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Best v. United States National Bank

Citation. 739 P.2d 554 (1987)
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Brief Fact Summary.

Plaintiffs, individually and as representatives of a class of depositors, sued Defendant, claiming that Defendant’s NSF fees greatly exceeded Defendant’s costs of processing the NSF checks; that Defendant breached its obligation to set NSF fees in good faith; and that the NSF fees were unconscionable.The trial court granted summary judgment to Defendant. The court of appeals reversed on the breach of good faith claim, but affirmed the circuit court’s judgment on the remaining claims. Plaintiffs appealed.

Synopsis of Rule of Law.

If a party is given discretion in performance of an aspect of the contract, he performs in bad faith when exercising that discretion for purposes not contemplated by the parties.

Facts.

As part of its regular business United States National Bank (Defendant) charged fees to account holders for nonsufficient-fund (NSF) checks (checks drawn where the account holder did not have enough money in their account to fulfill payment). Between 1973 and 1979 Defendant increased its fee from $3 to $5 per check. Charged for NSF checks, Lonnie and Teresa Best (Plaintiffs) sued individually and as representatives of a class of depositors. Plaintiffs claimed that the NSF fees greatly exceeded Defendant’s costs of processing the NSF checks; that Defendant breached its obligation to set NSF fees in good faith; and that the NSF fees were unconscionable. The circuit court granted summary judgment to the bank, and Plaintiffs appealed. The court of appeals reversed the circuit court on the breach of good faith claim, but affirmed the circuit court’s judgment on the remaining claims. Plaintiffs appealed.

Issue.

Whether a change in fee structure violates the reasonable contractual expectation of the parties.

Held.

No. The trial court’s ruling is reversed. If a party is given discretion in performance of an aspect of the contract, he performs in bad faith when exercising that discretion for purposes not contemplated by the parties.

Discussion.

Plaintiffs argue first that the changes in fees were unconscionable. The doctrine of unconscionability applies only at the time of contract formation and not to contract performance. Here, the specific fee charged was not part of Plaintiffs’ account agreement but was part of Defendant’s performance of the account agreement because the fee was not set out in the agreement itself but was left to the discretion of the bank. There was no evidence offered that Defendant took advantage of Plaintiffs. Plaintiffs do not offer evidence that they were not of ordinary experience or intelligence or that Defendant obtained anything through improper means. On the issue of good faith, the amount of the fee itself is not sufficient to infer bad faith on the part of Defendant. Whether a specified fee violates the obligation of good faith is determined by the reasonable contractual expectations of the parties. Summary judgment is not appropriate here because a genuine issue of material fact remains. The trier of fact can infer from the fact that the fees were not disclosed to depositors and were set in excess of the bank’s costs that Defendant breached its obligation of good faith.


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