Specialty Container Manufacturing, Inc. v. Rusken Packaging, Inc.

Citations: 572 So. 2d 403; 1990 Ala. LEXIS 929; 1990 WL 210357Docket: 89-846

Court: Supreme Court of Alabama; November 1, 1990; Alabama; State Supreme Court

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Specialty Container Manufacturing, Inc. (Specialty) initiated legal action against Rusken Packaging, Inc. (Rusken), Merchants Transfer Company, Inc. (Merchants), Coastal Container, Inc. (Coastal), and individuals Bobby and Gregory Rusk, alleging breach of contract, misrepresentation, tortious interference with business relations, and unfair business practices. Specialty sought the return of specific equipment or damages equivalent to its value. Initially, Southern Aluminum Casting, Inc. was included as a defendant but was later dismissed.

The trial court granted summary judgment for all defendants on all claims brought by Specialty. Under Alabama law, to counter a summary judgment motion, Specialty needed to present substantial evidence demonstrating a genuine issue of material fact. The court reviews evidence favorably for the non-movant and resolves doubts against the movant.

Evidence suggested that on June 9, 1986, following an offer from Specialty's vice president, Albert Joyner, for a sale price of $257,000, Mike Rose, claiming to represent Rusken, and Gregory Rusk visited Specialty. They allegedly indicated a willingness to purchase Specialty for $200,000. The next day, Rose reaffirmed this by stating, "We have a deal," and conducted interviews with Specialty employees regarding potential retention post-sale. Testimony from key sales representative Sherwood Helms indicated that Rose implied Specialty was sold, leading to Helms's resignation.

Rose subsequently acquired Specialty's customer lists and accounts before informing Joyner that the Rusks would not proceed with the $200,000 offer. Instead, they proposed $75,000, which Joyner found unacceptable but agreed to consider a counteroffer involving cash and credit terms. Ultimately, the Rusks reverted to their initial offer of $200,000, with Gregory Rusk indicating that Rose would return the following day to finalize the sale.

On the day following the breakdown of negotiations, Rose informed Specialty that no deal was reached. Subsequently, Specialty ceased operations, but negotiations resumed with the Rusks and Rusken, leading to the sale of most of Specialty's equipment for $102,500. Specialty claims the trial court wrongly granted summary judgment on its breach of contract claim against Rusken and the Rusk brothers, arguing that an oral contract existed. However, the court found that the evidence showed only a series of proposals and counter-proposals without a finalized contract, affirming the summary judgment.

Specialty also alleged misrepresentation by the Rusks and Rusken, claiming they falsely indicated intentions to buy Specialty to gain confidential information for competitive advantage. The court evaluated whether Specialty provided sufficient evidence against the individual defendants. It determined that claims against Gregory Rusk were valid based on his actions, while claims against Bobby Rusk and Rusken were tied to the actions of their agents, Rose and Gregory Rusk.

Evidence indicated that Rose, as general manager of Rusken, was acting with apparent authority from Bobby Rusk, who was aware of Rose and Gregory’s activities regarding Specialty. Rose misled Specialty's representatives by suggesting a purchase agreement was in place, leading to the resignation of key employees after he communicated to them that Specialty had been sold. Furthermore, Rose accessed confidential business information and misled Specialty's customers about its financial status. The Rusks and Rusken argued that Specialty could not maintain its misrepresentation claim since the negotiations spanned two months among experienced businessmen, and a mere failed transaction does not constitute fraud.

The cases cited are distinguishable from the current matter. In Duke, the fraud claim involved alleged misrepresentations related to an existing contract, which the court ruled did not allow recovery for the seller. In contrast, the misrepresentation claim here revolves around Rose's alleged false statements to Specialty and its customers regarding the existence of a sales contract during ongoing negotiations with Gregory and Bobby Rusk. The Dembitsky case is similarly distinguishable as it involved a business transaction that simply fell through. 

The Rusks and Rusken contend that Specialty cannot demonstrate damages due to its pre-existing financial difficulties, having suffered a $182,000 loss and significant accounts payable prior to negotiations in June 1986. However, Specialty provided evidence that Rose's and the Rusks' actions led to the loss of goodwill and other business assets, challenging the assertion that damages were impossible to prove. 

The Rusks and Rusken argue they were merely negotiating rather than forming a contract with Specialty. Their ongoing negotiations coincide with Rose's actions, which could be interpreted as on behalf of the Rusks. Given conflicting evidence supporting both Specialty's and the Rusks' claims, there are genuine material issues for a jury to resolve. The trial court's granting of summary judgment for the Rusks and Rusken on the misrepresentation claim was therefore incorrect and should be reversed.

Additionally, Specialty claims the trial court erred in granting summary judgment against Bobby Rusk, Gregory Rusk, and Rusken regarding allegations of intentional interference with contractual and business relations with multiple companies. To establish a prima facie case, Specialty must demonstrate: the existence of a contract or business relationship, the defendants' knowledge of it, intentional interference by the defendants, a lack of justification for their interference, and resultant damages to Specialty. The discussion of evidence relevant to the misrepresentation claim also pertains to the relationship with Merchants, Specialty's building lessor.

Evidence favorable to Specialty reveals that Rose informed Merchants' real estate agent about Specialty's impending closure, despite Specialty being current on rent payments. On June 30, 1986, Merchants changed the locks and demanded next month's rent for re-entry. Rose also communicated to other businesses that Specialty was bankrupt and unable to fulfill orders, while possessing Specialty's customer lists and accounts receivable. Sherwood Helms testified that Rose claimed Specialty had been sold and was reassessing employee retention.

Specialty provided substantial evidence supporting claims of interference with business and contractual relations. The Rusks and Rusken asserted that their interference was justified, citing affirmative defenses that include legitimate economic motives and bona fide competition. However, evidence suggested Rose's actions exceeded mere inquiries into Specialty's market presence, as he spread damaging statements about Specialty's viability. Whether these statements were true or justifiable is a matter for a jury.

The trial court incorrectly granted summary judgment to Gregory Rusk, Bobby Rusk, and Rusken regarding Specialty's interference claims, necessitating a reversal. Additionally, Specialty's claims of unfair business practices against these defendants were supported by substantial evidence, warranting a reversal of summary judgment.

Regarding the claim for the return of equipment from Coastal, Specialty presented sufficient evidence since Coastal admitted the equipment remained in its warehouse and belonged to Specialty. The trial court erred in granting summary judgment to Coastal, leading to a necessary reversal of that judgment as well.

The court affirmed the judgment against other defendants but reversed the trial court's summary judgment in favor of Merchants on Specialty's breach of lease claim. The evidence, viewed favorably for Specialty, showed that they had a lease agreement with Merchants, were current on rent, and not in default when Merchants changed the locks on the premises. Merchants' claim that Specialty was in default due to alleged abandonment or removal of furniture was unsupported by the record. The status of Specialty's occupancy and actions regarding the premises created a genuine issue of material fact, suitable for jury determination. Therefore, the trial court's ruling was deemed erroneous, and the case was remanded for further proceedings. The decision included a partial affirmation and reversal, with justices concurring.