Hechler Chevrolet, Inc. v. General Motors Corp.

• Decision Date: 27 November 1985
• Docket Number: No. 821275,821275
• Citation: 337 S.E.2d 744,230 Va. 396
• Court: Virginia Supreme Court
• Parties: HECHLER CHEVROLET, INC. v. GENERAL MOTORS CORPORATION and Capital GMC Trucks, Incorporated. Record

Page 744

337 S.E.2d 744

230 Va. 396

HECHLER CHEVROLET, INC. v. GENERAL MOTORS CORPORATION and Capital GMC Trucks, Incorporated.

Record No. 821275.

Supreme Court of Virginia.

Nov. 27, 1985.

Keith D. Boyette (Everette G. Allen, Jr.; Hirschler, Fleischer, Weinberg, Cox & Allen, Richmond, on briefs), for appellant.

E. Milton Farley, III, Charles L. Cabell (Joseph C. Kearfott, John Jay Range, Richmond, Elmer W. Johnson, John B. Clayton, Detroit, Mich., Hunton & Williams, Cabell, Moncure & Carneal, on briefs), Richmond, for appellees.

Present: CARRICO, C.J., and COCHRAN, POFF, COMPTON, STEPHENSON and RUSSELL, JJ., and HARRISON, Retired Justice.

RUSSELL, Justice.

This is a contract dispute between a franchised motor vehicle dealer and its manufacturer. The dealer contends that the manufacturer wrongfully terminated or refused to renew the dealer's franchise in violation of Code § 46.1-547(e), part of the Virginia Motor Vehicle Dealer Licensing Act. The dealer further contends that the manufacturer conspired with a competing dealer to interfere with the plaintiff dealer's business.

On June 8, 1981, Hechler Chevrolet, Inc. (Hechler), filed a motion for judgment in four counts against General Motors Corporation (General Motors) and Capital GMC Trucks, Incorporated (Capital). The motion for judgment referred to certain written agreements between Hechler and General Motors which were not made exhibits to the pleading. General Motors filed a motion craving oyer of the agreements on which the action was based. Hechler had no objection, the motion was granted, and the agreements were filed. General Motors and Capital filed demurrers. After considering briefs and arguments, the court sustained both demurrers. Hechler filed a motion for reconsideration and asked leave to file a proposed amended motion for judgment, a copy of which was attached to the motion for leave to amend. Hechler's motions were denied, and the court entered a final order on April 26, 1982, dismissing the motion for judgment with prejudice.

We are, with respect to the court's ruling on the demurrers, confined to the facts alleged in the motion for judgment, as amplified by the agreements added to the record on General Motors' motion. On familiar principles, all facts well pleaded are, for this purpose, to be taken as true. Hechler assigns error to the court's ruling sustaining the demurrers and also assigns error to the court's denial of its motion for reconsideration and for leave to amend.

Since 1971, Hechler had held General Motors franchises which gave it a nonexclusive right to buy, sell, and service Chevrolet passenger cars, Chevrolet light and standard trucks, including light utility vehicles ("LUV" trucks), and Chevrolet heavy duty trucks. In 1973, Hechler had three separate franchise agreements with General Motors covering each of the above three categories, which were all due to expire on June 30, 1978. On November 1, 1975, while the agreements were in effect, the parties replaced them with a single agreement which was to run from November 1, 1975 until October 31, 1980. It expressly superseded the former agreements. General Motors' stated reason for requesting this change was to make all its dealer franchises expire on the same date nationwide.

The 1975 agreement constituted Hechler an authorized dealer, with an "Area of Primary Responsibility" in the City of Richmond and eight nearby counties, with respect to: "[a]ll Chevrolet passenger cars and Chevrolet light duty, including Chevrolet LUV, medium and heavy duty trucks and truck chassis that are marketed by Chevrolet Motor Division of General Motors Corporation...."

Hechler operated actively under the 1975 agreement until August 29, 1979, when General Motors informed all its Chevrolet dealers who were authorized to sell heavy duty trucks that effective October 31, 1980, General Motors would discontinue the manufacture and sale of heavy duty trucks and truck chassis through its Chevrolet Motor Division, but that it would thereafter manufacture and market such equipment through its GMC Truck and Coach Division.

Before November 1, 1980, General Motors had marketed heavy duty trucks under the "GMC" name and had an existing network of franchised GMC dealers to sell them. These "GMC" heavy duty trucks were identical to Chevrolet heavy duty trucks. Capital was operating under such a GMC franchise in the Richmond area. General Motors informed Hechler that if its franchise were to be renewed for heavy duty trucks, it would have to be as a GMC franchise. Hechler requested that General Motors issue it a GMC franchise, but General Motors refused to do so. In 1979, Hechler's last full year of operations under the 1975 agreement, its gross revenue from the sale and service of Chevrolet heavy duty trucks, chassis, and parts was $218,060.

General Motors points to the following provisions in Hechler's 1975 agreement: "[General Motors has] the right and prerogative ... to determine the Chevrolet motor vehicles Chevrolet will offer for sale from time to time," and "General Motors may at any time discontinue the manufacture and/or sale of any Motor Vehicle covered under this Agreement, with or without substituting in place thereof another motor vehicle ... without incurring any obligation or liability to Dealer in connection therewith." General Motors contends that it was acting within the scope of these provisions when it decided to discontinue marketing Chevrolet heavy duty trucks.

Code § 46.1-547 provides, in pertinent part:

It is unlawful for any manufacturer ...:

....

(e) Notwithstanding the terms of any franchise agreement, to terminate, cancel or refuse to renew the franchise of any dealer, without good cause, and unless (1) the dealer and the Commissioner [of Motor Vehicles] have received written notice of the franchisor's intentions at least sixty days prior to the effective date of such termination, cancellation or the expiration date of the franchise, setting forth the specific grounds for such action, and (2) the Commissioner has determined, if requested in writing by the dealer within such sixty-day period, and after a hearing on the matter, that there is good cause for the termination, cancellation or nonrenewal of the franchise.

The gravamen of Hechler's claim is that General Motors' unilateral act withdrawing Chevrolet heavy duty trucks from the market constituted an unlawful termination of its franchise as to such trucks in violation of § 46.1-547(e); or more precisely, that such action was an unlawful refusal to renew Hechler's franchise because the withdrawal became effective on the date Hechler's franchise was to expire by its own terms. It is conceded that General Motors gave no notice of its intentions to the Commissioner of Motor Vehicles, and General Motors does not contend that it had "good cause" within the meaning of the statute to terminate or refuse to renew Hechler's franchise. Rather, General Motors takes the position that Hechler's franchise continues in effect, that Hechler continues to act as an authorized dealer for all products marketed by General Motors' Chevrolet Division, and that the statute is inapplicable because General Motors merely exercised its contractual prerogative of discontinuing a product line.

We agree that the statute is inapplicable. The General Assembly was fully aware of the distinction between terminating franchises and changing product lines when it enacted the Dealer's Act. Code § 46.1-547(d) regulates excessive competition by requiring a manufacturer to submit to the Commissioner's scrutiny its intention to increase the number of dealerships in a trade area "for a particular line--make of motor vehicle." Code § 46.1-547(g) requires equitable distribution among dealers of "each make, series and model covered under the franchise agreement" during shortages of popular models. Thus, it is clear that if the General Assembly, in enacting § 46.1-547(e), had desired to regulate a manufacturer's right to discontinue a...