Dick Broadcasting Company, Inc. of Tennessee v. Oak Ridge FM, Inc.

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.

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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.”

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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.”).

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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.”

-16-

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

-19-

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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