No. 14846 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1980 

LARRY PHILLIPS, 

Plaintiff and Appellant, 

THE MONTANA EDUCATION ASSOCIATION, 

a non-profit corporation; JOHN 

BOARD; C. D. "BUD" BEAGLE; MAURICE 

HICKEY; NOEL FURLONG and BETTY LOCKEY, 

Defendants and Respondents. 

Appeal from: District Court of the First Judicid District, 

In and For the County of Lewis and Clark, 

Honorable Peter Meloy, Judge presiding. 

Counsel of Record: 

For Appellant: 

Joseph Duffy argued, Great Falls, Montana 

For Respondents: 

Hilley and Loring, Great Falls, Montana 

Jardine, Stephenson, Blewett and Weaver, Great Falls, 

Montana 

Alexander Blewett I11 argued, Great Falls, Montana 

, . Filed: 9.;- L 

-- - 

Submitted: December 12, 1979 

Decided : at k 2 2 1980 
Mr. Justice John Conway Harrison delivered the Opinion of 

the Court. 

Appellant Larry L. Phillips appeals from an order and 

judgment of the Lewis and Clark County District Court granting a motion by the Montana Education Association (herein 

referred to as MEA); and John Board, C. D. "~ud" Beagle, 

Maurice Hickey, Noel Furlong, and Betty Lockey (herein 

referred to as individual defendants) for summary judgment. 

Phillips was hired by the MEA on April 2, 1974, and 

commenced employment on July 1, 1974. The terms of his 

employment as executive secretary were specified in a written, 

two-year contract. On December 30, 1974, the Board of 

Directors of the MEA terminated Phillips' contract and 

employment as of December 30, 1974. 

On January 28, 1975, Phillips filed a complaint against 

the MEA alleging breach of employment contract and failure 

to give the requisite three months notice of termination. On 

March 19, 1976, Phillips filed an amended complaint and 

alleged five counts which included the earlier claims, and 

added claims for slander, malicious inducement by agents of 

the MEA to breach the employment contract, and that the MEA 

had blacklisted him from further employment. The amended 

complaint added eight John and Mary Does as defendants. 

The MEA made a number of motions to dismiss, strike, to 

make more definite statements and to dismiss defendants. In 

an order dated November 8, 1976, the District Court dismissed the slander count for failure to state a claim, and 

struck Phillips' claim for punitive damages, penalties and 

attorney fees. 

Phillips appealed to this Court, and the MEA filed a 

motion to dismiss the appeal on the grounds that the order 
was not appealable. This Court granted the MEA's motion 

to dismiss the appeal, and the cause was remanded to the 

District Court. 

On August 1, 1977, the MEA deposed Phillips and he was 

unable to provide information concerning the alleged malicious inducement of breach of contract; and three days after 

that deposition, the MEA served interrogatories on Phillips 

seeking answers concerning the alleged malicious inducement 

of breach of contract. Phillips did not answer the interrogatories, and on April 3, 1978, the MEA filed a motion to 

compel answers. A hearing was held on May 2, 1978, and the 

District Court ordered Phillips to answer the interrogatories. 

Phillips did not answer the interrogatories within the 

time ordered by the District Court; and on August 31, 1978, 

the MEA again filed a motion to dismiss the amended complaint. A hearing was held on September 26, 1978, and the 

District Court found that Phillips had violated the court 

order by not answering the interrogatories; and ordered that 

the amended complaint would be dismissed with prejudice if 

Phillips did not answer the interrogatories by October 13, 

1978. The District Court further found that Phillips had 

failed to comply with a previous court order by not having 

filed a second amended complaint, and ordered that Phillips' 

complaint would be dismissed with prejudice if Phillips did 

not file a second amended complaint by October 13, 1978. 

Phillips filed a second amended complaint and answers to the 

interrogatories on October 13, 1978. 

On November 16, 1978, the MEA and the individual defendants moved for summary judgment on count two, the alleged malicious inducement of breach of contract; and count 

three, the alleged MEA blacklisting of Phillips from further 

employment, of Phillips' second amended complaint. 
The motion was briefed and a hearing held; and on April 

4, 1979, the District Court granted the motion for summary 

judgment. On April 10, 1979, final judgment was entered 

pursuant to Rule 54(b), M0nt.R.Civ.P. The judgment specifically stated that Phillips was entitled to proceed with 

counts one and four of the second amended complaint concerning the cause of action for breach of contract. Phillips 

has not appealed the granting of summary judgment on count 

three; therefore, Phillips' appeal is limited to the granting of summary judgment on count two. 

