| NY | Apr 1, 1993
OPINION OF THE COURT
Plaintiff instituted this action in 1991 alleging in its third cause of action that defendant AVX had tortiously induced the breach of its contract with another. AVX moved to dismiss the cause of action claiming it was time-barred (CPLR 3211 [a] [5]). The parties agree that the three-year Statute of Limitations for injury to property applies (see, CPLR 214 [4]), and the sole question presented is whether the cause of action accrued when the contract was breached in 1984, as AVX contends, or in 1988 when plaintiff alleges it first suffered actual damages as a result of AVX’s tortious conduct. Plaintiff had no cause of action, and the Statute of Limitations could not start to run, until plaintiff suffered injury (see, Schmidt v Merchants Desp. Transp. Co., 270 NY 287, 300; see generally, Siegel, NY Prac § 40, at 47 [2d ed]). Inasmuch as plaintiff’s complaint alleges facts demonstrating that no injury was sustained until 1988, AVX’s motion to dismiss should be denied.
I
Assuming as we must for purposes of this motion that the facts set forth in the amended complaint are true (Nasaba Corp. v Harfred Realty Corp., 287 NY 290, 294), plaintiff’s predecessor was the owner of patents for producing "multilayer capacitors” used in certain electronic devices. In 1974, it granted Corning Glass Works a nonexclusive license to produce capacitors under the patents. The agreement gave Corning "most favored licensee” status, i.e., if more favorable terms were subsequently negotiated by the licensor with another, the licensor was required to offer Corning the same terms. Five years later, plaintiff sold its capacitor assets to
In 1984, without notice to plaintiff or Corning, TAM entered into a license agreement with defendant AVX under terms more favorable than those in Coming’s licensing agreement, and AVX began competing with Corning in the capacitor market. In spite of this competition, however, plaintiff’s share of royalties from the Corning license continued to rise through 1987. At that time, Corning learned of AVX’s license and advised TAM that it had violated the "most favored licensee” provisions by not offering it comparable terms. The matter was never resolved, TAM taking the position it had no obligation to renegotiate the Corning license. A few months later AVX acquired from Corning the assets it used to manufacture capacitors without assuming any royalty obligation to plaintiff or TAM under the agreement. Because its own license contained no limit on production, AVX was able to use both its preexisting facilities and those acquired from Corning to produce its capacitors without resorting to the Corning license. In March of 1988, TAM informed plaintiff that no further payments from the Corning license would be made.
Plaintiff commenced an action in February 1991, seeking damages from AVX for its tortious inducement to breach plaintiff’s contract with TAM and for intentionally inflicting economic harm. AVX subsequently moved to dismiss, arguing the claims were time-barred.
II
Were this an action sounding in contract, AVX would be correct in its insistence that settled law marks accrual from the contractual breach. However, plaintiffs cause of action is one sounding in tort, and, as a general proposition, a tort cause of action cannot accrue until an injury is sustained (Schmidt v Merchants Desp. Transp. Co., 270 NY 287, 300-301, supra; see generally, Siegel, NY Prac § 40, at 47 [2d ed]). That, rather than the wrongful act of defendant or discovery of the injury by plaintiff, is the relevant date for marking accrual (Schmidt v Merchants Desp. Transp. Co., supra, at 300). The Statute of Limitations does not run until there is a legal right to relief. Stated another way, accrual occurs when the claim becomes enforceable, i.e., when all elements of the tort can be truthfully alleged in a complaint (see, Jacobus v Colgate, 217 NY 235, 245; Roldan v Allstate Ins. Co., 149 AD2d 20, 26).
The tort of inducement of breach of contract, now more broadly known as interference with contractual relations, consists of four elements: (1) the existence of a contract between plaintiff and a third party; (2) defendant’s knowledge of the contract; (3) defendant’s intentional inducement of the third party to breach or otherwise render performance impossible; and (4) damages to plaintiff (Israel v Wood Dolson Co., 1 NY2d 116, 120; see generally, Restatement [Second] of Torts § 766; 4 Lee and Lindahl, Modern Tort Law § 45.02, at 20 [rev ed]). Since damage is an essential element of the tort, the claim is not enforceable until damages are sustained. Thus, in its present posture, this action is time-barred only if plaintiff’s complaint must be read to allege damages arising prior to 1988.
