BEST DISTURBUTING CO. v. Seyfert Foods, Inc.

• Decision Date: 06 August 1999
• Docket Number: No. 49A04-9802-CV-98.,49A04-9802-CV-98.
• Citation: 714 N.E.2d 1196
• Parties: BEST DISTRIBUTING COMPANY, INC., Appellant-Defendant, v. SEYFERT FOODS, INC., Appellee-Plaintiff.
• Court: Indiana Appellate Court

714 N.E.2d 1196

BEST DISTRIBUTING COMPANY, INC., Appellant-Defendant, v. SEYFERT FOODS, INC., Appellee-Plaintiff.

No. 49A04-9802-CV-98.

Court of Appeals of Indiana.

August 6, 1999.

V. Samuel Laurin, George T. Patton, Jr., Monique Winkler, Bose McKinney & Evans, Indianapolis, Indiana, Attorneys for Appellant.

Dale W. Eikenberry, John D. Waller, Wooden & McLaughlin, Indianapolis, Indiana, Attorneys for Appellee.

OPINION

SHARPNACK, Chief Judge.

This case comes to us on interlocutory appeal. Best Distributing Company, Inc. ("Best") appeals the trial court's grant of partial summary judgment in favor of Seyfert Foods, Inc. ("Seyfert"). Best raises four issues which we restate as:

1) whether Best's purchase, maintenance, and replacement of display equipment or its rental of a warehouse constitute a franchise fee as that term is used in Ind.Code § 23-2-2.5-1;

2) whether Seyfert and Best had a fiduciary relationship such that a duty of good faith and fair dealing applies to the termination of their relationship;

3) whether Seyfert owed Best a duty of good faith under the Indiana Uniform Commercial Code; and,

4) whether Seyfert's thirty day notice of the termination of its relationship with Best was reasonable.

We affirm.

The undisputed facts follow. Best entered into an oral agreement with Seyfert in 1953 to purchase and resell Seyfert's snack foods to retailers. During the course of the relationship, which was never expressed to be for a specific period, Best and Seyfert never executed a written agreement. On April 24, 1995, Seyfert terminated its relationship with Best.

Seyfert filed a complaint against Best seeking damages based on money allegedly owed by Best to Seyfert under their agreement and damages based on Best's alleged breach of the agreement. Best counterclaimed seeking damages based upon claims that Seyfert and Best had a franchise relationship that Seyfert unlawfully terminated and that Seyfert acted in bad faith prior to its termination of the relationship with Best. In the alternative, Best claimed damages based upon Seyfert's breach of alleged fiduciary duties to Best, Seyfert's breach of the duty of good faith and fair dealing, and Seyfert's failure to give Best reasonable notice of the termination of the parties' relationship.

Seyfert filed a motion for partial summary judgment. Seyfert sought summary judgment, claiming as a matter of law that: there was no franchise relationship between Best and Seyfert; there was no fiduciary relationship between Best and Seyfert; there is no separate claim for relief under Indiana law for breach of an obligation to deal in good faith; and its thirty day termination notice was reasonable.

The trial court held a hearing on Seyfert's motion for partial summary judgment. In granting Seyfert's motion for partial summary judgment, the trial court's order stated that 1) there were no genuine issues of material fact in dispute and as a matter of law there was no basis to find a franchise relationship between Best and Seyfert because there was no franchise fee paid directly or indirectly by Best; 2) Best's affirmative defense claiming illegal matters arising out of a franchise relationship failed because the court found that no franchise relationship existed;¹ 3) there was no genuine issue of material fact and as matter of law there was no fiduciary relationship between Seyfert and Best; 4) that as matter of law there is no separate claim for relief under Indiana law for an alleged breach of an obligation to deal in good faith between a supplier and distributor; and 5) there were no genuine issues of material fact and as a matter of law the termination of Best with a thirty day notice was not unreasonable.

STANDARD

The issue raised is whether the trial court erred in granting partial summary judgment. When we review a trial court's decision on a motion for summary judgment, we are bound by the same standard as the trial court. Ayres v. Indian Heights Volunteer Fire Dep't, Inc., 493 N.E.2d 1229, 1234 (Ind.1986); see Ind. Trial Rule 56. The appellant bears the burden of proving the trial court erred in determining that there were no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. Rosi v. Business Furniture Corp., 615 N.E.2d 431, 434 (Ind.1993). Any doubt as to the existence of an issue of material fact, or an inference to be drawn from the facts, must be resolved in favor of the nonmovant. Cowe v. Forum Group, Inc., 575 N.E.2d 630, 633 (Ind.1991). A genuine issue of material fact exists where facts concerning an issue which would dispose of the litigation are in dispute or where the undisputed facts are capable of supporting conflicting inferences on such an issue. Scott v. Bodor, Inc., 571 N.E.2d 313, 318 (Ind.Ct.App. 1991).

