Aluevich v. Harrah's

660 P.2d 986, 99 Nev. 215, 1983 Nev. LEXIS 420

• Court: Nevada Supreme Court
• Decided: March 31, 1983
• Docket: 13533
• Status: Published

Opinions

OPINION

By the Court,

Manoukian, C. J.:

This appeal concerns the scope of an implied covenant of good faith and fair dealing. Finding that courts have not extended such a covenant to commercial leases between two sophisticated parties who are not otherwise bound by any special element of reliance or fiduciary duties, we affirm the directed verdict dismissing appellant’s claim for tortious breach of an implied duty of good faith and fair dealing.

Appellant is a Reno attorney who, from 1968 to 1978, operated Luke’s Gift Shoppe and Luke’s Nevada Photo Service at the northwest corner of Second and Virginia Streets on the ground floor of the Byington Building. Appellant occupied that building under a succession of subleases from Harrah’s Club. Since 1968, all of the subleases between appellant and Harrah’s Club have contained a provision which granted Harrah’s Club “the option to cancel this lease upon ninety (90) day’s written notice to [appellant].” Appellant now claims that throughout all lease negotiations, the respondents orally assured her that the ninety day termination privilege would not be exercised unless she operated unrestricted or unlimited gaming in the gift shop or the shop became cluttered with too much merchandise. None of those restrictions, however, appeared in any of the written lease agreements; the termination privilege contained in all of the subleases was absolutely unqualified.

On October 2, 1978, pursuant to the termination privilege contained in the 1978 sublease, Harrah’s served notice on appellant of its intention to cancel the sublease. The effective date of cancellation was January 1, 1979, but Harrah’s granted an extension until February 29, 1979. Appellant vacated the premises on that date. Following the cancellation, appellant filed a complaint which alleged numerous claims for relief. Because all other claims are meritless, we shall address only appellant’s contentions regarding the tort action for breach of an implied duty of good faith and fair dealing.

The court below held that no genuine issue as to any material fact existed regarding the “bad faith” claim and granted a directed verdict, pursuant to NRCP 50(a), in respondents’ favor. Appellant argues that the lower court’s ruling was erroneous, in that, evidence was presented which showed that respondents terminated the 1978 sublease to usurp a profitable business that she had operated on the demised premises for several years.

In U.S. Fidelity v. Peterson, 91 Nev. 617, 540 P.2d 1070 (1975), this court recognized a cause of action in tort for the breach of an implied covenant of good faith and fair dealing where an insurer fails to deal fairly and in good faith with its insured by refusing, without proper cause, to compensate its insured for a loss covered by the policy. Id. at 620, 540 P.2d at 1071. Appellant requests this court extend such a cause of action to her case. The tort recognized in Peterson, however, arose out of a need for special protection of insureds in light of the quasi-pub.lic nature of the insurance industry and the element of an insured’s heavy reliance upon the insurer’s credibility. See Comment, The New Tort of Bad Faith Breach of Contract: Christian v. American Home Assurance Corp., 13 Tulsa L. J. 605, 613-616 (1977-78). The dissent correctly notes that an implied covenant of good faith and fair dealing has mainly been implied in contractual relations which involve a special element of reliance such as that found in partnership, insurance and franchise agreements. The case relied on by the dissent concerned a situation where one party has traditionally held vastly superior bargaining power — the termination of a salesperson’s “at will” employment contract. Fortune v. National Cash Register Co., 364 N.E.2d 1251, 1253 (Mass. 1977).

In the present case, the appellant is an experienced businessperson and an attorney. The unqualified termination privilege was the subject of negotiations for ten years. Although the cancellation privilege remained unqualified, appellant continued to renew the subleases. The relationship between appellant and respondent was that of lessee and lessor. We do not find, in the present case, the special element of reliance which prompted this court in Peterson to recognize a cause of action in tort for the breach of an implied covenant of good faith and fair dealing.

We have considered the remaining assignments of error and find them to be without merit. Therefore, the lower court’s involuntary dismissal and directed verdict and the jury’s verdict in respondents’ favor are affirmed.

Mowbray and Steffen, JJ., and Zenoff, Sr. J.,¹ concur.