Plaintiff states in its complaint that it suffered damages in 1988: it has made no allegation of damage occurring before
AVX first proposes that the legal fiction of nominal damages be imported from contract law into this tort action. By doing so, and assuming for the sake of argument that the events of 1984 constituted a contractual breach, the court would be compelled to find that all the elements of the tort claim were present in 1984 and the cause of action accrued then. The use of the contractual breach as the date of accrual has been accepted in some jurisdictions (see, e.g., Metro Oil Co. v Sun Ref. & Mktg. Co., 936 F2d 501, 504; Rock Is. Bank v Aetna Cas. & Sur. Co., 692 F2d 1100, 1103) with some courts expressly employing the legal fiction of nominal damages (see, e.g., Bankers Health & Life Ins. Co. v Fryhofer, 114 Ga App 107, 150 S.E.2d 365" court="Ga. Ct. App." date_filed="1966-06-16" href="https://app.midpage.ai/document/bankers-health--life-insurance-v-fryhofer-1254103?utm_source=webapp" opinion_id="1254103">150 SE2d 365, 369-370; Note, Damages Recoverable in an Action for Inducing Breach of Contract, 30 Colum L Rev 232, 238). To do so, however, is to ignore the fundamental differences between tort and contract principles.
Nominal damages are always available in breach of contract actions (5 Corbin, Contracts § 1001, at 29), but they are allowed in tort only when needed to protect an "important technical right” (Note, Damages Recoverable in an Action for Inducing Breach of Contract, op. cit., at 238). For example, nominal damages have been recognized in tort to protect a landowner’s right to be free of trespass, but that exception from the established rule that actual injury must be shown is warranted because a continuing trespass may ripen into a prescriptive right and deprive a property owner of title to his or her land (Prosser and Keeton, Torts, at 75 [5th ed]). There is no similarly compelling reason for departing from the actual injury rule when the trespass alleged is not to real property but to a chattel (1 Harper, James and Gray, Torts § 2.3, at 141-143 [2d ed]) or, as in the present case, to an intangible property right arising under contract. In such cases, actual loss must be demonstrated (see, Prosser and Keeton, op. cit., at 1002-1003; Annotation, Liability for Procuring Breach of Contract, 26 ALR2d 1227, § 43; see, e.g., Hodge v Meyer, 252 F 479, cert denied 248 U.S. 565" court="SCOTUS" date_filed="1918-10-28" href="https://app.midpage.ai/document/reichert-towing-line-inc-v-rice-8143614?utm_source=webapp" opinion_id="8143614">248 US 565; Myers v Arcadio, Inc., 73 NJ Super 493, 180 A.2d 329" court="N.J. Super. Ct. App. Div." date_filed="1962-03-23" href="https://app.midpage.ai/document/myers-v-arcadio-inc-1941121?utm_source=webapp" opinion_id="1941121">180 A2d 329).
Moreover, it is important to distinguish the two breaches in this cause of action — one a tortious breach, the other a contractual breach — and to understand their differing legal significance. AVX’s breach of duty in tort owing to plaintiff occurred when it allegedly made improper inducements to TAM. That tortious breach is separate and distinct from any contractual breach committed by TAM. For purposes of this litigation, the contractual breach is a result of the tortious breach and, in large measure, simply a link in the causal chain between defendant’s wrongful act and plaintiff’s injury. No need to make a right enforceable against defendant arises at that point, for no right exists until there is loss.
AVX’s second theory for finding that damages arose in 1984 is that the particular factual allegations made by plaintiff necessarily imply damages at the time the contract was breached. Though plaintiff alleges no damages in 1984, we would nonetheless be bound to recognize them if the only reasonable inference to be drawn from plaintiff’s allegations is that it suffered some loss at that time (see, Nasaba Corp. v Harfred Realty Corp., 287 NY 290, 294, supra). A review of the amended complaint does not support such an inference.
To summarize, no cause of action for tortious inducement to breach a contract arises until actual damages are sustained; nominal damages associated with the underlying breach of contract will not stand in the stead of actual damages; and, finally, no inference of actual damages is implicit by the facts alleged in the amended complaint.
Accordingly, the order of the Appellate Division should be reversed, with costs, and defendant AVX Corporation’s motion to dismiss the third and fourth causes of action of the amended complaint denied.
Chief Judge Kaye and Judges Titone, Hancock, Jr., Bellacosa and Smith concur.
Order reversed, etc.
. Because the motion sought relief only under CPLR 3211 (a) (5), we do not address the arguments in defendant’s brief that the amended complaint fails to state a cause of action. Intentional infliction of economic harm has not been recognized in New York, and we state no opinion on this limited motion whether it should be. The claim, if such there was, accrued at the same time as the cause of action for inducement and would be governed by a three-year Statute of Limitations.
. Plaintiff would clearly prevail if the breach occurred in 1988 and while it renews this argument on appeal it relies principally on its claim that the cause of action did not accrue until it sustained actual damages in 1988. We agree with the Appellate Division that the complaint alleges a breach occurring in 1984.