Richard B. Adkisson, Chief Justice.
Appellant, L. L. Cole 8c Son, Inc. leased two rice fields to appellee, Rickey Hickman, for the 1980 crop year. Appellee filed suit alleging in his complaint that during the term of the lease, appellant, Richard L. Cole, acting both individually and on behalf of L. L. Cole 8¿ Son, Inc., deliberately and maliciously (1) evicted Hickman from ricefield #1; (2) removed the keys from a diesel engine used to irrigate rice field #2 causing 90% damage to the rice crop because of lack of water; and (3) “pursued a course of conduct which was designed to, and did, harass, ridicule, and embarrass this plaintiff [appellee], both publicly and privately.” Appellee then prayed for $30,000.00 in compensatory damages in regard to field #1 and $23,400.00 in compensatory damages in regard to field #2 and $500,000.00 punitive damages for “tortious breach of contract.” A jury returned a verdict for Hickman in the amount of $42,270.00 compensatory damages and $275,000.00 punitive damages.
From this judgment appellant appeals, alleging six points for reversal. On appeal we reverse in part and affirm in part.
Appellant first argues the trial court erred in not granting his motions for judgment n.o.v. and for a new trial. To support his allegation of error, appellant contends that (1) punitive damages were incorrectly allowed in this contract action; (2) substantial evidence to support the punitive damage award did not exist; and (3) the form of the punitive damage award instruction was incorrect.
The law has long recognized the view that a contracting party has the option to breach a contract and pay damages if it is more efficient to do so. Justice Holmes articulated this idea by stating, “The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else.” O. Holmes, “The Path of the Law,” in Collected Legal Papers 167,175 (1920). Ordinarily, punitive damages for breach of contract are not allowed. 5 Corbin, Contracts 438 (1964); 11 Williston, Contracts 210 (3d ed. 1968). This has traditionally been the law in Arkansas. McClellan v. Brown, 276 Ark. 28, 632 S.W.2d 406 (1982); Curtis v. Partain, 272 Ark. 400, 614 S.W.2d 671 (1981); Snow v. Grace, 25 Ark. 270 (1869).
Correspondingly, the law has long been in general agreement that a third party who intentionally, and with malice, interferes with the contractual relations of another incurs liability for his action in tort. Lumley v. Gye, 118 Eng. Rep. 749 (Q.B. 1853); W. Prosser, Handbook of the Law of Torts § 129 (4th ed. 1971). Such a tort is commonly termed “interference with contractual relations” or “tortious interference with contract,” and has long been recognized in Arkansas. Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969). For a full discussion see Dobbs, Dan B, “Tortious Interference with Contractual Relationships,” 34 Ark. L. Rev. 334. The elements of the tort of interference with contractual rights are thorougly set out in Walt Bennett Ford v. Pul Co. Spl. Sch. Dist., 274 Ark. 208, 624 S.W.2d 426. See also Restatement, (Second) of Torts § 766 (1979). Malice, or bad faith, is no longer in Arkansas án essential part of the plaintiff’s case. See Walt Bennett Ford, Supplemental Opinion on Petition for Rehearing, supra, and Stebbins & Roberts Inc. v. Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979). Punitive damages for the tort of interference with contractual relations may be awarded.
The law as to the relation between these two causes of action, one in tort and one in contract, when one of the contracting parties breaches the contract by an intentional act causing damage to person or property presents a confusing field still in the process of development. Generally, a breach of contract is not treated as a tort if it consists merely of a failure to act (nonfeasance) as distinguished from an affirmatively wrongful act (misfeasance). Morrow v. First Nat. Bank of Hot Springs, 261 Ark. 568, 550 S.W.2d 429 (1977). Also see Prosser, supra, § 92. The courts, however, have tended to extend the tort liability for misfeasance whenever the misconduct involves a foreseeable, unreasonable risk of harm to the plaintiff’s interests. Ordinarily, where on the facts either an action in contract or one in tort is possible, the plaintiff must make a choice. Prosser, supra § 92. A plaintiff should either plead and prove his cause of action in contract or in tort. Since the purpose of the law of contracts is to see that promises are performed while the law of torts provides redress for various injuries, and since punitive damages are ordinarily not awarded in contract but may be awarded in tort, the distinction is an important one. Where on the facts the action may sound either in contract or tort or in both, the court itself will often seek to determine the real character of the action. See Atkins Pickle Co. v. Burrough-Uerling-Brasuell, 275 Ark. 135, 628 S.W.2d 9 (1982) and Olsen v. Riddle, 280 Ark. 535, 659 S.W.2d 759 (1983) .
