Hanaway, L. v. The Parkesburg Group, Aplts.

[J-117-2016]
IN THE SUPREME COURT OF PENNSYLVANIA
MIDDLE DISTRICT

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

LYNN J. HANAWAY AND CONNIE : No. 55 MAP 2016
HANAWAY, :
: Appeal from the Order of the Superior
Appellees : Court at No. 2564 EDA 2014, dated
: December 15, 2015, affirming in part
: and reversing in part the judgment of
v. : the Chester County Court of Common
: Pleas at No. 2011-01522, dated August
: 14, 2014, and remanding.
THE PARKESBURG GROUP, LP; PARKE :
MANSION PARTNERS, LP; SADSBURY : ARGUED: December 6, 2016
ASSOCIATES, LP; PARKE MANSION, :
LLC; AND T.R. WHITE, INC., :
:
Appellants :

OPINION

JUSTICE WECHT DECIDED: August 22, 2017
This case involves a dispute between partners of the Parkesburg Group, L.P.

(“Parkesburg”), a Pennsylvania limited partnership. At issue is the applicability of the

implied covenant of good faith and fair dealing to a limited partnership agreement

formed pursuant to Pennsylvania’s Revised Uniform Limited Partnership Act

(“PRULPA”).1 The Superior Court reversed the trial court’s order, which had granted

1
15 Pa.C.S. §§ 8501-94 (repealed 2016). During the pendency of this appeal, the
General Assembly revised the statute, amending it on November 21, 2016, with an
effective date of February 21, 2017. The amendments contain the following application
provisions:
...

(b) Initial applicationBefore April 1, 2017, this chapter governs only:
(continued…)
partial summary judgment in favor of Parkesburg’s general partner and against two of

its limited partners. We reverse the Superior Court’s order in relevant part,2 and we

hold that the implied covenant of good faith and fair dealing is inapplicable to the

Pennsylvania limited partnership agreement at issue, which was formed well before the

enactment of amendments that codified such a covenant.3

(…continued)
(1) a limited partnership formed on or after February 21,
2017; and

(2) except as provided under subsections (c) and (d), a
limited partnership formed before February 21, 2017, which
elects, in the manner provided in its partnership agreement
or by law for amending the partnership agreement, to be
subject to this chapter.

(c) Full effective dateExcept as provided in subsections (d) and (e), on
and after April 1, 2017, this chapter governs all limited partnerships.
...

15 Pa.C.S. § 8611.

This opinion interprets the law in effect at the time the parties entered into their
agreement and at the time of the alleged breach. The parties agree that the
amendments do not apply to this dispute. The impact and interpretation of the new law
(Section 8611) is not encompassed within our allocatur grant, and, therefore, is not part
of this case.

2
The Superior Court affirmed the trial court’s grant of summary judgment with
respect to the Hanaways’ tort claims for conversion and breach of fiduciary duty
because the claims were time-barred. The Superior Court also determined that the trial
court’s rejection of their equity claims was waived because they failed to preserve the
issue. We do not disturb these determinations.
3
The amendments provide, in relevant part, as follows:

(c) Limitations A partnership agreement may not do any of the
following:

(continued…)

[J-117-2016] - 2
 On May 21, 1998, in order to pursue a real estate investment and development

project, Lynn and Connie Hanaway, T.R. White, Inc. (“T.R. White”), and several others

formed a limited partnership, Sadsbury Associates, L.P. (“Sadsbury”). The Hanaways

were among several limited partners of Sadsbury, while T.R. White served as the

general partner. Sadsbury profitably carried out its purpose.

In 2002, acting independently from Sadsbury, T.R. White contracted for options

to purchase two separate tracts of land. Specifically, in January 2002, T.R. White

acquired an option to purchase, for $850,000, a 43.2-acre parcel of unimproved land,

hereinafter referred to as the “Davis Tract.” On September 9, 2002, T.R. White

(…continued)
(11) Vary the contractual obligation of good faith and fair
dealing under sections 8635(a) (relating to limited duties of
limited partners) and 8649(d), except as provided in
subsection (d).

15 Pa.C.S. § 8615. Subsection 8635(a), relating to limited duties of limited partners,
provides as follows:

(a) Good faith and fair dealing A limited partner shall discharge any
duties to the limited partnership and the other partners under the
partnership agreement and exercise any rights under this title or the
partnership agreement consistently with the contractual obligation of good
faith and fair dealing.

15 Pa.C.S. § 8635(a). Subsection 8649(d), relating to standards of conduct for general
partners, provides as follows:

(d) Good faith and fair dealing A general partner shall discharge the
duties and obligations under this title or under the partnership agreement
and exercise any rights consistent with the contractual obligation of good
faith and fair dealing.

