IN THE SUPREME COURT OF TENNESSEE
AT KNOXVILLE
September 5, 2012 Session
DICK BROADCASTING COMPANY, INC. OF TENNESSEE v. OAK
RIDGE FM, INC. ET AL.
Appeal by Permission from the Court of Appeals, Eastern Section
Chancery Court for Knox County
No. 150482-3 Michael W. Moyers, Chancellor
No. E2010-01685-SC-R11-CV - Filed January 17, 2013
The legal issues in this appeal revolve around the assignment of three agreements. The first
is a Right-of-First-Refusal Agreement that allowed for an assignment with the consent of the
non-assigning party. The agreement was silent as to the anticipated standard of conduct of
the non-assigning party in withholding consent. The other two agreements—a Time
Brokerage Agreement and a Consulting Agreement—were assignable without consent. The
primary issue we address is whether the implied covenant of good faith and fair dealing
applies to the non-assigning party’s conduct in refusing to consent to an assignment when
the agreement does not specify a standard of conduct. Oak Ridge FM, Inc. (“Oak Ridge
FM”) contractually agreed for Dick Broadcasting Company (“DBC”) to have a right of first
refusal to purchase Oak Ridge FM’s WOKI-FM radio station assets. The agreement was
assignable by DBC only with the written consent of Oak Ridge FM. When DBC requested
Oak Ridge FM to consent to the assignment of the Right-of-First-Refusal agreement to a
prospective buyer, Oak Ridge FM refused to consent. Oak Ridge FM also refused to consent
to the assignment of the Consulting Agreement and Time Brokerage Agreement, neither of
which contained a consent provision. DBC sued Oak Ridge FM and the other defendants,
alleging breach of contract and violation of the implied covenant of good faith and fair
dealing. The trial court granted the defendants a summary judgment. DBC appealed, and
the Court of Appeals vacated the summary judgment. We hold that where the parties have
contracted to allow assignment of an agreement with the consent of the non-assigning party,
and the agreement is silent regarding the anticipated standard of conduct in withholding
consent, an implied covenant of good faith and fair dealing applies and requires the non-
assigning party to act with good faith and in a commercially reasonable manner in deciding
whether to consent to the assignment. Because there are genuine issues of material fact in
dispute, we affirm the judgment of the Court of Appeals and remand to the trial court.
Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals
Affirmed; Case Remanded to the Chancery Court for Knox County
S HARON G. L EE, J., delivered the opinion of the Court, in which G ARY R. W ADE, C.J., J ANICE
M. H OLDER, C ORNELIA A. C LARK, and W ILLIAM C. K OCH, J R., JJ., joined. W ILLIAM C.
K OCH, J R., J., filed a concurring opinion.
Robert S. Stone, Knoxville, Tennessee, for the appellant, Oak Ridge FM, Inc., and ComCon
Consultants.
John A. Lucas, Alcoa, Tennessee, for the appellant, John W. Pirkle.
John A. Day and Brandon E. Bass, Brentwood, Tennessee, for the appellee, Dick
Broadcasting Company, Inc., of Tennessee.
OPINION
I.
DBC and its related companies were the Federal Communications Commission
(“FCC”) licensees for various radio stations, including WIVK, WIVK-FM, and WIOL in
Knoxville, Tennessee, and WXVO-FM in Oliver Springs, Tennessee. Oak Ridge FM was
the FCC licensee for radio station WOKI-FM in Knoxville. On June 23, 1997, three
separate, but related, contracts (collectively “the WOKI-FM Agreements”) were executed
relating to WOKI-FM. The first agreement was a Time Brokerage Agreement between DBC
and Oak Ridge FM wherein Oak Ridge FM sold substantially all of WOKI-FM’s broadcast
time to DBC.1 DBC was required to program the purchased broadcast time to include
entertainment, music, news, commercials, and other matters for a period of seven years. The
Time Brokerage Agreement was binding on the parties and their “successors and assigns”
and contained no limitation on the right of either party to assign the agreement.
The second agreement was a Consulting Agreement between DBC and ComCon
Consultants (“ComCon”), a partnership composed of John W. Pirkle and his son Jonathan
W. Pirkle, employees at Oak Ridge FM. Under the Consulting Agreement, the Pirkles were
paid to serve as consultants to DBC for seven years. The Consulting Agreement was binding
on the parties and their “successors and assigns” and contained no limitation on the right of
either party to assign the agreement.
1
Oak Ridge FM sold 166 hours per week of broadcast time to DBC.
-2-
The third agreement was a Right-of-First-Refusal Agreement between Oak Ridge FM
and DBC that gave DBC the right of first refusal to purchase at a discounted price
substantially all of Oak Ridge FM’s assets used in the operation of WOKI. The critical part
of the Right-of-First-Refusal Agreement for the purpose of this appeal is the assignment
provision, which provides:
This First Refusal Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, including,
without limitation, any assignee of the FCC licenses for [WOKI-FM]. No
party may assign its rights, interests or obligations hereunder without the
prior written consent of the other party, and any purported assignment
without such consent shall be null and void and of no legal force or effect;
provided, however, that DBC shall be permitted to assign its rights and
obligations under this First Refusal Agreement (1) to an entity controlled by
James Allen Dick Jr., or by any one or more of the Dick family shareholders
of DBC, or (2) to another entity provided that DBC shall be prevented from
performing this First Refusal Agreement and provided that DBC shall
guarantee the obligations of such other entity as DBC’s assignee hereunder.
(Underlining in original; italics added).
On April 30, 2000, DBC entered into a written Asset Purchase Agreement with
Citadel Broadcasting Company (“Citadel”) selling most of its radio station assets, including
its agreements with Oak Ridge FM, for a purchase price of $300,000,000.
On July 18, 2000, DBC sent a letter to Mr. Pirkle as president and principal
shareholder of Oak Ridge FM advising him “of the pending acquisition” by Citadel of
substantially all of DBC’s assets, including the WOKI-FM Agreements, and asking him to
consent to the assignment of the Right-of-First-Refusal Agreement. At nearly the same time,
Mr. Pirkle, as president of Oak Ridge FM, sent a letter to DBC stating that he had learned
of DBC’s proposed deal with Citadel and that none of the agreements—the Time Brokerage
Agreement, the Consulting Agreement and the Right-of-First-Refusal Agreement—could be
assigned without ComCon’s and Oak Ridge FM’s permission. Mr. Pirkle refused to consent
unless they could agree on “an arrangement which satisfies our concerns allowing for the full
or partial replacement of DBC with Citadel.” In an affidavit filed in support of the motion
for summary judgment, Mr. Pirkle acknowledged that on the advice of counsel he refused
to agree to the assignment without additional consideration. His goal was to negotiate a
“separate and more profitable agreement with Citadel.”
-3-
To close the Citadel sale, DBC maintained that it had to obtain the assignment of all
three agreements,2 and therefore DBC continued unsuccessfully to request Mr. Pirkle’s
consent. DBC offered to guarantee Citadel’s obligations under the WOKI-FM Agreements,
but Mr. Pirkle continued to withhold consent. Eventually DBC finalized the deal with
Citadel without the assignment of the agreements and with a $10,000,000 reduction in the
sales price.
