Court Opinion

ID: 5165595
Source: CourtListenerOpinion
Date Created: 2022-01-02 03:31:03.545622+00
Date Added: 2024-06-11T13:57:12.902026
License: Public Domain

I concur in the main opinion's holding regarding the Continuous Operation Clause of the parties' lease. That issue was properly decided by the jury. I dissent, however, from the main opinion's holdings regarding (1) the implied covenant of good faith and fair dealing, and (2) unlawful detainer. Those issues should have been resolved by the trial court, as a matter of law.
 (1) Implied Covenant of Good Faith and Fair Dealing
Olympus Hills Shopping Center Ltd. (Olympus Hills) argued before the trial court that the decision of Smith's Food Drug Centers (Smiths) to replace its full-service supermarket with a Buy 'N Save discount supermarket breached the Use Clause in the lease and the implied covenant of good faith and fair dealing. Smiths moved for summary judgment on Olympus Hills's claims. The trial court granted Smiths's motion, only in part, ruling that the Use Clause unambiguously "allows commercial operations beyond a supermarket, drugstore and pharmacy" and that "[t]he only limitations are that defendant's operations be at the retail level and not compete with other major tenants." The trial court nonetheless denied Smiths's motion as to the implied covenant of good faith and fair dealing and allowed that issue to go to the jury. Specifically, the trial court instructed the jury to decide whether
 Smith's violated the covenant of good faith and fair dealing . . . by either unreasonably, unfairly or in bad faith exercising its discretion to change uses by shutting down *Page 463 
the supermarket, drug and pharmacy operation . . . and opening in its place . . . a warehouse box store, said use being designed to force established and potential customer traffic . . . to shop at Smith's newly opened superstore, drugstore and pharmacy. . . .
At the end of Olympus Hills's case, the trial court denied Smiths's motion for a directed verdict. The jury found that Smiths breached the covenant of good faith and fair dealing under the Use Clause, despite the trial court's earlier summary judgment holding that Smiths had complied with the Use Clause as a matter of law.
Smiths argues on appeal that the trial court erred by denying its motion for summary judgment on the issue of whether it breached the implied covenant of good faith and fair dealing and by allowing this issue to go to the jury.1 Smiths further argues that the trial court erred by denying its motion for a directed verdict. Both arguments have merit.
The main opinion recognizes that "Smith's is correct in its statement of the law that courts will not imply duties that are different from or contradictory to express rights in the contract." However, the main opinion then completely ignores its own statement of the controlling law and sanctions the use of the implied covenant of good faith and fair dealing as a tool to create duties and obligations in direct conflict with express contractual provisions.
A covenant of good faith and fair dealing inheres to most contractual relationships by operation of law. See Brehany v.Nordstrom, Inc., 812 P.2d 49, 55 (Utah 1991); St. Benedict'sDev. Co. v. St. Benedict's Hosp., 811 P.2d 194, 199 (Utah 1991); Seare v. University of Utah Sch. of Medicine,882 P.2d 673, 678 (Utah App. 1994). The purpose of the covenant of good faith and fair dealing is to insure that neither party will "intentionally or purposely do anything which will destroy or injure the other party's right to receive the fruits of the contract." St. Benedict's, 811 P.2d at 199; accord Bastian v.Cedar Hills Inv. Land Co., 632 P.2d 818, 821 (Utah 1981).
An implied covenant of good faith and fair dealing may not, however, be used to create a duty that is inconsistent with express terms of the contract. In Brehany, the Utah Supreme Court stated:
 Under the implied covenant of good faith . . . the parties of a contract are deemed to intend that the terms of a contract should be construed in a manner which assumes the parties intended that the duties and rights created by the contract should be performed and exercised in good faith. Such a covenant cannot be construed, however, to establish new, independent rights or duties not agreed upon by the parties. Nor can a covenant of good faith be used to nullify a right granted by a contract to one of the parties or to require a party vested with a contract right to exercise that right in a manner contrary to that party's legitimate self-interest.