15 Pa.C.S. § 8649(d).

[J-117-2016] - 3
obtained an option to purchase, for $800,000, an adjacent 17-acre parcel of unimproved

land, hereinafter referred to as the “Loue Tract.”

On October 14, 2005, prompted by the success of Sadsbury, the partners of

Sadsbury formed Parkesburg in order to implement a new residential development

project involving the Davis and Loue Tracts. T.R. White served as Parkesburg’s

general partner, and the Hanaways were among several limited partners.4

Parkesburg’s limited partnership agreement gave T.R. White broad discretion to carry

out its duties. Pursuant to the express terms of the agreement, T.R. White, as the

general partner, controlled “the business and affairs of the Partnership.” Parkesburg

Limited Partnership Agreement ¶6.1. The business of the partnership included “[r]eal

[e]state investment and development” as well as “all other acts and things which may be

necessary, incidental or convenient” to carry on the business of the partnership. Id. at

¶2.1. The agreement provided T.R. White with “full, exclusive and complete discretion

in the management and control of the business of the Partnership[.]” Id. at ¶6.2.

Additionally, T.R. White had the absolute right “to cause [Parkesburg] (i) to execute and

deliver any contract, amendment, supplement or other document relating to the

Business and (ii) subject to the terms of this Agreement, to exercise the rights and fulfill

the obligations of the Partnership under the applicable law[.]” Id. at ¶6.5. The

Agreement did not confer management authority on Parkesburg’s limited partners.

The parties referred to the Parkesburg development project as the Subdivision.

In addition to developing the Davis and Loue Tracts, Parkesburg’s plan for the

Subdivision included an adjacent quarry, which the Hanaways owned. Parkesburg had

acquired a $180,000 option to purchase the quarry from the Hanaways. On May 6,

4
The Hanaways held a 32.4 percent ownership interest in Parkesburg.

[J-117-2016] - 4
2006, Parkesburg acquired the option to purchase the Davis Tract. On July 11, 2006,

Parkesburg exercised its option, purchasing the tract for $1,024,000.

On February 21, 2007, the Hanaways informed T.R. White that the option to

purchase the quarry from them had expired and that they were unwilling to include it in

the Subdivision. They also refused to contribute any additional capital toward the

project. This change of heart forced Parkesburg to restructure and obtain new

approvals for a development plan that excluded the quarry. Because the Hanaways

were unwilling to contribute additional capital to continue developing the Subdivision,

the remaining limited partners became reluctant to contribute as well.5 Lacking capital

and financially restrained from proceeding, Parkesburg’s development of the

Subdivision stalled. With the option on the Loue Tract approaching its expiration date,

T.R. White acted to save the development project and its investment. On September

25, 2007, T.R. White informed the Hanaways that, upon obtaining a third party fair

market value appraisal, it intended to sell the Davis Tract and the option for the Loue

Tract contemporaneously.

The crux of this dispute concerns Parkesburg’s sale of the Davis Tract and the

Loue Tract option to a newly formed limited partnership, Parke Mansion Partners

(“PMP”). With the exception of the Hanaways, all of Parkesburg’s limited partners were

also partners of PMP. On November 29, 2007, Parkesburg assigned the option to

purchase the Loue Tract to PMP for $10. PMP subsequently exercised this option,

purchasing the Loue Tract for $800,000. On September 5, 2008, Parkesburg sold the

Davis Tract to PMP for $1.9 million. Having purchased the Davis and Loue Tracts, PMP

planned to continue developing the Subdivision without the Hanaways.

5
The Parkesburg limited partnership agreement did not require the limited
partners to contribute capital.

[J-117-2016] - 5
 On February 11, 2011, more than two years after PMP had purchased the

disputed land from Parkesburg, the Hanaways commenced this litigation by filing a six-

count complaint against T.R. White, PMP, Parkesburg, and Sadsbury. Of relevance,

the Hanaways averred in Count I of their complaint that T.R. White transferred the Davis

Tract and the Loue Tract option to PMP for less than adequate consideration and below

fair market value as part of a scheme to eliminate the Hanaways’ ownership interests.

Specifically, the Hanaways alleged that T.R. White, as general partner, breached

Parkesburg’s limited partnership agreement. They viewed the sale of the Parkesburg

tracts to PMP as a sham, executed to freeze them out of Parkesburg.

T.R. White filed a motion for partial summary judgment, arguing that the

Hanaways’ breach of contract claim failed as a matter of law because the Hanaways did

not identify a specific term of the Parkesburg limited partnership agreement that T.R.