On March 27, 2001, DBC sued Oak Ridge FM, ComCon, and Mr. Pirkle
(“Defendants”), seeking a declaratory judgment that the Time Brokerage Agreement and the
Consulting Agreement were assignable by DBC to Citadel without the consent of the
Defendants and that Mr. Pirkle, on behalf of Oak Ridge FM, breached the agreements by
wrongfully and unreasonably withholding consent to the assignments in order to extract
money from the sale to Citadel. DBC further alleged that the implied covenant of good faith
and fair dealing applied to the Right-of-First-Refusal Agreement and that the Defendants
breached the agreement by failing to act reasonably and in good faith. The Defendants
answered, admitting that Mr. Pirkle refused to consent to the assignment of the agreements
but denying any breach of contract on their part.
Both sides filed a motion for summary judgment. Following a hearing on the
parties’ competing summary judgment motions, the trial court held that the implied covenant
of good faith and fair dealing was not applicable to the Right-of-First-Refusal Agreement and
that the Defendants did not breach the agreement. As to the Consulting Agreement, the trial
court held that DBC’s interests in this agreement were freely assignable without the
Defendants’ consent and that there was a genuine issue of fact regarding whether Mr.
Pirkle’s actions in insisting the agreement was not assignable without his consent, and in
withholding that consent, were reasonable under the circumstances. The trial court
nevertheless granted a summary judgment to the Defendants, stating that it was “unwilling
to find that a party may be held liable for a breach of contract for holding out a good faith but
mistaken interpretation of a contract provision,” and dismissed the action.
DBC appealed. The Court of Appeals vacated the award of summary judgment,
holding that the implied covenant of good faith and fair dealing applies to the assignment
clause in the Right-of-First-Refusal Agreement and that genuine issues of material fact made
the summary judgment improper. Dick Broad. Co. of Tenn. v. Oak Ridge FM, Inc., No.
E2010-01685-COA-R3-CV, 2011 WL 4954199, at *11 (Tenn. Ct. App. Oct. 19, 2011). DBC
and the Defendants each filed an application for permission to appeal.
2
The trial court found in its memorandum opinion and order that “[i]t is conceded by [DBC] that
the assignment of all three . . . contracts to Citadel was required for the WOKI-FM portion of the asset
transfer agreement between DBC and Citadel to be effective.”
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We granted both applications primarily to address the following issue: where the
parties have contracted to allow assignment of an agreement with the consent of the non-
assigning party, and the agreement is silent regarding the anticipated standard of conduct in
withholding consent, does the implied covenant of good faith and fair dealing apply to
require the non-assigning party to act with good faith and in a commercially reasonable
manner in refusing to give its consent for the assignment of the agreement? We hold that the
implied covenant of good faith and fair dealing applies to a silent consent clause of an
assignment contract provision. When the agreement does not specify the standard of conduct
for withholding consent, a party’s decision to refuse consent must be made in good faith and
in a commercially reasonable manner. We further hold that the trial court erred in
considering Mr. Pirkle’s testimony that he thought he had a contractual right to block DBC’s
assignment of the Consulting Agreement by withholding consent based on a discussion with
his attorney.
II.
Our task in this case involves the interpretation of a contract. We review issues of
contractual interpretation de novo. Perkins v. Metro. Gov’t of Nashville & Davidson Cnty.,
380 S.W.3d 73, 80 (Tenn. 2012) (citing Allmand v. Pavletic, 292 S.W.3d 618, 624-25 (Tenn.
2009)). We are guided by well-settled principles and general rules of construction. “A
cardinal rule of contractual interpretation is to ascertain and give effect to the intent of the
parties.” Allmand, 292 S.W.3d at 630 (citing Allstate Ins. Co. v. Watson, 195 S.W.3d 609,
611 (Tenn. 2006)). We initially determine the parties’ intent by examining the plain and
ordinary meaning of the written words that are “contained within the four corners of the
contract.” 84 Lumber Co. v. Smith, 356 S.W.3d 380, 383 (Tenn. 2011) (citing Kiser v. Wolfe,
353 S.W.3d 741, 747 (Tenn. 2011)). The literal meaning of the contract language controls
if the language is clear and unambiguous. Allmand, 292 S.W.3d at 630. However, if the
terms are ambiguous in that they are “susceptible to more than one reasonable interpretation,”
Watson, 195 S.W.3d at 611, we must apply other established rules of construction to aid in
determining the contracting parties’ intent. Planters Gin Co. v. Fed. Compress & Warehouse
Co., 78 S.W.3d 885, 890 (Tenn. 2002). The meaning of the contract becomes a question of
fact only if an ambiguity remains after we have applied the appropriate rules of
construction. Id. (quoting Smith v. Seaboard Coast Line R.R., 639 F.2d 1235, 1239 (5th Cir.
Unit B Mar. 1981 (per curiam))).
The clause in the Right-of-First-Refusal Agreement that is the subject of this
controversy states: “[n]o party may assign its rights, interests or obligations hereunder
without the prior written consent of the other party.” This is known as a “silent consent”
clause because, although it requires consent of the non-assigning party, it is silent regarding
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the standard of conduct required of a party desiring to refuse consent to a requested
assignment. DBC argues that the implied covenant of good faith and fair dealing should
apply to the silent consent clause to require the non-assigning party to act in good faith and
in a commercially reasonable manner in denying consent. The Defendants argue that the
silent consent clause should be interpreted to grant the non-assigning party unfettered
discretion to deny consent for any or no reason.
Whether the implied covenant of good faith and fair dealing applies to a silent consent
clause in an assignment provision of a right of first refusal agreement is an issue of first
impression in Tennessee. We hold that the implied covenant of good faith and fair dealing
is applicable. Our decision is supported by the established common law of Tennessee and
a majority of other jurisdictions.
It is well-established that “[i]n Tennessee, the common law imposes a duty of good
faith in the performance of contracts.” Wallace v. Nat’l Bank of Commerce, 938 S.W.2d 684,
686 (Tenn. 1996). In Wallace, this Court observed that “[i]t is true that there is implied in
every contract a duty of good faith and fair dealing in its performance and enforcement, and
a person is presumed to know the law.” Id. (emphasis added) (quoting TSC Indus., Inc. v.
Tomlin, 743 S.W.2d 169, 173 (Tenn. Ct. App. 1987) (citing Restatement (Second) of
Contracts § 205 (1979))). As early as 1922, this Court imposed an implied condition of
reasonableness in a contract requiring the sellers of land to find “satisfactory” the price of
land sold at auction in order for the auctioneers to be paid a commission. Robeson & Weaver
v. Ramsey, 245 S.W. 413, 413 (Tenn. 1922). The contractual provision at issue in Robeson
& Weaver provided:
It is agreed . . . that if the said property does not sell for a price that is
satisfactory to the [sellers] that they are to pay to the [auctioneers] all actual
and legitimate expenses incurred in putting on said sale, . . . but if the sale of
said property is confirmed at the price it brought then the [sellers are] to pay
the [auctioneers] 5%, five per cent., of the amount the property is sold for.
