Court Opinion

ID: 9559296
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:25:56.288032+00
Date Added: 2024-06-11T09:10:32.457253
License: Public Domain

Chief Justice VOLLACK
concurring in part and dissenting in part:
The majority holds that the petitioner, Amoco Oil Company (Amoco), breached an implied covenant of good faith and fair dealing with the respondents, several of its Colorado dealers. The majority then reverses the court of appeals’ holding that Amoco tortiously interfered with the Dealers’ pro-*505speetive business relationships by applying “economic pressure” to those relationships.
I dissent from the portion of the majority’s opinion that holds that the implied covenant of good faith and fair dealing may be utilized to limit or rewrite the rent and rent modification provisions of the lease agreements in this case. I concur with the majority’s holding that liability against Amoco for tortious interference is precluded by the principle that competitors who do not engage in wrongful means are shielded from liability for tortious interference.
I.
Amoco is in the business of selling gasoline. It does so through a dual distribution scheme whereby (1) Amoco sells its gasoline to its independent dealers, including the respondents, who then resell it to the public, and (2) Amoco sells gasoline directly to the public through its company owned and operated stations. The respondents in this case are a group of sixteen Amoco-branded service station dealers (the Dealers).
Amoco leases gasoline stations to the Dealers and is thus the Dealers’ landlord. Each Dealer executed a written lease agreement with Amoco for a term from one to three years. Each lease agreement specifies the monthly rent that the Dealer agreed to pay Amoco.1 The leases also contain a modification of rental provision in which Amoco reserved the right to modify the amount of monthly rent of leases for more than one year.2 The provision only allows Amoco to increase the rent on the anniversary of the commencement of the lease, and only with ninety days’ notice to the lessee. The lease also contains an integration, cancellation and merger clause.3
From 1985 forward, Amoco used what it called its “Investment Value Rent program” (IVR program) to calculate the amount of rent it charged each of its lessees. Through this program, Amoco calculated the amount of rent based on the value of the service station. The IVR program was not any part of the lease agreements, nor did the lease agreements contain any other indication of how the rent was calculated.
On June 20, 1988, the sixteen respondents filed the instant action against Amoco, alleging, inter alia, breaches of contract and tor-tious interference with prospective business relationships. In October of 1990, the jury found against Amoco for breaching an implied covenant of good faith and fair dealing and for tortious interference. The district court subsequently entered judgment against Amoco for more than $2.5 million.
On appeal, the court of appeals affirmed the judgment of the district court and verdict of the jury. The court held, inter alia, that a reasonable jury could have found that Amoco breached its implied covenant of good faith and fair dealing to the Dealers because the Dealers submitted evidence that Amoco used redundant charges when calculating the Dealers’ monthly rent through the IVR pro*506gram. The court of appeals also rejected Amoco’s assertion that the merger and integration clause precluded application of the implied covenant of good faith and fair dealing. The court also held that the trial court did not err by allowing the jury to decide that Amoco had applied economic pressure to the Dealers, thereby tortiously interfering with the Dealer’s prospective business relationships. Finally, the court rejected Amoco’s affirmative defenses that the imposition of liability against Amoco for breach of an implied covenant of good faith and fair dealing violates the preemption provisions of the Petroleum Marketing Practices Act, and that imposition of liability against Amoco for tor-tious interference conflicts with federal and state antitrust law. We subsequently granted Amoco’s petition for certiorari.
II.
Although I agree with the majority that, in Colorado, the law imposes a duty of good faith and fair dealing upon all contracts, I disagree with the majority’s conclusion that it was proper to allow the jury to use this principle to materially rewrite unambiguous express provisions of the lease agreements between Amoco and the .Dealers. I would hold that the trial court acted improperly when it allowed the jury to (1) relieve the Dealers from the obligation to pay their rents and preclude Amoco from collecting those rents, (2) substitute the express rent terms in the lease agreements with lower amounts fashioned by the jury, and (3) delete entirely a paragraph barring implied covenants and modifications absent written agreement of both parties.