White had breached. See T.R. White’s Motion for Partial Summary Judgment,

07/01/2013, ¶ 64. In response, the Hanaways expounded upon their initial breach of

contract claim, contending that T.R. White had breached the implied covenant of good

faith and fair dealing. See The Hanaways’ Answer to Motion for Partial Summary

Judgment, 8/06/2013, ¶46. The trial court granted summary judgment as to the contract

claim, agreeing with T.R. White that the Hanaways had failed to identify a specific term

of the limited partnership agreement that had been breached.6 The trial court also

6
In addition to the breach of contract claim, the Hanaways had asserted the
following five counts in their complaint: (1) request for an accounting, (2) appointment of
a receiver, (3) alternate equitable relief, (4) breach of fiduciary duty, and (5) conversion.
In addition to seeking summary judgment as to the contract claim, T.R. White moved for
summary judgment with respect to the Hanaways’ conversion and breach of fiduciary
duty claims. The trial court granted the motion.

The trial court subsequently presided over a four-day bench trial to address the
Hanaways’ three remaining claims. The trial court ruled in favor of T.R. White as to all
claims. The Hanaways appealed to the Superior Court, challenging the trial court’s
(continued…)

[J-117-2016] - 6
observed that the Parkesburg limited partnership agreement unequivocally provided

T.R. White, as the general partner, with complete and exclusive discretion to manage

the partnership. According to the court, the implied covenant of good faith and fair

dealing could not override such clear language. See Trial Court Order, 1/23/2014, at 3.

The Hanaways appealed the trial court’s order to the Superior Court. A divided

panel of the Superior Court reversed the trial court’s order granting partial summary

judgment with respect to the contract claim, and concluded that T.R. White was obliged

to discharge its duties under the limited partnership agreement in good faith. Hanaway

v. Parkesburg Grp., L.P., 132 A.3d 461 (Pa. Super. 2015). The majority adopted the

Restatement (Second) of Contracts Section 2057 and, in doing so, considered several

cases in which courts have applied the concept of good faith in the contract setting.8 In

(…continued)
decision as to all six counts. The Superior Court reversed the trial court’s order granting
summary judgment as to the breach of contract claim, but affirmed the trial court as to
all other issues. The scope of our allocatur grant pertains only to the trial court’s and
Superior Court’s treatment of the breach of contract claim.
7
The Restatement (Second) of Contracts Section 205 provides that “[e]very
contract imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement.” Restatement (Second) of Contracts § 205 (1981).
8
See Murphy v. Duquesne Univ. of the Holy Ghost, 777 A.2d 418 (Pa. 2001)
(finding, without referencing Section 205 of the Restatement, that parties to an
employment contract had to perform their contractual duties (relating to an internal
review process) in good faith prior to a professor’s forfeiture of tenure); Herzog v.
Herzog, 887 A.2d 313, 317 (Pa. Super. 2005) (applying the Restatement (Second) of
Contracts Section 205 to impose a duty of good faith and fair dealing upon parties to a
marriage settlement agreement); Conomos, Inc. v. Sun Co., 831 A.2d 696, 708 (Pa.
Super. 2003) (explaining that the implied covenant of good faith and fair dealing
“serve[s] to imply terms that the parties would have spelled out had they foreseen their
need, a breach of such implied terms is equivalent to a breach of any other provision in
the contract”); Somers v. Somers, 613 A.2d 1211 (Pa. Super. 1992) (applying a general
duty to act in good faith to a consulting agreement); Baker v. Lafayette College, 504
A.2d 247 (Pa. Super. 1986) (finding a college had an obligation to conduct, in good
(continued…)

[J-117-2016] - 7
light of its review of precedent, the Superior Court perceived no reason to treat limited

partnership agreements differently than any other type of contract. The majority also

opined that the Hanaways’ breach of the covenant of good faith and fair dealing claim

was a breach of contract action, not an independent action for breach of a duty of good

faith.

To bolster its holding, the Superior Court majority examined Delaware law, which

recognizes an implied covenant of good faith and fair dealing with respect to limited

partnership agreements formed pursuant to Delaware’s Revised Uniform Limited

Partnership Act (“DRULPA”). DEL. CODE title 6, 17-101-1111. The majority noted that

DRULPA permits parties to a limited partnership agreement to contractually “expand,

restrict, or eliminate any fiduciary duties that a person may owe.” Hanaway, 132 A.3d at

473 (quoting DEL. CODE title 6, 17-1101(d)). The majority found it significant that

