MOONEY v. JOHNSON CATTLE

LINDE, J.

Plaintiff and defendants are cattle buyers. When plaintiff contracted to buy 550 head of steers from a third person for immediate resale, defendants caused the seller to breach this contract by buying the same cattle at a higher price, leaving plaintiff for a time unable to deliver cattle to his buyer. Plaintiff brought action for interference with his purchase contract, seeking damages for loss of reputation and for mental anguish suffered as "a direct and proximate result" of defendant's interference, as well as punitive damages. A jury awarded plaintiff $6,500 damages for mental anguish only.

The Court of Appeals reversed, holding that interference with contractual relations is not one of the torts in which damages for mental suffering may be awarded in the absence of physical injury. 49 Or. App. 959, 621 P.2d 93 (1980). We allowed review to consider the right to such damages in a tort action for inducing breach of contract.

Upon examination, the question proves to be far from settled. There are more assertions in the secondary commentary than actual decisions from which a general rule may be drawn. In England, it is said that the "primary protection afforded by the tort ushered in by Lumley v. Gye, is against business losses: "business men cannot complain of injured feelings alone." Mayne McGregor on Damages § 943 (12th ed 1961). Another text of the same vintage, to the contrary, states that a plaintiff "will often receive greater damages in tort" than for the breach of contract; "he can obtain exemplary damages, invoke the rule that intentionally caused damages are recoverable for an intentional tort, and obtain damages for loss of reputation and injured feelings." Street, Principles of the Law of Damages 252 (1962). Neither work cites authority for either proposition. As to American law, Sedgwick stated in a single sentence that "for maliciously procuring the breach of any contract the measure of damages is ordinarily the same as it would be in an action for breach of the contract itself." 2 Sedgwick on Damages § 470a at 900 (2nd ed 1912). A more detailed student note in 1930 reported that some courts deemed the contract rule to be the proper measure of tort damages for inducing a breach, while others stated that the tort defendant was liable for all resulting damages, by analogy to damages for intentional interference with tangible property, and a third group applied a "proximate" injuries rule comparable to that in negligence cases. Note, Damages Recoverable in an Action for Inducing Breach of Contract, 30 Col L Rev 232 (1930). Many of the early cases involved interference with plaintiff's employment, and in that setting Massachusetts decisions allowed recovery for "injured feelings," Gould v. Kraemer, 253 Mass. 433, 440, 149 N.E. 142 (1925), Doucette v. Salinger, 228 Mass. 444, 117 N.E. 897 (1917), or reputation, DeMinico v. Craig, 207 Mass. 593, 94 N.E. 317 (1911). The note reported only a few other decisions on either side of that issue. 30 Col L Rev at 237, n. 27.

118 Eng Rep 749 (1853) (action for maliciously interfering with employment relations not confined to master-servant relationship).

Mayne McGregor, supra, quote from Pratt v. British Medical Ass'n, [1919] 1 KB 244, 281-282, which held that physicians who were victims of a boycott,

"`are not limited to actual pecuniary damages suffered by them . . . The Court or jury, once actual financial loss be proved, may award a sum appropriate to the whole circumstances of the tortious wrong inflicted . . . I cannot ignore the deliberate and relentless vigour with which the defendants sought to achieve the infliction of complete ruin. I must regard not merely the pecuniary loss sustained by the plaintiffs but the long period for which they respectively suffered humiliation and menace.'"

The tort pleaded in that case was not, however, interference with a contract. See also Rookes v. Barnard, [1964] 1 All E.R. 367, a tort action of "intimidation" by an employee discharged as a result of union strike threats against his employer, in which Lord Devlin said that the measure of damages might take into account "the inconvenience caused to him by the change of job and the unhappiness maybe by a change of livelihood." Id. at 407.

Sedgwick cited a single case, Knickerbocker Ice Co. v. Gardiner Dairy Co., 107 Md. 556, 69 A. 405 (1908). Id. at 900, n. 252 (manufacturer liable for inducing dealer to break contract with customer so as to obtain direct sale; no exemplary damages unless defendant's purpose was to injure plaintiff).