Such is the case at bar. In his complaint, appellee Hickman has mixed allegations arising from a breach of contract with allegations of incidents which could form the basis of a tort action but which could also be proof of a breach of contract. In his prayer, appellee Hickman prays for punitive damages for “tortious breach of contract.” The record reflects confusion as to whether he is claiming damages for breach of contract, for tortious interference by Richard Cole with the contract negotiated between L. L. Cole & Son, Inc. and Hickman, or for tortious misfeasance incidental to the breach of contract.
There have been cases decided by this court in which punitive damages were seemingly allowed in an action on the contract. However, in those cases, other factors, some disclosed and some not disclosed in the opinion, satisfied our requirement that punitive damages must be predicated on some tortious act. In other cases, this court has sought to determine whether the cause of action sounds more in contract or more in tort with varying results. In the case at bar, we conclude the action is one in contract. Punitive damages were, therefore, improperly awarded.
Prospectively, we hold that in actions where on the facts either an action in contract or one in tort is possible, the plaintiff must specifically plead and prove his cause of action in tort in order to be awarded punitive damages. Otherwise, the presumption will be that the action is in contract where punitive damages are not recoverable.
Second, appellant argues that the trial court erred in allowing $21,500 as compensatory damages for alleged loss of equity in equipment taken by repossession.
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Richard B. Adkisson, Chief Justice.
Appellant, L. L. Cole 8c Son, Inc. leased two rice fields to appellee, Rickey Hickman, for the 1980 crop year. Appellee filed suit alleging in his complaint that during the term of the lease, appellant, Richard L. Cole, acting both individually and on behalf of L. L. Cole 8¿ Son, Inc., deliberately and maliciously (1) evicted Hickman from ricefield #1; (2) removed the keys from a diesel engine used to irrigate rice field #2 causing 90% damage to the rice crop because of lack of water; and (3) “pursued a course of conduct which was designed to, and did, harass, ridicule, and embarrass this plaintiff [appellee], both publicly and privately.” Appellee then prayed for $30,000.00 in compensatory damages in regard to field #1 and $23,400.00 in compensatory damages in regard to field #2 and $500,000.00 punitive damages for “tortious breach of contract.” A jury returned a verdict for Hickman in the amount of $42,270.00 compensatory damages and $275,000.00 punitive damages.
From this judgment appellant appeals, alleging six points for reversal. On appeal we reverse in part and affirm in part.
Appellant first argues the trial court erred in not granting his motions for judgment n.o.v. and for a new trial. To support his allegation of error, appellant contends that (1) punitive damages were incorrectly allowed in this contract action; (2) substantial evidence to support the punitive damage award did not exist; and (3) the form of the punitive damage award instruction was incorrect.
The law has long recognized the view that a contracting party has the option to breach a contract and pay damages if it is more efficient to do so. Justice Holmes articulated this idea by stating, “The duty to keep a contract at common law means a prediction that you must pay damages if you do not keep it — and nothing else.” O. Holmes, “The Path of the Law,” in Collected Legal Papers 167,175 (1920). Ordinarily, punitive damages for breach of contract are not allowed. 5 Corbin, Contracts 438 (1964); 11 Williston, Contracts 210 (3d ed. 1968). This has traditionally been the law in Arkansas. McClellan v. Brown, 276 Ark. 28, 632 S.W.2d 406 (1982); Curtis v. Partain, 272 Ark. 400, 614 S.W.2d 671 (1981); Snow v. Grace, 25 Ark. 270 (1869).
Correspondingly, the law has long been in general agreement that a third party who intentionally, and with malice, interferes with the contractual relations of another incurs liability for his action in tort. Lumley v. Gye, 118 Eng. Rep. 749 (Q.B. 1853); W. Prosser, Handbook of the Law of Torts § 129 (4th ed. 1971). Such a tort is commonly termed “interference with contractual relations” or “tortious interference with contract,” and has long been recognized in Arkansas. Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969). For a full discussion see Dobbs, Dan B, “Tortious Interference with Contractual Relationships,” 34 Ark. L. Rev. 334. The elements of the tort of interference with contractual rights are thorougly set out in Walt Bennett Ford v. Pul Co. Spl. Sch. Dist., 274 Ark. 208, 624 S.W.2d 426. See also Restatement, (Second) of Torts § 766 (1979). Malice, or bad faith, is no longer in Arkansas án essential part of the plaintiff’s case. See Walt Bennett Ford, Supplemental Opinion on Petition for Rehearing, supra, and Stebbins & Roberts Inc. v. Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979). Punitive damages for the tort of interference with contractual relations may be awarded.
