Full opinion text
LARSON, District Judge. The plaintiff, Continental Research, Inc., is a Minnesota corporation with its home office in Golden Valley, Minnesota. The defendant Cruttenden, Podesta & Miller, a securities dealer and broker,, was at the times relevant herein a partnership with its home office in Chicago, Illinois. This is an action in tort for interference with or inducing the breach of a contract between the plaintiff and .Harold E. Wood & Company, a Minnesota corporation, with its home office in St. Paul, Minnesota. The legal issues involve the interaction of three sets of events: (1) dealings between the plaintiff and the Wood Company, (2) dealings-between the Wood Company and the defendant, and (3) the changes which took place in the national and local securities-markets in 1962. The plaintiff corporation was organized on January 16, 1962, by members of a joint venture which had been formed June 24, 1961, to assist Ned Owens in the development of the invention of an oxygen dispenser. Mr. Owens, a naval aviator in World War II, had become interested in oxygen not only for its high altitude uses, but for its other beneficial-effects on the human system. On November 27, 1961, the group applied for a patent on the product, the application for which was still pending at the time-of trial. The corporation decided that it would raise the capital necessary to begin production and marketing of the product by selling stock to the public. In pursuit of this goal the plaintiff began discussions with officers of the Wood Company in the latter part of January, 1962. The Wood Company told the plaintiff that the proposed issue had good qualities and should be priced at the $5.00 per share level. On February 1, 1962, the president of the Wood Company, Leo Quist, met with Ned Owens, now president of the plaintiff, and others in the plaintiff corporation to discuss the type of selling agreement to be entered into. The two alternatives available to the plaintiff were either an underwriting contract or a best efforts contract. Under the former the Wood Company would have paid the plaintiff the total dollar amount of the stock issue, which was $250,000, and then would have proceeded to sell the stock to the public at its own risk. Under the latter plan the plaintiff would receive no firm commitment, the risk of the stock sale resting on the issuer. The plaintiff urged the Wood Company to underwrite the issue, stating that it could muster a nucleus of “sophisticated” investors which would insure the success of the issue, but the Wood Company chose to become the selling agent only on a “best efforts” basis. The Wood Company’s president testified that although he was quite optimistic about the market at the outset of the year 1962, he began to be concerned after the major steel companies announced an across-the-board price increase in the spring of 1962 but then withdrew the increase. The plaintiff and the Wood Company signed the selling agreement on April 2, 1962, under which the issuer offered 50,000 shares of common stock at a price of $5.65 per share, $0.65 of which would go to the Wood Company as its commission. The offering was registered by the Minnesota Securities Commissioner on May 15, 1962. The issuer wished to comply with the Federal securities law by proceeding under a Regulation A exemption. There was delay in the completion of the Offering Circular in satisfactory form and approval from the Chicago office of the Securities and Exchange Commission was not obtained until August of 1962. This approval, which under Regulation A takes the form of a so-called “no comment letter,” was given on August 22 to be effective on August 27. The Offering Circular, dated August 27, 1962, and which is the only permissible selling literature other than the tombstone ad, was then in final form. On August 27, 1962, the so-called tombstone ad, a brief announcement of the offering, was run in the major morning and evening papers in the Minneapolis-St. Paul metropolitan area and an investment publication. The officers and salesmen of the Wood Company also commenced their personal selling efforts, which usually took the form of first sending the offering circular to a prospective buyer and then contacting him later either on the telephone or in person. The selling agreement between the plaintiff and the Wood Company required the latter to use its best efforts for ninety days from the first day of selling, August 27, here. Although more than $20,000 worth of stock was sold through the Wood Company, the only persons to whom sales were made were people whose names had been furnished to the Wood Company by the plaintiff. These people were all friends or relatives of plaintiff’s promotion group. Numerous other persons in the metropolitan area who were described as “sophisticated” investors were contacted by the Wood Company’s sales force, but not one of them finally bought any of the plaintiff’s stock. Prior to 1961 Harold E. Wood, founder of the Wood Company, had been a longtime friend of Robert Podesta, managing partner of the defendant. Mr. Podesta was in Denver, Colorado, when he learned that Harold Wood had been killed on October 7, 1961, in an automobile accident. He called Leo Quist, whom he also knew, to inquire about the well-being of the deceased’s family, to express his sorrow over the accident, and to inquire generally of the future plans of the Wood Company. The nature of the defendant’s operation is such that it is always looking for ways to expand its branch offices. Mr. Podesta and Mr. Harold Wood over the years had frequently mentioned the possibility of affiliating, but no serious negotiations had ever been undertaken. In his telephone conversation with Mr. Quist, Mr. Podesta told him that if he later considered an affiliation with a larger securities concern, Mr. Podesta would appreciate Mr. Quist’s calling him in Chicago. Mr. Quist did not contact Mr. Podesta immediately. For several years prior to 1962 the securities market for “local” issues had been good in the metropolitan area of Minneapolis-St. Paul. A “local” issue is stock in a corporation which has its home office here. Numbers of issues in new and unseasoned business ventures were offered to the public with considerable success. At the outset of 1962 the national securities market was enjoying prosperity; the Dow-Jones averages (indicating the relationship of current prices to prices in former years) were high and the volume of sales was substantial. During the spring of 19.62 the market apparently wavered slightly, reflecting some concern over the unsuccessful attempt of the major steel companies to raise their prices, but continued relatively strong into the month of May. The market situation changed drastically in the latter part of May. On May 28 prices fell sharply on the New York Stock Exchange and other exchanges. Prices rapidly declined elsewhere; both national and local issues were hit hard by a wave of pessimism which swept the country. The “big break” caused several things to happen insofar as the parties in this case are concerned. The dealings between the plaintiff and the Wood Company were affected because sophisticated investors had neither ’ the financial interest nor the financial means to purchase the stock being offered by the plaintiff. A sophisticated investor was described in various ways by experts at the trial. His sophistication was alternatively described to be a function of his