                I N THE SUPREME COURT O THE STATE O M N A A
                                       F           F O T N




TAMMY PROUT,

                 P l a i n t i f f and Appel3ant,
         -vs-

SEARS, ROEBUCK and COMPANY,
and TERRY McGINNIS,

                 D e f e n d a n t s and R e s p o n d e n t s .




APPEAL FROM:     D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t ,
                 I n and f o r t h e County o f Lewis and C l a r k ,
                 The H o n o r a b l e Henry L o b l e , LTudge p r e s i d i n g .

COUNSEL OF RECORD:

         For Appellant:

                 Randy K .      Dix a r g u e d , H e l e n a , Montana

         For Respondent:

                 J o h n S u l l i v a n a r g u e d ; Hughes, K e l l n e r , S u l l i v a n & Al.ke,
                 H e l e n a , Montana




                                                 Submitted:        November 2 8 , 1988

                                                    Decided:       F e b r u a r y 1 6 , 1989

Filed:
Honorable Frank I. Haswell, Retired Chief Justice, delivered
the Opinion of the Court.

      In this action for wrongful termination of employment,
the underlying issue is whether there is a genuine issue of
material fact precluding summary judgment.     The District
Court held there was none. We disagree.
      Plaintiff Tammy Prout, an employee of the Sears cata-
logue store in Helena, Montana, was fired by Terry McGinnis,
the store manager, on December 2, 1986.      The reason for
termination given by Sears to Tammy was falsification of her
time sheets showing the hours she worked on two occasions.
She sued Sears and McGinnis for wrongful termination of her
employment, alleging breach of the implied covenant of good
faith and fair dealing, negligent firing, estoppel and negli-
gent infliction of emotional distress.    The defendants an-
swered claiming that Tammy was an employee at-will subject to
termination for any reason deemed sufficient by Sears, with-
out any reasonable expectation of job security; accordingly,
the implied covenant of good faith and fair dealing did not
exist in the employment relationship between Sears and Tammy
and cannot be used as a basis for her claim of wrongful
discharge.
      Following pretrial discovery and entry of a pretrial
order pursuant to Rule 16, M.R.Civ.P.,   the District Court of
Lewis and Clark County granted the defendants' motion for
summary judgment holding there was no genuine issue of mate-
rial fact presented and that defendants were entitled to
judgment as a matter of law.
      The undisputed facts disclose that plaintiff went to
work at the Sears catalogue store in Helena on a part-time
basis when she was a sixteen-year-old high school student.
At that time she signed an employment application reading in
pertinent part:
           "In consideration of my employment, I
           agree to conform to the rules and regu-
           lations of Sears, Roebuck & Co. and my
           employment and    compensation can be
           terminated with or without notice, at
           any time, at the option of either the
           company or myself. I understand that no
           unit manager or representative of Sears,
           Roebuck & Co. other than the president
           or vice president of the company, has
           any authority to enter into any agree-
           ment for employment for any specified
           period of time, or to make any agreement
           contrary to the foregoing.



      When plaintiff was hired four days later she signed a
personal record card containing the following language:
           "In consideration of my employment, L
           agree to conform to the rules of Sears,
           Roebuck & Co. and my employment and
           compensation can be terminated, with or
           without cause and with or without no-
           tice, at any time, at the option of
           either the company or myself.
           June 4, 1979.   /s/ Tammy Sharpe [Prout]"

