Brief Fact Summary. Market Street Associates Limited Partnership (Plaintiff), lessee, brought an action against Dale Frey (Defendant), lessor, alleging breach of lease. Plaintiff appealed from a judgment of the district court granting summary judgment for the Defendant.
Synopsis of Rule of Law. There is a duty of good faith implied in every contract, which states that there is an implied undertaking by the parties not to take advantage in way that could not have been contemplated at the time of drafting the contract and which was not resolved by the parties.
In fact the law contemplates that people frequently will take advantage of the ignorance of those with whom they contract, without thereby incurring liability.View Full Point of Law
Issue. Whether the Plaintiff violated the implied duty of good faith under the lease agreement?
Held. A question of whether the Plaintiff violated the implied duty of good faith exists. Judgment reversed and remanded.
There is a genuine issue of fact as to whether Plaintiff acted in bad faith in failing to point out to the Defendant, a paragraph in the lease which gave lessee right to purchase property under terms specified in that paragraph in the event negotiations over financing improvements to property broke down. The duty of good faith is not a duty of candor. You can make a contract to purchase something that you know your seller undervalues. However, you may not take advantage of an oversight by your contract partner concerning his rights under the contract. This is sharp dealing and may be actionable as fraud or deceit. However, this is a contact case and not a tort case so the conduct may not rise to the level of fraud necessary to violate the duty of good faith. Therefore, the duty of good faith is between a fiduciary duty and the duty to refrain from fraud. Good faith is an implied undertaking not to take advantage in way that could not have been contemplated at the time of drafting an
d which therefore was not resolved explicitly by the parties. Emphasis is put on the post-contractual rather than the pre-contractual stage.
Here, Plaintiff tried to trick the Defendant and succeeded in doing so. Plaintiff did not want financing from the Defendant and when it learned that it could not get the financing without owning the property the Plaintiff wanted to purchase the property. Therefore, Plaintiff tried to trick the Defendant into forcing them to sell the Plaintiff the property under paragraph 34 by not mentioning it in the various letters requesting financing. However, the facts must be construed in favor of the nonmoving party when a motion for summary judgment is before the court. Thus, it could appear that the Plaintiff was not at fault. Therefore, there is a genuine issue of fact whether the Plaintiff acted in good faith and the Motion for Summary Judgment should be dismissed.
Discussion. This case also had a jurisdictional issue; the suit was filed in a Wisconsin state court and removed to federal district court. Defendants were required to file a petition for removal to federal court. In this petition, there was a mistake as to the citizenship that counts in the case of a limited partnership, and it stated that the partnership was a resident of Wisconsin. However, the citizenship of all of the partners of the limited partnership needs to be taken into account. Affidavits proved that none of the Defendants were residents of Wisconsin. The court decided that there was complete diversity of citizenship, although not all of the limited partners are from Wisconsin, none of them are citizens of the same state as the Plaintiff.