Rodgers v. Tecumseh Bank

Citations: 756 P.2d 1223; 1988 WL 32722Docket: 61928

Court: Supreme Court of Oklahoma; April 13, 1988; Oklahoma; State Supreme Court

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The case involves Douglas E. Rodgers and others (the Borrowers) appealing a summary judgment in favor of Tecumseh Bank (the Bank) regarding a promissory note and real estate mortgage. The central issue is whether the implied duty of good faith and fair dealing, typically applied in insurance contracts, should also apply to commercial loan contracts to support a claim of 'tortious breach of contract.' The Borrowers asserted their loan was for two years, citing a provision allowing renewal without penalty, while the Bank contended the loan was for one year with no extension agreement. The Bank argued that the disputed renewal clause was added to encourage timely payments and that it had informed the Borrowers that renewal would not be granted. After the Borrowers settled their loan, they filed a lawsuit alleging breach of contract. Both parties sought summary judgment, which the district court granted to the Bank after a pre-trial conference, where the Borrowers were absent. 

The court's analysis of the summary judgment motion emphasized that all facts must be viewed favorably for the opposing party, and summary judgment is only appropriate when no material facts are in dispute. Under Oklahoma law, contracts are interpreted against the drafter, with a focus on the parties' intent. The court ruled that the note and mortgage should be read together, noting that any handwritten or typed additions to a printed contract take precedence over conflicting printed terms, thus affirming the refinancing provision as part of the agreement.

An interpretation that validates a provision within an agreement is favored over one that renders it meaningless. The bank's assertion that the provision merely encouraged payment is rejected; the borrowers had a clear legal obligation to repay the bank under the modified contract terms. The court dismisses the bank's claims of lack of benefit, absence of independent consideration, and withdrawal of the offer as unfounded, noting the provision was intended to motivate the borrowers to enter the contract. The trial court erred by dismissing the borrowers' breach of contract claim, as a contrary ruling would require rewriting the contract, which the court will not do. On remand, the trial court must grant partial summary judgment in favor of the borrowers regarding their breach of contract claim, pending only the assessment of compensatory damages.

Regarding the borrowers' request to extend the duty of good faith and fair dealing, established in Christian v. American Home Assurance Co., to commercial loan agreements, the court declines. It distinguishes between insurance policies—characterized as adhesion contracts, where one party has significantly more bargaining power—and the commercial loan agreement in question, which involved equitable negotiation and no inherent disparities in bargaining strength. The nature of insurance contracts, aimed at risk elimination, contrasts with the commercial loan agreement, which does not share this characteristic. Thus, the court reiterates that the implied duty of good faith and fair dealing is specific to insurers and does not extend to commercial lending relationships.

A special relationship exists between insurers and insureds, acknowledging the economic disparity and differing bargaining power, as the insured seeks protection against accidental losses rather than commercial gain. In contrast, commercial loans are intended to support business risks. In the absence of a special relationship, parties are free to contract within lawful limits, and imposing tort liability for every contract breach could deter commercial activities. However, instances of gross recklessness or wanton negligence could justify a tortious breach claim. The case referenced, Christian, identifies a statutory duty for insurers to promptly pay claims, and commercial transactions carry a good faith obligation. Each contract inherently includes a mutual covenant of good faith. The borrowers' alternative theory of tortious breach is based solely on the contract, lacking an independent tort basis, leading to the dismissal of that claim. The trial court's order is partially reversed and partially affirmed, with the case remanded for further proceedings consistent with this opinion.