Id. at 413-14. The land sold at auction for a price “several thousand dollars more” than it
was worth, but two of the three sellers did not agree to confirm the sale because they were
not satisfied with the price. Id. at 414. The sellers argued that under the express terms of the
contract, they had an absolute unfettered right to find the auction price “unsatisfactory” and
refuse to confirm the sale. This Court disagreed, holding that where the sales price
substantially exceeded the market price, then the price should be considered satisfactory and
the sellers would be “capricious” if dissatisfied with it. Id. at 415. The Robeson & Weaver
Court concluded that because the farm brought more than its value and an amount that should
have satisfied a reasonable person, the auctioneers were entitled to their commission.
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Id. Thus, where the contract was silent as to the standard of conduct anticipated by the
parties in the performance of the agreement, i.e., the sellers providing consent to the sale
price as “satisfactory,” the Court rejected a standard allowing the sellers to act capriciously
and required them to act in a commercially reasonable manner. Id.; see also German v. Ford,
300 S.W.3d 692, 705 n.9 (Tenn. Ct. App. 2009) (“‘When a contract is contingent on one
party’s satisfaction, that party must exercise his or her judgment in good faith and as a
reasonable person, when a definite objective test of satisfaction is available; not arbitrarily
without bona fide reason for his or her dissatisfaction.’” (quoting 13 Richard A. Lord,
Williston on Contracts § 38:24 (4th ed. 2000)).
These decisions are in accord with section 205 of the Restatement (Second) of
Contracts (1979), which provides that “[e]very contract imposes upon each party a duty of
good faith and fair dealing in its performance and its enforcement.” (Emphasis added);
accord Wallace, 938 S.W.2d at 686; Elliott v. Elliott, 149 S.W.3d 77, 84-85 (Tenn. Ct. App.
2004); TSC Indus., 743 S.W.2d at 173; Covington v. Robinson, 723 S.W.2d 643, 645 (Tenn.
Ct. App. 1986).3 Tennessee courts have consistently applied the principle that Tennessee law
recognizes an implied covenant of good faith and fair dealing in every contract. Lamar
Adver. Co., 313 S.W.3d at 791 (“In Tennessee, a duty of good faith and fair dealing is
imposed in the performance and enforcement of every contract.”); Jones v. LeMoyne-Owen
College, 308 S.W.3d 894, 907 (Tenn. Ct. App. 2009) (“[E]very contract contains an implied
covenant of good faith and fair dealing . . . .”); German, 300 S.W.3d at 706 (“[E]very
contract imposes on the parties a duty of good faith and fair dealing in its performance.”);
Long v. McAllister-Long, 221 S.W.3d 1, 9 (Tenn. Ct. App. 2006) (“A marital dissolution
agreement, like any other contract, contains an implied covenant of good faith and fair
dealing both in the performance and in the interpretation of the contract.”).4
3
See also Lamar Adver. Co. v. By-Pass Partners, 313 S.W.3d 779, 791 (Tenn. Ct. App. 2009); Austa
La Vista, LLC v. Mariner’s Pointe Interval Owners Ass’n, Inc., 173 S.W.3d 786, 792 (Tenn. Ct. App. 2005).
4
See also Barnes & Robinson Co. v. OneSource Facility Servs., Inc., 195 S.W.3d 637, 642 (Tenn.
Ct. App. 2006) (“Parties to a contract owe each other a duty of good faith and fair dealing as it pertains to
the performance of a contract.”); Hurley v. Tenn. Farmers Mut. Ins. Co., 922 S.W.2d 887, 892 (Tenn. Ct.
App. 1995) (“Every contract contains an implied duty of good faith and fair dealing in its performance and
enforcement.”); ACG, Inc. v. Se. Elevator, Inc., 912 S.W.2d 163, 168 (Tenn. Ct. App. 1995) (“In this
jurisdiction an implied duty of good faith and fair dealing is recognized in every contract in its performance
and enforcement.”); Winfree v. Educators Credit Union, 900 S.W.2d 285, 289 (Tenn. Ct. App. 1995)
(“‘Every contract imposes upon each party a duty of good faith and fair dealing in its performance and
enforcement.’”) (quoting Covington, 723 S.W.2d at 645); Park Place Ctr. Enters., Inc. v. Park Place Mall
Assocs., 836 S.W.2d 113, 117 (Tenn. Ct. App. 1992) (“Implied in every contract is a duty of good faith and
fair dealing in its performance and enforcement.”); McClain v. Kimbrough Constr. Co., 806 S.W.2d 194, 198
(Tenn. Ct. App. 1990) (“[W]e have required contracting parties to deal with each other fairly and in good
(continued...)
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In some cases, the courts have expressed this principle as allowing the qualifying
word “reasonable” and its equivalent “reasonably” to be read into every contract. Pylant v.
Spivey, 174 S.W.3d 143, 152 (Tenn. Ct. App. 2003) (quoting Moore v. Moore, 603 S.W.2d
736, 739 (Tenn. Ct. App. 1980)); see Hathaway v. Hathaway, 98 S.W.3d 675, 678-79 (Tenn.
Ct. App. 2002) (“[I]t is well settled that ‘[a] qualifying word which must be read into every
contract is the word ‘reasonable’ or its equivalent ‘reasonably.’”(quoting Minor v. Minor,
863 S.W.2d 51, 54 (Tenn. Ct. App. 1993))); Hurley, 922 S.W.2d at 892 (quoting Moore, 603
S.W.2d at 739). Our courts have consistently imposed the implied covenant of good faith
and fair dealing upon every contract. In no case or authority cited herein has the court found
an exception to the all-inclusive term “every.” The word “every” has been defined as “being
each individual or part of a group without exception.” Webster’s Ninth New Collegiate
Dictionary 430 (1986).
Learned commentators and treatises confirm that these principles of Tennessee
contract law generally conform to established and accepted contract law principles in other
American jurisdictions. See 17A C.J.S. Contracts § 437 (2011) (“Absent an express
disavowal by the parties, every contract, whether oral or written, generally contains an
implied covenant or duty of good faith and fair dealing in its performance and enforcement.”
(footnotes omitted)); 17A Am. Jur. 2d Contracts § 370 (2004) (“Generally, there is an
implied covenant of good faith and fair dealing in every contract, whereby 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.” (footnotes omitted)); 23 Richard A. Lord, Williston on
Contracts § 63:22 (4th ed. 2002) (“Every contract imposes an obligation of good faith and
fair dealing between the parties in its performance and its enforcement, and if . . . not
expressed by its terms in the contract, it will be implied.” (footnotes omitted)).
The United States District Court for the Western District of Tennessee, facing a
similar issue, applied Tennessee law and imposed a reasonableness requirement upon
contractual provisions requiring consent to an assignment where the agreement did not
provide for the standard of conduct for withholding consent. Town & Country Equip., Inc.
v. Deere & Co., 133 F. Supp. 2d 665, 670 (W.D. Tenn. 2000). In Town & Country, an owner
of a dealership authorized to sell John Deere products sued and alleged that Deere had
breached their agreement by unreasonably withholding approval of the sale of the dealership
to anyone but Deere’s preferred buyer. Id. The parties’ agreement provided that the dealer
could assign the agreement only with the prior written consent of Deere. Id. The district
court, citing the implied duty of good faith and fair dealing under Tennessee law, id. at 668,
4
(...continued)
faith, even though these duties were not explicitly embodied in their contract . . . [and] have also held the
extent of contractual obligations should be tempered by a ‘reasonableness’ standard.”).
