Opinion ID: 1977295
Heading Depth: 1
Heading Rank: 3

Heading: bad-faith termination of contract

Text: The trial court stated in its instructions that one of Dr. Wild's claims against the defendants consisted of bad-faith termination of contract. The jury awarded $2,148,300 in compensatory and punitive damages on this claim. Defendants contend that there is no tort action for bad-faith termination of contract independent of or in addition to damages for conventional breach of contract. Dr. Wild contends that bad-faith termination of contract was submitted to the jury as a part of the interference with then present contract and professional business advantages and relationships tort claims. He argues that the trial court combined interference with contract and professional business relationships and bad-faith termination of contract as intentional torts separate and apart from breach of contract for the period from August 1, 1963 (termination of contract), up to the time of termination of the project on January 31, 1964 (submitted to the jury as questions Nos. 4, 5, and 6 of the special verdict), and combined such interference and bad-faith termination following the termination of the project into interference following termination of the project (submitted in questions Nos. 7, 8, and 9). A reading of the special verdict and the instructions convinces us that bad-faith termination of contract was submitted to the jury as a separate and distinct tort claim for which a separate recovery was awarded and that it was not a part of the interference claims found in questions Nos. 7, 8, and 9. We are of the opinion that when a plaintiff seeks to recover damages for an alleged breach of contract he is limited to damages flowing only from such breach except in exceptional cases where the defendant's breach of contract constitutes or is accompanied by an independent tort. Whittaker v. Collins, 34 Minn. 299, 25 N.W. 632 (1885); Beaulieu v. G. N. Ry. Co., 103 Minn. 47, 114 N.W. 353 (1907); City of East Grand Forks v. Steele, 121 Minn. 296, 141 N.W. 181 (1913); Calamari & Perillo, The Law of Contracts, § 204; Simpson, Law of Contracts (2 ed.) § 195, p. 394. An excellent example of this is found in wilful and unlawful injuries to passengers upon railroad trains. There is in such cases a contract by the railroad company to safely carry the passenger to his destination and an implied legal duty to protect him while the relationship of passenger and carrier exists, and the courts declare that a breach of that duty constitutes an independent tort, for which recovery may be had for the injury to which the passenger is subjected. In such cases the duty is an incident of the relationship rather than the contract, and the carrier would be liable if the passenger was carried free. Mykleby v. Chicago, St. P., M. & O. Ry. Co., 39 Minn. 54, 38 N.W. 763 (1888). For other examples, see, Prosser, Torts (4 ed.) § 92. We hold that this is not the exceptional case where the breach of contract amounts to an independent tort. The foundation of Dr. Wild's action was the contract, and the gravamen of it, its breach. Whittaker v. Collins, supra . The duty imposed on Minnesota Foundation was a contractual one. Dr. Wild, however, contends that an implied covenant of good faith is found in this contract and that a bad-faith or malicious breach of that covenant provides a tort remedy. Some courts have held that there is an implied condition of good faith in all contracts, whether sales contracts or not. 17 Am.Jur.2d, Contracts, § 256; 17A C.J.S., Contracts, § 328. Minnesota statutory law, in the Uniform Commercial Code, provides for an implied condition of good faith in sales contracts. Minn.St. 336.1-201(19), 336.1-203, 336.2-103(1)(b). This court has read an implied condition of good faith into a nonsales contract containing reciprocal duties and obligations on the part of the contracting parties where one of the parties made it impossible for the other to perform. Haase v. Stokely-Van Camp, Inc., 257 Minn. 7, 99 N.W.2d 898, 87 A.L.R.2d 726 (1959). Whether this court will read such a condition of good faith into all contracts has not yet been decided. Assuming for the sake of argument that an implied covenant of good faith was maliciously broken in this contract, that malicious motive may be important in determining whether a material breach has occurred, but it is immaterial in so far as damages for contract breach are concerned. In Independent Grocery Co. v. The Sun Ins. Co., 146 Minn. 214, 217, 178 N.W. 582, 583 (1920), this court stated: The motives prompting the breach of a contract are immaterial, so far as the rule of damages is concerned, and, however malicious or wrongful, the measure of compensation remains the same. North v. Johnson, 58 Minn. 242, 59 N.W. 1012; 1 Sutherland, Dam. § 99. That is settled law, with few exceptions referred to in Beaulieu v. Great Northern Ry. Co., 103 Minn. 47, 114 N.W. 353, 19 L.R.A. (N.S.) 564, 14 Ann.Cas. 462,   . See, also, 5B Dunnell, Dig. (3 ed.) § 2559. A malicious or bad-faith motive in breaching a contract does not convert a contract action into a tort action. Accordingly, we think that bad-faith termination of contract is not an independent tort of the kind that will permit a tort recovery.