      The agreed facts in the pretrial order further indicate
that Tammy was initially hired as a sales person but a little
over two years later, on August 10, 1981, she was promoted to
the position of machine operator and given a twenty cent per
hour increase in pay due to the higher technical skills
required of the machine operator's position.    On January 2,
1983, Tammy was promoted to the position of Division Head A
(supervisor) and received a pay increase of $1.50 per hour.
The agreed facts further state that "Tammy Prout was given
these promotions because her supervisors were generally
satisfied with her job performance."  On December 2, 1986,
Terry McGinnis advised Tammy that her employment with Sears
was terminated effective that date.
      During Tammy's employment at the Helena Sears store
Sears changed managers five times.   At least three of these
managers gave performance evaluations on Tammy reporting that
she had difficulties with absenteeism and tardiness which
needed attention and correction.     These reports and other
warnings given to Tammy were both written and verbal.     The
reason given by Sears to Tammy for her termination was falsi-.
fication of two time sheets although McGinnis, the manager,
also claimed he asserted absenteeism and tardiness.
      At the heart of this dispute is Sears's time-keeping
and payment system.  Sears paid its employees in the Helena
store every Friday for the preceding week on the basis of
time sheets due at the central payroll office each Thursday
for the entire work week. Thus, if an employee was scheduled
to work on Friday and Saturday, the employee would enter the
scheduled hours for those days on the Thursday time sheet and
be paid accordingly on Friday of the following week.   If, in
fact, the recorded Friday and Saturday hours were not worked
as scheduled, the employee was supposed to teletype the
correction of hours to the central payroll office the follow-
ing Monday.
      The weekly time sheets signed by Tarnmy contained this
language :
           "I have recorded my actual starting and
           quitting time each day. Any falsifica-
           tion will subject me      to immediate
           dismissal."
This was signed by Tammy each week as she sent in her weekly
time sheet.
      Tammy believed that it was an acceptable practice to
make up the necessary hours during the next work week rather
than to teletype the corrections into the central payroll
office on the Monday following a missed day.   Tammy and two
former    employees   of   the   Helena   Sears   store testified   by
deposition this was an accepted store practice under two
prior store managers.  The existence of this practice was
disputed by defendant McGinnis and several current employees.
      During two pay periods in November, 1-986, Tammy missed
time at work which she had recorded on her time sheets as
having worked.   She did not teletype in the Monday correc-
tions adjusting her pay.    Tammy was paid for these hours
which were missed.   She was attempting to make up the hours
missed on a compensatory time basis. Both of the two incor-
rect time sheets were observed by manager McGinnis, and he
promptly   fired Tammy for this reason when she returned to
work after receiving the pay check under the second inaccu-
rate time sheet.
      The pretrial order lists the following issues of fact,
among others, that remain to be litigated upon the trial:
      1. Whether defendants acted unfairly and in bad faith
towards plaintiff;
      2.    Whether   defendants acted      in a negligent manner;
      3.  Whether defendants negligently inflicted emotional
distress upon plaintiff;
      4. Whether defendants are equitably estopped from
relying upon the language in the employment application and
personal record card regarding termination without cause or
notice;
      5.  Whether defendants led plaintiff to believe that
her time-keeping procedures were acceptable to them, and, if
so, whether defendants are equitably estopped from terminat-
ing plaintiff for allegedly falsifying her time sheets;
      6. Whether plaintiff acted negligently concerning her
termination.
      One of the issues of law listed in the pretrial order
is   whether  the  provisions  of   plaintiff's  employment
application and personal record card bar the claims asserted
in this lawsuit.   The pretrial order notes that this legal
issue is the subject of a pending motion for summary judgment
by defendants.
      The gist of the District Court's ruling on the motion
for summary judgment is contained in the followinq language:
           "The sole issue decided by the Court is
           that plaintiff's claims are precluded as
           a matter of law by the language of
           plaintiff's employment application and
           her personal record card. That language
           in clear and unequivocal terms notified
           plaintiff that her employment could be
           terminated at any time and for any
           reason, and defeats the claims plaintiff
           is attempting to assert in this case."
      At the outset, we note that this case is governed by
the law that existed at the time of firing, December 1986,
and is no way affected by legislation enacted by the 1987
legislature.
      Montana's at-will employment statute provides in perti-
nent part :
            "TERMINATION AT WILL.     An employment
            having no specified term may be termi-
            nated at the will of either party on
            notice to the other, except where other-
            wise provided by [statute]." Section
            39-2-503, MCA.
      Notice prior to termination is not required. Gates v.
Life of Montana Insurance Company (19821, 196 Mont. 178, 638
P.2d 1063 (Gates I)   .   None of the statutory exceptions are
applicable to this appeal.
      Because of the harshness of this statute when applied
literally and mechanically to all at-will employment termina-
tions (Nye v. Dept. of Livestock (1982), 196 Mont. 222, 639
P.2d 498), and because of abuses inherent in employment
relationships between parties of unequal bargaining power
(Dare v. Montana Petroleum Marketing Co. (1984), 212 Mont.
274, 687 P.2d 1015; Stark v. The Circle K Corporation (Mont.
1988), 751 P.2d 162, 45 St.Rep. 3771, courts in Montana and
elsewhere, to achieve justice in a wide variety of employment
situations, have established exceptions to the unlimited
discretion of the at-will employer to discharge his employ-
ees.   We need not concern ourselves here with a survey and
exposition of the law in this area nationally or in other
jurisdictions, as Montana has proven to be a fertile field
for such litigation and has developed its own law and prece-
dent accordingly.
      Aside from statutory enactments, Montana courts have
recognized four exceptions to the right of the at-will em-
ployer to discharge its employees:
      1. When the discharge violates public policy: Keneally
v. Orgain (1980), 186 Mont. 1, 606 P.2d 127; Staudohar v.
Anaconda Co. (D. Mont. 1981), 527 F.Supp. 876; Nye v. Dept.
of I~ivestock,supra.
      2. When the discharge breaches an express or implied
promise of job security:   Gates I, supra; Dare v. Montana
Petroleum Marketing Co., supra; Stark v. The Circle K
Corporation, supra.
      3. When the discharge breaches the implied covenant of
good faith and fair dealing: Gates I, supra; Gates v. Life
of Montana Insurance Co. (1983), 205 Mont. 304, 668 P.2d 213
(Gates 11) ; Dare, supra; Crenshaw v. Bozeman Deaconess
Hospital (1984), 213 Mont. 488, 693 P.2d 487; Malloy v.
Judges Foster Home Program (Mont. 1987), 746 P.2d 1073, 44
St.Rep. 1996; Stark, supra.
      4. Negligent discharge: Crenshaw, supra.
      These four exceptions frequently overlap. For a good
exposition of the Montana law in this area, see Hopkins and
Robinson, -        -
          Employment At-Will, Wrongful Discharge, - -
                                                  and the
Covenant - -
          of Good Faith - - Dealing in Montana, Past,
                         and Fair         7