DRULPA forbids contracting parties from waiving the implied covenant of good faith and

fair dealing. To that end, the majority reasoned that, in Delaware, “the implied covenant

of good faith and fair dealing provides a viable alternate remedy in contract where the

fiduciary duty has been restricted.” Hanaway, 132 A.3d at 473. The Superior Court

found a Delaware Supreme Court case persuasive, see Gerber v. Enterprise Products

Holdings, L.L.C., and incorporated aspects of the Gerber court’s analysis into its own

opinion.9 Drawing from Gerber, the Superior Court reasoned that, in this situation, as in

Gerber and under Delaware law, parties to a limited partnership agreement owe a duty

(…continued)
faith, a comprehensive evaluation and review process pursuant to an employment
contract).
9
See Gerber, 67 A.3d 400 (Del. 2013) (overruled on other grounds by Winshall v.
Viacom Intern., Inc., 76 A.3d 808 (Del. 2013)). The Superior Court majority in the case
sub judice observed that, in Winshall, the Delaware Supreme Court confined the
contours of the implied covenant of good faith. Hanaway, 132 A.3d at 474.

[J-117-2016] - 8
to exercise managerial discretion in good faith, a duty that cannot be eliminated

contractually. The majority remanded the breach of contract claim to the trial court to

consider whether T.R. White acted in bad faith in performing its managerial duties under

the limited partnership agreement.

From a dissenting posture, then-Judge, now Justice, Donohue opined that the

implied covenant of good faith and fair dealing could not save the Hanaways’ defective

breach of contract claim. In her view, the implied covenant of good faith and fair dealing

does not apply to limited partnership agreements because limited partnerships are

unique “creatures of the legislature” that must comport with PRULPA. Hanaway, 132

A.3d at 477 (Donohue, J., dissenting). Then-Judge Donohue explained that “[t]he

rights, duties, and liabilities of the partners in a limited partnership formed in

[Pennsylvania and Delaware] are governed, first and foremost, by . . . legislative acts.”

Id.

The dissent traced the evolution of both PRULPA and DRULPA, stressing the

critical distinctions between the acts. Notably, the dissent emphasized that, at the

relevant time, PRULPA, unlike DRULPA, prioritized contractual freedom, as evidenced

by the fact that it provided parties with the freedom to contracta statutory right

unencumbered by any limitations. See 15 Pa.C.S. § 8520(d) (repealed 2016).

Because the majority discussed Delaware law extensively, the dissent made it a

point to discuss why the majority’s reliance upon Delaware law contained major flaws.

The dissent observed that Delaware adopted its own version of the Revised Uniform

Limited Partnership Act of 1976 (“Model Act”) in 1982. Pennsylvania followed suit in

1988. Then-Judge Donohue observed that the Model Act initially lacked any reference

to the implied covenant of good faith and fair dealing. Similarly, at their inception,

neither DRULPA nor PRULPA contained such a reference. In 2001, however, when a

[J-117-2016] - 9
revised Model Act was published, it incorporated specific provisions indicating that

parties to a limited partnership agreement owe one another the implied duty of good

faith and fair dealing. In 2004, Delaware amended its act to add similar, but not

verbatim, language. Then-Judge Donohue highlighted the fact that Pennsylvania never

updated PRULPA to conform to the Model Act. Instead, the General Assembly

incorporated Section 8520(d) into PRULPA, suggesting a departure from the Model Act.

Finally, then-Judge Donohue observed that the Hanaways had available tort remedies

through which they could have obtained relief, and she criticized them for failing to

timely pursue these viable remedies.

T.R. White sought discretionary review in this Court. We granted allocatur to

consider whether the implied covenant of good faith and fair dealing applies to all limited

partnership agreements formed in Pennsylvania, and, if so, whether the implied duty of

good faith and fair dealing can override the express terms of a limited partnership

agreement.

T.R. White observes that neither this Court, nor any Pennsylvania statutory

provision in effect at the time that the parties formed Parkesburg, directed that the

implied covenant of good faith and fair dealing applied to limited partnership

agreements. T.R. White espouses then-Judge Donohue’s dissenting position,

emphasizing that limited partnership agreements are unique and ill-suited for application

of the implied covenant of good faith and fair dealing because they are governed by

statute. Accordingly, T.R. White contends that limited partnership agreements should

not be treated like other types of contracts. T.R. White argues that the Superior Court

majority’s reasoning is flawed because the court ignored the crucial differences between

Pennsylvania law and Delaware law. To that end, T.R. White agrees with then-Judge

Donohue’s observations that DRULPA, unlike PRULPA, expressly mentions the implied

[J-117-2016] - 10
covenant of good faith and fair dealing. T.R. White stresses the fact that DRULPA was

amended in 2004 to align with the Model Act, whereas PRULPA evinced unfettered

freedom to contract through Section 8520(d). Additionally, T.R. White argues that

Delaware law simply cannot serve as a model for Pennsylvania limited partnerships on

this issue, because the two states contain different statutes of limitations periods.