knowlege of the market, his general economic position in life, or his current tax situation in regard to capital gains and losses. One expert said that a sophisticated investor was one who knew as much about the market as the salesman who came to call on him; he fully appreciated the risks involved in untried corporations without being given a full and formal disclosure. Another described a typical sophisticated investor as a man in business with a large current income who invested some of his funds in proven securities but also had funds with which to speculate. A third description portrayed a man who will buy speculative issues because he. has large capital gains and does not object to some losses due to his high tax bracket. By August 27, 1962, a number of these people had no unrealized capital gains and in many cases their paper gains had turned to losses, unrealized or otherwise. This took away the tax incentive for buying a stock such as that being offered by the plaintiff, which was uniformly described as a speculative issue. Also, for those who had the means to buy, there were numerous local issues with proven success and established earnings record which were selling at 50%-60%. of their price level of some three months before. These established issues were being offered (though seldom taken) at the same general price level at which the plaintiff’s stock was being offered. Although most of the witnesses who professed to know anything about initial offerings of unseasoned corporations said that the plaintiff’s product was above average in potential, they all agreed that sale of that type of an issue in the fall of 1962 through normal channels was flatly impossible. There was little demand for any sort of stock but no demand for an untried local issue. The decline in the price level of nationally listed securities “bottomed-out” in the summer and the Dow-Jones averages began to climb in the fall, but this was only because of the need for large institutional investors such as mutual funds, insurance companies and pension trusts to keep their money invested. This type of investor bought only the listed securities, however, and this cushioning effect did not reach to the unlisted local issues. Even on the national exchanges the volume of sales that was formerly enjoyed has not yet returned, even though the averages are up. The testimony reflected a feeling that the national market is a picture of glowing prosperity in comparison to the local market. Local issues are traded only on order. The brokers who formerly endeavored to “make a market” in these issues by buying them for their account and reselling them have abandoned this practice, if they are still in business. The overwhelming pessimism as to local issues was the reason that the efforts of the Wood Company did not produce the sale of a single share of the plaintiff’s stock except to friends and relatives of plaintiff’s original promotion group. Thurston Wood, son of the deceased founder, said that he attempted to line up some “fence-riders” but was not successful. Fence-riders were described as persons who would indicate a tentative interest in coming in on the venture if enough other subscribers could be lined up to assure 100% subscription of the issue. There was no provision for escrow of partial subscriptions for refund in the event that the issue was not wholly subscribed. This feature of the offering seems to have caused other difficulties, which are described later. Although both Thurston Wood and Leo Quist originally indicated an interest in making substantial investments in the plaintiff’s stock, neither of them ultimately bought any of the stock, due partly to the escrow feature and partly to the general market situation. The dealings between the Wood Company and the defendant were also critically affected by the change in the market picture. When Mr. Podesta called Leo Quist on November 10, 1961, and inter alia, expressed an interest in having the Wood organization become affiliated with the defendant’s organization, Leo Quist did not call him back for some time. The Wood Company was reorganized with Mr. Quist as its president, and enjoyed a profit in December of 1961 of $22,637.34 and a profit of $2,965.04 in January of 1962. This was followed by losses in February and March of $1,-385.93 and $15,942.60. A small profit of $377.18 in April was followed by losses in May, June, and July of $9,871.99, $13,-127.85 and $7,599.46, respectively. During the financially gloomy months following May 28,1962 the Wood Company considered several ways of turning the ebbing tide. The Wood Company considered joining the New York Stock Exchange, hoping that the ability to sell nationally listed securities would enable it to keep going, but this plan was not accomplished. The severe and continuing losses compelled action of some sort by the directors and stockholders of the Wood Company. Other brokers and dealers were also faced with similar problems. The firm of Craig-Hallum Kinnard, Inc., which had apparently had some negotiations or agreement with the Wood Company as to some sort of a participation in the selling of the plaintiff’s stock, in September of 1962 cut back the number of its personnel and also curtailed its policy of offering untried local issues. One witness testified that about fifteen or twenty small securities concerns had started into business in the flourishing local market of 1959 and 1960, but approximately twelve to fifteen of them had dropped out since then. Another witness said that several old and well established financial firms had either merged or gone out of business because of the extremely low volume of sales. The directors of the Wood Company apparently felt that in this sort of a pessimistic market the Wood Company could not survive alone. Mr. Quist testified that the common stock equity in the Wood Company was wiped out and that he had no money or interest in keeping the company going. He remarked drily that the Wood Company was an “expensive luxury” that he could not afford. In August of 1962 he went to see Mr. Podesta in Chicago and informed him that the Wood- Company was retiring from business and that its assets were for sale. The defendant at that time had 'an office in the same building that the Wood Company occupied in St. Paul. The defendant at that time had two salesmen in this office with room for two more. The Wood Company had eight men qualified to sell securities at this time. The defendant had previously considered hiring more men and expanding its St. Paul office. It is apparently the practice in the securities business that when one concern wishes to become affiliated with another, the former buys the tangible assets of the latter rather than engaging in a legal merger. This is done partly for the reason that the acquiring concern does not wish to assume the obligations, contingent or otherwise, of the acquired business, the Wood Company here. The tax laws also do not allow depreciation of good will as a business expense under Section 162 of the Internal Revenue Code. For these and perhaps other reasons the negotiations between the Wood Company and the defendant were designed to lead to a purchase of the Wood Company’s tangible assets, which consisted mostly of office furniture and equipment and leasehold improvements. However, in this transaction the defendant was definitely concerned with whether or not the salesmen employed by the Wood Company would