Brehany, 812 P.2d at 55 (emphasis added). The supreme court further stated that "[n]o obligation can be implied . . . which would be inconsistent with the other terms of the contractual relationship." Id. (quoting Murphy v. American Home Prod.,58 N.Y.2d 293, 461 N.Y.S.2d 232, 237, 448 N.E.2d 86, 91 (1983));accord Rio Algom Corp. v. Jimco Ltd., 618 P.2d 497, 505 (Utah 1980). Similarly, in Seare, 882 P.2d at 678, the court of appeals stated:
 Although contracts are subject to implied covenants of good faith, such covenants " 'cannot be construed . . . to establish new, independent rights or duties not agreed upon by the parties.' " Sanderson v. First Sec. Leasing Co., 844 P.2d 303, 308 (Utah 1992) (quoting Brehany v. Nordstrom, Inc., 812 P.2d 49, 55 (Utah 1991)). Thus, these covenants are implied in contracts "to protect the express covenants or promises of the contract. . . ." Peterson v. *Page 464 Browning, 832 P.2d 1280, 1284 (Utah 1992) (quoting Foley v. Interactive Data Corp., 47 Cal.3d 654, 254 Cal.Rptr. 211, 232, 765 P.2d 373, 394 (1988)).
Judge Greenwood, writing for the court, explained inSeare that where there are no express covenants or promises in a contract compelling a party to the contract to act in a particular manner, "there could be no implied covenants or promises to do the same." Id. 882 P.2d at 678-79.
In Ted R. Brown and Associates v. Carnes Corp., 753 P.2d 964
(Utah App. 1988), Judge Jackson likewise rejected the notion that the implied covenant of good faith and fair dealing can be used to rewrite a contract.
 It is fundamental that every contract imposes a duty on the parties to exercise their contractual rights and perform their contractual obligations reasonably and in good faith. Nonetheless, a court may not make a better contract for the parties than they have made for themselves; furthermore, a court may not enforce asserted rights not supported by the contract itself. "[I]t cannot be adopted as a general precept of contract law that, whenever one party to a contract can show injury flowing from the exercise of a contract right by the other, a basis for relief will be somehow devised by the courts."
Id. at 970-71 (quoting Mann v. American W. Life Ins. Co.,586 P.2d 461, 464 (Utah 1978) (citations omitted)).
In Woodland Theatres, Inc. v. ABC Intermountain Theatres,Inc., 560 P.2d 700 (Utah 1977), the Utah Supreme Court examined how a court should interpret and enforce an implied covenant:
 An implied covenant must rest entirely on the presumed intention of the parties as gathered from the terms as actually expressed in the written instrument itself, and it must appear that it was so clearly within the contemplation of the parties that they deemed it unnecessary to express it and therefore omitted to do so; or it must appear that it is necessary to infer such a covenant in order to effectuate the full purpose of the contract as a whole as gathered from the written instrument. It is not enough to say that an implied covenant is necessary in order to make the contract fair, or that without such a covenant it would be improvident or unwise, or that the contract would operate unjustly. It must arise from the presumed intention of the parties as gathered from the instrument as a whole.
Id. at 703 (quoting Percoff v. Solomon, 67 So.2d 31, 40 (Ala. 1953)). The court further stated that "[w]hile we must enforce the lease in accordance with the intent of the parties, we must find that intent from the language of the lease itself, especially when it is clearly expressed." Id. (quoting Flowersv. Wrights, Inc., 119 Utah 378, 383, 227 P.2d 768, 771 (1951)). The court also noted that "[a]n express covenant on a given subject matter excludes the possibility of an implied covenant of a different or contradictory nature." Id.
In the present case, the Use Clause in the lease provided:
 Lessee may use the demised building for conducting therein the business of a supermarket, drug store and pharmacy or any other lawful retail selling business not directly in conflict or competition with another major tenant in the shopping center.