The Minnesota decision in Swaney v. Crawley, 133 Minn. 57, 157 NW 910 (1916) is one precedent commonly cited for the proposition that "the injured party is limited, as a general rule, to such damages as might have been recovered for a breach of the contract itself," although the court went on to state that "the rule is broad enough" to include compensation for an injury to reputation as well as exemplary damages. 133 Minn. 60. The inclusion of the phrase "as a general rule" in the quoted passage is characteristic of most statements concerning the damages recoverable in this tort action.
The significance of a tort or contract measure of damages for recovering damages for mental distress in a dispute between the contracting parties in a business context is discussed in Farris v. U.S. Fid. and Guar. Co., 284 Or. 453, 456, 458-465, 587 P.2d 1015 (1978) (failure of a liability insurer to assume duty to defend the insured does not support award of damages for emotional distress).

More recently, Dean Prosser briefly repeated the same classification, adding a few more recent citations but none on the issue of recovery for mental anxiety or distress. Prosser's own preference was for the measure of damages common to other intentional torts to persons or property. Prosser, Law of Torts § 129, at 948-949 (4th ed 1971). His position was adopted by a California appellate court in Duff v. Engelberg, 237 Cal.App.2d 505, 47 Cal.Rptr. 114 (1965), in which defendants motivated by racial prejudice had caused a seller to renege on a contract to sell a residence to plaintiffs. Professor Dobbs's treatment of the law of damages states that damages for mental suffering, loss of reputation, and punitive damages, though normally not available for breach of contract, "are pretty well accepted as recoverable against the tortious inducer of that breach"; however, the statement is not supported by any citations. Dobbs, Remedies § 6.4, at 463 (1973). A number of other commentators have reviewed the three different measures of damages drawn from actions for breach of contract, intentional torts, and negligence without adding much information on the subject of mental or emotional distress. See Developments in the Law-Competitive Torts, 77 Harv L Rev 888, 967-969 (1964); Note, Interference with Contractual Relations in New England, 38 BUL Rev 285 (1958); Comment, Interference With Contractual Relations: A Common Measure of Damages, 7 Santa Clara Law Rev 140 (1966).

The original Restatement of Torts, in section 766, stated that one who purposely causes a third person not to perform a contract with another "is liable to the other for the harm caused thereby." The quoted phrase appeared to measure the range of liability entirely by causation in fact, but the comments to section 766 said nothing further on the issue of damages. The Restatement of Torts (Second) added a new section 774A which states that the damages recoverable in an action for interference with contractual relation include the pecuniary loss of the benefits of the contract, other consequential losses, and "emotional distress or actual harm to reputation, if they are reasonably to be expected to result from the interference." The record of the adoption of this statement by the American Law Institute, however, reflects no great conviction that it is a "restatement" of an established rule. In sum, the state of the authorities encourages us to examine the question anew.

"§ 774A. Damages

"(1) One who is liable to another for interference with a contract or prospective contractual relation is liable for damages for

"(a) the pecuniary loss of the benefits of the contract or the prospective relation;

"(b) consequential losses for which the interference is a legal cause; and

"(c) emotional distress or actual harm to reputation, if they are reasonably to be expected to result from the interference.

"(2) In an action for interference with a contract by inducing or causing a third person to break the contract with the other, the fact that the third person is liable for the breach does not affect the amount of damages awardable against the actor; but any damages in fact paid by the third person will reduce the damages actually recoverable on the judgment."

The original Reporter, Dean Prosser, submitted the new § 774A in 1969 with the note: "There is actually very little case law on subsection (1)." Restatement of Torts (Second), Tentative Draft No. 14 (1969) at 86. When the draft again came before the Institute in 1977, the subsequent Reporter, Dean John W. Wade, said with regard to damages for emotional distress from interference with contractual relations:

"I admit that when I first saw that, I felt rather surprised. Yet when I looked at the cases — they were mostly older cases, I must admit — there were a number of cases indicating that this could be true. I left it alone . . . but it is open before you, and if you want to eliminate that aspect, I am amenable."