Specifically, contract claims in Pennsylvania enjoy a longer statute of limitations.

T.R. White directs our attention to House Bill 1398, which Governor Wolf signed

into law on November 21, 2016, as Act 170. This new legislation, in relevant part,

amends PRULPA to require that partners discharge their duties consistent with the

contractual obligation of good faith and fair dealing.10 According to T.R. White, this

drastic change is evidence that the Superior Court has exceeded its authority in the

instant case by taking it upon itself to rewrite the law. While T.R. White concedes that

the implied covenant of good faith and fair dealing exists going forward, T.R. White

asserts that it did not exist at the time that the parties formed Parkesburg and entered

into a limited partnership agreement.

T.R. White stresses that the terms of Parkesburg’s limited partnership agreement

clearly provided T.R. White with exclusive managerial authority. Permitting the

Hanaways to invoke the implied covenant of good faith and fair dealing contradicts the

intent of the parties and the unambiguous language of their agreement. T.R. White

maintains that the Hanaways take issue merely with the unfettered discretionary power

10
The amendments provide, in relevant part, that “[a] general partner shall
discharge the duties and obligations under this title or under the partnership agreement
and exercise any rights consistent with the contractual obligation of good faith and fair
dealing.” 15 Pa.C.S. § 8649(d). Additionally, pursuant to the amendments, a
partnership agreement may not “[v]ary the contractual obligation of good faith and fair
dealing[.]” 15 Pa.C.S. § 8615.

[J-117-2016] - 11
that they voluntarily entrusted to the general partner.11 Finally, T.R. White asserts that

the Hanaways are only now advancing a breach of contract claim, rooted in the implied

duty of good faith and fair dealing, because they did not file their tort claims within the

two-year statute of limitations, and because they failed to identify a specific term of the

Parkesburg limited partnership agreement that T.R. White had breached. Because they

sat on their rights, the Hanaways crafted an argument based upon the implied duty of

good faith and fair dealing in order to avoid the statute of limitations governing tort

claims.

The Hanaways urge this Court to adopt the Superior Court’s reasoning. They

argue that the implied covenant of good faith applies to all contracts formed in

Pennsylvania, including the 2005 Parkesburg limited partnership agreement. They

claim that, because Delaware law and Gerber are comparable, the same principles

should be applied to the facts of the instant case.

Contrary to T.R. White’s argument, the Hanaways emphasize that DRULPA does

not expressly create an implied covenant of good faith and fair dealing. Rather,

DRULPA “merely prevents the partners from abrogating the duty[,] which attaches

generally under Delaware common law.” Appellees’ Brief at 17. Accordingly, the

Hanaways suggest that PRULPA and DRULPA are not entirely distinct.12 They contend

that limited partnership agreements should be treated like any other type of contract,

and they urge this Court to hold that the General Assembly intended to import Section

205 of the Restatement of Contracts into Pennsylvania’s Limited Partnership Act.

11
T.R. White also counters that it should be able to carry out its obligations relating
to the business of the partnership without fear of being second guessed by a jury.
12
On this point, T.R. White countered in a reply brief that, prior to Act 170,
PRULPA was silent as to the implied covenant of good faith. DRULPA references the
duty in a way that Pennsylvania previously had not.

[J-117-2016] - 12
 According to the Hanaways, the fact that they did not pursue available tort

remedies is irrelevant, because an action premised upon the implied covenant of good

faith and fair dealing is a breach of contract claim, not an independent cause of action

or a tort claim. They contend that the implied covenant of good faith and fair dealing

never overrides express contract language. Instead, it merely infuses the performance

of duties pursuant to an agreement and attaches to existing contract obligations.

We review a trial court’s order granting summary judgment for an error of law or

an abuse of discretion. Gilbert v. Synagro Cent., LLC, 131 A.3d 1, 10 (Pa. 2015). A

party is entitled to summary judgment if the record clearly demonstrates that there is no

genuine issue of material fact and the moving party is entitled to judgment as a matter

of law. Id. Any doubts as to the existence of a genuine issue of material fact must be

resolved in favor of the non-moving party. Id. Whether the implied covenant of good

faith and fair dealing may be implicated in all limited partnership agreements formed

pursuant to Pennsylvania law is a question of law as to which we apply a de novo

standard of review. We note that, “when interpreting a statute we must listen attentively

to what the statute says, but also to what it does not say.” Johnson v. Lansdale

Borough, 146 A.3d 696, 711 (Pa. 2016). In other words, “it is not for the courts to add,

by interpretation, to a statute, a requirement which the legislature did not see fit to

include.” Commonwealth v. Johnson, 26 A.3d 1078, 1090 (Pa. 2011).