Present, and Future, 46 Mont. L. Rev. 1 (1985).
      In this case we have an express, written, at-will
employment relationship between Sears and Tammy, giving Sears
the right to terminate her employment, without notice, with-
out cause and providing that any falsification of time sheets
would subject Tammy to immediate dismissal. We have a pre-
trial order approved both as to form and content by the
attorneys for the respective parties, signed and entered by
the district judge, and listing what the parties considered
eight issues of fact remaining to be litigated at the trial.
Fact issues listed include whether the defendants acted
unfairly and in bad faith toward the plaintiff; whether
defendants acted negligently concerning plaintiff's termina-
tion; whether defendants led plaintiff to believe that her
time-keeping procedures were acceptable to them, and, if so,
whether defendants are equitably estopped from terminating
plaintiff for allegedly falsifying her time sheets; and
whether defendants are equitably estopped from relying upon
the language in the emplovment application and personal
record card regarding termination without cause or notice.
At first blush it would appear that at least some of these
fact issues are really issues of law and that some of them
are mixed questions of fact and law. However, the parties
treated them as issues of fact and, underlying all these
listed issues, are numerous factual disputes concerning
Tammy's job performance, the reason for and manner in which
she was discharged, the employer's practice concerning
time-keeping procedures, and related matters.
      The District Court held as a matter of law that the
language of Tarnmy's employment application and personal
record card barred her claims in this action, thus rendering
the fact issues listed in the pretrial order irrelevant.
      In deciding this appeal we need not further detail the
evidence developed in pretrial discovery. The parties con-
cede the existence of numerous fact issues for litigation at
trial by approving the content of the pretrial order. These
must be resolved to determine whether plaintiff's claims fall
into any of the four exceptions to the right of the at-will
employer to discharge its employees. This precludes summary
judgment.
      Our decision in this appeal turns on the facts peculiar
to this case. It is not to be read as a carte blanche to the
jury in every wrongful discharge case. The distinguishing
characteristics in this case are the agreement by the attor-
neys that the listed fact issues in the pretrial order "re-
main to be litigated upon the trial"; the alleged conduct of
the employer in discharging its employee for dishonesty
consisting of a time-keeping practice that allegedly had been
condoned on prior occasions and which allegedly made it
difficult, if not impossible, for the discharged employee to
secure further employment; and the alleged negligence of the
employer.   In this case we neither expand the exceptions to
the at-will rule nor create jury issues out of thin air, but
simply apply Montana precedent to this case.
      At the same time we give effect to the employment
application and record. card.   These give the employer the
right to fire without cause. They do not give the employer
the right to fire for a false cause. If the at-will employer
who can fire without cause under the employment contract
chooses instead to fire an employee for dishonesty, the
discharged employee must be given the opportunity to prove
the charge of dishonesty false.
      The foregoing limitation on an employer's right to fire
without cause was recently stated by Justice Harrison:
             "Employers can still terminate untenured
             employees at will and without notice.
             They simply may not do so in bad faith
             or unfairly without becoming liable for
             damaqes." Crenshaw v. Bozeman Deaconess
             Hospital, 693 P.2d at 492.
      We vacate the summary judgment, dismiss the claim for
negligent infliction of emotional distress as having insuffi-
cient basis, and remand the balance of the case to the Dis-
trict Court for further proceedinqs.