There was a motion to eliminate damages for emotional distress from § 774(A)(c) as being "too easily trumped up." In response to a question as to the "weight of authorities in the cases," the Reporter replied that it was "sort of hard to tell." Justice Braucher of Massachusetts said that he was "as much against damages for emotional distress in this case as in other cases" but saw no reason "why this one is that much different." The motion to strike damages for emotional distress from § 774A failed by a vote of 64-44. The American Law Institute, Proceedings, 54th Annual Meeting (1977) at 429-431.

Search for a principle may take its starting point either in the decisions allowing or denying damages for mental distress in other tort actions, or in a narrower focus on the characteristics of the interference tort. Taking the first tack, defendants brief Douglas v. Humble Oil, 251 Or. 310, 445 P.2d 590 (1968), in which the torts were a trespass to a home and conversion of personal property, Fredeen v. Stride, 269 Or. 369, 525 P.2d 166 (1974), which involved a veterinarian's conversion of a dog, and Edwards v. Talent Irrigation District, 280 Or. 307, 570 P.2d 1169 (1977), a case of negligent flooding of land. From these they argue the general propositions that damages are allowed for mental distress only when this distress is a direct and predictable result accompanying a tangible injury, or aggravated by the quality of defendant's wrongful conduct, and that without a physical injury to person or property only a few torts are specifically designed to recognize emotional injuries, such as invasion of privacy, see Hinish v. Meier Frank Co., 166 Or. 482, 113 P.2d 438 (1941) or intentional infliction of emotional distress, as in Turman v. Central Billing Bureau, 279 Or. 443, 568 P.2d 1382 (1977). The Court of Appeals thought itself bound to reverse the award of damages for mental distress by what was said in these cases and in Melton v. Allen, 282 Or. 731, 580 P.2d 1019 (1978), which denied such damages for a trespass to plaintiff's automobile.

The court quoted a passage in Melton stating that redress for mental disturbance without accompanying physical injury has been allowed only in cases involving "intentional acts of a flagrant character under most unusual facts and circumstances," "a serious invasion of the plaintiff's right and not feigned," and "special circumstances of considerable magnitude." 282 Or at 736. These phrases were the court's description of prior cases, not criteria that a jury is to be instructed to apply in evaluating a case submitted to it. To the cases cited in the text one may add Macca v. Gen. Telephone Co. of N.W., 262 Or. 414, 495 P.2d 1193 (1972), which sustained a recovery for mental distress caused by frequent telephone calls due to a listing error. The court there stated:

"Allowing recovery for mental suffering and anguish unaccompanied by physical injuries under the circumstances of the present case is in accord with previous decisions of this court. Where an independent basis of liability exists, irrespective of whether there existed physical injuries, recovery has been uniformly allowed for mental suffering and anguish." [citing Douglas v. Humble Oil, and other cases.]

262 Or at 420, n. 1.

These and other cases may have left some question about the significance of various factors to liability for mental distress, for instance whether this liability results from defendant's intent, as distinguished from recklessness or negligence, compare Melton, supra, with McEvoy v. Helikson, 277 Or. 781, 562 P.2d 540 (1977), or from the "direct and natural" causation, that is to say predictability, of the mental distress, see Fredeen v. Stride, supra, and Douglas v. Humble Oil, supra, and whether "aggravated circumstances" are relevant to liability for such distress because of defendant's greater culpability for acts of "a flagrant character," Melton v. Allen, supra, or because defendant's "aggravated conduct" contributes "evidence of genuine emotional damage," Fredeen v. Stride, supra. As the court stated in Edwards, "[t]he law involving recovery for emotional distress generally is confused and perhaps in need of rethinking by the courts." 280 Or at 310, n. 4.

