Pinney & Topliff v. Chrysler Corporation

• Decision Date: 17 September 1959
• Docket Number: No. 850-58.,850-58.
• Citation: 176 F. Supp. 801
• Court: U.S. District Court — Southern District of California
• Parties: PINNEY & TOPLIFF, a corporation, Plaintiff, v. CHRYSLER CORPORATION, a corporation, Defendant.

176 F. Supp. 801

PINNEY & TOPLIFF, a corporation, Plaintiff, v. CHRYSLER CORPORATION, a corporation, Defendant.

No. 850-58.

United States District Court S. D. California, Central Division.

September 17, 1959.

Gold, Needleman & Fain, by Harry M. Fain, and J. Howard Sturman, Beverly Hills, Cal., for plaintiff.

McCutchen, Black, Harnagel & Shea, by G. Wm. Shea, John Lawrence Leary, Los Angeles, Cal., and Keith A. Jenkins, Detroit, Mich., for defendant.

YANKWICH, District Judge.

In this case we are to determine whether the plaintiff is entitled to recover under a Complaint seeking damages for fraud, either actual or constructive, or deceit,¹ or, in the alternative, on the theory of promissory estoppel,² or under the federal Automobile Dealers Act.³

At the request of the parties the Court has agreed to try the separate "issue" of liability first.⁴ So the question of damages is not at present before the Court.

As is evident, two of the remaining causes of action are brought under State law, the third under Federal law. While the same amount of damages is sought under all the remaining claims, treble damages are also asked under the Clayton Act,⁵ as well as costs and attorneys fees.

I Fraud and Coercion

In essence, the proof in the case was directed to an attempt to show that the defendant, who will be referred to as "Chrysler", made certain promises and undertakings to the plaintiff, who will be referred to as "Pinney", with relation to the termination of a dealership at El Centro, California, which were false and fraudulent under California law and constituted coercion and intimidation or threats of coercion or intimidation under the federal statute.⁶ Before considering the facts it is well to set down certain fundamental principles which govern the quantum of proof in cases of this character.

Pinney is a California corporation, Chrysler a Delaware corporation. Two of the claims being based on diversity of citizenship are governed by State law.⁷ And under California law there is a presumption of fair dealing which is tantamount to the presumption of innocence in criminal cases.⁸ However, the statutory definitions of fraud and deceit are very broad. The relevant sections are printed in the margin.⁹ Because of the broad scope of these provisions which have been in the California Codes since their enactment in 1872, the courts have laid down the rule that the evidence in proof of fraud must be clear and convincing.¹⁰ This is also the general and the federal rule.¹¹ And whether we are dealing with actual or constructive fraud there must be a false representation or promise as to a material fact, knowledge of its falsity when made, or lack of reasonable ground to believe in its truth, intent to deceive, or suppression, and reliance with resulting damages.¹²

II The Basic Issues in the Case

We are of the view that there is no clear and convincing evidence of fraud or deceit, actual or constructive, which would warrant a judgment in favor of Pinney on the question of liability.

A. Pinney's Contentions

The chief basis for the claim of fraud, as alleged in the Complaint, is that Pinney, beginning in 1954 and continuing a long time thereafter, informed Chrysler, through its district and regional managers, that they desired to sell the Agency Agreement, entered into August 20, 1952, whereby Pinney became the Dodge direct dealer for Dodge automobiles and trucks and Plymouth automobiles for the El Centro territory. The Complaint also averred that Pinney stated that, in the event a buyer could not be secured, they would be compelled to terminate the agency, as their President desired to enter law school. In response to these statements it was alleged that Chrysler agreed to secure a buyer within a reasonable time and, in the event the buyer was not secured, Pinney would be immediately notified so that they could terminate the agency.

In the light of these allegations the main problems presented by the proof are, as correctly stated by counsel for Pinney:

(1) Whether Chrysler, through any duly authorized representative, promised or represented to Pinney that if they would continue their operations, Chrysler would produce a satisfactory buyer for their dealership within a reasonable time;

(2) Whether Pinney reasonably relied on such promises or representations to their detriment;

(3) Whether Chrysler, through its representatives either (a) made such promises or representations without intention of performing or fulfilling them or knowing them to be untrue or having no basis for believing them to be true, or (b) suppressed material facts which suppression was likely to mislead Pinney, or (c) misled or took advantage of Pinney in breach of a duty imposed by the relationship of the parties.