continue with the defendant. The reason is that the reten-tionor acquisition of the trained salesmen with established clienteles was definitely something of value, even though that something cannot be sold (because the salesmen are free agents) and would not be bought (because of the tax laws) even if it could be sold. The understanding that the Wood Company’s salesmen, or most of them, would continue with the defendant after the so-called “buy-out” was the central reason for the culmination of the transaction, once the negotiations had been initiated in 1962 by the Wood Company. Thurs-ton Wood testified that the understanding that the Wood Company’s salesmen would come along with the deal was Leo Quist’s “main sales pitch” when he contacted Mr. Podesta in Chicago in August of 1962. Mr. Quist said that he assured the defendant that most of the Wood Company’s employees would come with the defendant, but pointed out that there was no requirement to this effect. Mr. Mayer, who was in charge of sales for the defendant, testified that he “expected” all of the Wood Company’s men to have their licenses transferred and come to work for the defendant. This was apparently arranged in a meeting that Mr. Mayer had with the Wood Company’s sales force prior to September 29, 1962. Mr. Podesta testified that if he had not been assured that most of the Wood Company’s sales force was coming with the defendant’s organization, he would not have gone through with the deal. He said that they did their best to get the Wood Company’s salesmen to come with them. When all of the preliminary matters were completed to the defendant’s satisfaction, it made an offer to the Wood Company in a letter dated September 29, 1962, in which the terms of the transaction were outlined. The offer stated that the assets would be purchased no later than October 15, 1962. The offer seems to have been accepted no later than October 4, 1962, for Mr. Quist on October 5, 1962, wrote Mr. Owens, the plaintiff’s president, and advised him that the Wood Company was consolidating with the defendant on October 15, 1962; that the defendant had been told of the contract between the Wood Company and the plaintiff during the negotiations ; that the defendant had said that it would “carry the ball for you” if the issue could be qualified in the State of Illinois; that Mr. Robert Podesta had advised him in a letter received October 4, 1962, that the issue would not qualify in Illinois; and that he (Leo Quist) had contacted Craig-Hallum, Kinnard, Inc., relative to their taking over the selling agreement. As this point the Wood Company could not now perform its contract with the plaintiff, though the plaintiff did not immediately learn this. The reason, not expressed in that particular letter, was that the Wood Company’s entire sales force was going to work for either the defendant or for some other financial institution and would no longer be licensed to sell for the Wood Company. Although the officers of the Wood Company had not needed a license to sell for their company under Minnesota law, the State Securities Commissioner would not allow a person to sell securities as an officer of one company (though unlicensed) and a licensed salesman for another. Though the law did not expressly forbid this it was testified that one such situation had been “corrected.” When the full import of the consolidation between the Wood Company and the defendant was grasped by the plaintiff and its counsel, they were extremely concerned as to the future of both the issue and ultimately the corporate venture itself. This grave anxiety was manifested in numerous letters, phone calls, and telegrams, most of which were directed from the plaintiff’s counsel to Mr. Mayer, a general partner in the defendant’s Chicago office. These communications began about October 19 and continued until November 20,1962. Their general theme was to the effect that the plaintiff wanted someone to sell its stock under any feasible plan. There are a number of these communications in the record. They reflect moods, varying from doubt and concern at the outset to gloom and despair at the end, for the plaintiff’s financial future. The plaintiff’s counsel was apparently first led to believe that four members of the Wood Company would continue with their best efforts to sell the plaintiff’s stock until the end of 1962, but Mr. Arthur Reiter in the Minnesota Commissioner of Securities’ office told counsel that the four officers of the Wood Company could not do this if they were licensed to sell for the defendant. All of the Wood Company’s officers and salesmen still remaining on the payroll did, in fact, obtain licenses to sell for the defendant by October 22, 1962. By October 23 the plaintiff’s counsel learned that Craig-Hallum, Kinnard, Inc., would not be able to assist in the sale. The subsequent efforts of the plaintiff’s counsel to persuade the defendant to assist the sale in some way were to no avail. The plaintiff’s counsel was led to believe that the defendant was not permitted to engage in this sort of financing by the rules of the various exchanges of which the defendant was a member. It was also stated to the plaintiff’s counsel that the defendant felt that the issue would not qualify under Illinois law. The plaintiff’s counsel consulted with the new manager of the defendant’s St. Paul office, the law firm that had represented the Wood Company in its dealings with the plaintiff, and also had some conversations with Mr. Mayer in the defendant’s Chicago office that left counsel unsure of the over-all situation. The whole affair finally came to a halt with no one selling any more stock. The people who had purchased stock did not get their money back, and the plaintiff remains laden with debts. At the trial both Mr. Mayer and Mr. Podesta of the defendant firm testified at some length as to why they did not undertake to sell the plaintiff’s stock when the contract was made known to them by the Wood Company and when the plaintiff’s counsel later urgently requested that the defendant do so. It was first pointed out that the defendant did not feel legally obligated to do so, as the defendant had only purchased the assets of the Wood Company, as was its practice. It was further pointed out that the characteristics of the plaintiff’s stock and the way it was being sold were such that the defendant did not wish to handle it. In this vein it was explained that it was just as costly to qualify a three million dollar offering in Illinois under Regulation A of the Federal securities law as it was to qualify a two hundred fifty thousand dollar offering. Second, the issue was of a speculative character and the defendant had adopted a policy against offering speculations because it did not wish to lose any of its customers when the issuer went broke, as new companies quite often do. In addition, the lack of a provision for escrowing the sale proceeds until the entire amount had been sold would alone have barred the issue from qualification in Illinois. But the final and most important reason that the two witnesses gave for not wishing to take on the selling agreement was that the defendant’s salesmen would not have tried to sell the stock if they had been told to do so and could not have sold the stock if they had wanted to do so. The two men said that the salesmen would have been just as concerned about their reputation as their parent organization; they would not want to sell a