Preliminary, we note that, after the Superior Court issued its decision in the

underlying case and just prior to oral argument before this Court, the General Assembly

enacted Act 170. The new legislation amended PRULPA to expressly state, inter alia,

that limited and general partners must discharge their duties consistent with the

contractual obligation of good faith and fair dealing. Because this case precedes Act

170, we must consider whether the duty of good faith and fair dealing applied at the

[J-117-2016] - 13
time that the parties formed Parkesburg in 2005 or at the time that an alleged breach

arose in 2008. For the reasons that follow, we hold that it did not apply at either

juncture.

PRULPA governs all limited partnerships formed in Pennsylvania. 15 Pa.C.S §§

8501, et seq. (repealed by Act of Nov. 21, 2016, P.L. 1328, No. 170). To form a

Pennsylvania limited partnership, parties must comply with PRULPA’s statutory

directives. PRULPA defined a limited partnership as “[a] partnership formed by two or

more persons under the laws of this Commonwealth and having one or more general

partners and one or more limited partners.” 15 Pa.C.S. § 8503 (repealed 2016).

PRULPA also defined a partnership agreement as “[a]ny agreement, written or oral, of

the partners as to the affairs of a limited partnership and the conduct of its business.”

Id. In order to form a limited partnership, PRULPA requires execution and filing of a

certificate of limited partnership in the Department of State. 15 Pa.C.S. § 8511

(repealed 2016). The certificate must set forth certain information delineated in

Subsection 8511(a). Because the existence of a limited partnership is dependent upon

compliance with PRULPA, failure to conform to its various statutory provisions could

lead to exposure to unwanted liabilities.

At the time the parties formed Parkesburg, Section 8520 of PRULPA governed

limited partnership formation and partnership agreements. It contemplated broad

freedom of contract:

(d) Freedom of contract.A written partnership agreement may contain
any provision for the regulation of the internal affairs of the limited
partnership agreed to by the partners, whether or not specifically
authorized by or in contravention of this chapter, except where this
chapter:

(1) refers only to a rule as set forth in the certificate of limited
partnership; or

[J-117-2016] - 14
 (2) expressly provides that the partnership agreement shall
not relax or contravene any provision on a specified subject.

15 Pa.C.S. § 8520(d) (repealed 2016).
The Parkesburg limited partnership agreement conferred absolute discretionary

authority upon T.R. White, as follows:

6.1. Except as specifically provided in this Agreement, the business and
affairs of the Partnership shall be controlled by the General Partner.

6.2. The General Partner shall have full, exclusive and complete
discretion in the management and control of the business of the
Partnership, and shall have all such other powers of a general partner in
a partnership formed under Pennsylvania law without limited partners, the
exercise of which are consistent with the Business of the Partnership.

Parkesburg LPA ¶¶6.1-6.2 (emphasis added).
According to the agreement, the purpose of the partnership was to pursue “[r]eal

[e]state investment and development.” Id. at ¶2.1.1. The agreement provided that “the

General Partner shall have the right, upon such terms and conditions as it, in its sole

and absolute discretion, may deem advisable . . . to cause the Partnership . . . to

execute and deliver any contract, amendment, supplement or other document relating

to the Business[.]” Id. at ¶¶6.5, 6.5.1. The Parkesburg agreement stated that “[t]he

Limited Partners shall take no part in the management, shall not contribute any services

to the Partnership and shall have no authority to act on behalf of, or to bind, the

Partnership.” Id. at ¶6.6.

This Court has never addressed the applicability of the implied covenant of good

faith and fair dealing in the context of limited partnership agreements. Like then-Judge

Donohue, we find it helpful to consider the evolution of PRULPA. The Model Act, which

has served as a paradigm for most states drafting their own versions of the limited

partnership act, initially did not reference the implied covenant of good faith and fair

[J-117-2016] - 15
dealing. It was not until 2001 that a new, revised Model Act incorporated the

contractual obligation of good faith and fair dealing. Specifically, Sections 110, 305, and

408 were updated to prevent parties from eliminating the obligation and to require

parties to discharge duties in good faith. See Limited Duties of Limited Partners., Unif.