-8-
concluded that Deere did not have the right to “unreasonably limit or interfere with the
sale.” Id. at 670. The plaintiff, Town & Country, also alleged breach of another silent
consent provision, that “Deere breached the dealer agreement by unreasonably rejecting its
proposal to relocate the business,” id. at 669, and the court rejected arguments echoing those
made by the Defendants in the present case:
Deere, however, argues that it had an absolute contractual right to withhold its
approval of any relocation, for any reason. This is not borne out by the express
terms of the agreement, which provides only that the dealer may not operate
the business at any other location without prior written approval of the
Company. Relocation without prior approval is grounds for immediate
cancellation of the agreement. Nothing in the agreement suggests that Deere
may withhold that approval unreasonably.
Id. (citations omitted). The Town & Country court, finding genuine issues of material fact
regarding whether Deere acted reasonably in denying Town & Country’s request to relocate
and whether Deere unreasonably limited or interfered with Town & Country’s efforts to sell
the dealership by assigning the agreement, denied summary judgment on these issues. Id. at
673.
Courts in numerous other jurisdictions have similarly held that a clause requiring
consent to the assignment of an agreement, if silent regarding the circumstances under which
consent may be withheld, is interpreted in accordance with the implied covenant of good
faith and fair dealing to require the exercise of reasonableness and good faith in deciding
whether to consent to the assignment. In Prince v. Elm Investment Co., 649 P.2d 820, 824
(Utah 1982), a tenant, the holder of a right of first refusal to purchase the leased property,
alleged a violation of the duty of good faith and fair dealing when the seller executed a
partnership agreement that amounted to a sale of the property without notice to the tenant and
refused to allow the tenant an opportunity to match the offer. The Utah Supreme Court
vacated the summary judgment, finding a genuine issue of material fact regarding whether
the seller acted in good faith, reasoning as follows: “[w]here a contract provides that the
matter of approval of performance is reserved to a party, he must act fairly and in good faith
in exercising that right. He has no right to withhold arbitrarily his approval; there must be
a reasonable justification for doing so.” Id. at 825 (citations omitted) (internal quotation
marks omitted); see also Larese v. Creamland Dairies, Inc., 767 F.2d 716, 717-18 (10th Cir.
1985) (applying Colorado law to hold that franchisor may not act unreasonably or arbitrarily
in withholding consent to transfer franchise rights); Homa-Goff Interiors, Inc. v. Cowden,
350 So. 2d 1035, 1038 (Ala. 1977) (“[E]ven where the lease provides an approval clause, a
landlord may not unreasonably and capriciously withhold his consent to a sublease
agreement.”); Hendrickson v. Freericks, 620 P.2d 205, 211 (Alaska 1980) (“Where the
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lessor’s consent is required before an assignment can be made, he may withhold his consent
only where he has reasonable grounds to do so.”); Tucson Med. Ctr. v. Zoslow, 712 P.2d 459,
461 (Ariz. Ct. App. 1985) (following the “growing number of cases [that] have rejected the
right of the landlord to arbitrarily refuse his consent and have held that the lessor must act
reasonably in withholding his consent”); Warmack v. Merchs. Nat’l Bank of Fort Smith, 612
S.W.2d 733, 735 (Ark. 1981) (holding that a silent consent “provision in a lease should not
permit a landlord to unreasonably withhold consent”); Kendall v. Ernest Pestana, Inc., 709
P.2d 837, 845 (Cal. 1985) (holding where “the lessor retains the discretionary power to
approve or disapprove an assignee proposed by the other party to the contract[,] this
discretionary power should . . . be exercised in accordance with commercially reasonable
standards”); Cafeteria Operators L.P. v. AMCAP/Denver Ltd. P’ship, 972 P.2d 276, 278-79
(Colo. App. 1998) (holding that “without a freely negotiated provision in the lease giving the
landlord an absolute right to withhold consent, a landlord’s decision to withhold consent must
be reasonable”); Basnett v. Vista Vill. Mobile Home Park, 699 P.2d 1343, 1346 (Colo. App.
1984) (holding landlord may not unreasonably refuse consent under silent consent clause
because that result “incorporates the principles of fair-dealing and reasonableness and also
preserves freedom of contract”), rev’d on other grounds, 731 P.2d 700 (Colo. 1987); Warner
v. Konover, 553 A.2d 1138, 1140-41 (Conn. 1989) (“[W]e hold that a landlord who
contractually retains the discretion to withhold its consent to the assignment of a tenant’s
lease must exercise that discretion in a manner consistent with good faith and fair dealing.”);
Fernandez v. Vazquez, 397 So. 2d 1171, 1174 (Fla. Dist. Ct. App. 1981) (“[W]e hold that a
lessor may not arbitrarily refuse consent to an assignment of a commercial lease which
provides, even without limiting language, that a lessee shall not assign or sublease the
premises without the written consent of the lessor.”); Cheney v. Jemmett, 693 P.2d 1031,
1034 (Idaho 1984) (in construing contract to sell real estate, “the interpretation of a
non-assignment clause conditioned on the consent of the seller . . . necessarily implies that
the seller will act reasonably and in good faith in exercising his right of approval”); Funk v.
Funk, 633 P.2d 586, 589 (Idaho 1981) (“[N]o desirable public policy is served by upholding
a landlord’s arbitrary refusal of consent merely because of whim or caprice . . . .”); Jack
Frost Sales, Inc. v. Harris Trust & Sav. Bank, 433 N.E.2d 941, 949 (Ill. App. Ct. 1982)
(“[W]here a lease forbids any sublease or assignment without the consent of the lessor, the
lessor cannot unreasonably withhold his consent to a sublease.”); Gamble v. New Orleans
Housing Mart, Inc., 154 So. 2d 625, 627 (La. Ct. App. 1963) (Under a silent consent clause,
“the lessor cannot unreasonably, arbitrarily or capriciously withhold his consent”); Julian v.
Christopher, 575 A.2d 735, 739 (Md. 1990) (“When the lease gives the landlord the right to
exercise discretion, the discretion should be exercised in good faith, and in accordance with
fair dealing; if the lease does not spell out any standard for withholding consent, then the
implied covenant of good faith and fair dealing should imply a reasonableness standard.”);
Newman v. Hinky Dinky Omaha-Lincoln, Inc., 427 N.W.2d 50, 55 (Neb. 1988) (under silent
consent clause, landlord may refuse consent to assignment of lease “only when the lessor has
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a good faith and reasonable objection to assignment of the lease or subletting”); Boss
Barbara, Inc. v. Newbill, 638 P.2d 1084, 1086 (N.M. 1982) (“No logical reason exists for not
requiring good faith” in construing silent consent clause); Littlejohn v. Parrish, 839 N.E.2d
49, 50, 52-53 (Ohio Ct. App. 2005) (applying good faith doctrine to mortgage prepayment
clause “subject to the mortgagee’s approval”); Pac. First Bank v. New Morgan Park Corp.,
