Court Opinion

ID: 9657306
Source: CourtListenerOpinion
Date Created: 2023-08-23 20:19:37.968709+00
Date Added: 2024-06-11T18:13:43.118649
License: Public Domain

SABERS, Justice
(concurring in part and dissenting in part).
I concur in the majority opinion in affirming summary judgment on breach of a fiduciary duty and to the extent that it reverses the trial court’s grant of summary judgment on fraud and deceit and intentional infliction of emotional distress. However, I would go further and hold that the trial court erred in denying French leave to amend his complaint to include an action for breach of the covenant of good faith and fair dealing and in granting summary judgment on breach of contract.
1. Breach of the Covenant of Good Faith and Fair Dealing
Previously, I have urged this court to recognize an implied covenant of good faith and fair dealing in the employment context:
The duty to treat an employee fairly and in good faith arises in every employment relationship. An “at will” employee may be terminated for reasons other than “for cause,” but the duty imposed by the covenant of good faith and fair dealing requires that the employer exercise such good faith and fairness in termination decisions and proceedings, (emphasis in original).
Blote v. First Federal Savings and Loan Association, 422 N.W.2d 834, 839 (S.D.1988) (Sabers, J., dissenting).
The duty of good faith and fair dealing is well éstablished in the law of contracts. *293“Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” (emphasis added). 2 Restatement (Second), Contracts § 205 (1979). The comment to § 205 defines this contractual obligation:
Good faith is defined in Uniform Commercial Code § 1-201(19) as “honesty in fact in the conduct or transaction concerned.” ... Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party[.] (emphasis added).
2 Restatement (Second), Contracts § 205, comment a.
In this case French was told by Olson that his academic qualifications were no longer a problem. In fact, it is clear from the record that French’s "deficient” academic qualifications were never approved. This evidence shows a lack of “honesty in fact.” Further, French was told shortly before his dismissal that his job was secure. French alleges that this express assurance came from Olson even after French told Olson of his plans to buy a house if the job was secure. French’s reasonable and objective reliance upon these assurances at least gave rise to a “justified expectation” of fair treatment, if not continued employment.
The imposition of a covenant of good faith and fair dealing does not transform an employment contract terminable at the will of either party into a “for cause” employment contract. The obligation of good faith does not concern whether the employee was terminated for good cause. Rather, the obligation assures that employees will be treated fairly and equitably by employers.
The ultimate issue on appeal is whether the trial court erred in denying French’s motion to amend his pleading to include an action for breach of the implied covenant of good faith. SDCL 15-6-15(a) provides that, “a party may amend his pleading only by leave of court ... and leave shall be freely given when justice so requires.” (emphasis added). The grant or denial of this motion is reviewed by this court under an abuse of discretion standard. Behring-er v. Muchow, 72 S.D. 80, 30 N.W.2d 5 (1947). In view of these facts giving rise to the potential bad faith claim against the employer, justice would require that the motion to amend be granted. J.I. Case Threshing Mach. Co. v. Eichinger, 15 S.D. 530, 91 N.W. 82 (1902). I would hold that the trial court abused its discretion in not granting French leave to amend his complaint.
2. Breach of Contract
The majority concedes that French’s employment relationship with the Hospital was no longer one at will because of the provisions in the Hospital employment manual. Osterkamp v. Alkota Mfg., Inc., 332 N.W.2d 275 (S.D.1983). However, the majority holds that French was fired under the ninety-day probationary provision in the Hospital manual, and thus concludes that French’s termination was proper. In doing so the majority ignores the oral statements made to French by Olson. These statements create a jury question whether the Hospital breached its contract with P’rench and wrongfully terminated him.
The majority apparently concludes that the probationary provision in the Hospital manual is applicable to French by finding that the term department head, in relation to French, refers to Olson.1 Accepting the majority’s construction of the probationary provision, French approached Olson concerning job security nearly two and one-half months after French, had commenced working and close to the end of the ninety-day probationary period. French could certainly have had a reasonable expectation *294that Olson had already had “sufficient time” to evaluate French's performance and that the contingencies of his continued employment beyond the probationary period had been removed by Olson's assurance of job security.
An employer’s breach of an employee’s legitimate expectations of continued employment based upon the employer’s handbook may give rise to an action for wrongful termination. Woolley v. Hoffmann-La Roche, Inc., 99 N.J. 284, 491 A.2d 1257 (1985); Arie v. Intertherm, Inc., 648 S.W.2d 142 (Mo.App.1983); Toussaint v. Blue Cross & Blue Shield, 408 Mich. 579, 292 N.W.2d 880 (1980). The question of whether these circumstances created a legitimate expectation of continued employment, and French was improperly terminated under the Hospital manual, is a question for the jury. Toussaint, supra.
Apart from the contract created by the employment manual, a separate “for cause” employment relationship may have been created by the oral assurances of job security to French. Toussaint, often cited as a leading authority in the area of employment relationships,2 recognized that oral statements made by an employer, in addition to employment handbooks, may bind that employer to the employment relationship. The court in Toussaint stated that:
Toussaint testified that he was told he would be with the company “as long as I did my job.” Ebling testified that he was told that if he was “doing the job” he would not be discharged. Toussaint’s testimony, like Ebling’s, made submissive to the jury whether there was an agreement for a contract of employment terminable only for cause, (footnote omitted) (emphasis added).
Toussaint, 292 N.W.2d at 884.
Like the provisions of the Hospital manual, the alleged statements made by Olson may have bound the Hospital to the continued employment of French under Tous-saint. At the least, French should be permitted his day in court to present this evidence for a jury’s determination.
For the above reasons I would hold summary judgment was improperly granted on French’s breach of contract claim.

. The probationary provision in the Hospital’s manual states in part:
The first three months of employment shall be considered by the hospital as a 'probationary period’. This is a period for the employee to adjust to the hospital procedures and schedules. It also allows the department head sufficient time to evaluate the employee. At the end of the probationary period, the department head decides if the employee’s performance is satisfactory and if employment will be continued, (emphasis added).

. Sabetay v. Sterling Drug Inc., 69 N.Y.2d 329, 514 N.Y.S.2d 209, 506 N.E.2d 919 (1987); Helle v. Landmark Inc., 15 Ohio App.3d 1, 472 N.E.2d 765 (1984); Arie, supra; Simpson v. Western Graphics Corp., 293 Or. 96, 643 P.2d 1276 (1982); Hamby v. Genesco, Inc., 627 S.W.2d 373 (Tenn.App.1981).