Opinion
Summary
Defendants and appellants John Scull, Christopher Boomis and SERJ Corporation (SERJ) appeal from a judgment entered against them. The judgment, consisting of $55,000 for breach of contract, $50,000 in compensatory damages for intentional interference with contractual relations and $300,000 in exemplary damages, was in favor of plaintiff and respondent Stanley N. Shapoff. The judgment was based on jury findings SERJ had breached a development agreement with Shapoff and that the breach was caused by Boomis’s tortious interference.
Prior to submission of the legal claims to the jury, the trial court had determined Scull and Boomis were in fact alter egos of SERJ. The trial court found that the corporation had no capital and that the nature of its development project was controlled by Boomis. 1
*1462 After the jury returned its verdict the trial court entered judgment for Shapoff and against Scull, Boomis and SERJ. As against Boomis the judgment awarded Shapoff $55,000 in contract damages, $50,000 in tort damages and $300,000 in punitive damages.
The defendants made a timely motion for a new trial and for a judgment notwithstanding the verdict. They argued the judgment was inconsistent in that it made Boomis liable both for breach of, and interference with, the same contract. They asked the court to enter judgment in Boomis’s favor on the interference claim because they believed the court’s alter ego finding, as a matter of law, precluded Boomis’s tort liability.
At the hearing on the posttrial motions, the trial court agreed Boomis could not be held liable both for breach of and interference with a contract. However the court declined to find that its alter ego determination relieved Boomis of tort liability as a matter of law. Rather the court allowed Shapoff to elect between his claims against Boomis. As one might expect Shapoff chose to proceed on the tort claim. Accordingly the trial court amended its judgment to delete its determination Boomis was an alter ego of SERJ.
The defendants filed a timely notice of appeal from the amended judgment.
Issues on Appeal
On appeal the defendants argue the trial court had no power to delete its alter ego determination from the original judgment, that the alter ego finding bars Shapoff’s tort claim as a matter of law and that even in the absence of the alter ego finding Boomis cannot be held liable for interference with contractual relations.
Like the trial court, we do not believe the alter ego finding is, as a matter of law, a defense to the tort claim. Moreover, we find nothing in the record before us which establishes such a defense. Accordingly, we aifirm the judgment.
*1463 Discussion
I
Evidence of the Parties
1. Shapoff’s Claims
At trial Shapoff testified that in the early part of November 1985 he was introduced to Boomis and Scull by a real estate broker. The broker told Shapoff that Boomis and Scull needed assistance in finding financing for a real estate development project in downtown San Diego. During a series of three meetings Shapoff learned SERJ opened an escrow which would permit it to acquire a parcel of property on K Street between 6th and 7th and that SERJ planned to construct a high-rise office building on the property. Construction of the building would be handled by Boomis who had an interest in various construction companies.
At the time Shapoff met Boomis and Scull, the escrow on the property was due to expire in a few weeks. Because SERJ had been capitalized with only $500, unless equity financing was obtained promptly Boomis and Scull would incur additional expense in order to extend the escrow.
According to Shapoff, Boomis and Scull offered him a 25 percent interest in SERJ if he would agree to assist them in finding financing. Shapoff accepted this offer and terminated his relationship with Schoemacher Development Company where he had been a principal and president.
In the middle of November 1985 Shapoff began working at offices leased by a company owned by Boomis. In preparing materials for distribution to potential investors, Shapoff learned that under the terms of the pending escrow SERJ would pay $925,000 for the K Street property. By the middle of December Shapoff had attracted the interest of two investors, Milton Sirokin and Michael Saywitz (S & S). On January 6, 1986, S&S sent SERJ a written proposal which suggested a joint venture between SERJ and S&S. Instead of an office building, S&S suggested constructing a hotel on the K Street property. Significantly, S & S’s proposal required that SERJ contribute the property to the joint venture at SERJ’s cost.
S & S’s proposal was acceptable to SERJ. However, on January 29, 1986, at a meeting between Shapoff, Scull and Boomis, Boomis told Shapoff he did not want SERJ to contribute the property at its cost. Rather, Boomis wanted Shapoff to represent to S & S that the acquisition cost was higher than the $925,000 purchase price. Boomis told Shapoff he wanted to recoup *1464 approximately $85,000 in losses he had incurred on other projects. Shapoff refused to make any misrepresentations to S & S and left the meeting.