The following issue is raised by Phillips for our consideration on appeal: 

Whether the District Court erred in granting summary 

judgment on count two of the second amended complaint 

wherein Phillips alleged that the individual defendants were 

personally liable for the tort of malicious inducement of 

breach of contract. 

Causes of action for interference with contract rights 

have long been recognized in Montana. Pelton v. Markegard 

(19781, - Mont. , 586 P.2d 306, 35 St.Rep. 1593; Taylor 

v. Anaconda Federal Credit Union (1976), 170 Mont. 51, 550 

P.2d 151; Quinlivan v. Brown Oil Co. (1934), 96 Mont. 147, 

29 P.2d 374; Burden v. Elling State Bank (1926), 76 Mont. 

24, 245 P.958; Simonsen v. Barth (1922), 64 Mont. 95, 208 P. 

938. See also W. Prosser, --- The Law of Torts, 5129 at 927 

(4th Ed. 1975). A complaint seeking damages for inducing a 

breach of contract is sufficient where it alleges (1) that a 

contract was entered into, (2) that its performance was 

refused, (3) that such refusal was induced by the unlawful 

and m~~licious acts of the defendant, and (4) that damages 

have resulted to the plaintiff. Pelton v. Markegard, supra, 
586 P.2d at 308; Burden v. Elling State Bank, supra, 

245 P. at 959. 

The law, independent of the contract, imposes upon 

strangers to a contract the duty not to interfere with its 

performance. The violation of this duty is a tort, the 

remedy for such interference is by action in tort. Burden v. 

Elling State Bank, supra, 245 P. at 959. One type of interference with economic relations has been marked out rather 

definitely by the courts, and regarded as a separate tort, 

under the name of inducing breach of contract. 

The parties do not dispute the fact that Phillips has a 

cause of action against the corporation for the alleged 

breach of contract, and this cause of action is pending in 

District Court. The fact that there is an available action 

against the party who breaks the contract is no defense to 

the one who induces the breach, since the two are joint 

wrongdoers, and each is liable for the loss. Prosser, 

supra, S129 at 948. In terms of legal theory, it is therefore possible to bring suit for breach of contract and also 

to bring suit for the tort of inducing breach of contract. 

The specific issue of whether agents, employees, officers and directors of a corporation may be held individually 

liable for the tort of malicious inducement of breach of an 

employment contract is one of first impression in Montana. 

Phillips contends that the MEA and the individual 

defendants are in fact joint tortfeasors. He argues that 

the tort of malicious inducement of breach of contract is 

impugnible individually to the individual defendants who 

sought to, and took steps to see that the corporation did 

breach the employment contract. Phillips further contends 

that individual officers cannot, with impunity, commit torts 
and be allowed to hide behind the corporate veil in order 

to escape accountability for those torts. The individual 

defendants contend that officers, directors and employees 

are the only persons who can act on behalf of a corporation; 

and that no director or officer would ever make a corporate 

decision involving the performance of a contract without 

fear of being sued for the tort of maliciously inducing the 

corporation to breach a corporate obligation. The individual defendants further contend that corporations simply 

could not function if the officers, directors and employees 

were to be exposed to individual liability on every occasion 

when the corporation failed to perform on a contract. 

Given the intention to interfere with a contract, 

liability usually will turn upon the ultimate purpose or 

objective which the defendant is seeking to4 advance. Generally, an intentional interference with the existing contractual relations of another is prima facie sufficient for 

liability and the burden of proving that it is "justified" 

rests upon the defendant. The defendant may show that the 

interference is privileged by reason of the interests furthered by his conduct, but the burden rests upon him to do 

so. The question of privilege must be considered in the 

light of the means adopted and the relations between the 

parties. Prosser, supra, 8129 at 942-43. 