On appeal, we scrutinize the trial court's determination to ensure that the nonprevailing party is not improperly denied its day in court. Perryman v. Huber, Hunt & Nichols, Inc., 628 N.E.2d 1240, 1243 (Ind.Ct. App.1994), trans. denied. This court applies the same standard as does the trial court. USA Life One Ins. Co. of Ind. v. Nuckolls, 682 N.E.2d 534, 537 (Ind.1997). At the time of filing the motion or response, a party shall designate to the court all parts of the pleadings, depositions, answers to interrogatories, admissions, matters of judicial notice, and any other matters on which it relies for purposes of the motion. T.R. 56(C). We consider only the materials designated to the trial court to determine whether there is a genuine issue as to any material fact and whether the moving party is entitled to a judgment as a matter of law. T.R. 56(C). We liberally construe all inferences and resolve all doubts in the nonmovant's favor. Nuckolls, 682 N.E.2d at 537.

I. INDIRECT FRANCHISE FEE

Best asserts that it had a franchise relationship with Seyfert and that the Indiana franchise laws apply to that relationship. Seyfert claims that the franchise laws do not apply to its relationship with Best. There are three requirements that must be met to constitute a franchise under the Indiana franchise statute:

"(a) `Franchise' means a contract by which:

(1) a franchisee is granted the right to engage in the business of dispensing goods or services, under a marketing plan or system prescribed in substantial part by a franchisor;

(2) the operation of the franchisee's business pursuant to such a plan is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising, or other commercial symbol designating the franchisor or its affiliate; and

(3) the person granted the right to engage in this business is required to pay a franchise fee."

Ind.Code § 23-2-2.5-1(a) (emphasis added). However, only one of these requirements is at issue in this appeal. That is, whether Best paid a franchise fee to Seyfert. The trial court granted summary judgment in favor of Seyfert finding that there was no franchise relationship established because Best did not pay a direct or indirect franchise fee to Seyfert. Indiana Code § 23-2-2.5-1(i) defines franchise fee as follows:

(i) "`Franchise fee' means any fee that a franchisee is required to pay directly or indirectly for the right to conduct a business to sell, resell, or distribute goods, services, or franchises under a contract agreement, including, but not limited to, any such payment for goods or services."

(emphasis added).² Best admits that it did not pay a direct franchise fee to Seyfert. Instead, Best asserts that it paid an "indirect franchise fee" to Seyfert. Best claims that it paid an indirect franchise fee to Seyfert by its purchase, maintenance, and replacement of racks and end caps³ over the course of the forty plus year relationship. Best also asserts that its construction of a new warehouse constituted an indirect franchise fee.⁴

The determination of what constitutes an indirect franchise fee in the statute has not yet been made by an Indiana state court. In interpreting the language of a statute, we presume that words appearing in the statute were intended to have meaning, and we endeavor to give those words their plain and ordinary meaning absent a clearly manifested purpose to do otherwise. Indiana Dept. of Human Services v. Firth, 590 N.E.2d 154, 157 (Ind.Ct.App.1992), trans. denied. A statute should also be construed so as to ascertain and give effect to the intention of the legislature as expressed in the statute. State v. Windy City Fireworks, Inc., 600 N.E.2d 555, 558 (Ind.Ct.App.1992), adopted by, 608 N.E.2d 699 (Ind.1993). In doing so, the objects and purposes of the statute in question must be considered, as well as the effect and consequences of such interpretation. Id.

The United States Court of Appeals for the Seventh Circuit has interpreted the meaning of "indirect franchise fee" under our franchise statute. See Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128 (7th Cir.1990),

reh'g denied.⁵ In Wright-Moore, the Seventh Circuit noted that there was no definition given for "indirect" franchise fee in the Indiana statute and, therefore, the court focused on the policies underlying the franchise laws. Id. at 135. The Seventh Circuit stated that "[t]he purpose of most franchise laws is to protect franchisees who have unequal bargaining power once they have made a firm specific investment in the franchisor." Id. In addition, the Seventh Circuit stated that the central function of the franchise statutes is to prevent "suppliers from behaving opportunistically once franchisees or other dealers have sunk substantial resources into tailoring their business around, and promoting a brand." Id. (citations omitted). The court went on to explain that the reason for the franchise fee is to insure that only those entities that have made a firm specific investment are protected under the franchise laws, because if "there is no investment, there is no fear of inequality of bargaining...