Lessee's use as a supermarket, drug store and pharmacy shall be exclusive in the Center, so long as lessee operates as a supermarket, drug store or pharmacy.
(Emphasis added.) Under this express provision, and as recognized by the trial court, Smiths's operation of "any lawful retail selling business" would satisfy the provisions of the lease so long as the use did not compete with "another major tenant."
The trial court correctly held that Smiths complied with this express provision of the lease, as a matter of law, when it opened its Buy 'N Save store in the leased premises.2 There is no dispute that the Buy 'N Save *Page 465 
store was a "lawful retail selling business" not in direct competition with "another major tenant" of the shopping center. Smiths complied with the express covenants of the Use Clause and, as a matter of law, there can be no implied covenants that are inconsistent. See Seare, 882 P.2d at 678-79. Since the express covenants or promises did not require Smiths to operate anything more than a "lawful retail selling business" that did not compete with another major tenant, there could be no implied covenants or promises compelling Smiths to do otherwise. Id. Therefore, I would hold that the trial court erred in denying Smiths's motion for summary judgment on the issue of the implied covenant of good faith and fair dealing.
Because the main opinion erroneously upholds the trial court's denial of Smiths's motion for summary judgment on the covenant of good faith and fair dealing, it also erroneously upholds the trial court's decision to admit evidence going to the alleged breach of the covenant of good faith and fair dealing. Specifically, the trial court erroneously allowed the following evidence to be admitted: (1) evidence that traffic counts at the shopping center were sixty-percent lower after Smiths's change of use; (2) evidence that another business in the shopping center was adversely affected by Smiths's change of use; and (3) evidence that the highest and best use of the premises was as a full-service supermarket.3 The trial court admitted this evidence on the ground that it was relevant to determine whether Smiths had breached its covenant of good faith and fair dealing. Smiths correctly argues that this evidence was both irrelevant and highly prejudicial because it allowed the jury to evaluate the decision to open its Buy 'N Save store from the perspective that Smiths had the duty act to as an "anchor tenant" in order to benefit all tenants of the shopping center.
In Woodland Theatres, the plaintiff argued that the lessee had an implied duty "to operate the theatre in a prudent, diligent, and businesslike manner; so as to maximize the revenue with resulting benefit to lessor. . . ." 560 P.2d at 701. The supreme court rejected the plaintiff's argument as being contrary to express provisions in the lease.
 The lease instrument itself throughout paragraph 2, by its express provisions, clearly negates the implied covenant urged by lessor. In describing the designated percentage of the gross admission receipts and gross concession receipts, as well as the means of computation and time of payment, the contract repeats four times the term "if any" to indicate that there was no express representation the lessee would conduct a sufficient volume of business to guarantee payment. If there were any doubt as to the intention of the parties an express provision of the instrument clarifies the matter.
 "The lessee in no way guarantees that there shall be any percentage rental earned and due and payable under the terms and conditions of this Lease."
 An express covenant on a given subject matter excludes the possibility of an implied covenant of a different or contradictory nature. The lessor's asserted implied covenant cannot be sustained, in view of the foregoing express provision.
Id. at 703 (citations omitted).
The lease in the present case expressly provided that "[l]essee makes no representation or warranty as to the sales which it expects to make in the leased premises." This provision is similar to that in Woodland Theatres. Smiths expressly disavowed any representation or warranty as to the level of sales it would make in the leased premises. *Page 466 
It was therefore not reasonable, as the main opinion suggests, for Olympus Hills to expect that Smiths would operate as an "anchor tenant" and thereby benefit all other tenants.
If Olympus Hills wanted Smiths to operate a particular kind of business with a certain volume of customers it could have so specified in the lease. It did not do so. The parties are now bound by the contract they signed, and the contract should not be rewritten by a court merely because one of the parties to the contract is dissatisfied with its bargain. See Brown, 753 P.2d at 970-71 ("a court may not make a better contract for the parties than they have made for themselves. . . . '[I]t cannot be adopted as a general precept of contract law that, whenever one party to a contract can show injury flowing from the exercise of a contract right by the other, a basis for relief will be somehow devised by the courts.' ") (quoting Mann, 586 P.2d at 464).
