holding that the law recognizes an implied covenant of good faith and fair dealing in all contractsSummary of this case from Kasey, Inc. v. Alpine Realty Now, Inc.
Docket No. 121694.
Decided March 2, 1992, at 9:05 A.M.
Alan R. Miller, P.C. (by Stephen B. Foley), for the plaintiff.
Keywell Rosenfeld (by Gary W. Klotz), for the defendants.
Before: JANSEN, P.J., and SULLIVAN and MARILYN KELLY, JJ.
This is a wrongful discharge case between plaintiff, John Hammond, and his former employers, defendants United Cable Television of Oakland County and others. Defendants appeal by leave granted from a circuit court order granting in part and denying in part their motion for summary disposition.
Defendants argue on appeal that plaintiff is precluded from bringing a breach of contract action, because he failed to tender back severance benefits he received upon resigning. They further contend that the trial court erred in finding a factual issue existed over whether plaintiff was constructively discharged. Lastly, defendants argue error in the court's recognition of a cause of action for breach of a covenant of good faith and fair dealing. We affirm in part and reverse in part.
Plaintiff was employed by defendants from February, 1983 to April, 1986. At the time he left, plaintiff was manager of programming services.
Plaintiff alleged that, when he was hired, Jim Anderson, defendants' then-general manager, promised him that he would be a long-term employee; he would have a position with defendants as long as he did a good job. Plaintiff also alleged that defendants' employee handbook established a policy under which he could be discharged only for just cause.
In October, 1985, Anderson was replaced by a new general manager, John Gash. Gash dismissed several managers hired by Anderson. On April 20, 1986, after hearing rumors that Gash might fire him, plaintiff asked Gash if his job was secure. According to plaintiff, Gash assured him that, because his performance was good, he would not be discharged.
However, the next day, Gash called plaintiff into his office and advised him that his position was being eliminated. Plaintiff alleged that Gash coerced him into signing a resignation document by "brandishing a knife." Plaintiff further alleged that, after he resigned, his position was not eliminated; other individuals later served as manager of programming services.
Plaintiff filed a complaint alleging multiple theories of liability including: breach of contract; breach of covenant of good faith and fair dealing; constructive discharge; discharge in violation of public policy; negligent discharge; fraud; and retaliatory discharge. The trial court granted defendants' motion for summary disposition except for the claims of breach of contract, constructive discharge and breach of covenant of good faith and fair dealing. MCR 2.116(C)(8) and (10). With respect to the good faith and fair dealing theory, the court explained:
[A]lthough Defendant cites numerous cases holding that Michigan does not recognize such a cause of action, all those cases refer to at will employment.
Thus, if Plaintiff can prove at trial that his employment was a just cause situation, he may also establish a breach of covenant of good faith and breach in the contract.
On appeal, defendants argue that the trial court should have dismissed all of plaintiff's claims. Plaintiff has not filed a cross appeal, and therefore review of the decision regarding those claims which were dismissed is not before us.
Defendants assert that plaintiff's breach of contract claim should have been dismissed; plaintiff failed to rescind his resignation by tendering back the severance pay and benefits he received as consideration. We disagree.
If an employee, upon leaving a job, releases his employer from liability in exchange for consideration, he must tender back the consideration before suing the employer. Stefanac v Cranbrook Educational Community (After Remand), 435 Mich. 155, 163; 458 N.W.2d 56 (1990); Leahan v Stroh Brewery Co, 420 Mich. 108, 112; 359 N.W.2d 524 (1984). The employee must place the employer in the position it was in prior to the settlement. Stefanac, 164 (quoting Kirl v Zinner, 274 Mich. 331, 334-335; 264 N.W. 391). A plaintiff is not entitled to retain the benefit of an agreement and at the same time bring suit in contravention of it. Id., 177.
For example, in Stefanac, the plaintiff signed a release stating that in exchange for two weeks' severance pay, she would
fully and forever release, acquit and discharge Cranbrook, its agents, servants and representatives of and from any and all claims, demands, actions and causes of action of every kind, nature and description which Stefanac may have had, may now have or may hereafter have of any matter, cause, act or omission arising out of or in connection with Stefanac's employment with and/or resignation from Cranbrook. [ Id., 160.]
Since Stefanac did not tender back the severance pay prior to, or simultaneous with, the filing of her lawsuit, our Supreme Court held that her complaint was properly dismissed. Id., 176-178. The other cases on which defendants rely contained similar settlement agreements releasing the employer from liability. See, e.g., Leahan, supra, 111; Davis v Bronson Methodist Hosp, 159 Mich. App. 251; 406 N.W.2d 201 (1986).