Another meeting between Shapoff, Scull and Boomis on the following day ended after Shapoff told Boomis he had already disclosed the terms of the escrow to S & S. Boomis told Shapoff to get out of the office and to take his belongings with him.
Shapoff told S & S what had transpired between Boomis and him. S & S then abandoned its efforts to provide financing for SERJ’s project.
Ultimately, SERJ formed a partnership with the seller of the property, one of Boomis’s construction companies, and others and successfully completed construction of a Ramada Hotel on the K Street property.
2. Boomis’s Defense
In defense of the claims made against him, Boomis testified he had no control over SERJ and all the corporation’s business decisions were made by Scull and Zaida Boomis. With respect to Shapoff’s departure on January 30, 1986, Boomis testified he never asked Shapoff to misrepresent SERJ’s acquisition costs. Rather, according to Boomis, he told Shapoff to leave his corporation’s office space because Shapoff had agreed to allow another developer to participate in a commercial project in Santee. Boomis felt he should have been given the opportunity to participate in the Santee project. According to Boomis, Shapoff’s continued participation in SERJ was entirely Scull’s business.
II
Intentional Interference With Contract by Alter Egos
The defendants assert there is no California authority which discusses the effect that an alter ego finding has on a defendant’s liability for intentional interference with contractual relations. This view of the law, while accurate in a very narrow sense, is incomplete.
The tort of interference with contract is a species of the broader tort of interference with prospective economic advantage.
(Dryden
v.
Tri-Valley Growers
(1977)
Contrary to the defendants’ argument, a party to a contract may under some circumstances be held liable in tort for inducing its breach. (See
Rosenfeld, Meyer & Susman
v.
Cohen
(1983)
“. . . . To hold the contracting party along with his confederates liable in tort seems to us not only to be within the compass of the above principle but also consonant with good morals. We perceive no fatal anomaly in the circumstance that the plaintiff may, as he does here, seek relief in an independent cause of action on the contract. It happens frequently that the wrongful act at the center of the controversy may partake of the nature of both tort and contract and in such event the wronged plaintiff may sue in tort for the wrongful invasion of his rights and also sue for breach of contract. [Citation.] A complaint may in different counts set forth inconsistent causes of action.” (223 Cal.App.2d at pp. 71-72.)
Of course, in finding contracting parties liable on a conspiracy theory, Cohen, Olivet and Wise presuppose the existence of bona fide third parties, the absence of which is at the heart of Boomis’s argument on this appeal. Implicitly, the defendants suggest the trial court’s alter ego finding in this case prevents existence of a third party and hence the occurrence of any interference by a third party. As we explain in greater detail below, we *1466 reject the equation the defendants draw between an alter ego finding and the absence of tort liability as a third party.
Our review of California law discloses ownership and control of an entity do not by themselves relieve a defendant from tort liability for interfering with the entity’s contracts.
(Collins
v.
Vickter Manor, Inc.
(1957)
A. Tort Liability of Owners, Managers and Advisers for Breach
A number of California cases have discussed the tort liability of individuals, like Boomis, who own, manage or advise a party which has terminated an economic relationship. Those cases have consistently found owners, managers and advisers may be held liable in tort as third parties where they were not acting to protect the interest of the contracting party.
In
Collins, supra,
In
Kozlowsky, supra,
“We recognize that a majority stockholder has an important interest in the bank, justifying the expression of his views to the directors in matters affecting the bank’s well being and his own as a stockholder. But the board of directors has responsibilities to persons other than the holder of the majority voting power. We cannot say, as a matter of law, that, by virtue of *1468 Caspers’ position as majority stockholder and director, his interference with the business relationships of the Bank would be, under all conceivable circumstances, privileged.
“In the case at bench the complaint does not allege any of the circumstances surrounding Caspers’ action except to say that he acted ‘wantonly, maliciously and without justification.’ Such an allegation imports that defendant was not acting for the protection of
his legitimate interests as a shareholder.
