St. Benedict's Development Co. v. St. Benedict's Hospital
In St. Benedict's Development Co. v. St. Benedict's Hospital, 811 P.2d 194, 201 (Utah 1991), after finding no implied covenant of continuous operations, the Court described the requirements of the covenant of good faith and fair dealing and remanded the case for trial on that issue. 811 P.2d at 202.
In that case, the hospital entered into a ground lease with the development company. Id. at 196. According to the terms of their lease, the development company would build two professional office buildings on the leased property expected to be occupied by medical practitioners using hospital facilities. Id.
The lease expressly required the hospital to "actively assist" the development company "in acquiring and holding good tenants until such time as the New Office Building is completely occupied." Id. at 197. It also expressly guaranteed payment of rent by the hospital for one-third of the net leasable area of the building until the building was two-thirds occupied. Id.
Subsequently, the hospital and a third-party developer announced their plan to construct another medical office building on property adjacent to the now existing two buildings. Id.
After this announcement was made, several tenants declared to the developer of the existing buildings their intention to vacatee once the new facility was completed and would agree to pay rent only on a month-to-month basis in anticipation of their imminent relocation. Id.
Thereafter, the development company of the existing buildings brought suit against the hospital for, among other claims, breach of the implied covenants of continuous operation and good faith and fair dealing. Id. at 197-99.
In reversing the lower court's decision on the case, this court concluded that the developer's showing that "the hospital encouraged . . . a competing office building" was sufficient to state a claim against the hospital for breach of the covenant of good faith and fair dealing. Id. at 200.
In St. Benedict's, the lease contained express language imposing a legal duty on the hospital, whereas such language is conspicuously absent from the Albertsons lease.
In reversing in the St. Benedict's case, the Court explained: "It is difficult to imagine a scenario where a party could be found to be 'diligently endeavoring' to obtain and retain tenants for one building while at the same time encouraging the solicitation of existing tenants for a competing building." Id.