Ltd. Part. Act 2001 §§ 110(b)(7), 305(b), and 408(d).13 Three years after the Model Act

was revised in 2001, DRULPA was amended to correspond with the Model Act.14

13
Presently, the Model Act references the duty in subsection 305(a), regarding the
limited duties of limited partners, and in subsection 409(d), regarding the standards of
conduct for general partners. In a comment to Section 409, the authors of the Model
Act explained that, by referring to the contractual obligation of good faith and fair
dealing, it intended to invoke the implied obligation embedded in the Restatement
(Second) of Contracts Section 205.
14
Subsections 17-1101(d)-(f) of the Delaware Code provide:

(d) To the extent that, at law or in equity, a partner or other person has
duties (including fiduciary duties) to a limited partnership or to another
partner or to another person that is a party to or is otherwise bound by a
partnership agreement, the partner’s or other person’s duties may be
expanded or restricted or eliminated by provisions in the partnership
agreement; provided that the partnership agreement may not eliminate the
implied contractual covenant of good faith and fair dealing.

(e) Unless otherwise provided in a partnership agreement, a partner or
other person shall not be liable to a limited partnership or to another
partner or to another person that is a party to or is otherwise bound by a
partnership agreement for breach of fiduciary duty for the partner’s or
other person’s good faith reliance on the provisions of the partnership
agreement.

(f) A partnership agreement may provide for the limitation or elimination of
any and all liabilities for breach of contract and breach of duties (including
fiduciary duties) of a partner or other person to a limited partnership or to
another partner or to another person that is a party to or is otherwise
bound by a partnership agreement; provided, that a partnership
agreement may not limit or eliminate liability for any act or omission that
constitutes a bad faith violation of the implied contractual covenant of
good faith and fair dealing.

DEL. CODE. title 6, 17-1101.
(continued…)

[J-117-2016] - 16
 Before Act 170, Pennsylvania’s General Assembly never similarly modernized

PRULPA to correspond with the revised Model Act of 2001. Instead, the General

Assembly enshrined the freedom to contract through Subsection 8520(d), conveying a

legislative will starkly different from that expressed in the Model Act and DRULPA.15

When the parties formed Parkesburg, PRULPA contained certain mandates, but beyond

that, Subsection 8520 expressly provided them with unrestrained freedom to contract.

Neither PRULPA nor the Parkesburg limited partnership agreement contained any

restrictions on the ability of the general partner to carry out its obligations. By the terms

of the agreement and Subsection 8520(d), T.R. White had unfettered discretion to fulfill

its business obligations and duties, without fear of being second-guessed by a court.

PRULPA’s silence with respect to the duty of good faith and fair dealing, the fact

that PRULPA expressly provided parties with contractual freedom, and the clear terms

of the Parkesburg limited partnership agreement reveal to us that the implied covenant

of good faith and fair dealing did not apply as a matter of law. This is a case in which a

party failed to secure desirable contractual protections during negotiation of a limited

partnership agreement.16 The Hanaways had the opportunity to bargain for specific

protections without having to rely upon implicit concepts.

In support of its holding, the Superior Court majority examined several decisions

from this Court and from Pennsylvania’s intermediate appellate courts that have applied

the implied covenant of good faith and fair dealing in certain circumstances. For

instance, in Murphy v. Duquesne Univ. of the Holy Ghost, 777 A.2d 418 (Pa. 2001), this

(…continued)
15
Notably, Act 170 repealed Section 8520. In its place is a contractual obligation to
discharge duties in good faith. 15 Pa.C.S. § 8649(d) (effective Feb. 21, 2017).
16
The Hanaways also had viable tort remedies which they failed to timely pursue.

[J-117-2016] - 17
Court considered an employment contract, which provided an internal, judicial-like

review process prior to a professor’s forfeiture of tenure. This Court determined that

such an internal review process accorded due process so long as the University

performed its duties under the contract in good faith. In addition to Murphy, the

Superior Court in this case found several intermediate appellate court cases to be

instructive. See Somers, 613 A.2d 1211; Baker, 504 A.2d 247; Conomos, Inc., 831

A.2d 696; Herzog, 887 A.2d 313, supra.

This Court in Murphy, as well as the intermediate appellate courts in the

foregoing cases, analyzed various contracts through a good faith lens. Some of the

cases went as far as to adopt Section 205 of the Restatement (Second) of Contracts

outright. See Herzog, 887 A.2d at 317; Conomos, Inc., 831 A.2d at 705-706. Here, the

Superior Court relied upon these authorities to conclude that the implied duty of good

faith extends to limited partnership agreements as well. The factual circumstances of

the referenced cases contain a critical distinction: the contracts at issue were not

governed by statute. Accordingly, we cannot endorse the Superior Court’s extension of

these cases to the instant dispute.