To determine whether interference with contractual 

relations is justified, public policy considerations must be 

examined. Justification or privilege constitutes the primary 

defense to an action for interference. Johnson v. Radde 

(1972), 293 Minn. 409, 196 N.W.2d 478; Estes, Expanding 

Horizons ---- In The Law of Torts--Tortious Interference, 23 

Drake L.Rev. 341, 358 (1974). 
One public policy consideration is that the officers, 

directors, employees and agents of a corporation must be 

shielded from personal liability for acts taken on behalf of 

the corporation, including the breaching of contracts in 

furtherance of corporate goals, policies, and business 

interests. This corporate shield is needed in order to 

allow corporations to effectively function. A competing 

public policy consideration is that individual corporate 

agents, employees, directors and officers should not be 

allowed to commit torts at will, and then be allowed to hide 

behind the corporate veil in order to escape accountability 

for those torts. 

Corporate officers or directors are privileged to 

interfere with or induce breach of the corporation's contracts or business relations with others as long as their 

actions are in good faith and for the best interests of the 

corporation. Wilson v. McClenny (1964), 262 N.C. 121, 136 

S.E.2d 569; Allison v. American Airlines (N.D. Okla. 1953), 

112 F.Supp. 37. Where an officer or director acts against 

the best interests of the corporation, acts for his own 

pecuniary benefit, or with the intent to harm the plaintiff, 

he is personally liable. Pennington Trap Rock Co. v. Pennington Quarry Co. (1944), 22 N.J.Misc. 318, 38 A.2d 869; A. 

S. Rampell, Inc. v. Hyster Company (1957), 3 N.Y.2d 369, 165 

N.Y.S.2d 475, 144 N.E.2d 371; W. P. Iverson & Co. v. ~unham 

Manufacturing Co. (1958), 18 111.App.2d 152 N.E.2d 615; 

Stell ~anufacturing Corp. v. Century Industries, Inc. (1961), 

15 App.Div.2d 87, 221 N.Y.S.2d 528. 

In Wilson v. McClenny, supra, Wilson entered into a 

preincorporation agreement with several individuals who 

later became directors of a corporation called Gateway ~ife 
Insurance Company. Under the agreement, Wilson became 

president of the corporation. Later, because of a drinking 

problem, ~ilson was ousted as president during a directors' 

meeting. Wilson filed an action against the individual 

defendants for a breach of the preincorporation agreement 

and for tortious interference with his contractual rights 

with the corporation. 

In Wilson, the court found that the acts of the directors were found to have been for the benefit of the corporation, that Wilson offered no evidence to the contrary, and 

that there were no individual or separate torts by the 

individual defendants distinguishable from their acts on the 

corporation's behalf. The court found that Wilson had 

failed to state a claim against the individual defendants. 

We hold that the corporate veil should not be utilized 

as a protective devise by those who employ corporate power 

or authority to serve their own ends. Tort liability for 

the inducement of breach of contract should be imposed when 

a corporate agent, employee, officer or director induces a 

breach of contract for private benefit, or because of personal feelings and purposes relative to a third party. The 

privilege of limited liability should be applicable in those 

situations where actions are motivated and taken in the 

furtherance of corporate purposes, policies and ixterests. 

In the instant case, the record discloses that Phillips 

wrote a memorandum to the MEA Board of Directors in reference to terminating the employment of certain employees. A 

board member and some of the employees discussed the hilli ips 

memorandum, and then some of those individuals wrote a 

letter characterizing the function of the staff administration. They also requested a meeting with the Board of ~irec- 
tors, exclusive of Phillips. The District Court concluded, 

and we agree, that the actions taken by the individual 

defendants were within the scope of their employment, designed without malice, and in the furtherance of corporate 

interests. 

Phillips has failed to show that the actions taken by 

the individual defendants were not taken in furtherance of 

corporate purposes and interests. Therefore, the privilege 

of limited liability applies in the instant case, and the 

individual defendants are shielded from personal liahility. 

The record shows the absence of any genuine issue of 

material fact; therefore, the order and judgment of the 

District Court granting the individual defendants' motion 

for summary judgment on count two, the tort cause of action 

for the malicious inducement of breach of contract is 

affirmed. 

1 

We concur: 

~Adg Qcd _ Chief Justice 

4~lcQ.Aikd4 ustices 

Mr. Justice Daniel J. Shea dissents and will file a written 

dissent later. 
DISSENT OF MR. JUSTICE DANIEL J. SHEA 

No. 14846 

LARRY L. PHILLIPS, 

Plaintiff and appellant, 

THE MONTANA EDUCATION ASSOCIATION, 

a non-profit corporation, et al., 

Defendants and respondents. 