 (2) Unlawful Detainer
Two weeks after the notice of unlawful detainer or termination, Olympus Hills accepted and negotiated Smiths's rental check. Smiths argues that by accepting rent, Olympus Hills waived any defaults of which it had knowledge. I agree.
The main opinion recognizes that acceptance of rent payments constitutes a waiver of a claim for breach under Utah law.See Girard v. Appleby, 660 P.2d 245, 248 (Utah 1983); WoodlandTheatres, 560 P.2d at 701. The main opinion attempts to avoid this controlling precedent by relying on cases from other jurisdictions that have held otherwise.
In Woodland Theatres, the Utah Supreme Court addressed the question of whether acceptance of rent payments waved the lessor's right to enforce a forfeiture. The court stated:
 Where, by reason of a breach of a condition, a lease becomes forfeited, the lessor is entitled to recover possession. He waives that right by the acceptance of rent. He cannot accept the rent, and at the same time claim a forfeiture of the lease.
Id. (quoting Brigham Young Trust Co. v. Wagener, 13 Utah 236,241, 44 P. 1030, 1031 (1896)). The court further stated:
 A landlord seeking enforcement of a forfeiture must take care not to do anything which may be deemed an acknowledgement of a continuation of the tenancy. Any act done by a landlord knowing of a cause for forfeiture by his tenant, affirming the existence of the lease and recognizing the lessee as his tenant, is a waiver of such forfeiture.
 If the lessor receives rent from the lessee after full notice or knowledge of the broken covenant or condition, he cannot thereafter assert his rights of forfeiture given by the lease, notwithstanding express denial of the waiver upon acceptance of the rent.
Id. 560 P.2d at 702 (quoting 3A Thompson On Real Property (1959 Replacement), Sec. 1328, p. 576). The court concluded that since the lessor accepted rental payments after the default, the lessor was precluded from seeking forfeiture. Id.
In the present case, where Olympus Hills accepted and negotiated a rent check after filing a notice of default, it is precluded, as a matter of law, from seeking damages for unlawful detainer.
 CONCLUSION
I would hold that Smiths complied with the express provisions of its lease with Olympus Hills and was entitled to judgment, as a matter of law, on Olympus Hills's claim for breach of the covenant of good faith and fair dealing. I would also hold, as a matter of law, that Olympus Hills's acceptance of a rent check waived its right to seek damages for unlawful detainer.
1 Summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Landes v. Capital City Bank,795 P.2d 1127, 1129 (Utah 1990); accord Utah R.Civ.P. 56(c). Because the underlying facts are undisputed, the trial court's denial of Smiths's motion should be reviewed as a matter of law. Estate Landscape v. Mountain States Tel. Co.,844 P.2d 322, 326 (Utah 1992).
2 Smiths initially sought permission from Olympus Hills to sublet the space to REI, a national chain of sporting goods stores. REI was also a lawful retail selling business that would not have directly competed with another major tenant. Olympus Hills refused Smiths's reasonable request to sublet the space.
3 The main opinion rewrites the contract to include a "reasonable" economic use provision, and then holds that the Buy 'N Save was not such a use and that Smiths therefore breached its duty of good faith and fair dealing. Perhaps, in retrospect, the Buy 'N Save was not the best economic use of the leased premises. However, this fact, whether accurate or inaccurate, is immaterial. Nothing in the lease mandates that Smiths make the best possible use of the premises. The main opinion goes on to hold that the "highest and best use" of the premises was a full-service supermarket rather than a discount supermarket. The lease, however, does not require Smiths to operate a supermarket of either type. The unambiguous language of the lease simply does not support the main opinion's position. Woodland Theatres, 560 P.2d at 703 ("An implied covenant must rest entirely on the presumed intention of the parties as gathered from the terms as actually expressed in the written instrument itself"). *Page 467