stock such as the plaintiff’s in the market conditions that then existed. A number of securities experts testified at the trial and the single thread that ran through all their testimony was that the plaintiff’s stock was impossible to sell in the fall of 1962 due to the extremely adverse conditions which prevailed. Those who wanted local issues could find them “on the bargain counter,” but very few investors were looking for this sort of stock. It was said that it is usually possible to tell fairly soon from the volume of sales whether an issue is going to be successful or not. This period was described as being from two to three days at the inside to two weeks at the outside. Thurston Wood testified in March of 1962 he thought the issue would sell in a few days. When final approval came from the regulatory agencies the Wood Company tried to sell plaintiff’s stock from August 27, 1962, to approximately the fifteenth of October and never sold a single share to someone whose name had not been furnished by the plaintiff. Though the plaintiff’s stock could not be legally sold before August 27, 1963, plaintiff’s officers had obtained permissible “indications of interest” from prospective stockholders and these were supplied to Wood before or after August 27. It was also impossible to make any sales to so-called “fence-riders.” The plaintiff’s contract bound the Wood Company to use its best efforts for a period of ninety days following final clearance by the State and Federal regulatory agencies. The SEC issued its so-called “no comment” letter on August 22, 1962, to be effective on August 27, 1962. When the defendant’s buy-out of the Wood Company went into effect on October 15, 1962, it was thereafter impossible for the Wood Company to exert any effort in the plaintiff’s behalf. The Wood Company’s personnel were then under the control of the defendant, and by October 22, 1962, the Wood Company’s salesmen had had their licenses transferred to the defendant, leaving them unable to further sell as agents for the Wood Company. Up until October 15, 1962, the Wood Company had not made a single independent sale of the plaintiff’s stock. The plaintiff has elicited testimony that at this time the Dow-Jones averages were moving up again and hit a “high” at about the end of the year. The apparent inference that the plaintiff wishes to have drawn from this testimony is either that the defendant should have allowed its St. Paul office to continue to endeavor to sell the plaintiff’s stock, as reasonable securities dealers could have foreseen that market conditions were going to get better, or that the defendant should have held up its “buy-out” of the Wood Company for the full ninety days, affording maximum protection to the plaintiff’s interest in having its contractual expectations fulfilled. The defendant has put on considerable evidence to the effect that neither the Wood Company (assuming its salesmen had remained licensed to sell for it) nor any other broker or dealer would or could have sold any of the plaintiff’s stock. In short, there seems, to be a controversy as to what view reasonable securities dealers might take of the local stock market, looking at it as of October 15, 1962. The plaintiff’s case is posited on the theory that the defendant’s buy-out of the Wood Company was unjustified; the defendant’s evidence tends to contradict this, though the defendant argues that it does not have to show any justification. Recovery may be had in Minnesota for inducing breach of contract by establishing: (1) the existence of a contract, (2) the alleged wrongdoer’s knowledge of the contract, (3) his intentional procurement of its breach (4) without justification and (5) damages resulting therefrom. Snowden v. Soren-sen, 246 Minn. 526, 75 N.W.2d 795, 799 (1956). Recovery may also be had for interference with contract, “[which] is somewhat broader than ‘inducing breach of contract’ in that the former includes ‘ “any act injuring or destroying persons or property which retards, makes more difficult, or prevents performance, or makes performance of a contract of less value to the promisee.” ’ ” Royal Realty Co. v. Levin, 244 Minn. 288, 69 N.W.2d 667, 671 (1955). The defendant has introduced considerable evidence that there is no industry standard as to what a dealer’s best efforts are supposed to be, apparently in support of the idea that the plaintiff’s contract with the Wood Company was void because of vagueness as to the terms and therefore was not an “existing contract” within the meaning of the definition in the Snowden ease, supra. It is true that the contract was not extremely favorable to the plaintiff, but it was a legally binding contract during the period from August 27, 1962, to November 24, 1962. The defendant further argues with considerable force that it did not know of the plaintiff’s contract as of September 29, 1962, the date of the defendant's offer to the Wood Company, or, if it did know of the contract’s existence, it did not know that the contract had not been performed, citing Sweeney v. Smith, 167 F. 385 (E.D.Pa.1909), aff’d. 171 F. 645 (3rd Cir.) and cited with approval in Snowden v. Sorensen, 246 Minn. 526, 75 N.W.2d 795 (1956) and Minnesota Wheat Growers’ Co-op. Marketing Ass’n v. Radke, 163 Minn. 403, 204 N.W. 314 (1925). It is true that the plaintiff’s corporate counsel exerted all of his efforts to persuade the defendant to take on the plaintiff’s issue after the date of the defendant’s offer to purchase the Wood Company’s assets. There is no direct evidence that the defendant knew of the plaintiff’s contract before September 29, 1962, but there is sufficient circumstantial evidence upon which to base an inference that the defendant’s management did know of the plaintiff’s contract and that it had not been performed by the Wood Company. Leo Quist wrote to Ned Owens on October 5, 1962, and informed him of the forthcoming consolidation with the defendant on the 15th of the month. He said that: “ * * * When these negotiations were going on, we discussed with them the CONTINENTAL RESEARCH offering. Mr. Podesta, the managing partner, suggested that if they could qualify this issue in the State of Illinois they would carry the ball for you. “I received a letter from Bob yesterday advising that unfortunately CONTINENTAL RESEARCH simply would not qualify in the State of Illinois; * * *” At the trial Mr. Podesta also mentioned that such proposed issues as the plaintiff’s were run through the routine channels of their office, that he had seen the plaintiff’s offering circular and that he “assumed” that the plaintiff’s offering circular had been given the routine treatment in their office. When Podesta testified at the trial, his general manner reflected an assumption that he knew about the plaintiff’s issue when he decided to buy the Wood Company’s assets and hire its salesmen but that, as previously described, he did not feel legally obligated to assume the plaintiff's issue even on a best efforts basis and that he did not wish to do so. The defendant’s awareness of the plaintiff’s contract prior to September 29, 1962, was not as extensive as it was after the plaintiff’s corporate counsel began to urge the defendant to help the plaintiff get its stock sold, but it was sufficient.. As the Minnesota Court has said, Swaney v. Crawley, 154 Minn. 263, 191 N.W. 583, 584 (1923): “The rule is that such knowledge is an essential element of a cause of action based on