MAY - 6 1980 

ELERK OF SUPREME COURT 

A STATE _OL MONTANA 
Mr. Justice Daniel J. Shea dissenting: 

I would reverse the District Court's grant of summary 

judgment on the second count and remand for trial on the 

factual issue of whether the conduct of the corporate agents 

was motivated primarily by personal considerations. 

There can be no question that the corporate veil should 

not be utilized as a protective device by those who employ 

corporate power or authority to serve their own ends. Tort 

liability for the inducement of breach of contract should 

be imposed when a corporate agent, employee, officer or 

director induces a breach of contract for private benefit, 

or because of personal feelings and purposes relative to a 

third party. The privilege of limited liability should be 

applicable only in those situations where actions are motivated 

and taken in the furtherance of corporate purposes and policies. 

I cannot agree, however, with the majority's determination 

that the trial court properly granted the individual 

defendant's motion for summary judgment on the tort cause 

of action for the malicious inducement of breach of contract. 

In a case in which an officer, director, agent or employee's 

act is for some ulterior motive of his own, but happens to 

be consistent with corporate interests, the question of 

whether to impose personal liability should be based upon 

the dominant reason motivating the officer, director, agent 

or employee. Caverno v. Fellows (1938), 300 Mass. 331, 15 

N.E.2d 483; Remy Beverages v. Myer (1945), 56 N.Y.S.2d 828, 

lo I3 

aff'd. (N.Y.App. 1945), 269 App.Div. W, 59 N.Y.S.2d 371. 

If the dominant reason motivating a corporate agent 

is the furtherance of corporate interests or policies, the 

corporate agent should be shielded from personal liability. 

On the other hand, if the dominant reason motivating a 
corporate agent is one for personal interest, feelings 

or benefit, then he should be held individually liable. 

This is so even if the personal motive happens to be consistent with corporate interests or policies. The heart 

of the test of whether individual personal liability attaches 

is whether the acts taken by the corporate agent is in good 

faith. See Smith v. Great Basin Grain Co. (1977), 98 Idaho 

The rationale and public policy considerations behind 

this approach is set forth in Avins, Liability For Inducing 

A - Corporation - To Breach Its Contract 43 Cornell 

L.Q. 55, 65: 

"Officers, directors, agents or employees who 

have an interest in the activities of a 

corporation or the duty to advise or direct 

such activities should be immune from liability 

for inducing the corporation to breach its contract, 

assuming their actions are in pursuit of such 

interests or duties. Public policy demands that 

so long as these parties act in good faith and for 

the best interests of their corporation, they 

should not be deterred by the danger of personal 

liability. Any other position would make the 

limited liability of a corporation somewhat 

meaningless. 

"On the other hand, the corporate veil should 

not stand as a means of protection for those who 

choose to employ corporate power to serve their 

own ends. Tort liability should be swiftly 

imposed whenever an officer, director, employee 

or stockholder induces a breach of contract for 

private benefit or to satisfy personal feelings 

against a third party. The limited liability of 

the corporate charter was granted for corporate 

purposes. Where such purposes no longer exist, 

there should be no limited liability." 

The trial court concluded, and the majority agreed, 

that the actions taken by the individual defendants were 

within the scope of their employment, designed without 

malice, and in the furtherance of MEA corporate interests. 

The issue, however, as to whether the individual defendants 

acted in good faith or bad faith is a factual question 

which precludes summary judgment. See Nott v. Booke (19791, 
Mont . , 598 P.2d 1137, 36 St.Rep. 1542. 

The individual conduct of the defendants should be 

examined to determine the dominant reason which existed 

in motivating their conduct and actions. The plaintiff 

alleges in essence that the individual defendants named 

in the second amended complaint, acting for personal 

reasons, maliciously induced the MEA corporation to breach 

its employment contract with the plaintiff. A genuine 

issue of fact does exist in relation to the individual 

defendants' actions and motives relating to ultimately 

inducing corporate action terminating the plaintiff's 

employment contract. 

It is clear therefore, that the order and judgment of 

the trial court in granting the individual defendants' 

motion for summary judgment on the second count, the tort 

cause of action for malicious inducement of breach of 

contract, should be reversed.