876 P.2d 761, 767 (Or. 1994) (applying good faith doctrine to silent consent clause).
Most, but not all,5 of the cases we have cited that apply the implied covenant of good
faith and fair dealing involve the construction of a lease and a landlord’s decision to consent
to a tenant’s request to sublease the property. However, we do not find the reasoning of these
opinions any less persuasive in the context of the particular issue presented here simply
because they involve the assignment of a leasehold interest. “The legal effect of the terms
of a lease are governed by the general rules of contract construction[]” as in any other
contract. Planters Gin Co., 78 S.W.3d at 889; see also Cali-Ken Petroleum Co. v. Slaven,
754 S.W.2d 64, 65 (Tenn. Ct. App. 1988) (“Like any other contract, a[] . . . lease should be
interpreted using the commonly accepted rules of construction.”); cf. Lamar Adver. Co., 313
S.W.3d at 791-92 (applying general contract interpretation principles, including duty of good
faith and fair dealing, to lease agreement).6 Moreover, both the issue and the pertinent
considerations are the same in the case of the construction of a silent consent clause in an
assignment provision in a lease agreement as in other types of contracts. In each case, the
parties have agreed that a contractual right or set of rights shall be assignable only with the
consent of the non-assigning party but have not expressly agreed on the standard of conduct
anticipated in withholding consent.
The Defendants argue that the position adopted by the courts in other jurisdictions
cited and discussed above represents an unpersuasive “minority rule” and that a majority of
the courts considering the silent consent clause issue have applied the traditional common
law view that parties asked to consent to assignment may refuse arbitrarily or unreasonably
refuse. See generally James C. McLoughlin, Annotation, When Lessor May Withhold
Consent Under Unqualified Provision in Lease Prohibiting Assignment or Subletting of
5
See Larese, 767 F.2d at 717-18 (involving consent to transfer franchise rights); Town & Country,
133 F. Supp. 2d at 667, 670 (involving consent to move dealership to more desirable location and to sell the
dealership); Cheney, 693 P.2d at 1034 (imposing good faith doctrine in interpreting silent consent
requirement in contract to sell property); Littlejohn, 839 N.E.2d at 52-53 (applying good faith doctrine to
mortgage prepayment clause “subject to the mortgagee’s approval”); Prince, 649 P.2d at 825 (imposing good
faith doctrine to seller’s decision not to allow holder of right of first refusal to exercise right).
6
See also Fernandez, 397 So. 2d at 1173-74 (“Underlying the cases abolishing the arbitrary and
capricious rule is the now well-accepted concept that a lease is a contract and, as such, should be governed
by the general contract principles of good faith and commercial reasonableness.” (footnote omitted)).
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Leased Premises Without Lessor’s Consent, 21 A.L.R.4th 188 (1983). Our research indicates
that the former “majority rule” approach has steadily eroded over time and is now a minority
position among the courts that have considered the issue. In 1977, the Alabama Supreme
Court noted that although “[t]he general rule throughout the country has been that, when a
lease contains an approval clause, the landlord may arbitrarily and capriciously reject
proposed subtenants,” the rule “has been under steady attack in several states in the past
twenty years.” Homa-Goff Interiors, 350 So. 2d at 1037; see also Tucson Med. Ctr., 712
P.2d at 461 (“A growing number of cases have rejected the right of the landlord to arbitrarily
refuse his consent and have held that the lessor must act reasonably in withholding his
consent.”); Fernandez, 397 So. 2d at 1173 (“The arbitrary and capricious rule is undergoing
continued erosion. An increasing number of jurisdictions” are adopting the rule of
reasonableness and fair dealing); Alex M. Johnson, Jr., Correctly Interpreting Long-Term
Leases Pursuant to Modern Contract Law: Toward a Theory of Relational Leases, 74 Va.
L. Rev. 751, 753 (1988) (noting “the rapidly expanding list of state courts that have rejected
the property rules on alienability of leaseholds and, by applying contract principles, have
limited the lessor’s right to restrict alienation arbitrarily”).
Currently, some fourteen jurisdictions—Delaware,7 Georgia,8 Indiana,9
Kentucky,10 Massachusetts,11 Michigan,12 Minnesota,13 New Hampshire,14 New Jersey,15 New
7
See Manley v. Kellar, 94 A.2d 219, 221 (Del. Super. Ct. 1952).
8
See Tap Room, Inc. v. Peachtree-TSG Assocs, 606 S.E.2d 13, 15 (Ga. Ct. App. 2004).
9
See First Fed. Sav. Bank of Ind. v. Key Mkts., Inc., 559 N.E.2d 600, 605 (Ind. 1990). Indiana does
not recognize a general duty of good faith and fair dealing outside the realms of the Uniform Commercial
Code or insurance law. Id.
10
See Hill v. Rudd, 35 S.W. 270, 271 (Ky. Ct. App. 1896).
11
See Slavin v. Rent Control Bd. of Brookline, 548 N.E.2d 1226, 1228-29 (Mass. 1990).
12
See White v. Huber Drug Co., 157 N.W. 60, 61 (Mich. 1916).
13
See Gruman v. Investors Diversified Servs., Inc., 78 N.W.2d 377, 381 (Minn. 1956).
14
See Segre v. Ring, 170 A.2d 265, 266 (N.H. 1961).
15
See Muller v. Beck, 110 A. 831, 832 (N.J. 1920). The law in New Jersey is not entirely clear
because in Jonas v. Prutaub Joint Venture, 567 A.2d 230, 232 (N.J. Super. Ct. App. Div. 1989), the court
recognized “the developing so-called minority view” but declined to decide whether to adopt it under the
facts presented. Id.
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York,16 North Carolina,17 South Carolina,18 Vermont,19 and Washington20 —continue to
adhere to the older common law view that a landlord may arbitrarily or unreasonably refuse
to consent under a silent consent clause in a lease’s anti-assignment provision. Seventeen
jurisdictions have adopted the “modern” position discussed above, imposing an implied duty
of good faith and fair dealing in interpreting a silent consent clause.21
The Defendants argue that the trial court was correct in finding that the Right-of-First-
Refusal Agreement was unambiguous and complete and holding that to interpret the contract
in accordance with the implied covenant of good faith and fair dealing “would be in effect
to add a new provision to the contract which the parties were free to add themselves.” We
disagree. It is true that “the common law duty of good faith does not extend beyond the
agreed upon terms of the contract and the reasonable contractual expectations of the
parties.” Wallace, 938 S.W.2d at 687. Moreover, “‘[t]he implied obligation of good faith
and fair dealing does not . . . create new contractual rights or obligations, nor can it be used
to circumvent or alter the specific terms of the parties’ agreement.’” Lamar Adver. Co., 313
S.W.3d at 791 (quoting Barnes & Robinson Co., 195 S.W.3d at 643). However, while the
implied covenant of good faith and fair dealing “does not create new contractual rights or
obligations, it protects the parties’ reasonable expectations as well as their right to receive
the benefits of their agreement.” Long, 221 S.W.3d at 9.
In this case, neither party is asking the Court to create a new contractual right or
obligation, alter the terms of the Right-of-First-Refusal Agreement, or insert a new material
and un-bargained for condition. See Kendall, 709 P.2d at 847 (“It is not a rewriting of a
contract, as respondent suggests, to recognize the obligations imposed by the duty of good
16
See Dress Shirt Sales, Inc. v. Hotel Martinique Assocs., 190 N.E.2d 10, 11 (N.Y. 1963).
