Thus, Crye- Leike’s evidence of malice, or the “wilful violation of a known right,” was sufficient to def eat the motion for

summary judgment filed by Pahlow a nd Trammel Crow. Id. Clearly the definition of malice utilized in Crye-Leike is applicable in this case, and Salem i
was not required to submi t evidence th at Wilki nson & Snowd en’s conduct was motivated by “hatred, ill will or spite” in order to establish the element of malice. Consequently , we must conclude that the trial court

erred in apply

ing the punitive damage definition of “malice” to Salemi’s procurement claim agains t Wilkinson &

Snowden. Theref

ore, we revers e the trial court’s dismissal of Salemi’s claim ag ainst Wilkin son & Snowden, and remand f or furth er proc eeding s.
The decision of

the trial court is rev ersed, and th e case i s rema nded f or furt her pro ceedin gs notinconsiste

nt wit h this Op inion. Costs on appeal are to be taxed to Appellees Wilkinson & Snowden and Eugene Woods, for which execution may issue, if necessary

.

___________________________________ HOLL Y M. KIRBY, JUDGE