defendant’s willful interference with plaintiff’s contractual relations with a third person. Twitchell v. Glenwood-Inglewood Co., 131 Minn. 375, 155 N.W. 621; 7 Minn.Law Rev. 69. It is not necessary to prove actual knowledge. It is enough to show that defendant had knowledge of facts which, if followed by reasonable inquiry, would have led to a complete disclosure of the contractual relations and rights of the parties.” There is some question whether the Twitchell case is still law but the proof adduced by the plaintiff here goes far beyond this requirement. It does not follow, however, that merely because the defendant knew of the plaintiff’s contract when it entered into the contract with the Wood Company that it thereby intentionally induced the Wood Company to breach its contract with the plaintiff. Compare Sweeney v. Smith, 167 F. 385 (E.D.Pa.1909), aff’d. 171 F. 645 (3rd Cir.). The evidence here conclusively shows that although Mr. Podesta did offer to negotiate with Mr. Quist on November 10, 1961, Mr. Quist went to Chicago in August of 1962 to first open serious negotiations on his own initiative and because of the fact that the Wood Company was losing money at an alarming rate. Mr. Podesta responded to Mr. Quist’s preliminary offer with his firm offer of September 29,1962. It is therefore impossible to find that the defendant intentionally procured the breach of the plaintiff’s contract with the Wood Company, considering that Mr. Quist went to Mr. Podesta in August of 1962 — and not vice versa. Compare Sorensen v. Chevrolet Motor Co., 171 Minn. 260, 214 N.W. 754, 84 A.L.R. 35 (1927). There can be little doubt, however, that the defendant has interfered with the plaintiff’s contractual relations. The Wood Company could not continue to try to sell the plaintiff’s stock for the balance of the ninety days without salesmen, and the defendant, with sufficient knowledge of this state of facts, hired the Wood Company’s salesmen and thereby made performance of the plaintiff’s contract impossible. It is also doubtful whether the Wood Company would have been able to function well without its assets, which included its office lease, the desks and chairs, and other such equipment. The case is thus somewhat similar to Twitchell v. Glenwood-Inglewood Co., 131 Minn. 375, 155 N.W. 621 (1923). In that case the plaintiff had established a business ■ of selling spring water from a well upon her land. She then transferred the business and its necessary paraphernalia to Anderson and Nelson, who agreed to carry on the business for ten years and pay the plaintiff $100 per month as rent. They also agreed not to dispose of the business without the written consent of the plaintiff. The two men were bothered by one Cummings, who set up a totally unfounded claim to their well. Cummings purchased the interest of Anderson, who sold it to one Nimmerfroh, who subsequently sold it to the defendant Glenwood-Inglewood Co., a corporation engaged in the same line of business. Nelson then sold out to the Glenwood-Inglewood Co., and as a part of the transaction entered its employ as a salesman, solicited the plaintiff’s old customers and was successful in winning them over to the Glenwood-Inglewood Co. The business leased by the plaintiff to Nelson and Anderson was abandoned and the plaintiff’s contract was thus “broken and violated.” Damages against the defendants Cummings and Glenwood-Inglewood Co. for wrongful interference with the contractual relations of the plaintiff were sustained. There, as here, the performance of the contract was made impossible by virtue of a third party buying the assets .and hiring the personnel of .the obligor, the assets and the personnel being the means by which the contract obligee was to receive her contractual performance. A similar case is Swaney v. Crawley, 133 Minn. 57, 157 N.W. 910 (1916), in which the defendant prevented the performance of a contract to sell land by persuading the owner by false statements to sell the land to the defendant rather than to the contract vendee. Liability was imposed because of the “wrongful and malicious interference” with the contract relations between the vendor and vendee, citing Twitchell v. Glenwood Inglewood Co., supra. There is no question here that the plaintiff has suffered an invasion of its interest in having its contract relations unimpaired by the intentional acts of third parties; the question is whether the defendant’s acts were “wrongful” under Minnesota law. Swaney v. Craw-ley, supra. It thus is necessary to attempt to ascertain the precise elements and boundaries of the tort of interference with contract relations. For purposes of this case, it seems most feasible to examine the Minnesota cases from the standpoint of the motives of the persons sought to be charged. This is somewhat difficult because a number of the cases involve complaints which were tested by demurrer. Further, the word “malice” might have occasionally been used to mean different things in different cases. The first group of cases involves situations in which the defendant or defendants have acted with the single purpose of in jurying the plaintiff, with ill will being present occasionally. Tuttle v. Buck, 107 Minn. 145, 119 N.W. 946, 22 L.R.A.,N.S., 599 (1909), is the most prominent case in this category. In that case the trial court overruled a demurrer to a complaint which alleged that the plaintiff operated a barbershop, that the defendant had been trying to destroy the plaintiff’s business, that, among other things, the defendant had fitted up a rival barber shop for the “sole and only purpose of injuring the trade of the plaintiff” and “not for the purpose of serving any legitimate interest of his own.” In a holding which had been ably prophesied only four years before, the Court affirmed, holding that the liability of the defendant turned on the motive with which he had acted. “To divert to one’s self the customers of a business rival by the offer of goods at lower prices is in general a legitimate mode of serving one’s own interest, and justifiable as fair competition. But when a man starts an opposition place of business, not for the sake of profit to himself, but regardless of loss to himself, and for the sole purpose of driving his competitor out of business, and with the intention of himself retiring upon the accomplishment of his malevolent purpose, he is guilty of a wanton wrong and an actionable tort. In such a case he would not be exercising his legal right, or doing an act which can be judged separately from the motive which actuated him. To call such conduct competition is a perversion of terms. It is simply the application of force without legal justification, which in its moral quality may be no better than highway robbery.” A similar case is Faunce v. Searles, 122 Minn. 343,142 N.W. 816 (1913), in which the defendants induced a school board to breach a written contract with the plaintiff, who had been employed by the school board as superintendent of the city schools. One defendant was a member of the school board and the other was a resident of the school district. In affirming a verdict for damages for “malicious interferencé” the Court said that the evidence justified a finding by the jury that the defendants “were actuated by malice,” apparently meaning ill will and a desire to injure. As to the matter of possible justification, the Court said, “The jury might have concluded, but did not, that the defendants were