17
See Isbey v. Crews, 284 S.E.2d 534, 536-37 (N.C. Ct. App. 1981).
18
See Dobyns v. S.C. Dep’t of Parks, Recreation & Tourism, 480 S.E.2d 81, 84 (S.C. 1997).
19
See B & R Oil Co. v. Ray’s Mobile Homes, Inc., 422 A.2d 1267, 1267 (Vt. 1980).
20
Johnson v. Yousoofian, 930 P.2d 921, 925 (Wash. Ct. App. 1996).
21
The states adopting what has now become the majority rule are Alabama, Homa-Goff Interiors,
350 So. 2d at 1038; Alaska, Hendrickson, 620 P.2d at 211; Arizona, Tucson Med. Ctr., 712 P.2d at 461;
Arkansas, Warmack, 612 S.W.2d at 735; California, Kendall, 709 P.2d at 845; Colorado, Cafeteria Operators
L.P., 972 P.2d at 278-79; Connecticut, Warner, 553 A.2d at 1140-41; Florida, Fernandez, 397 So. 2d at 1174;
Idaho, Cheney, 693 P.2d at 1034, Funk, 633 P.2d at 589; Illinois, Jack Frost Sales, 433 N.E.2d at 949;
Louisiana, Gamble, 154 So. 2d at 627; Maryland, Julian, 575 A.2d at 739; Nebraska, Newman, 427 N.W.2d
at 55; New Mexico, Boss Barbara, Inc., 638 P.2d at 1086; Ohio, Littlejohn, 839 N.E.2d at 52-53; Oregon,
Pac. First Bank, 876 P.2d at 767; and Utah, Prince, 649 P.2d at 825.
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faith and fair dealing, which duty is implied by law in every contract.”). Both parties are
asking the Court to infer a standard of conduct anticipated by the parties in carrying out the
rights and liabilities provided for in the contract. The contractual language at issue provides
that the Right-of-First-Refusal Agreement “shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, including, without limitation,
any assignee of the FCC licenses for [WOKI-FM]. No party may assign its rights, interests
or obligations hereunder without the prior written consent of the other party[.]” The parties
anticipated the possibility of and made allowance for the assignment of the agreement. They
also agreed that a party’s attempt to exercise its right to assign the agreement triggers a duty
on the part of the non-assigning party to consider and decide whether to consent. What
standard of conduct did the parties anticipate the non-assigning party must exercise in
granting or denying consent? DBC is asking the Court to infer the standard “consent shall
not be unreasonably withheld.” The Defendants are asking the Court to infer the standard
“consent may be withheld in the decider’s sole discretion, for any or no reason, however
arbitrary or unreasonable.” The parties could have inserted either provision into the
Agreement, and either provision would generally have been enforceable as reflecting the
bargained-for intent of the parties. See Wallace, 938 S.W.2d at 686 (observing that
contracting parties “‘may by agreement . . . determine the standards by which the
performance of obligations are to be measured.’” (quoting Bank of Crockett v. Cullipher, 752
S.W.2d 84, 91 (Tenn. Ct. App. 1988))). But the contract in this case was silent on this point,
leaving the resolution of the ensuing conflict to the courts.
Tennessee courts have imposed a standard of reasonableness in the performance of
an agreement when the circumstances have warranted such a construction. In Park Place
Center Enterprises, Inc. v. Park Place Mall Associates, the court interpreted a lease that
contained both a provision that the tenant may not sublet the property or assign the lease
“without the prior consent of the Landlord[,] which consent shall not be unreasonably
withheld,” and a provision that if requested, the “Landlord may elect to do one of the
following: (i) consent thereto; (ii) withhold consent in its sole and absolute discretion; or (iii)
terminate this Lease within thirty (30) days after receipt of Tenant’s request to assign or
sublet.” 836 S.W.2d 113, 115 (Tenn. Ct. App. 1992) (emphasis omitted). When the Park
Place tenant requested to assign the lease, the landlord “never made any decision as to
whether it should consent to the assignment of the lease as requested and merely notified
defendant that the lease would be terminated pursuant to the stated lease
provision.” Id. Citing the principle that “[i]mplied in every contract is a duty of good faith
and fair dealing in its performance and enforcement,” id. at 117, the court held:
Clearly, the parties intended that the tenant could not put someone else in its
place unless the landlord consented, but the denial of consent must have a
reasonable basis. After expressing this intent, [the lease] proceeds to outline
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the options of the landlord when assignment or subletting is sought. These
options must be considered in light of the clear mandate of the contract that
there must be reasonable basis for a denial of consent by the landlord.
Defendant [landlord] argues that its option to “withhold consent in its
sole and absolute discretion” authorizes it to do what it wants without regard
to any reasonable basis therefor. We disagree with this interpretation.
....
[Landlord] argues also that the option to terminate the lease provided
for in the (iii) [allowing termination of the lease] is absolute. Here again, we
must respectfully disagree with [landlord]’s argument. We interpret this
provision to mean that the landlord has this option if, and only if, it has first
made the determination that there is a reasonable basis for withholding consent
to assignment or subletting. In such event, it can then either rest on the
withholding of consent or go further and terminate the lease pursuant to the
provisions of (iii).
Id. at 116, 117.
In German v. Ford, the court stated that “[w]hen the parties’ bargain is sufficiently
definite to be a contract, but they have not agreed with respect to a term that is necessary to
a determination of their rights and duties, a term which is reasonable may be supplied by the
court.” 300 S.W.3d 692, 706 (Tenn. Ct. App. 2009) (citing Restatement (Second) of
Contracts § 204 (1981)). The court further observed that “[t]he Restatement frames the issue
in the context of the duty of good faith and fair dealing, noting: ‘[B]ad faith may be overt or
may consist of inaction, and fair dealing may require more than honesty,’ and bad faith can
include ‘failure to cooperate in the other party’s performance.’” Id. at 707 (second alteration
in original) (quoting Restatement (Second) of Contracts § 205 cmt. d). In such an instance,
“a contractual term requiring the act of cooperation may be supplied by the court.” Id. (citing
Restatement (Second) of Contracts § 226 cmt. c).
The court in Pylant v. Spivey imposed a standard of reasonableness in interpreting a
parent’s agreement to pay for a child’s college expenses. 174 S.W.3d 143, 147 (Tenn. Ct.
App. 2003). Although the agreement did not specify a college or an amount of money, the
court held that an obligation to pay such expenses “is subject to an implied condition of
reasonableness, at least where no specific college or amount of expenses is set forth.” Id. at
153. Applying the principle that “courts may incorporate a reasonableness requirement into
any contract,” id. at 152, the court reasoned that its conclusion was “consistent with those
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cases holding that where a term is missing from a contract, a reasonable one will be
implied.” Id. at 155. Similarly, in McClain v. Kimbrough Construction Co., the court noted
that “[a]s a practical matter . . . contracting parties are not always precise and frequently
leave material provisions out of their contracts. In these situations, the courts impose
obligations on contracting parties that are reasonably necessary for the orderly performance
of the contract.” 806 S.W.2d 194, 198 (Tenn. Ct. App. 1990). As examples of such a
situation, the McClain court observed that “we have required contracting parties to deal with
each other fairly and in good faith, even though these duties were not explicitly embodied
in their contract” and that “[w]e have also held the extent of contractual obligations should
be tempered by a ‘reasonableness’ standard.” Id. (citing Moore, 603 S.W.2d at 739).
