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Francis Hospitality, Inc. v. Read Properties, LLC

Supreme Court of Virginia

November 21, 2018

FRANCIS HOSPITALITY, INC., ET AL.
v.
READ PROPERTIES, LLC, D/B/ACOLDWELL BANKER COMMERCIAL READ & COMPANY

          FROM THE CIRCUIT COURT OF THE CITY OF LYNCHBURG John T. Cook, Judge

         PRESENT: All the Justices

          OPINION

          ELIZABETH A. McCLANAHAN JUSTICE

         Read Properties, LLC ("Read Properties") filed a complaint against Francis Hospitality, Inc. ("Francis Hospitality") and Delta Educational Systems, Inc. ("Delta") asserting claims for breach of contract, intentional interference with contract, and statutory business conspiracy under Code §§ 18.2-499 and -500. The circuit court found in favor of Read Properties on all claims and entered judgment against Francis Hospitality and Delta on an award of three-fold damages and attorney's fees pursuant to Code § 18.2-500.

         Francis Hospitality and Delta contend that the circuit erred in ruling that they were liable for tortiously interfering with their own contract and, therefore, in finding that their tortious interference could serve as the predicate unlawful act for statutory business conspiracy. We agree with appellants and will reverse the circuit court's judgment against them as to the claims for tortious interference and statutory business conspiracy and will enter final judgment in favor of Read Properties as to its claims for breach of contract on which it prevailed in the circuit court.

         I. BACKGROUND

         In 2002, Richard Read, a commercial real estate broker with Coldwell Banker Commercial Forehand & Co. ("Forehand"), assisted in negotiating a lease agreement between Creekside Development Company, Inc. ("Creekside"), as lessor, and Delta, as lessee. The agreement, dated September 25, 2002, provided for the lease of approximately 2.668 acres with a building containing 21, 600 square feet located on Creekside Lane in Lynchburg. The term was five years with an option to renew the lease agreement under the same terms and conditions for two additional periods of five years each. Creekside and Delta renewed the lease agreement in 2007 and 2012, with the second extension expiring on September 30, 2017.

         As relevant here, the lease agreement required payment of a monthly leasing fee to Forehand. Specifically, the agreement stated that the parties "acknowledge that Coldwell Banker Forehand & Co. and Rick Read are licensed Realtors in the State of Virginia and are representing the LESSEE in this transaction" and that "Coldwell Banker Forehand & Co. is to receive a leasing fee equal to five percent (5%) of the gross rents as received during the Lease term or applied options (not to exceed $810 monthly)." The lease agreement also stated that "[t]he terms, conditions and covenants" of the agreement "shall apply to, inure to the benefit of and be binding upon the parties hereto, their respective successors in interest and legal representatives."

         Pursuant to the terms of the lease agreement, Forehand received a monthly leasing fee of $810 through December 2010, when Read Properties, a limited liability company formed by Richard Read, purchased Forehand's commercial real estate division. On December 22, 2010, Read Properties and Forehand entered into an asset purchase agreement under which Forehand's rights and obligations with regard to certain contracts were assigned to Read Properties. The Creekside property was listed as one of the contracts included in the assignment. Beginning in January 2011, Read Properties received the $810 monthly leasing fee provided for in the lease of the Creekside property.

         In 2013, Creekside entered into a real estate purchase agreement with Francis Hospitality for the sale of the property under lease to Delta. The real estate purchase agreement was made subject to the lease agreement and its amendments, which were attached as exhibits to the real estate purchase agreement. On March 19, 2014, the sale of the Creekside property closed and Creekside assigned the lease agreement to Francis Hospitality. Read Properties did not receive a leasing fee in April 2014 or thereafter.

         Read Properties filed a warrant in debt against Francis Hospitality and Delta in the Lynchburg General District Court in June 2014, seeking damages for breach of the lease agreement. On August 27, 2014, Francis Hospitality and Delta executed a third amendment to the lease agreement, in which the provision for payment of the leasing fee was eliminated. Francis Hospitality and Delta also executed an indemnification agreement whereby Francis Hospitality agreed to indemnify Delta "against all losses, claims, damages, liabilities, cost or expenses, arising out of" the third amendment to the lease agreement and the lawsuit filed by Read Properties. Read Properties nonsuited the general district court action and filed the current action in the circuit court.

         Read Properties asserts three causes of action in its complaint. In Count I, Read Properties alleges breach of contract by Francis Hospitality and Delta and asserts that as the successor-in-interest to Forehand, an intended third-party beneficiary of the lease, it was entitled to receive the leasing fees through September 30, 2017. In Count II, Read Properties alleges intentional interference with contract by Francis Hospitality and Delta and asserts that Francis Hospitality and Delta tortiously interfered with Read Properties' right to receive the leasing fees under the lease agreement when they entered into the third amendment to the lease, terminating the provision for payment of leasing fees. In Count III, Read Properties alleges a statutory business conspiracy by Francis Hospitality and Delta in violation of Code §§ 18.2-499 and -500 and asserts that Francis Hospitality and Delta conspired to tortiously interfere with Read Properties' right to receive the leasing fees under the lease agreement, entitling it to three-fold damages and attorney's fees.

         After a bench trial, the circuit court issued a letter opinion in which it separately "address[ed] each of the causes of action." Finding that Forehand "transferred the right to the leasing fees to Read Properties," the circuit court ruled in favor of Read Properties as to its claim in Count I that Francis Hospitality and Delta breached the lease agreement under which Read Properties was entitled to the leasing fees as an intended third-party beneficiary. Therefore, with regard to Read Properties' claim of "$34, 020 of leasing fees until the end of the lease in September of 2017," the circuit court found that "Delta and Francis Hospitality are jointly liable for the leasing fees."

         With regard to Count II for intentional interference with contract, the circuit court ruled that Read Properties "proved all elements of this cause of action against both Francis Hospitality and Delta." The circuit court rejected the appellants' argument that "they cannot intentionally interfere with their own contract," ruling that "Francis Hospitality and ...


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