The concept of "tort" is vulnerable to this confusion because the one word is used to encompass both the defendant's wrong and the injury entitling plaintiff to redress. When the focus is on defendant's conduct, an intentional wrongdoer often seems more deserving of liability than a careless or innocent one. From the plaintiff's perspective, the injury that the defendant has caused may be equally severe in either event, unless plaintiff's knowledge of defendant's attitude in fact magnifies plaintiff's distress. Nevertheless, as in some formulations of recovery for mental distress from trespass or conversion, the double focus sometimes leads to carrying the factor of defendant's culpability from the definition of the tort into the measure of plaintiff's damages as well. See Restatement of Torts, § 927, Comment 1, quoted in Fredeen v. Stride, supra. As already stated, however, the formula actually employed in that decision and in Douglas v. Humble Oil, supra, rested the inclusion or exclusion of damages for mental distress not on the defendant's motives but on whether such distress was a common and predictable result under the circumstances of the kind of conversion involved. In the tort of interference with another's contract, the defendant's knowledge and intent are required elements of the tort itself. See American Sanitary Service v. Walker, 276 Or. 389, 394, 554 P.2d 1010 (1976), Wampler v. Palmerton, 250 Or. 65, 73, 439 P.2d 601 (1968). The question is whether it follows that the liability for damages to which it gives rise necessarily is the same as in other intentional torts.

"If the deprivation is the legal cause of harms to the feeling, damages may be allowable for such harms, as where the defendant intentionally deprives the plaintiff of essential household furniture which humiliates the plaintiff, a result which the defendant should have realized would follow."
4 Restatement of Torts § 927, Comment 1 at 657.

See generally Top Service Body Shop v. Allstate Ins. Co., 283 Or. 201, 205-210, 582 P.2d 1365 (1978), as to the plaintiff's burden of proof in interference cases.

The court appeared to adopt that position in Wampler v. Palmerton, supra, although it reached no holding on damages, because the court concluded that no tort had been proved. In the course of an introductory review of the interference tort, the opinion stated:

"The relief granted is of the broad type available in intentional tort actions and includes recompense for mental suffering, damage to reputation, and punitive damages. It therefore affords the relief which would have been recoverable from the party breaching the contract and also for the less tangible personal harms such as those sought in the instant case." (Footnotes omitted.)

250 Or at 73. This passage, however, must be read in its context. It was preceded by a discussion of the expansion of the tort from interference with employment, as in Lumley v. Gye, supra, to other contractual relationships.

"The interest protected by the interference with contract action is the interest of the individual in the security and integrity of the contractual relations into which he has entered. Economic relations are controlled by contract and the public also has an interest in maintaining the security of such transactions. Therefore the law provides protection." (Footnotes omitted.)

Id. at 73. Commercial or economic interests, of course, are only one kind of interest secured by the protection that the law affords to contractual relations. They are the kind involved in Wampler and in this case. The interest in one's occupation, as in the Massachusetts cases previously cited, or in one's choice of a home, as in Duff v. Engelberg, supra, often goes beyond the merely economic interest in regular wages or in an advantageous price to include such noneconomic values as personal associations, love of a place, and pride in one's work that add up to one's sense of identity.

We think, therefore, that recovery of damages beyond pecuniary loss from interference with a contract does not depend only on the presence of intentional interference for an improper objective or by wrongful means, along with causation. See Top Service Body Shop v. Allstate Ins., Co., 283 Or. 201, 582 P.2d 1365 (1978). Damages for noneconomic injury depend also on what kind of contractual arrangement is disrupted by defendant and how the claimed injury relates to that kind of arrangement. The mental distress, injured reputation, or other consequential harm not only must have occurred, and have resulted from defendant's interference, it also must have been an injury of a kind that should have been expected as a common and predictable accompaniment of disrupting the type of relationship with which the defendant interfered.

There is a temptation here as elsewhere in tort law to state this relationship in terms of "direct" or "proximate" as distinguished from remote causation. Thus, plaintiff in this case pleaded that his reputation as a reliable cattle dealer was damaged and he endured mental suffering as "a direct and proximate result of the interference of the defendants." But it is not a question of causation. If the harm occurred in fact, it makes little sense to dispute whether the occurrence was "natural" or "unnatural." Consideration whether the kind of injury claimed was a common and predictable feature of the type of disrupted relationship at issue more accurately describes what is called "direct and natural" in Douglas and Fredeen or "legal cause" in Restatement of Torts (Second) § 774(A)(1)(b), supra, n. 5.