In essence, Pinney asserts that Chrysler, through its district and regional managers, Jack A. Wixom and Harold Erskine Wyatt, agreed, in consideration of Pinney's continuing in business, to secure a buyer for the dealership.

B. The Wish and Efforts to Terminate

Undeniably, the desire to sell originated with Pinney who were dissatisfied with the conditions as of the fall of 1954 and whose President, in 1955, had determined to enter Stanford Law School, a fact which was not communicated to Wixom until late in 1955. Wixom tried to dissuade him from doing so, urging that he was sacrificing what, for several years, had been a successful business operation.

While Chrysler had an interest in maintaining the dealership at El Centro, nothing was done by them to discourage the sale. Neither L. C. McDonald, Wixom or Wyatt, who did not meet Pinney until June 27, 1956, ever promised to find a dealership. Actually, the testimony is that they had no such express authority. And it is doubtful whether their promise, if made, would bind the company.¹³ However, regardless of actual authority, of Chrysler agents, under took to do so within the scope of their employment, they might, under California law, bind Chrysler.¹⁴ But the credible evidence in the record is that no such promise was made by McDonald or Wyatt, who were district managers during the period, or by Wixom who was regional manager from November 1953 to March 1956, or by Robert B. McCurry who succeeded him. Pinney claims that McCurry, on or about September 11, 1956, made the final promise to secure approval of a transfer of the agency to a group known as the "Burton-Battenfield-Measures" group.

There is much conflict in the record as to dates. But the credible evidence shows that, at all times, from beginning to end, the most Chrysler's representatives in the field did was to offer to assist in finding a buyer, at the same time leaving to Pinney the right of finding buyers, subject to final approval of the buyer by Chrysler. Neither the district manager nor the regional manager could do more than recommend to Chrysler's head office, which had the final say as to whether the buyer would be approved and would, in case of approval, sign the written transfer of dealership. It was stated at the trial that, at times, when a district and regional approval had been given, Chrysler's own investigating force found derogatory matters concerning the proposed transferee, which led to disapproval of the recommendation.

The record shows that attempts were made by Pinney and at least four prospects were consulted and given a sales formula. (Answer to Defendant's Interrogatories, No. 48.) The persons consulted did not satisfy the requirements as to experience or were not, otherwise, suitable. In reality, only one group of buyers was considered seriously, the group known as "Burton-Battenfield-Measures". They declined to consummate the sale because they refused to accept a single dealership—Dodge.

Pinney contended that he was surprised when, at the September 7, 1956, meeting, concerning the sale to this group, it was announced that a policy had been established by Chrysler against future dual dealerships.

III The Policy Against Dual Dealerships

A. The Issue as to Single Dealership

The record is uncontradicted that on August 24, 1955, a circular was prepared and sent out to all Chrysler dealers to the effect that separate dealerships would be the future policy. Unrefuted testimony of the printing and mailing of this to all dealers is contained in the deposition given by James Morgan, a Chrysler employee in charge of printing and mailing. His testimony is supplemented by documentary proof of expenses incurred in conjunction with such printing and mailing. This notice having gone to all dealers, it was not necessary that district or regional managers of Chrysler give additional information to Pinney, until such time as they were ready to sell the agency. For it is undisputed that the new condition was to apply only to new dealers.

This was made plain by Wyatt at the meeting on September 7, 1956, as testified to by him and as corroborated by Franklin Douglas McDaniel, who was one of Pinney's directors and their counsel and was called as a rebuttal witness by Pinney. The Court has caused a transcript of his testimony to be made, from which we quote the following:

"A. It seems to me that what struck me, what I recall most about it was after we had gone along somewhat in generalities, so far as I was concerned personally, Mr. Wyatt either asked or made a comment to the effect that—as to whether or not the ownership of the business was going to change. I forget who now asked as to what difference that made.

"He made the comment then, `If there is any change in the dealership, ownership interest, we can't give you Plymouth,' saying that to the three prospective purchasers. And Chuck was pretty upset. I mean he was sort of surprised, and wondered why that was.

"The Court: Did he say so?

"The Witness: Yes, He said,

`What is the point of all this?'

"The Court: All right.

"The Witness: Then as I recall, Wyatt explained that the company was embarked upon a policy of divorcing Plymouth from the

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