Written contracts that are complete and free from ambiguity will be enforced according to the plain language of their terms. In Re May, 756 P.2d 362, 369 (Colo.1988). Thus, when the contract is unambiguous, extrinsic evidence may not be employed to interpret the contract. Barnes v. Van Schaack Mortgage, 787 P.2d 207, 209 (Colo.App.1990). While it is teue that every contract contains an implied duty of good faith and fair dealing, Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2d 1359, 1362 (Colo.App.1994) (citing Restatement (Second) of Contracts § 205 (1981)), the essence of the implied covenant of good faith and fair dealing is the protection of the reasonable expectations of the parties. Big Horn Coal Co. v. Commonwealth Edison Co., 852 F.2d 1259, 1267 (10th Cir.1988) (citing E. Allan Farnsworth, Good Faith Performance and Commercial Reasonableness under the Uniform Commercial Code, 30 U.Chi.L.Rev. 666, 670 (1963)). In Big Horn, the Court of Appeals for the Tenth Circuit explained:
Although good faith is generally applicable to all contract provisions, “it is possible to so draw a contract as to leave decisions absolutely to the uncontrolled discretion of one of the parties and in such a ease the issue of good faith is irrelevant.” ... In such a case the reason for invoking the provision is irrelevant. The reason may be purely a whim or caprice; all that matters is that proper notice is given. The rationale behind [this rule] is that the parties expressly contracted for the unconditional right and thus they cannot reasonably expect any special implied protection from terminating the contract other than the proper written notice.
Big Horn, 852 F.2d at 1267-68 (quoting Tymshare, Inc. v. Covell, 727 F.2d 1145, 1153 (D.C.Cir.1984) (Sealia, J.)) (emphasis added); accord Flight Concepts Ltd. Partnership v. Boeing Co., 38 F.3d 1152, 1157 (10th Cir.1994) (“Although the doctrine is generally implied for all contract provisions, it is irrelevant where the contract is drawn so as to leave a decision to the ‘uncontrolled’ discretion of one of the parties.”); Devery Implement Co. v. J.I. Case Co., 944 F.2d 724, 729 (10th Cir.1991).
I would apply the same reasoning employed by the Tenth Circuit in Big Horn to the instant case and hold that the implied covenant of good faith and fair dealing may not be utilized to limit the rent or modification provisions of the lease agreements in this case.4 The modification clause in the *507lease agreements gives Amoco absolute discretion to modify a dealer’s rent so long as Amoco gives adequate notice to that dealer. The reason for the modification is thus entirely irrelevant; the only duty imposed on Amoco by the express terms of the contract is to give notice to a dealer before modifying the rent.5 The Dealers and Amoco, as sophisticated businesspersons, expressly agreed to a contract term that allowed Amoco unfettered discretion in modifying the rent. The Dealers should not now be permitted to maintain the untenable position that they did not reasonably expect Amoco to exercise this legal right under the lease agreements.
To hold otherwise would allow the Dealers to use the jury as a tool to renegotiate the lease agreements after their legal formation. This would cut off Amoco’s right to enter into any legal contract and to exercise its lawful rights thereunder. Here, Amoco exercised its right to offer lease property and equipment to the Dealer. Amoco had the right to make the offer on any terms it desired, whether subject to negotiation or not. Amoco was not legally bound to extend the offer, much less negotiate its terms. The Dealers then had the option, at their complete discretion, to accept or reject Amoeo’s offer. Once the Dealers accepted the offer, an express contract was formed, the rent and modification terms conveying absolute discretion to Amoco. In light of this unfettered discretion, I would hold, as a matter of law, that the Dealers could have had no reasonable expectation that Amoco would not exercise its legal right to modify the rent as provided in the lease agreement. I would thus hold that the implied covenant of good faith and fair dealing may not be utilized to limit the rent or modification provisions of the lease agreements in this case.6
III.
Because I disagree with the utilization of the implied covenant of good faith and fair dealing to rewrite the rent and rent modification provisions of the lease agreements in this case, I respectfully dissent from part II of the majority’s opinion. I concur with the majority’s holding that liability against Amoco for tortious interference is precluded by the principle that competitors who do not engage in wrongful means are shielded from liability for tortious interference.
*508I am authorized to say that Justice MUL-LARKEY joins in this concurrence and dissent.