Consistent with then-Judge Donohue’s astute observations, we note that

PRULPA governs limited partnership agreements, whereas the Uniform Commercial

Code (“UCC”) governs commercial contracts. Commercial contracts formed under the

UCC must conform to its statutory provisions. Significantly, unlike the version of

PRULPA that was in effect during the relevant time period, the UCC explicitly

references the duty of good faith. It defines “good faith” 17 and requires parties to

17
See 13 Pa.C.S. § 1201 (defining “good faith” as “honesty in fact and the
observance of reasonable commercial standards of fair dealing”).

[J-117-2016] - 18
perform their duties and to enforce commercial contracts in good faith. 18 Moreover,

under the UCC, a breach of the duty of good faith does not create a separate cause of

action. Comment one of Section 1304 provides as follows:

This section does not support an independent cause of action for failure to
perform or enforce in good faith. Rather, this section means that a failure
to perform or enforce, in good faith, a specific duty or obligation under the
contract, constitutes a breach of that contract or makes unavailable, under
the particular circumstances, are medial right or power. This distinction
makes it clear that the doctrine of good faith merely directs a court
towards interpreting contracts within the commercial context in which they
are created, performed, and enforced, and does not create a separate
duty of fairness and reasonableness which can be independently
breached.

13 Pa.C.S. § 1304 (cmt 1).
The General Assembly intentionally imposed an affirmative good faith

requirement upon parties to commercial contracts. Although it could have similarly

referenced the duty of good faith in PRULPA, it chose not to do so. See City of Phila. v.

Int’l. Ass’n of Firefighters, Loc. 22, 999 A.2d 555, 566 (Pa. 2010) (explaining that “we

. . . presume that when enacting legislation, the General Assembly is familiar with

extant law). Until Act 170, “the legislature did not see fit to include” such a provision,

and “it is not for the courts to add, by interpretation, to a statute, a requirement which

the legislature did not see fit to include.” Johnson, 26 A.3d at 1090.19

At oral argument, the Hanaways asserted that Act 170 serves only to confirm the

existence of the duty of good faith and fair dealing in the context of limited partnership

18
See 13 Pa.C.S. § 1304 (providing that “[e]very contract or duty within this title
imposes an obligation of good faith in its performance and enforcement”).
19
The Hanaways seem to believe that a legislative pronouncement is unnecessary,
but they ignore the fact that the UCC expressly recognized such a duty.

[J-117-2016] - 19
agreements. They claim that, through the amendments, the General Assembly has

merely codified an obligation that existed all along. We disagree.20 “We cannot discern

the legislative intent of the General Assembly that passed the relevant, prior version of

the . . . statute by examining the intent of the General Assembly that amended that

statute.” Commonwealth v. Lynn, 114 A.3d 796, 827 (Pa. 2015).21

Prior to Act 170, there was no duty of good faith applicable to limited partnership

agreements formed pursuant to PRULPA. Because the duty of good faith and fair

dealing did not exist at the time that the parties entered into the Parkesburg limited

partnership agreement, and because it did not exist at the time that an alleged breach

occurred, it is unnecessary to address T.R. White’s second inquirywhether the implied

duty of good faith and fair dealing can override the parties’ express contract terms.22

20
We reiterate the fact that the General Assembly passed Act 170 during the
pendency of this legislation, thereby amending the law. See Subsection 8649(d),
providing:

(d) Good faith and fair dealing A general partner shall discharge the
duties and obligations under this title or under the partnership agreement
and exercise any rights consistent with the contractual obligation of good
faith and fair dealing.

15 Pa.C.S. § 8649(d) (effective Feb. 21, 2017). Through Act 170, the General
Assembly also deleted Subsection 8520(d) relating to freedom to contract.
21
This tenet, as articulated by the Court in Lynn, undermines the Dissent’s reliance
upon the amendments to support its interpretation of a prior law. See Dissenting Op. at
3.
22
We recognize that T.R. White expressed concern regarding the scope and
confines of the term “good faith,” characterizing it as a concept that is “shrouded in
mystery.” Appellant’s Brief at 13 (quoting Thomas Diamond & Howard Foss, Proposed
Standards for Evaluating When the Covenant of Good Faith and Fair Dealing Has Been
Violated: A Framework for Resolving the Mystery, 47 HASTINGS L.J. 585, 585-86
(1996)). In light of our holding, we need not define the specific parameters or set forth
any criteria for applying the implied duty of good faith.

[J-117-2016] - 20
The trial court did not err in granting T.R. White’s motion for summary judgment. The

order of the Superior Court is reversed.

Chief Justice Saylor and Justices Todd and Dougherty join the opinion.

Justice Mundy files a dissenting opinion in which Justice Baer joins.

Justice Donohue did not participate in the consideration or decision of this case.

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