Broach v. Carter

Citations: 399 S.C. 434; 732 S.E.2d 185; 2012 WL 3024762; 2012 S.C. App. LEXIS 209Docket: Appellate Case No. 2011-182306; No. 5006

Court: Court of Appeals of South Carolina; July 25, 2012; South Carolina; State Appellate Court

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Howard Jacobson appeals the jury's findings that he was personally liable for Paradise Grande, LLC and that he tortiously interfered with the contracts of James Broach and Mark Loomis with Advantage Real Estate, Inc. He also contests the jury's award of punitive damages. The appeal is reversed.

The case involves Broach and Loomis, independent contractors working for Advantage to secure sales of condominium units at Horizon 77th, developed by Paradise Grande. They entered into identical Independent Contractor Agreements with Advantage, stipulating that their commissions would be payable after Advantage received payment from buyers. Both parties acknowledged this understanding at trial and claim they are owed commissions related to the condominium sales.

The relevant agreements include an Exclusive Sales and Marketing Agreement signed on February 24, 2006, by Jacobson on behalf of Paradise Grande and by Eugene Carter for Advantage. This First Agreement allowed Paradise Grande to terminate the contract if Advantage did not presell all units by August 31, 2006, which did not occur, leading to termination of the agreement.

Subsequently, Paradise Grande entered a Second Exclusive Sales and Marketing Agreement with Advantage tied to a construction loan from Wachovia Bank. To secure the loan, Paradise Grande needed at least 80% of the units presold; however, only 75% to 76% were presold. As part of renegotiations with Wachovia, which included providing a $500,000 letter of credit and covering over $2 million in furniture costs, Paradise Grande agreed to defer payment of real estate commissions until the loan was fully repaid. Jacobson indicated that these concessions were critical to the project's financing and completion.

Advantage entered into a Second Agreement with Paradise Grande after failing to fulfill the First Agreement by preselling all condominium units. Carter, representing Advantage, described the decision as obvious and without deliberation, emphasizing the urgency to ensure the project proceeded to avoid financial losses. He acknowledged that refusal to subordinate commissions would jeopardize the construction loan, leading to project cancellation. Initially, Carter did not inform Broach and Loomis about the subordination clause, deeming it insignificant, and did not foresee the real estate market collapse that ultimately resulted in significant losses for Paradise Grande, including over six million dollars, a loan default, and subsequent foreclosure by Wachovia.

Due to the Second Agreement, all sales commissions were subordinated to the construction loan, resulting in Advantage not receiving commissions, and Broach and Loomis not being compensated for their successful sales of Horizon units. Broach claimed an additional $135,741.39 in commissions owed, while Loomis claimed $21,917.98. 

On November 19, 2008, Broach and Loomis filed a complaint against Carter, Advantage, and Paradise Grande for their commissions, leading to an amended complaint including Jacobson. A jury trial on November 29, 2010, resulted in findings against Advantage and Carter for breaching the Independent Contractor Agreement, while Paradise Grande was not found liable for tortious interference. Jacobson was held individually liable for tortious interference, and the jury awarded Broach and Loomis $50,000 in actual damages and $50,000 in punitive damages. Jacobson has since appealed the decision. The standard of review on appeal is limited to correcting legal errors, with the jury's factual findings upheld unless unsupported by evidence.

Jacobson challenges the jury's finding of tortious interference with the Independent Contractor Agreements between Broach, Loomis, and Advantage, arguing insufficient evidence supports this conclusion. The essential elements for tortious interference include: 1) existence of a valid contract; 2) defendant's knowledge of the contract; 3) intentional procurement of its breach; 4) lack of justification; and 5) resulting prejudice to the plaintiff.

Regarding the existence of contracts, it is undisputed that Broach and Loomis had agreements with Advantage. The Independent Contractor Agreement with Broach was presented at trial without objection, while testimony supported the existence of a contract with Loomis. 

On the knowledge requirement, evidence exists indicating Jacobson was aware of these contracts. An email from Jacobson revealed his understanding that the Independent Contractor Agreements provided commissions for Broach and Loomis, and expressed concern that a new Second Agreement could interfere with their contractual relationship. This suggests that Jacobson had knowledge of the contracts' terms.

Lastly, regarding intentional procurement of breach, the evidence indicates Jacobson intended to interfere with the contracts. Despite his testimony asserting no intention to harm Broach or Loomis, the law does not require intent to harm to establish tortious interference; rather, it is sufficient that he intended to interfere with the existing contracts. Therefore, the jury's conclusion that Jacobson tortiously interfered with the agreements is supported by the evidence.

Evidence suggests that Jacobson intentionally interfered with Broach’s and Loomis’s contracts with Advantage, particularly by negotiating a subordination clause that altered their rights to immediate payment. However, Jacobson was justified in executing a subsequent agreement, as Advantage had breached the original contract. Jacobson's justification for entering into the Second Agreement, aimed at salvaging the Horizon project and ensuring payment for all parties, was supported by his testimony. Because Jacobson's actions were justified, the essential elements to establish tortious interference with a contract were not present. Consequently, the jury’s finding of liability against Jacobson for tortious interference is reversed, along with the associated punitive damages, which depend on actual damages that are no longer valid due to the reversal of liability. The court also noted that other parties originally named in the lawsuit were dismissed, and it chose not to address remaining issues related to tortious interference or personal liability, as the justification finding was conclusive for the appeal.