[Citation.] Under the authorities reviewed above, we must conclude that the complaint states a cause of action, and that the question of defendant’s privilege, as a stockholder, to seek plaintiff’s discharge is a matter of defense.” (
In
Culcal, supra, 26
Cal.App.3d 879, the plaintiffs had licenses to operate shoe retail outlets in Unimart stores. The licenses were granted by Food Giant. The plaintiffs alleged their license agreements were terminated without just cause. Among other claims, they brought tort claims against Food Giant’s corporate parent, Vornado, Inc., for interference with the license agreements. Relying on
Collins, Kozlowsky,
and section 769 of the Restatement Second of Torts, the Court of Appeal found a tort claim against the corporate parent of a contracting party could be stated. “[Defendants, being the principal owners of a business, without more, did not make their intentional interference with a contract of the business privileged as a matter of law—that is, privileged ‘under all conceivable circumstances.’ The privilege that arises by reason of section 769 is at most a qualified one dependent for its existence upon the circumstances of the case. It is essentially a state-of-mind privilege and therefore its existence cannot normally be satisfactorily determined on the basis of pleadings alone. [Citation.] The resolution of the issue turns on the defendants’ predominant purpose in inducing the breach of the contract. [Citation.] This is preferably a matter to be determined on the basis of proof rather than of pleading.” (
In addition to the qualified privilege of owners, California has also consistently recognized a privilege for one who manages the affairs of another or advises another with respect to the performance of contracts. However, the so-called “manager’s” or “advisor’s” privilege, like the owner’s privilege, requires a defendant demonstrate he was acting on behalf of the contracting party. “The privilege to induce an otherwise apparently tortious breach of contract is extended by law to further certain social interests deemed of sufficient importance to merit protection from liability. Thus, a manager or agent may, with impersonal or disinterested motive, properly endeavor to protect the interests of his principal by counseling the
*1469
breach of a contract with a third party which
he reasonably believes to be harmful to his employer’s best interests.” (Olivet, supra,
104 Cal.App.3d at pp. 840-841, italics added, fn. omitted.) To claim the privilege, a manager or adviser need not be acting solely on behalf of his employer or client; rather, he is entitled to the protection of the privilege so long as he can establish his employer’s or client’s interest was one of the factors motivating his conduct or advice.
(Los Angeles Airways, Inc.
v.
Davis
(9th Cir. 1982)
In
Olivet, supra,
B. Alter Ego
Unlike tort liability for economic interference, liability as an alter ego does not depend upon whether an owner or manager was acting in the interest of a contracting party. “ ‘It is the law in California as elsewhere that, although a corporation is usually regarded as an entity separate and distinct from its stockholders, both law and equity will, when necessary to circumvent fraud, protect the rights of third persons and accomplish justice, disregard this distinct existence and treat them as identical.’
The issue is not so much whether, for all purposes, the corporation is the ‘alter ego’ of its stockholders or officers, nor whether the very purpose of the organization of the corporation was to defraud the individual who is now in court complaining, as it is an issue of whether in the particular case presented and for the purposes of such case justice and equity can best be accomplished and fraud and unfairness defeated by a disregard of the distinct entity of the corporate form.” (Kohn
v.
Kohn
(1950)
In general the two requirements for application of the alter ego doctrine are “(1) that there be such unity of interest and ownership that the separate
*1470
personalities of the corporation and the individual no longer exist and (2) that, if the acts are treated as those of the corporation alone, an inequitable result will follow.”
(Automotriz etc. De California
v.
Resnick
(1957)
However, one who has attempted to benefit from the corporate form of doing business may be estopped to deny a corporation’s existence.
(Aladdin Oil Corp.
v.
Perluss
(1964)
We also note that even where no estoppel would arise and the facts disclosed in a particular record would be sufficient to establish the unity of interest and control necessary to ignore a corporation’s separate identity, disregard of the corporate entity is in no sense automatic. (See
United States Fire Ins. Co.
v.
National Union Fire Ins. Co.
(1980)
The court in
Tarter, Webster & Johnson, Inc.
v.
Windsor Developers, Inc., supra,
Thus it is plain that contrary to the defendants’ argument on appeal, abuse of the corporate privilege by itself does not require that a court disregard the separate identity of a corporation. There must be some equitable purpose which will be served by ignoring the corporate form.