                                3;Ac4,,W',&<
                               Hon. Frank ' . Haswell, sitting
                                           I
                               in place of Justice William E.
                               Hunt, Sr.



We concur:



     Chief Justice
Mr. Justice Fred J. Weber dissents as follows:

                             I
     The majority has not addressed the key legal issue
presented in this case. Where the Sears-Prout written con-
tract is clear and unambiguous, can the covenant of good
faith and fair dealing be implied in such a manner as to
negate the express contractual terms and allow recovery of
tort damages?
     The District Court concluded that the plaintiff's claims
were precluded as a matter of law because of the clear and
unambiguous language of the employment application and per-
sonal record card.    On appeal, the majority reverses the
District Court, concluding that there are issues of fact
which preclude the granting of summary judgment. To reach
that conclusion, it is necessary to ignore the terms of the
written contract because those terms would preclude a factual
inquiry into Sears' termination of Tammy Prout. The majority
opinion implies that the terms of Sears1 employment contract
can be disregarded by a court of law. The majority has also
implied that the employment at-will statute has no signifi-
cance here.   I do not agree with such a result. For that
reason, I believe that it is necessary to critically examine
the Montana cases and to compare our analysis of the law with
that of other jurisdictions.
                             I1
     In the 15001s, the English common law presumed that an
employment contract with an annual salary computation was for
a one year term. In the early 19th century, American courts
borrowed the English rule, concluding that the rule was
consistent with the predominant master-servant employment
relationships of that time.
     Then, in apparent response to economic changes sweeping
the country, American courts abandoned the English rule and
adopted the employment-at-will doctrine.    This became the
common law doctrine generally followed in the United States.
Under that doctrine an employer was free to fire an employee
hired for an indefinite term for good cause, no cause, or
even for cause morally wrong, without being guilty of legal
wrong.   See generally, Wagonseller v. Scottsdale Memorial
Hospital (Ariz. 1985), 7 1 0 P.2d 1 0 2 5 .
     In 1895 Montana enacted its termination at-will statute
providing:

     An employment having no specified term may be
     terminated at the will of either party on notice to
     the other   .      .   [with exceptions not here
     applicable]
That section was adopted from the Field Civil Code, and has
remained essentially unchanged until the 1987 enactment of
the Wrongful Discharge from Employment Act, codified as
S S 39-2-901 to 914, MCA. The facts here preceded the enact-
ment of that Act, which therefore does not apply in this
case.
     As pointed out in Wagonseller, the trend in the United
States has been to create exceptions to the at-will employ-
ment doctrine with the result that the employer's unlimited
discretion to discharge at will has been limited. As pointed
out in the majority opinion, most jurisdictions including
Montana recognize an exception based on the employer's viola-
tion of public policy. Several jurisdictions have recognized
an exception based on an implied-in-fact promise of employ-
ment for a specified term. Other jurisd.ictions have recog-
nized an exception where there is an implied-in-law contract
term known as the impl-ied covenant of good faith and fair
dealing.
     California has been one of the leading jurisdictions
recognizing both an implied-in-fact contract to discharge
only for good cause (See, Pugh v. See's Candies, Inc. (1981),
116 Cal.App.3d 311, 171 Ca1.Rptr. 917), and the implied
covenant of good faith and fair dealing in employment con-
tracts (See, Cleary v. American Airlines, Inc. (1980), 111
Cal.App.3d 443, 168 Cal.Rptr. 722). The court in Cleary held
that an employer's breach of the covenant would support an
employee's action in either tort or contract.     That theory
was adopted in a number of other appellate court decisions of
the state of California. California reversed that position
by its Supreme Court decision dated December 19, 1988, Foley
v. Interactive Data Corp., (Cal. 1988), 765 P.2d 3?3.
     In Foley the majority made a detailed review of cases in
California and elsewhere.    In a similar way the dissents
carefully reviewed the contrary positions in detail-. Foley
is an excellent case through which to study the development
of law in this entire area.    The California Supreme Court
concluded that an action based upon the implied covenant of
good faith and fair dealing was an action upon contract and
that tort damages were not recoverable. The Court considered
the application of bad faith insurance cases to the employ-
ment context and stated:

          In our view, the underlying problem in the
     line of cases relied on by plaintiff lies in the
     decisions' uncritical incorporation of the insur-
     ance model into the employment context, without
     careful consideration of the fundamental policies
     underlying the development of tort and contract law
     in general or of significant differences between
     the insurer/insured and employer/employee relation-
     ships. When a court enforces the implied covenant
     it is in essence acting to protect "the interest in
     having promises performed" (Prosser, Law of Torts
     (4th ed. 1971) p. 613)--the traditional realm of a
     contract action--rather than to protect some
        general duty to society which the law places on an
        employer without regard to the substance of its
        contractual obligations to its employee. .     .
                                                      . The
        covenant of good faith is read into contracts in
        order to protect the express covenants or promise
        of the contract, not to protect some general public
        policy interest not directly tied to the contract's
        purposes.   The insurance cases thus were a major
        departure from traditional principles of contract
        law.
765 P. 2d at 3 9 3 . I agree with the foregoing analysis and
with the conclusion reached by the Court:

             We therefore conclude that the employment
        relationship is not sufficiently similar to that of
        insurer and insured to warrant judicial extension
        of the proposed additional tort remedies in view of
        the countervailing concerns about economic policy
        and stability, the traditional separation of tort
        and contract law, and finally, the numerous protec-
        tions against improper terminations already afford-
        ed employees.
765 P.2d at 3 9 6 . After its careful review of the numerous
California appel-late decisions holding to the contrary, the
California Supreme Court then reached the following holding:

            .
     . . as to his cause of action for tortious breach
     of the implied covenant of good faith and fair
     dealing, - - - -
               we hold that tort remedies - - avail-
                                          are not
     able - breach - - implied covenant in an
     -     for          of the
     employment contract to employees who allege they
     have been discharged in violation of the covenant.
     (Emphasis supplied. )
7 6 5 P.2d at 401.   As will more fully appear in this dissent,
I agree with the holding of the California Court. California
joined the majority of jurisdictions in the United States
which    have   either   expressly   rejected the   notion of   tort
damages in such cases or impliedly done so by rejecting the
covenant in employment at-will contracts. Under the majority
opinion in t-his case, Montana remains one of the few, if not
the only jurisdiction, which would allow recovery of tort
damages for a breach of the implied covenant.    I conclude
that such a result is inconsistent with the general princi-
ples of contract law.
                             I11
     As I review the cases of other states and compare them
to Montana's cases, I believe it is essential to reanalyze
our position in previous cases with regard to the covenant of
good faith and fair dealing and the right of recovery in
tort.
      In Gates v. Life of Montana Ins. Co. (1982), 196 Mont.
178, 638 P.2d 1063, (Gates I) the majority concluded that the
employee entered into an employment contract terminable at
will; the employer later promulgated a handbook of personnel
policies with termination procedures; the employer presumably
sought to secure an orderly, cooperative and loyal work force
by these uniform policies; the employee then developed the
peace of mind associated with job security; and if the em-
ployer failed to follow its own policies, the peace of mind
of its employees was shattered. Ve therefore said:
                                 7