The above-cited opinions confirm that at the time the parties in this case entered into
these agreements, Tennessee law was firmly established that the implied covenant of good
faith and fair dealing is imposed in the performance and enforcement of every contract. E.g.,
Wallace, 938 S.W.2d at 686. “It is well established that the laws affecting enforcement of
a contract, and existing at the time and place of its execution, enter into and form a part of
the contract.”22 Kee v. Shelter Ins. Co., 852 S.W.2d 226, 228 (Tenn. 1993) (citing Robbins
v. Life Ins. Co. of Va., 89 S.W.2d 340 (1936); Lunati v. Progressive Bldg. & Loan Ass’n, 67
S.W.2d 148 (1934); Webster v. Rose, 53 Tenn. 93 (1871); Cary v. Cary, 675 S.W.2d 491
(Tenn. Ct. App. 1984)). We recently reaffirmed this principle in Ellis v. Pauline S. Sprouse
Residuary Trust, 280 S.W.3d 806, 814 (Tenn. 2009), stating:
Because the rights and obligations of contracting parties are governed by the
law in effect when they entered into their contract, the courts have recognized
that “[t]he lex loci contractus [the law of the place of the contract] becomes as
much a part of the contract as if specifically incorporated therein, and, in the
absence of evidence of contrary intention, the parties must be held to have
contemplated the application of that law to the terms of their agreement.
Id. (emphasis added) (citation omitted)(quoting Moak v. Cont’l Cas. Co., 4 Tenn. App. 287,
292 (1927)). Consistent with Ellis, the application of the duty of good faith and fair dealing
is thus a matter of enforcing the parties’ agreed-upon contract, and refusing to apply the duty
would, as in Ellis, “vary the terms of the . . . agreement.” 280 S.W.3d at 815.
22
The Time Brokerage Agreement and the Right-of-First-Refusal Agreement each provided that
“[t]his Agreement shall be construed and enforced under the laws of the State of Tennessee.” The
Consulting Agreement provided that “[t]his Agreement is being made and executed in Tennessee and shall
be governed by and construed and enforced in accordance with the laws of the State of Tennessee.”
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We conclude that where a contractual provision requiring consent to assign an
agreement is silent regarding the standard of conduct governing a party’s decision whether
to consent, such decision must be made in good faith and in a commercially reasonable
manner. See Wallace, 938 S.W.2d at 686 (“‘In construing contracts, courts look to the
language of the instrument and to the intention of the parties, and impose a construction
which is fair and reasonable.’” (quoting TSC Indus., 743 S.W.2d at 173)). The parties are
free to contract for a standard of decision-making that is subject to a party’s sole, absolute,
unfettered discretion, allowing for the denial of consent for any reason, however arbitrary,
or for no reason. Such an agreement will be enforceable absent any other public policy
ground precluding it. Wallace, 938 S.W.2d at 686 (observing that parties may agree to “the
standards by which the performance of obligations are to be measured” (quoting Cullipher,
752 S.W.2d at 91)). To avoid the imposition of the implied covenant of good faith and fair
dealing, the parties must explicitly state their intention to do so. See 17A C.J.S. Contracts
§ 437 (2011) (“Absent an express disavowal by the parties, every contract . . . generally
contains an implied covenant or duty of good faith and fair dealing in its performance and
enforcement.”(emphasis added) (footnotes omitted)).
Our holding effectuates several desirable results: (1) it is consistent with established
precedent in Tennessee case law and a majority of other jurisdictions as cited and discussed
herein; (2) it establishes predictability, consistency, and bright-line clarity to contracting
parties in the drafting and interpretation of agreements; (3) it guarantees full disclosure and
clarity of understanding “on the front end” in reaching a deal if one or both parties want to
retain complete and unfettered decision-making authority to provide or deny consent; and (4)
it preserves and upholds the parties’ right to freedom of contract. See generally Baugh v.
Novak, 340 S.W.3d 372, 382-83 (Tenn. 2011) (discussing importance of right of freedom of
contract).
The Defendants argue that there could have been no breach of the Right-of-First-
Refusal Agreement because there was never an offer to buy WOKI-FM’s assets, and thus any
right of first refusal remained “nascent” and untriggered by a potential sale. We do not
agree. The Defendants cite no authority for this proposition other than a general description
of the nature of a right of first refusal and how it generally works.23 The right of first refusal
to buy the assets of WOKI-FM at a discounted rate of one million dollars less than an offer
from another potential buyer is a valuable asset, and we have already determined that the
parties anticipated and agreed this right would be assignable with the other party’s
consent. DBC’s request for consent to assign the Right-of-First-Refusal Agreement triggered
a duty on the part of Oak Ridge FM through Mr. Pirkle to consider and decide whether to
23
See Riverside Surgery Ctr., LLC v. Methodist Health Sys., Inc., 182 S.W.3d 805, 811 (Tenn. Ct.
App. 2005).
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consent and to exercise his discretion in good faith and in a commercially reasonable
manner. DBC has alleged that Mr. Pirkle’s failure to do so cost DBC more than ten million
dollars, reflected in the reduction of the sales price in the agreement with Citadel and other
expenses. It will be a matter for the fact-finder at trial to determine whether Mr. Pirkle
withheld consent to the assignment unreasonably or in bad faith.24
The Defendants also argue that we should apply the maxim expressio unius est
exclusio alterius as a rule of construction to provide evidence that the parties intended to
provide Mr. Pirkle an absolute right to deny consent to assign the Right-of-First Refusal
Agreement. The Defendants point to language employed by the parties in the Time
Brokerage Agreement—a different agreement executed at the same time as the Right-of-
First-Refusal Agreement as part of the same transaction—providing the following:
CURE OF FCC-RELATED DEFICIENCIES. It is the intention of the parties
that this Agreement comply fully with the FCC Rules and other federal/state
government agency policy or rules concerning agreements of this nature. In
the event that there is any complaint, inquiry, investigation, or proceeding at
the FCC or other government agency concerning this Agreement and the
relationship between the parties, the parties shall cooperate fully in responding
to such matter. . . . The parties also agree to modify this Agreement in any
reasonable way required to maintain compliance with the FCC Rules or other
government agency rules or orders so as to substantially provide the benefits
to each party, or its permitted assignee, that were bargained for and
contemplated herein and, at the same time, comply with said order, provided,
however, that any such reformation must be approved by the parties, whose
approval shall not be unreasonably withheld, delayed or conditioned.