The law as to the relation between these two causes of action, one in tort and one in contract, when one of the contracting parties breaches the contract by an intentional act causing damage to person or property presents a confusing field still in the process of development. Generally, a breach of contract is not treated as a tort if it consists merely of a failure to act (nonfeasance) as distinguished from an affirmatively wrongful act (misfeasance). Morrow v. First Nat. Bank of Hot Springs, 261 Ark. 568, 550 S.W.2d 429 (1977). Also see Prosser, supra, § 92. The courts, however, have tended to extend the tort liability for misfeasance whenever the misconduct involves a foreseeable, unreasonable risk of harm to the plaintiff’s interests. Ordinarily, where on the facts either an action in contract or one in tort is possible, the plaintiff must make a choice. Prosser, supra § 92. A plaintiff should either plead and prove his cause of action in contract or in tort. Since the purpose of the law of contracts is to see that promises are performed while the law of torts provides redress for various injuries, and since punitive damages are ordinarily not awarded in contract but may be awarded in tort, the distinction is an important one. Where on the facts the action may sound either in contract or tort or in both, the court itself will often seek to determine the real character of the action. See Atkins Pickle Co. v. Burrough-Uerling-Brasuell, 275 Ark. 135, 628 S.W.2d 9 (1982) and Olsen v. Riddle, 280 Ark. 535, 659 S.W.2d 759 (1983) .
Such is the case at bar. In his complaint, appellee Hickman has mixed allegations arising from a breach of contract with allegations of incidents which could form the basis of a tort action but which could also be proof of a breach of contract. In his prayer, appellee Hickman prays for punitive damages for “tortious breach of contract.” The record reflects confusion as to whether he is claiming damages for breach of contract, for tortious interference by Richard Cole with the contract negotiated between L. L. Cole & Son, Inc. and Hickman, or for tortious misfeasance incidental to the breach of contract.
There have been cases decided by this court in which punitive damages were seemingly allowed in an action on the contract. However, in those cases, other factors, some disclosed and some not disclosed in the opinion, satisfied our requirement that punitive damages must be predicated on some tortious act. In other cases, this court has sought to determine whether the cause of action sounds more in contract or more in tort with varying results. In the case at bar, we conclude the action is one in contract. Punitive damages were, therefore, improperly awarded.
Prospectively, we hold that in actions where on the facts either an action in contract or one in tort is possible, the plaintiff must specifically plead and prove his cause of action in tort in order to be awarded punitive damages. Otherwise, the presumption will be that the action is in contract where punitive damages are not recoverable.
Second, appellant argues that the trial court erred in allowing $21,500 as compensatory damages for alleged loss of equity in equipment taken by repossession. Since the jury returned a general verdict in the amount of $42,270, there is no way to distinguish what amount was awarded for loss of equipment in connection with field #1 and what amount was awarded for loss of crop in connection with field #2. The record reflects that Hickman testified that when he entered into the farm lease with Cole in anticipation of planting rice he bought new equipment which he would not have bought had he known field #1 was going to be taken away from him. He further testified that he tried to find replacement land to farm, but that at the end of 1980 he was unable to make his equipment payments and had lost equity in the amount of $21,500.00. Owners of property may testify as to the value of the property for the purpose of determining damages. Moore Ford Co. v. Smith, 270 Ark. 340, 604 S.W.2d 943 (1980); Garrett v. Trimune, 254 Ark. 79, 491 S.W.2d 586 (1973). The evidence was undisputed that Hickman lost equity in equipment in the amount of $21,500. Appellants’ only objection was to a jury instruction based on this testimony on the ground that loss of equity was not the proper measure of damages. On appeal we view the evidence in the light most favorable to the appellee. There is substantial evidence to support the finding of the jury.
Third, appellant argues that the trial court erred in not granting his motions for mistrial and for new trial because of alleged misconduct of a juror and because of surprise resulting from change in the testimony of a witness. Mistrial is a drastic remedy. Perry v. State, 277 Ark. 357, 642 S.W.2d 865 (1982). Since appellant has not demonstrated that he was clearly prejudiced by these events, we cannot say the trial court abused its discretion in denying the request for a mistrial.
Fourth, appellant argues that the trial court erred in admitting parol evidence relating to the written farm lease between Hickman and L. L. Cole 8c Son, Inc. A term of the lease was a provision regarding the furnishing of a rice well. The parol testimony was admitted to explain what was meant by that term. The parol evidence rule does not preclude an oral explanation of an ambiguity in an agreement. Blount v. McCurdy, 267 Ark. 989, 593 S.W.2d 468 (1980). There was no error.
Fifth, appellant argues the trial court erred in its refusal to admit testimony of two defense witnesses who offered statements of Richard Cole (deceased at the time of trial) which were self-serving as to Cole. Statements, other than those made at trial by the declarant, offered in evidence to prove the truth of the matter asserted are hearsay and are therefore inadmissible. Ark. Unif. R. of Evid. 801(c); Gautney v. Rapley, 2 Ark. App. 116, 617 S.W.2d 377 (1981). The trial court properly excluded this testimony.
Affirmed in part; reversed in part.
George Rose Smith, Hickman, Hays and Hollingsworth, JJ., concur in part and dissent in part.