    We hold that a covenant of good faith and fair
    dealing was implied in the employment contract of
    the appellant.   There remains a genuine issue of
    material fact which precludes summary judgment,
    i.e. whether the respondent failed to afford appel-
    lant the process required and if so, whether the
    respondent thereby breached the covenant of good
    faith and fair dealing.
638 P.2d at 1067. The summary judgment was reversed and the
case was remanded to the lower court.
     As I review that case, I find some contradictions in the
opinion. We stated that the employee handbook was not a part
of the plaintiff's employment contract when she was hired and
could not have been a modification of her contract because
there was no new and independent consideration.      We also
stated that an employee handbook distributed after the em-
ployee is hired does not become a part of the employee's
contract. These statements seem inconsistent with the hold-
ing that "a covenant of good faith and fair dealing was
implied in the employment contract." We will further discuss
the question of whether or not a covenant implied in the
contract is in some manner contractual in nature.
     In Gates v. Life of Montana Ins. Co. (1983), 205 Mont.
304, 668 P.2d 213, (Gates 11) , the majority again considered
the same case and concluded that the jury verdict in favor of
the plaintiff for $1,891 in compensatory damages and $50,000
in punitive damages should be affirmed.     The majority re-
ferred to Lipinski v. Title Insurance Co. (1982), 202 Mont.
1, 655 P.2d 970, in which this Court held that punitive
damages could be assessed for a bad faith insurance practice
in the absence of a statutory provision. The Gates I1 major-
ity further explained that an action for breach of an implied
covenant of fair dealing at first blush may sound both in
contract and in tort, but that the duty arises out of the
employment relationship and yet exists apart from and in
addition to any terms agreed to by the parties. The majority
stated that the duty is much like the duty to act in good
faith in discharging insurance contractual obligations and
that such a duty is imposed by operation of law and its
breach should find a remedy in tort. The majority referred
to a 1906 Indiana case as authority. Without other signifi-
cant authority the majority concluded:

    We hold that S 27-1-221, MCA, [the section which
    provides that in any action "not arising from
    contract" where the defendant has been guilty of
    oppression, fraud, or malice, the jury may give
    exemplary or punitive damages] only exempts breach
    of contract actions from its provisions. Breach of
     the duty owed to deal fairly and in good faith in
     the employment relationship is a tort for which
     punitive damages can be recovered if defendant's
     conduct is sufficiently culpable.
668 P.2d at 215.
     This is a key holding which I believe should be reexam-
ined. As pointed out by Justice Gulbrandson in his dissent
to Gates 11, by allowing punitive damages the majority ap-
proved an independent tort of bad faith in at-will employment
contracts whereas all other jurisdictions do so only when the
determination violates public policy.    In my own dissent I
pointed out that Gates I1 was an action for the breach of the
covenant of good faith and fair dealing, arising - -
                                                   from the
contract from which that covenant is implied. I pointed out
that § 27-1-221, MCA, allowed punitive damages in any action
not arising from contract. I suggested that it seemed clear
that the breach of the contractual obligation did not justify
an award of punitive damages under the express terms of the
statute.
     It is not appropriate in dissent to review all of the
cases which have considered these theories.     However, I do
refer to Stark ~ 7 . Circle K Gorp. (Mont. 1988), 751 P.2d 162,
45 St.Rep. 371. While I joined in that opinion, as I again
review the matter, 1 question the following conclusions
reached in Stark: that the covenant is implied as a matter
of law based on the public policy of this state; that it does
not depend on contractual terms for its existence; that the
covenant of good faith and fair dealing is not subject to
contractual waiver, express or implied; and that the duty
exists apart from and in addition to any terms agreed to by
the parties. It is important to consider the evidence which
was hefore the Court in Stark as compared to the present
case.   It is true that in - -
                            Stark there was a provision by
which the employee agreed that he could be dismissed with or
without cause.     However, there were extensive provisions
adopted by the employer including a policy guide with regard
to termination, which Stark's supervisor admitted was the
policy guide which applied to the termination of Stark. That
guide, of course, contained many provisions with regard to
the manner of termination and the just cause requirement..
That should be distinguished from the present case where
there is no evidence that Sears issued any similar employer
provisions with regard to either just cause or termination.
     As I review the cases from other states, and consider
both Stark and the present case, I conclude that the type of
action in both Montana cases more properly should be de-
scribed as one for the breach of "an implied-in-fact con-
tract" as described in detail in Foley.     I approve of the
California analysis in Foley which pointed out that such
impl-ied-in-fact contract terms ordinarily stand on equal
footing with express terms; and concluded there is no analyt-
ical reason why an employee's promises to render services or
his actual rendition of services may not support an employ-
er's promise to refrain from arbitrary dismissal. The Cali-
fornia court noted that permitting proof of and reliance on
implied-in-fact contract terms does not nullify the at-will
rule, it merely treats such contracts in a manner in keeping
with general contract law.    I agree with the conclusion of
the California court which found no sound reason to exempt
the employment relationship from the ordinary rules of con-
tract interpretations which permit proof of implied terms.
As a result, I conclude in both Stark and the present case
that a more detailed analysis leads to a conclusion that the
covenant of good faith is a part of the implied-in-fact
contract and. should be treated as are other contract cases.
It then logically follows that tort damages are not
recoverable.
      In our analysis of the law, we should also consider the
law previously adopted in Montana as it may apply to the
present case. In Keith v. Kottas (1946), 119 Mont. 98, 172
P.2d 306, we quoted from 12 Arn.Jur., p. 505, which stated
that there cannot be an express and an implied contract for
the same thing existing at the same time so that no agreement
can be implied where there is an express one existing. The
Keith case has been subsequently cited in Weston v. Montana
State Highway Commission (1981), 186 Mont. 46, 606 P.2d 150
and McNulty v. Bewley Corporation (1979), 182 Mont. 260, 596
P.2d 474.    This same theory is more clearly restated in 17
Arn.Jur.2d 649 as follows:

     Intention or meaning in a contract may be manifest-
     ed or conveyed either expressly or impliedly, and
     it is fundamental that that which is plainly or
     necessarily implied in the language of a contract
     is as much a part of it as that which is expressed.
     .   .
       . Therefore, whatever may fairly be implied
     from the terms or nature of an instrument is, in
     the eyes of the law, contained in it.
In addition, this authority states at 17 Am.Jur.2d 652:

     No meaning, terms, or conditions can be implied
     which are inconsistent with the expressed provi-
     sions. Expressed stipulations cannot, in general,
     be set aside or varied by implied promises.    In
     other words, a promise or covenant is not implied
     where there is an express written contract pro~ri-
     sion covering it.
Clearly this contradiction between the theory of an implied
covenant and the existing written contract provision should
be considered. Here we have a clear and unambiguous express
contract which negatives the idea of an implied covenant.
B o t h Foley and Waqonseller point out that many jurisdictions
in consideration of the Sears form of contract have refused
to allow any form of implied covenant.
     I would therefore conclude that the covenant of good
faith and fair dealing in Montana is an implied-in-fact
portion of the contract itself which is subject to general
contract analysis under the law of Montana.     I would also
conclude that any violation of such an implied-in-fact cove-
nant allows recovery only of contract damages and that puni-
tive damages are not recoverable.
                             IV
     In the present case, the District Court concluded that
the plaintiff's claims were precluded as a matter of law by
the language of the contract because that language in clear
and unequivocal terms notified the plaintiff that her employ-
ment could be terminated at any time and for any reason, and
therefore defeated the claims asserted by the plaintiff. The
majority has chosen not to address this fundamental legal
issue, instead returning the case to the lower court because
of the claimed presence of material issues of fact precluding
summary judgment. I disagree with that procedure.
     Here we have facts which are significantly different
from Gates I or Stark. In both of those cases there had been
extensive conduct by the employer from which the covenant of
good faith properly could be implied.     Here, there is no
evidence of conduct of that nature on the part of the employ-
er. In addition, we have the specific contractual limitation
which provides that no representative of Sears other than the
president or vice president has any authority to modify the
written contract which allows termination with or without
notice, at any time. Neither Gates I nor Stark had a similar
contract provision.    Here Prout agrees that there was no
modification of the written contract by the authorized offi-
cers of Sears. Under the facts presented for consideration
at summary judgment, I do not conclude there is a material
issue   of   ultimate   fact which   has   been   presented   by   the
plaintiff.
     In accordance with the Foley analysis, I would add that
there has been no violation of public policy which justifies
a tort theory of recovery. I would therefore conclude that
the District Court should be affirmed because Prout's claims
are precluded as a matter of law by the language of the
contract between the employer and the employee, and because
of the absence of any violation of public policy.