. These provisions uniformly stated: "Rental. Lessee shall pay to Lessor as rent for the Premises, the sum of $[varying amounts] per month during the term of this Lease

. This provision states:
Modification of Rental. In the event that the original term of this Lease is for more than one year, each year of said term Lessor reserves the right to modify the monthly rental specified above to conform with Lessor's established policy rental in effect for this type facility as of each anniversary date of the commencement of the term by giving Lessee at least ninety (90) days’ advance written notice of such changed rental, and Lessee shall have the right at any time during said ninety (90) day period to terminate this Lease upon giving Lessor fifteen (15) days' notice in writing.

. This provision states:
Entire Agreement. This Lease cancels and supersedes all prior written and unwritten agreements and understandings between the parties pertaining to the matters covered in this Lease. No obligations, agreement [sic] or understandings shall be implied from any of the terms and provisions of this Lease, all obligations, agreements and understandings with respect to the subject matter hereof being expressly set forth herein. No representations or statements, other than those expressly set forth herein, were relied upon by the parties in entering into this Lease. No modification or waiver of, addition to, or deletion from the terms of this Lease shall be effective unless reduced to writing and signed by Lessee and a representative of Lessor authorized to execute this Lease.

. Although § 4-1-203, 2 C.R.S. (1992), states that "[e]veiy contract or duty within this title imposes an obligation of good faith in its perfor-manee or enforcement,” § 4-1-102(3), 2 C.R.S. (1992), provides that "parties may by agreement determine the standards by which the perfor-*507manee of [good faith] is to be measured if such standards are not manifestly unreasonable.” By imposing no limitation on Amoco’s right to modify the rent, the parties in the instant case contracted for a standard of absolute discretion with regard to that provision. The reasonable expectations of the parties are thus guided by that standard as provided by § 4-2-102.

. The Dealers do not allege that Amoco failed to give them proper notice.

. Even if I agreed that utilization of the implied covenant of good faith and fair dealing was appropriate in this case, I would hold that the trial court improperly allowed the jury to use the covenant to reform express provisions of the lease agreements. In Wells Fargo Realty Advisors Funding, Inc. v. Uioli, Inc., 872 P.2d 1359 (Colo.App.1994), the court of appeals stated:
[T]he duty of good faith and fair dealing does not obligate a party to accept a material change in the terms of the contract or to assume obligations that vary or contradict the contract’s express provisions. Nor does the duty of good faith and fair dealing inject substantive terms into the parties’ contract. Rather, it requires only that the parties perform in good faith the obligations imposed by their agreement.
... When one party uses discretion conferred by the contract to act dishonestly or to act outside of accepted commercial practices to deprive the other party of the benefit of the contract, the contract is breached.
Id. at 1363 (citations omitted); see also Abbott v. Amoco, 249 Ill.App.3d 774, 189 Ill.Dec. 88, 97-98, 619 N.E.2d 789, 798-99 appeal denied, 153 Ill.2d 557, 191 Ill.Dec. 616, 624 N.E.2d 804 (1993).
Applying the above reasoning to the case at bar, I would hold that the trial court erred by allowing the jury to (1) relieve the Dealers from the obligation to pay their rents and preclude Amoco from collecting those rents; (2) substitute the express rent terms in the lease agreements with lower amounts fashioned by the jury; and (3) delete entirely a paragraph barring implied covenants and modifications absent written agreement of both parties. By doing so, the trial court obligated Amoco to accept material changes in the terms of the contract and to assume obligations contradictory to the express provisions of the lease agreements. This was in direct contravention of the Wells Fargo principles articulated above and I would reverse on that basis.