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Auto Direct, Inc. v. Abecco Auto Group, Inc.

BER-L-12171-04 (N.J. Super. Law Div. 2004) (Unpublished)

CORPORATIONS; OFFICERS; LIABILITY—A corporate representative may be held liable for tortious conduct in which he or she significantly participated, but if the breach of the corporation’s duty is determined to be governed by contract rather than tort principles, the participation theory of tort liability is inapplicable.

A lease provided that a tenant could conduct “wholesale and export sales of motor vehicles only” at its premises. The tenant, however, claimed that it was told that it could also sell automobiles at retail. It asserted that it “relied on this representation in executing the lease.” When it had to discontinue the retail sale of automobiles, it made a claim against its landlord. The landlord responded that the alleged oral representations were barred by the Statute of Frauds. Its argument was based on the fact that the lease was for five years and the “Statute of Frauds requires that for a lease of over three years, the terms must be set in a writing, and thus, ... the supposed arguments regarding the permissibility of retail automobile sales [were] not binding.”

The tenant also claimed that its landlord “placed signs around the premises that named other businesses, and that these signs confused customers and interfered with [the tenant’s] prospective economic advantage.” The landlord denied that intent and claimed that the signs were in place by mistake for only twenty-four hours and were removed as soon as the tenant complained.

The tenant also claimed that its landlord, and one of the landlord’s shareholders in particular, disconnected the tenant’s phone lines and computer system and tampered with overnight deliveries by telling the couriers that the tenant was out of business. The landlord’s officer admitted to changing the locks for one day. He claimed reliance on the provision in the lease that allowed the landlord to enter the premises, by force or otherwise, upon a tenant’s default. At the time in question, the tenant “had been in default for non-payment of rent.” On one occasion, the police were called by the landlord when the tenant’s principals refused to leave the premises and the principals were arrested. When the overdue rent and all related charges were paid, the tenant was allowed to re-enter the premises.

The Court found that factual disputes existed, precluding grant of summary judgment. It also found that the landlord’s officer “did not represent himself personally in dealings with the [tenant].” According to the Court, “[a] corporate representative may be held liable for tortious conduct in which he participated significantly, ... [i]f, however, the breach of the corporation’s duty to the [tenant] is determined to be governed by contract rather than tort principles, the participation theory of tort liability is inapplicable.” Therefore, as a representative of the landlord, the corporation’s officer could not be held responsible for a breach of the lease.


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