working in the interests of the schools, and bore [him] no malice.” The Court also noted that the trial court might have instructed the jury “relative to the good faith of the defendants” and the effect which they might give to the fact that both defendants had a legitimate interest in the welfare of the school and the problems it had been having. Another case of like import is Heffernan v. Whittlsey, 126 Minn. 163, 148 N.W. 63 (1914). In that case the plaintiff was employed as a railroad ticket seller. Whittlsey had been station agent at the same town for a number of years and the plaintiff had worked under him. Whittlsey was retired because of a controversy between him and the plaintiff over telegram commissions, in which the plaintiff was sustained. Whittlsey caused the plaintiff to be investigated because of an irregularity in ticket sales, and the plaintiff was subsequently fired. The plaintiff sued Whittlsey and the railroad for maliciously conspiring to cause the plaintiff to be investigated and wrongfully discharged from his position. The plaintiff got a verdict against both defendants. The Court reversed the judgment against the railroad, saying that there was “no evidence whatever of bad motives or malice” on the railroad’s part and “that there is no liability in the absence of malice cannot be doubted.” The verdict against Whittlsey was sustained, the evidence being “sufficient to justify a finding that the charges made against plaintiff were false, and that he acted out of motives of ill will, and with a desire to injure plaintiff.” 148 N.W. at 65. The opposite side of the issues in Faunce v. Searles and Heffernan v. Whittlsey is seen in Wolfson v. Northern States Management Co., 210 Minn. 504, 299 N.W. 676 (1941), where it was held that the defendants were justified in causing the plaintiff to lose his job because he was derelict in the performance of his duties, because he gave his own interests preference in the distribution of his efforts, and because he permitted the dissipation of corporate funds by an employee. Cases similar in principle are Virtue v. Creamery Package Mfg. Co., 123 Minn. 17, 142 N.W. 930, L.R.A. 1915B, 1179 (1913) (“good faith” determinative of liability) and Dewey v. Kaplan, 200 Minn. 289, 274 N.W. 161 (1937) (complaint dismissed for lack of allegation of purpose to destroy plaintiff's business). A second category of cases involves inducement of breach or interference with contract by one who sought to benefit himself at the expense of the plaintiff. In Sorenson v. Chevrolet Motor Co., 171 Minn. 260, 214 N.W.2d 754 (1954), the plaintiff had an exclusive agency contract with the Chevrolet Motor Co. The defendant Sander, a competitor of the plaintiff, intentionally procured the breach of this agency contract to get the agency contract for himself. The plaintiff’s complaint alleged that the defendant’s purpose was to destroy the plaintiff’s business and appropriate it to himself. The Court’s opinion contains language indicating that the first motive imposed the liability and the second only accentuated the “inherent wrongfulness” of the defendant Sander’s conduct, but discussion of Sorenson in Johnson v. Gustafson, 201 Minn. 629, 277 N.W. 252 (1938) , indicates that the element of appropriation to the defendant of contract rights and benefits which the plaintiff had secured to himself by contract is a sufficient basis for tort liability without the presence of a purpose to injure the plaintiff. In the Johnson case the plaintiff was a real estate broker who showed the defendant Clarity some property he wished to buy, although Clarity did not wish to pay the plaintiff’s commission. As the plaintiff’s listing contract was not an exclusive one, the defendant Clarity had the defendant Gustafson go to the owner, buy the property without telling the owner of his relationship with Clarity, and then convey the property to Clarity. Although the Court’s holding that the defendants were liable to the plaintiff for wrongful interference with his contractual rights has been questioned on theoretical grounds,the case is nevertheless significant here for the rationale it announced. Although the Court said that it was not a justification for interference that the defendants were acting to further their own interests, citing Sorenson v. Chevrolet Motor Co., the Court’s quotation of language from a New Jersey case seems to illustrate what the Court deemed to be the precise rationale of that case and perhaps the Sorenson case as well, 277 N.W. at 255: “ ‘Merely to persuade a person to break his contract, may not be wrongful in law or fact. * * * But if the persuasion be used for the indirect purpose of injuring the plaintiff, or of benefiting the defendant at the expense of the plaintiff, it is a malicious act, which is in law and in fact a wrong act, and therefore a wrongful act, and therefore an actionable act if injury ensues from it.’ ” (Emphasis by Minnesota Court.) If the above motives are not present, then it might follow that there is no liability for persuading one to breach his contract with another, and it should certainly follow that there is no liability for mere interference which causes a breach of contract. A number of the Minnesota cases are in harmony with the above quoted language from the Johnson case. In Mealey v. Bemidji Lumber Co., 118 Minn. 427, 136 N.W. 1090 (1912), the plaintiff had made a contract with one Ashcraft to cut certain timber and haul out the logs by April 1, 1908. In January and March of that year the defendant persuaded Ash-craft’s employees to quit work for the purpose of preventing the logs from being hauled out. The reason for the defendant’s interference with the work was that he had contracted to buy the logs from the plaintiff in the fall and the price of logs fell sharply soon after the contract had been entered into. The defendant thus stood to gain at the plaintiff’s expense by interfering with the performance of Ashcraft’s contract with the plaintiff. In Canellos v. Zotalis, 145 Minn. 292, 177 N.W. 133 (1920), the plaintiff alleged that the defendant, a business competitor, had “maliciously” caused him to be evicted from the building he occupied for the purpose of destroying his business. The plaintiff further alleged that the defendant had slandered him. The Supreme Court held that there was no misjoinder of causes of action as each allegation stated a single cause of action. It has not been necessary for the defendant to be in direct business competition with the plaintiff in order to be held liable for interfering with the plaintiff’s contractual relations. In the Sorenson and Canellos cases, supra, the defendant was a competitor of the plaintiff, and the same was true of the defendant corporation in Twitchell v. Glenwood-Inglewood Co., 131 Minn. 375, 155 N.W. 621 (1915). Other schemes to defraud brokers of their fees did not involve direct competitors. Royal Realty Co. v. Levin, 244 Minn. 288, 69 N.W.2d 667 (1955); Spring Co. v. Holle, 248 Minn. 51, 78 N.W.2d 315 (1956). But all of these cases seem explicable by the rationale spelled out in Johnson v. Gustafson, supra, a case cited as a definitive precedent in Jensen v. Lundorff, 258 Minn. 275, 103 N.W.2d 887, 890 (1960), and one in which the defendant stood to benefit at the expense of the plaintiff by his interference. The principle implicit in the real estate agent cases was extended to impose liability in American Surety Co. v. Schottenbauer, 