C. Boomis’s Tort Liability
With respect to Boomis’s tort liability it is difficult to imagine what equitable goal would be served by using the alter ego doctrine to defeat Shapoff’s tort claim. Indeed, rather than promoting the ends of justice, such use of the alter ego doctrine would allow Boomis to avoid tort liability for which he is otherwise responsible.
As disclosed in our previous discussion of the “owner’s” and “managers” privileges, one who owns or controls a contracting entity may escape liability for interfering in the entity’s contracts only after demonstrating he was acting to further the interests of the contracting entity. (Rest.2d Torts §§ 769, 770.) As privileges, these are matters for which a defendant bears the burden of pleading and proof.
(Culcal Stylco, Inc.
v.
Vorando, Inc., supra,
Thus, in arguing the alter ego doctrine protects Boomis from liability, the defendants are attempting to provide Boomis with the very relief the courts in Collins, Koslowsky, Culcal and Olivet denied similarly situated defendants: immunity without regard to motive. We reject such use of the alter ego doctrine—it is designed not to provide an escape from liability but to prevent abuse.
We decline to follow the out-of-state authorities the defendants rely upon in arguing alter egos may not be held liable for interference with contract. (See, e.g.,
Rao
v.
Rao
(7th Cir. 1983)
*1473 In sum then, the trial court’s alter ego finding did not prevent the jury from finding Boomis liable for tortious interference with contract, nor did it prevent the trial court from entering judgment on the jury’s verdict.
D. Boomis’s Contract Liability
Shapoff has not appealed from the trial court’s order amending its judgment to relieve Boomis from liability on SERJ’s contract. Thus, we have no occasion to pass on the merits of the trial court’s determination a defendant may not be held liable both in tort for interference and on the contract as an alter ego. We note, however, that liability as an alter ego is an equitable matter left largely to the discretion of the trial court. 3 (See Witkin, Summary of Cal. Law, supra, Corporations, § 13, p. 527.)
III
Procedural Errors
The defendants spend a great deal of time arguing the trial court had no power to amend its judgment deleting its alter ego finding. Because we have found the alter ego finding would not prevent tort liability, this issue is now moot. We note in passing, however, that the defendants moved for a new trial and a judgment notwithstanding the verdict and that where post-trial motions attacking the judgment have been made, the trial court is not limited to an order granting or denying the relief requested in the moving party’s papers. (See
Hamaski
v.
Flotho
(1952)
IV
Sanctions
Shapoff asks that we impose sanctions under rule 26(a), California Rules of Court. We decline his request. While we have rejected Boomis’s
*1474
arguments, as our discussion indicates they are not indisputably without merit. Moreover, there is nothing in the record which would suggest this appeal was brought for an improper motive. Accordingly, we have no power to impose sanctions.
(In re Marriage of Flaherty
(1982)
Judgment affirmed.
Froehlich, J., and Nares, J., concurred.
Appellants’ petition for review by the Supreme Court was denied November 15, 1990.
Notes
The trial court stated: “[I]t is patent that SERJ is a shell. It has no assets, never has had any assets. It owns no furniture, no equipment, no space, has no employees. It consists of Mrs. Boomis and Mr. Scull; has only one project; was organized for development. It’s also
*1462 patent to the court that it was organized as an instrument to obtain development projects for construction activities in which Mr. Boomis was interested.
“The court was particularly struck with Mr. Boomis’s statement that he directed what kinds of projects, he chose what kinds of building; it was his decision as to the kind of design because the SERJ corporation could not receive financing unless he selected the type of building and it’s consistent with the rest of the inferences from the testimony that Mr. Boomis made, the principal developmental decisions with regard to the nature of the project that the SERJ corporation would engage in.
“He was not a consultant, an independent bidder, as it were, but the controller of the developmental destiny of the SERJ corporation.”
In attempting to establish the manager’s privilege, the defendants rely upon
Becket
v.
Welton Becket & Associates
(1974)
Although the courts in
Wise
and
Olivet
held defendants liable both on the contract and in tort, those courts used a conspiracy theory which was not asserted here. (See also
Manor Investment Co.
v.
F.W. Woolworth Co.
(1984)