                                L




     Chief Justice J.A. Turnage and Justice L. C. Gulbrandson
concur in the foregoing dissent.
          IN THE SI!PREME COTJRT OF THE STATE OF MONTAFA       5            C
                                                                           0 3



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                           No. 88-117                      --
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                                                           -i -
                                                           C
                                                                           ru    2
TAMMY PFOUT,                                                                     r
           Appellant,                       1     AMENDFEST~T
                                            !   DISSENT #I~TT;CE
     v.                                     )    PART O, Q P I ~ N
                                                        F
                                                IF ENTITEE& C ~ S E
SEARS, FOERIJCK AND COMPANY                      DATED A D F ~ E D
and TERRY McGINNIS,                         1    APRIL 37,                1989
          Respondents.


     Subsequent to this opinion, Sears filed a petition for
rehearing. In that petition, Sears argues that the majori-
ty's emphasis on factual issues contained in the pretrial
order is erroneous.    This is because the interpretation of
the pretrial order had. not been suggested by either party,
was not considered by the District Court in granting summary
judgment, and is a matter which first appears in the majority
opinion as the basis for reversal.
     The basic issue presented to the District Court and to
this Court on appeal was whether the language of the employ-
ment contract and the employee record card, without evidence
of modification, precluded the plaintiff's claims as a matter
of law so that summary judgment was proper?     Rased on the
evidence before it, the District Court concl-uded that the
plaintiff's claims were precluded as a matter of law and that
no material issues of fact existed which would render a
granting of summary judgment improper.      A review of the
materials before the court reveals no facts alleged by the
plaintiff that she had devel~pedany sense of'job security or
that her at-will employment contract had been modified in any
way, either expressly or impliedly.      The contested facts
regarsing Tammy Prout's conduct, her treatment, or Sears'
timekeeping policies were contained in the pretrial order and
were expressly reserved pending the motion fcr summary judg-
ment. I conclude that it was improper for this Court to have
ignored the basic inquiry as to whether plaintiff's claims.
were precluded as a matter of law, and to focus i~steadon
factual issues in the pretrial orZer which were secondary to
the pending motion. Whether Sears is entitled to a rehearing
on the matter is governed by Rule 34, M.R.App.P.
     Rule 3 4 ( 2 ) , M.R.App.P., provides that a party is enti-
tled to a rehearing if it can show that the Court has over-
looked any questions decisive of this case. By deciding the
propriety of summary judgment based upon factual issues
presented in the pretrial order which were understood to be
reserved pending the motion, the majority has indeed over-
looked the basic inqui.ry in this case: whether the plain-
tiff's claims were precluded. by the at-will employment
contract which she signed, which remained unmodified, and to
which there had been no Factual al-legations of job security.
Had the majority square1.y addressed this issue, I do not see
how it. could have reached the result in this opinion.
     T vroulr2 grant Sears' petition '    o
                                          r rehearing an2 allow
reconsideration ef this case without j.nterpretlng the pretri-
al order. The basic inquiry as to whether plaintiff's c1.aj.m~
are precl.uded as a matter of law should be ad6ressed in
Zeciding whether summary judgment was proper.




     Mr. Justice L. C. Gu!.brandson   j
amendment to the dissent.




    Mr. Chief Justice J. A. Turnage joins in the foregoing
amendment to the dissent.
          IN THE SUPREME COURT OF THE STATE OF MONTANA
                           No. 88-117


TAMMY PROUT,
          Plaintiff and Appellant,
                                              O R D
SEARS, ROEBUCK AND
COMPANY, and TERRY
McGINNIS,
          Defendant and Respondent.



     The petition for rehearing is denied.
                              *iJ-4,
     DATED this         day of Bplk, 1989.




                                       z 2..B.~G&,JQ
                                        d
                              Hon. Frank I. ~aswe71, ~etired-
                              chief Justice, sitting in place
                              of Mr. ~ustice~i'lliam Hunt
                                                     E.

     Mr. Justice Fred J. Weber, Mr. Justice L.C. Gulbrandson,
and Mr. Chief Justice J.A. Turnage would have granted the petition
for rehearing and have modified their dissent to address issues
raised in the petition for rehearing.