This analysis corresponds to the rule formulated in the Restatement with one qualification. To recover either for emotional distress or for harm to reputation in an action for interference with contractual relations, injury of that kind must be a common and predictable result of disrupting the type of relationship or transaction involved rather than a result "reasonably to be expected" in the particular situation, as seems to be the import of section 774(A)(1)(c), supra, n. 5. The defendant's wrong is intentional, not a default of foresight. There are many kinds of contractual relations, however, just as there are many different settings for trespass or conversion. Compare Douglas and Fredeen, supra, with Hall v. Work, 223 Or. 347, 354 P.2d 837 (1960). The claimed injury must be typical of the kind of contractual relationship involved in the case in order to come within the interests that the tort duty of noninterference is designed to protect, whatever other theory of recovery may also be available to the injured party.

As already stated, these typical interests can differ when the disrupted relationship is employment, or a consumer purchase of a particular home or unique chattel, or a commercial transaction between entrepreneurs, or perhaps a wholly nonfinancial agreement. For instance, when the tort is applied in order to secure contractual arrangements and opportunities in the general economy, mental or emotional distress will not be a characteristic result of interference between corporate enterprises. The same may or may not be true of business dealings characteristically carried on by individuals.

It can be argued that in ordinary commercial dealings even among individuals, the tort is designed to protect only business interests — the purely economic interests of Adam Smith's abstract "economic man" who, as suggested in Mayne McGregor, supra, "cannot complain of injured feelings alone." Upon consideration, we reject that view. Commerce is too broad a category to sweep all kinds of transactions under a single rule protecting only pecuniary interests against an outsider's wrongful interference. Established customs and expectations may vary in one economic sector from those in an entirely different one. The loss of some fraction of all deals, whether induced by a competitor or by other intermeddling, may be a common experience in some branches of business, though the plaintiff in the particular case tends to become upset. In other branches, such interference may universally be recognized as a rare breach of custom and a predictable source of shock and dismay. Again, mental distress has been included in damages for interference with one's employment; but too many crafts and trades rely on independent contracts as well as on contracts of employment, and the distinction is too tangential to the likelihood of anxiety and distress, to allow recovery for such consequences when the interference is with employment but exclude it for interference with business contracts as a matter of law. Rather, it remains open to show that they are common and predictable consequences of such interference in the type of business setting involved.

Even when serious anxiety and frustration are typical and predictable effects of disruptive interference in a business setting, however, damages are confined to those effects. Recovery extends only to the mental or emotional distress involved in dealing with the disruption itself. By this test, the stress of finding another buyer or source of supply, of restoring confidence in the future performance of the business, or in case of more fatal interference, of selling or liquidating the enterprise could give rise to damages; distress at personal consequences such as a sacrificed vacation, financial stringency, or family stresses would not.

In this case the applicable rule was discussed at length in the course of argument on defendant's motion for dismissal at the conclusion of plaintiff's case (more accurately a motion for directed verdict, ORCP 60), and on their motion for judgment notwithstanding the verdict. The trial court concluded that contractual interference is not the kind of tort in which "as a matter of law" there is such likelihood of emotional distress that the jury can be instructed to include it in an award of general damages, but rather that the instructions would be that a higher standard of proof would be required. The instructions actually given were not challenged on appeal and are not before us. Neither does the appeal present an issue concerning the adequacy of evidence whether nonpecuniary injuries typically can be expected to result from interfering with contracts between cattle dealers. Rather, defendants argue that even assuming that damages for mental distress resulting from interference with a contract could be allowed at all, there was insufficient evidence of "aggravated conduct" by defendants to justify submitting plaintiff's claim for such damages to the jury.

Under the test we have set forth in this opinion, recovery for mental distress in this tort hinges on factors other than the degree of defendant's culpability. Because we have concluded that the Court of Appeals was mistaken about the requirements for such an award of damages, and no other issue is presented concerning the application of the correct rule to the facts in this case, the decision of the Court of Appeals must be reversed and the judgment on the jury's verdict reinstated.

Reversed.