In the instant case, the document that plaintiff signed on his last day of work did not release defendants from liability. It simply provided that plaintiff was submitting his resignation and that he understood that he would receive two months' severance pay plus extended insurance benefits. It stated:
I, John Hammond, hereby submit my resignation from United Cable Television of Oakland County, effective immediately.
I understand that I will receive two months severance pay. . . .
Additionally, I understand that my insurance benefits will expire on June 30, 1986.
Since there was no provision in the document releasing defendants from a potential lawsuit, there was no requirement that plaintiff tender back the severance pay before filing a lawsuit. Defendants do not contend that the money was paid in exchange for an agreement that plaintiff not sue. Therefore, defendants remain in the position they were in prior to the signing of the document. Stefanac, 164. Furthermore, plaintiff is not bringing an action in contravention of the document; he never agreed not to sue. Stefanac, 177.
We also reject defendants' contention that the trial court erred in finding that a genuine issue of fact remained over whether plaintiff was constructively discharged. A constructive discharge occurs when an employer deliberately makes an employee's working conditions so intolerable that the employee is forced into an involuntary resignation. Mourad v Auto Club Ins Ass'n, 186 Mich. App. 715, 721; 465 N.W.2d 395 (1991).
In the instant case, plaintiff presented an affidavit stating that, at the time Gash fired him, Gash "was agitated and brandishing a knife and told me that I had no choice but to sign the [resignation] document." He further alleged that his resignation was not voluntary. Viewing these allegations in the light most favorable to plaintiff, a juror could reasonably conclude that plaintiff was forced to resign. MCR 2.116(C)(10); Farm Bureau Mutual Ins Co v Stark, 437 Mich. 175, 184-185; 468 N.W.2d 498 (1991); Mourad, 721.
At trial, defendants may introduce the resignation document and the fact that plaintiff received severance pay as evidence that he was not constructively discharged but rather resigned voluntarily. However, the fact that plaintiff received severance pay or that he never returned his severance pay does not, as a matter of law, defeat his constructive discharge claim.
We turn next to defendants' argument that plaintiff failed to state a claim for breach of the covenant of good faith and fair dealing. MCR 2.116(C)(8). Initially, we note that neither plaintiff nor defendants define this covenant. It has been said that the covenant of good faith and fair dealing is an implied promise contained in every contract "that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract." Fortune v National Cash Register Co, 373 Mass. 96, 104; 364 N.E.2d 1251 (1977); see also Dumas v Auto Club Ins Ass'n, 437 Mich. 521, 529, n 3; 473 N.W.2d 652 (1991), (concurring opinion by BOYLE, J.) 554-555, n 14; (dissenting opinion by LEVIN, J.) (citing Fortune, supra); Aragon-Hass v Family Security Ins Services, Inc, 231 Cal.App.3d 232, 237; 282 Cal.Rptr. 233 (1991); Foley v Interactive Data Corp, 47 Cal.3d 654; 254 Cal.Rptr. 211; 765 P.2d 373 (1988); 2 Restatement Contracts, 2d, § 205, p 99.
This Court has been unwilling to recognize a cause of action for breach of an implied covenant of good faith and fair dealing in cases involving at-will employment relationships. See Cockels v Int'l Business Expositions, Inc, 159 Mich. App. 30, 36-37; 406 N.W.2d 465 (1987), and cases cited therein. Moreover, contrary to the trial court's holding, we have refused to recognize the cause of action in cases involving just cause employment relationships as well. Dahlman v Oakland University, 172 Mich. App. 502; 432 N.W.2d 304 (1988). Accordingly, to the extent that the trial court held that plaintiff properly stated a cause of action for breach of the covenant of good faith, we reverse. MCR 2.116(C) (8).
Although Michigan has not recognized the covenant in the employment context, an employer's attempt to injure an employee's rights may be highly relevant in a standard breach of contract case. As suggested in the seminal case of Toussaint v Blue Cross Blue Shield of Michigan, the promise to act in good faith may be encompassed by a just cause contract:
408 Mich. 579, 623; 292 N.W.2d 880 (1980).
Where the employee has secured a promise not to be discharged except for cause, he has contracted for more than the employer's promise to act in good faith or not to be unreasonable. . . .
In addition to deciding questions of fact and determining the employer's true motive for discharge, the jury should, where such a promise was made, decide whether the reason for discharge amounts to good cause: Is it the kind of thing that justifies terminating the employment relationship? Does it demonstrate that the employee was no longer doing the job?
If, in this case, it is established that a just cause employment contract existed, the jury will be required to determine what Gash's true motive was in discharging plaintiff. If the jury determines that Gash was not acting in good faith when alleging that he was eliminating plaintiff's position, plaintiff may be entitled to damages for breach of contract.
Affirmed in part, reversed in part and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.