24
Justice Koch’s concurring opinion notes that our majority opinion does not address the scope of
the implied duty of good faith and fair dealing. We do not address this issue because it was not briefed or
argued on appeal. See Baugh v. Novak, 340 S.W.3d 372, 381 (Tenn. 2011) (“As a general matter, the issues
addressed by the appellate courts should be limited to those that have been raised and litigated in the lower
courts, and which have been fully briefed and argued in the appellate courts.”) (citations omitted). Given
the procedural posture of this case, this issue must await another day. We do note, however, that although
this Court has not had occasion to fully explore the specific contours of the implied covenant of good faith
and fair dealing, we have generally observed that “what this duty [of good faith and fair dealing] consists of
. . . depends upon the individual contract in each case.” Wallace, 938 S.W.2d at 686. The inquiry is
therefore largely fact-dependent. See Lamar Adver. Co., 313 S.W.3d at 791 (“Whether a party acted in good
faith is a question of fact.”); 23 Richard A. Lord, Williston on Contracts § 63:22 (4th ed. 2002) (“[W]hether
particular conduct violates or is consistent with the duty of good faith and fair dealing necessarily depends
upon the facts of the particular case, and is ordinarily a question of fact to be determined by the jury or other
finder of fact.”).
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(Emphasis added). This issue was neither raised nor argued in the trial court; the argument
was made for the first time on appeal. Issues raised for the first time on appeal are
waived. Dye v. Witco Corp., 216 S.W.3d 317, 321 (Tenn. 2007) (quoting Black v. Blount,
938 S.W.2d 394, 403 (Tenn. 1996)). Even if it were not waived, this argument would not
prevail. We have observed that the Latin expression expressio unius est exclusio alterius is
translated as “‘the expression of one thing is the exclusion of another (of the same kind).’”
D & E Constr. Co. v. Robert J. Denley Co., 38 S.W.3d 513, 519 (Tenn. 2001) (emphasis
added) (quoting City of Knoxville v. Brown, 260 S.W.2d 264, 268 (Tenn. 1953)). The subject
matter and purposes of the above-cited provision—an attempt to ensure compliance with
applicable rules and regulations so that the radio station may remain in legal operation—are
vastly different from the consent clause in the anti-assignment provision in the Right-of-
First-Refusal Agreement. The two provisions are not “of the same kind” so as to justify the
application of the maxim as a rule of construction.
We are reviewing the trial court’s ruling on competing motions for summary
judgment. A summary judgment is appropriate only when the moving party can demonstrate
that there is no genuine issue of material fact and that it is entitled to judgment as a matter
of law. Tenn. R. Civ. P. 56.04; Hannan v. Alltel Publ’g Co., 270 S.W.3d 1, 5 (Tenn.
2008). When ruling on a summary judgment motion, the trial court must accept the
nonmoving party’s evidence as true and resolve any doubts concerning the existence of a
genuine issue of material fact in favor of the nonmoving party. Shipley v. Williams, 350
S.W.3d 527, 536 (Tenn. 2011) (quoting Martin v. Norfolk S. Ry., 271 S.W.3d 76, 84 (Tenn.
2008)). “A grant of summary judgment is appropriate only when the facts and the reasonable
inferences from those facts would permit a reasonable person to reach only one
conclusion.” Giggers v. Memphis Hous. Auth., 277 S.W.3d 359, 364 (Tenn. 2009) (citing
Staples v. CBL & Assocs., Inc., 15 S.W.3d 83, 89 (Tenn. 2000)). “The granting or denying
of a motion for summary judgment is a matter of law, and our standard of review is de novo
with no presumption of correctness.” Kinsler v. Berkline, LLC, 320 S.W.3d 796, 799 (Tenn.
2010).
The trial court found that genuine issues of material fact existed regarding the
question of whether the Defendants exercised good faith in refusing to consent to the Right-
of-First-Refusal Agreement. Neither party disputes this conclusion. Each side points to
evidence in the record supporting its argument regarding whether Mr. Pirkle demonstrated
a commercially reasonable reason and acted in good faith in denying consent to assign the
agreement. We vacate the trial court’s grant of a summary judgment to the Defendants
because the issue of whether Mr. Pirkle acted in good faith is a question of fact. See Lamar
Adver. Co., 313 S.W.3d at 791 (“Whether a party acted in good faith is a question of fact.”);
23 Richard A. Lord, Williston on Contracts § 63:22 (4th ed. 2002) (“[W]hether particular
conduct violates or is consistent with the duty of good faith and fair dealing necessarily
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depends upon the facts of the particular case, and is ordinarily a question of fact to be
determined by the jury or other finder of fact.”).
DBC also alleged that Mr. Pirkle breached the Consulting Agreement by objecting to
DBC’s proposed assignment when the terms of the agreement did not require either party to
consent to the assignment. The Consulting Agreement provided that “[t]his Agreement shall
be binding on the parties hereto and their successors and assigns.” (Emphasis added). This
language indicates that the parties intended that the agreement would be assignable to third
parties. “Generally, contractual rights can be assigned.” Petry v. Cosmopolitan Spa Int’l,
Inc., 641 S.W.2d 202, 203 (Tenn. Ct. App. 1982) (citing Restatement (Second) of Contracts
§ 317(2) (1981)). The Consulting Agreement contained no limitation on the rights of either
party to assign the agreement. In response to DBC’s attempt to assign the Consulting
Agreement as part of the larger deal with Citadel, Mr. Pirkle insisted that his consent was
necessary for assignment and refused to give that consent, despite the clear and unambiguous
language of the contract that indicated he had no such right.
Mr. Pirkle argues that his refusal to consent to the assignment of the Consulting
Agreement was based on the advice of his counsel that the assignment was subject to his
consent. The trial court held that the implied covenant of good faith and fair dealing applied
to the Consulting Agreement but that it was “unwilling to find that a party may be held liable
for a breach of contract for holding out a good faith but mistaken interpretation of a contract
provision.”
The trial court erred in considering Mr. Pirkle’s testimony that he thought he had a
contractual right to block DBC’s assignment of the Consulting Agreement by withholding
consent based on a discussion with his attorney. Mr. Pirkle’s testimony regarding his
discussion with counsel was extraneous evidence that would be inadmissible under the parol
evidence rule, which “does not permit contracting parties to ‘use extraneous evidence to alter,
vary, or qualify the plain meaning of an unambiguous written contract.’” Staubach Retail
Servs.-Se., LLC v. H.G. Hill Realty Co., 160 S.W.3d 521, 525 (Tenn. 2005) (quoting GRW
Enters. v. Davis, 797 S.W.2d 606, 610 (Tenn. Ct. App. 1990)); see also Tenn. R. Civ. P.
56.06 (requiring that affidavits in support of and opposition to summary judgment “shall set
forth such facts as would be admissible in evidence”). Moreover, it would be inadvisable to
allow a trial court to consider a contracting party’s argument that “my lawyer told me it
would be okay” as a defense to a breach of contract action where the written agreement
clearly and unambiguously supports the contrary conclusion.
-20-
III.
In conclusion, we hold that where the parties have contracted to allow assignment of
an agreement only with consent and the agreement is silent regarding the anticipated standard
of conduct in withholding consent, the implied covenant of good faith and fair dealing
requires a party to act with good faith and in a commercially reasonable manner in refusing
consent to assign the agreement. The judgment of the Court of Appeals is affirmed. The
trial court’s summary judgment in favor of the Defendants is vacated, and the case is
remanded to the Chancery Court for Knox County for such further action as may be
necessary, consistent with this opinion. Costs on appeal are assessed to the Appellants, John
W. Pirkle, Oak Ridge FM, Inc., and ComCon Consultants, and their respective sureties, for
which execution may issue if necessary.
_________________________________
SHARON G. LEE, JUSTICE
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