257 F.2d 6 (8th Cir., 1958), a diversity case involving Minnesota law. It is not enough, however, to say here that the defendant was acting in furtherance of its own interest in freedom to enter contractual relations and with motives unlike those proscribed in the two categories above mentioned. There are other cases in which motives were disregarded and the cases decided on other grounds. These cases all involve concerted action or what might be loosely termed a boycott. The first case in this category is the leading case in Minnesota involving interference with contract. Bohn Mfg. Co. v. Hollis, 54 Minn. 223, 55 N.W. 1119, 21 L.R.A. 337 (1893). In that case the defendants, retail lumber dealers, had agreed to boycott or refuse to deal with lumber manufacturers who sold directly to retail consumers, unless the manufacturer was willing to pay the association a fine of 10% on such sales. The association had no desire to injure manufacturers in their business unless the latter did not comply with the former’s wishes. One such manufacturer who did not pay his 10% fine sued to prevent a boycott by the association, alleging a potential loss of profits. The plaintiff did not prevail. Justice Mitchell, after ably foretelling that the issue presented would be one of the courts’ most difficult questions for the next twenty-five years, pointed out that the members of the association were acting in their own interests and that the plaintiff manufacturer had his choice whether he chose to comply with the association’s wishes or not. It was observed that associations may be entered into which may tend to diminish the gains and profits of another, and yet, so far from being unlawful, they may be highly meritorious, citing Steamship Co. v. McGregor, 23 Q.B.D. 598 (1889), aff’d [1892] A.C. 25. “What one man may lawfully do singly, two or more may lawfully agree to do jointly.” 55 N.W. at 1121. The explicit rationale of Bohn Mfg. Co. v. Hollis was then relied upon by the defendants in Ertz v. Produce Exchange Co., 79 Minn. 140, 81 N.W. 737, 48 L.R.A. 90 (1900), who were dealers in farm produce who controlled the market in Minneapolis and who had allegedly boycotted the plaintiff, one of their competitors, for the sole purpose of injuring his business. The defendants demurred to the complaint, giving no reason for their motion. The defendants argued on appeal that the intent with which they had acted was immaterial. The Court affirmed the trial court’s overruling of the demurrer, distinguished Bohn Mfg. Co. v. Hollis, and reasoned that: * * * [0]ne ipan singly, nor any number of men jointly, having no legitimate interests to protect, may not lawfully ruin the business of an- other by maliciously inducing his patrons and third parties not to deal with him. See Walker v. Cronin, 107 Mass. 555, 562; * * * In Gray v. Building Trades Council, 91 Minn. 171, 97 N.W. 663, 63 L.R.A. 753 (1903), the plaintiff sued to enjoin the defendants, delegates from various labor unions to the Minneapolis Building Trades Council, from exerting what is now called a secondary boycott on the plaintiff. The defendants went to one of the plaintiff’s customers and told the customer that it would get labor trouble if it continued to deal with the plaintiff. The defendants wished the plaintiff to hire union labor. The plaintiff argued that he would lose profits by the defendants’ boycott. The defendants argued that their efforts to unionize the plaintiff were legitimate, were resorted to for the purpose of furthering the interests of the unions and “without malicious intent to injure the business of plaintiff,” and that if injury in fact resulted to the plaintiff, it was incidental to the exercise of a lawful right by the defendants. Here, as in Bohn Mfg. Co. v. Hollis, the plaintiffs could have stopped the boycott by complying with the defendants’ wishes. The Court held for the plaintiffs, saying that a strike was legal, citing the Bohn Mfg. Co. case, but that a boycott was an unlawful conspiracy, citing, inter alia, Vegelahn v. Guntner, 167 Mass. 92, 97, 44 N.E. 1077, 35 L.R.A. 722 (1896); In re Slaughter House Cases, 16 Wall. 36, 21 L.Ed. 394; and Temperton v. Russell, [1893] 1 Q.B. 715. The Court noted that the authorities restrained boycotts because they were “unlawful interferences with property rights,” adding that the Minnesota Constitution guaranteed a remedy for wrongs to all fundamental rights. The Court did modify the trial court’s injunction against the defendants insofar as it restrained them from notifying the plaintiffs’ customers that the plaintiffs were unfair (meaning that they did not hire union labor). The next case was Joyce v. Great Northern Ry., 100 Minn. 225, 110 N.W. 975, 8 L.R.A.,N.S., 756 (1907), where the plaintiff, a former employee of the St. Paul Union Depot Co., sued the defendant railroad company for preventing the plaintiff from regaining his employment with the St. Paul Union Depot Co. unless the plaintiff would sign a release for injuries caused by the defendant’s train while in the depot company’s employ. The depot company would have been glad to rehire the plaintiff if he simply signed the release. There was a business relationship between the defendant and the depot company, which enabled the defendant to interfere with the plaintiff’s contractual relations in this way. The trial court dismissed the corn-plaint on the theory that the defendant had a sufficient interest in the men employed by the depot company in and about the yards to justify such a demand. Basing its decision partly on a statute, the Court reversed the case for a new trial, also citing the boycott cases and Lumley v. Gye, 2 El. & Bl. 216, 118 Eng.Rep. 749 (1853). The Court reasoned that the statute, reprinted in the margin, required a showing of malice, noting that other courts had read the defense of good faith into the statute. Clarifying the meaning of the word “malice,” the Court then held that the statute meant that a person had the right to take action in behalf of his own interests so long as he did not intentionally cause harm to another without justification, but that the furtherance of such interests could not be justified by interference for the purpose of depriving the plaintiff of his rights in tort against the defendant, assuming that the plaintiff’s claim had reasonable merit. In Scott-Stafford Opera House Co. v. Minneapolis Musicians’ Ass’n., 118 Minn. 410, 136 N.W. 1092 (1912), theatre owners sued to enjoin enforcement of a rule of the defendant musicians union which ■ would forbid the members of the union to work for any of the plaintiffs unless a certain number of persons, all union men, were included in the orchestra. A demurrer to the complaint was sustained, the Court stating that Bohn Mfg. Co. v. Hollis was in point and that Ertz v. Produce Exchange Co. and Tuttle v. Buck were not. The plaintiffs argued that the defendant’s rule was not beneficial to the members of the union, but the Court replied that the rule was not so non-adapted to produce benefit “as to raise an inference of malice or evil motive;” that the defendants in the Bohn case had had similar legitimate interests to protect, and that there had been no secondary boycott. In Grant Const. Co. v. St. Paul Bldg. Trades Council, 136 Minn. 167, 161 N.W. 520 (1917) and Steffes v. Motion Picture Mach. Operators’ Union, 136 Minn. 200, 161 N.W. 524 (1917) the Court allowed peaceful picketing by labor. unions in an attempt