In light of the text and history, we conclude that, when the legislature used the phrase "good faith" in ORS 90.130 and defined it as "honesty in fact" in ORS 90.100(19), it intended to follow the URLTA in incorporating the meaning of "good faith" in UCC section 1-201(19). This court has previously interpreted that UCC provision, originally codified in Oregon at ORS 71.2010(19) (1963).See U.S. National Bank v. Boge , 311 Or. 550, 814 P.2d 1082 (1991) ; Community Bank v. Ell , 278 Or. 417, 564 P.2d 685, reh'g den. , 279 Or. 245, 566 P.2d 903 (1977). In Community Bank , we explained that the appropriate standard for "good faith" under ORS 71.2010(19) (1977) is a "subjective one, looking to the intent or state of mind of the party concerned."
See Best v. U.S. National Bank, 303 Or. 557, 739 P.2d 554 (1987); Restatement (Second) Contracts § 205, comment d (1979). We find the Supreme Court's analysis in U.S. National Bank v. Boge, 311 Or. 550, 814 P.2d 1082 (1991), instructive in addressing defendant's argument. In that case, the parties agreed that the good faith specified by ORS 71.2010(19) applied to their secured transaction.
Good faith is defined in ORS 71.2010(19) as "honesty in fact in the conduct or transaction concerned." Under Oregon law the duty of good faith created by the Uniform Commercial Code displaces the common law duty of good faith.U.S. National Bank of Oregon v. Boge, 311 Or. 550, 814 P.2d 1082 (1991). The Boge court points out that the subjective standard set out in the UCC "does not encompass commercial reasonableness or the broader concept of good faith under the common law."
If, as the majority contends, a simple statement of "good faith," without more, will suffice to change the nature of the contract from one terminable at-will to one terminable only for cause, then it escapes me why, when the same covenant is implied, the same result does not follow. In U.S. National Bank v. Boge, 311 Or. 550, 814 P.2d 1082 (1991), the Oregon Supreme Court summarized its holdings on good faith: "The obligation of good faith does not vary the substantive terms of the bargain * * * nor does it provide a remedy for an unpleasantly motivated act that is expressly permitted by contract or statute.
. The UCC comments are particularly important because they “are actually statements of the purpose of each section” and “[i]t was the intention of the drafters that these comments be used to determine the purposes of the UCC and accordingly they are labeled as statements of purpose.” Sec. Bank v. Chiapuzio, 304 Or. 438, 415 n.6 (1987) (citation omitted); see alsoU.S. Nat. Bank of Oregon v. Boge, 311 Or. 550, 563 (1991) (explaining that “[a]lthough the Official Comments lack the force of law, they are instructive, because the legislature took note of them at the time of adoption, because they are consistent with the structure of the UCC, . . . and because the purpose of the Official Comments is to promote uniform construction of the UCC”). The UCC comments are available through Westlaw under the corresponding ORS 74A provisions.
“The obligation of good faith does not vary the substantive terms of the bargain . . . nor does it provide a remedy for an unpleasantly motivated act that is expressly permitted by contract or statute.” U.S. Nat'l Bank of Or. v. Boge, 311 Or. 550, 567 (1991). A “party invoking its express, written contractual right does not, merely by doing so, violate its duty of good faith.”
Zygar, 169 Or. App. at 645 (citing Stevens, 154 Or. App. at 58); see alsoOr. Univ. Sys. v. Or. Pub. Emps. Union, Local 503, 185 Or. App. 506, 511 (2012) (noting that the duty of good faith and fair dealing "may be implied as to a disputed issue only if the parties have not agreed to an express term that governs that issue"); U.S. Nat'l Bank of Or. v. Boge, 311 Or. 550, 567 (1991) ("[T]he obligation of good faith does not vary the substantive terms of the bargain[.]") (en banc).
(Hahs 2014 Decl. Ex. A at 11.) The Agreement creates a security interest in the Molds and is subject to the UCC. The parties agree the Note and Security Agreement are subject to the UCC. The statutory duty of good faith found in the UCC displaces the common law implied duty of good faith and fair dealing in transactions to which the UCC applies. U.S. Nat'l Bank of Oregon v. Boge, 311 Or. 550, 564 (1991). OR. REV. STAT. 71.3040 provides "[e]very contract or duty within the Uniform Commercial Code imposes an obligation of good faith in its performance and enforcement.
In rejecting the idea that the U.C.C. should be so applied, the court looked not just to the language of Oregon's U.C.C. but to the U.C.C. Official Comments as well, noting: “legislative intent can be derived from the language of the statute along with the official comments.” State v. Maybee, 235 Or.App. 292, 232 P.3d 970, 976 (2010) (concluding from the Official Comments to ORS 72.4010 ( U.C.C. § 2–401) that the U.C.C. provisions were not intended to affect the non-U.C.C. public regulatory statute at issue); accord U.S. Nat'l Bank v. Boge, 311 Or. 550, 814 P.2d 1082, 1090 (1991) (quoting Sec. Bank v. Chiapuzio, 304 Or. 438, 747 P.2d 335, 339–40 & n. 6 (1987)). The Court is aware that the Oregon Bankruptcy Court in In re Matrix Dev. Corp., 2008 WL 4549117, at *5 (Bankr.D.Or.
In rejecting the idea that the U.C.C. should be so applied, the court looked not just to the language of Oregon's U.C.C. but to the U.C.C. Official Comments as well, noting: "legislative intent can be derived from the language of the statute along with the official comments." State v. Maybee, 232 P.3d 970, 976 (Or. App. 2010) (concluding from the Official Comments to ORS 72.4010 (U.C.C. § 2-401) that the U.C.C. provisions were not intended to affect the non-U.C.C. public regulatory statute at issue); accord U.S. Nat'l Bank v. Boge, 814 P.2d 1082, 1090 (Or. 1991) (quoting Sec. Bank v. Chiapuzio, 747 P.2d 335, 339-40 n. 6 (Or. 1987)). The Court is aware that the Oregon Bankruptcy Court in In re Matrix Dev. Corp., 2008 WL 4549117, at *5 (Bankr. D. Or. Oct. 9, 2008), followed Wollin.