to force an employer to hire only union labor, but in Rorabach v. Motion Picture Mach. Operators’ Union, 140 Minn. 481, 168 N.W. 766, 169 N.W. 529, 3 A.L.R. 1290 (1918), the Court would not allow picketing of a theatre for the purpose of persuading the owner to hire union labor and stop operating the machines himself. Citing Tut-tle v. Buck and Ertz v. Produce Exchange Co. and distinguishing Steffes v. Motion Picture Mach. Operators’ Union, supra, the Court said: “Defendants may use any lawful means to accomplish a lawful purpose, although the means adopted may incidentally cause injury to plaintiff; but they may not intentionally injure or destroy plaintiff’s business to accomplish an unlawful purpose.” Phrasing the question as being “whether the owner shall be permitted to work himself in his own business,” the Court said that the right of every person to work in his own business was guaranteed to him by the Bill of Rights and the Fourteenth Amendment to the Federal constitution. “If the facts bear out plaintiff’s claim that the purpose of defendants is to compel him to cease working as an operator in his own business, it will follow that they are seeking to accomplish an unlawful purpose, and that the acts by which they are attempting to prevent the public from patronizing him will fall within the class of acts which the law deems malicious, and which it is the duty of the courts to restrain.” Hitchman Coal & Coke Co. v. Mitchell, 245 U.S. 229, 38 S.Ct. 65, 62 L.Ed. 260, Ann.Cas.l918B, 461 (1917). The last two boycott cases are Bacon v. St. Paul Union Stockyards, 161 Minn. 522, 201 N.W. 326 (1924) and Carnes v. St. Paul Union Stockyards, 164 Minn. 457, 205 N.W. 630, 206 N.W. 396 (1925). In the Bacon case the plaintiff alleged that the defendant forbade any firm using its stockyards from hiring him, as one such firm had formerly done. The trial co'urt sustained a demurrer to the complaint but the Court reversed, saying : “The wrongful interference with the contract relations of others causing a breach is a tort. We are of the opinion that the complaint states a cause of action for wrongful interference with plaintiff’s employment. It appears from the complaint that the plaintiff had steady employment, and that defendant wrongfully, willfully, and unlawfully prevented him from continuing in that employment. We think such conduct is in violation of plaintiff’s rights. * * * The defendant may have reasons to justify its conduct, but such reasons do not appear in the complaint.” The Carnes case was a similar case of exclusion from the defendant’s yards. The defendant refused to deal with any commission firm who hired the plaintiff as a salesman. After adverting to the general rule and explaining the meaning of the word malice, the Court turned to the matter of justification. The evidence was not fully developed at the trial, as the defendant had been granted a dismissal of the ease after the plaintiff had rested. The defendant had pleaded that it had learned after admitting the plaintiff to its yard that the plaintiff had been guilty of business irregularities and had been suspended by the Live Stock Exchange for misconduct in business transactions. The defendant argued that the plaintiff was a mere licensee and that the defendant could protect its interests by excluding the plaintiff for any cause it deemed sufficient. The Court felt this argument was impaired by the fact that the defendant was a public stockyard, that the plaintiff had been duly admitted, and that the firm which had offered the plaintiff employment was also admitted. The Court, however, did feel that the defendant had valid interests to protect, that there could be justification for such an exclusion, and that because of this interest it had a wide liberty of action and “a discretion of management not lightly to be interfered with by the judiciary.” It will be observed that some of the foregoing cases fit into the two categories of cases previously mentioned and some do not. The Ertz, Bacon and Carnes cases seem explicable under the rationale of Tuttle v. Buck that it is tortious to take action for the sole purpose of harming another without justification or excuse. Joyce v. Great Northern Ry. seems explicable under the rationale of Johnson v. Gustafson — that it is tortious to interfere with contractual relations for the benefit of the defendant and at the expense of the plaintiff. Other cases, however, are difficult to reconcile. The refusal to deal in the Bohn Mfg. Co. case was no less harmful to the plaintiff than the refusal to deal in Rorabach v. Motion Pictures Mach. Operators’ Union, and an injunction was authorized against the defendants in the latter case and not in the former. The Court in Rorabach v. Motion Pictures Mach. Operators’ Union held that the purpose sought by the defendants was an unlawful one, but the plaintiff there had the same choice that the plaintiff in Bohn Mfg. Co. had — he could act in the manner that suited him best (and face pressure from the defendants) or he could yield to the will of the defendants and alleviate the pressure upon him. If the plaintiff in Rorabach had been compelled to hire more workers than he needed, this was no more than the plaintiff had to do in Seott-Stafford Opera House Company v. Minneapolis Musicians Ass’n., where the Court held that it was permissible for the union to strike for the purpose of achieving maximum employment of its members. In both Gray v. Building Trades Council and Bohn Mfg. Co. v. Hollis, the defendants acted with what might be called a limited desire to harm — a desire to harm only if the adverse party did not yield to the defendants’ wishes. In both eases, the harm complained of was incidental to action taken in furtherance of the actor's own interests but the defendants were enjoined in Gray and not in Bohn Mfg. Co. The distinction in the two cases is quite relevant in the instant case for the defendant here is charged with wrongful interference with the plaintiff’s contractual relations because of harm incidental to the furthex*ance of its own interests, which was essentially the harm to the plaintiff in Gray v. Building Trades Council. It seems doubtful that the distinction lies in the fact that the boycott was secondax-y rather than primary for the same type of pressure which was condemned in Gray v. Building Trades Council was given tentative approval in Carnes v. St. Paul Union Stockyards Co. If the Minnesota cases are conflicting, however, the Court was simply following the early English and Massachusetts cases. The first of the English cases germane here is Keeble v. Hickeringill, 11 East 574, n., 103 Eng.Rep. 1127 (1707), which was an action on the case for discharging guns near the decoy poixd of another “with design to damnify the owner by frightening away the wildfowl resorting thereto.” Lord Holt held that the action would lie, and two hpotheticals which he mentioned seem to illustrate the distinction in conduct which could form the basis for recovery in tort and conduct which has not. Lord Holt said, “Suppose the defendant had shot in his own ground; if he had occasion to shoot, it would have been one thing; but to shoot on purpose to damage the plaintiff is another thing, and a wrong.” These words suggest that Lord Holt thought that liability for an act would turn on the motive or purpose for which it was done. Another analogy by Lord Holt is to the same effect, 11 East at 576: “One schoolmaster se