Bushwick-Decatur Motors v. Ford Motor Co.

• Decision Date: 30 December 1940
• Docket Number: No. 97.,97.
• Citation: 116 F.2d 675
• Parties: BUSHWICK-DECATUR MOTORS, Inc., v. FORD MOTOR CO.
• Court: U.S. Court of Appeals — Second Circuit

116 F.2d 675 (1940)

BUSHWICK-DECATUR MOTORS, Inc., v. FORD MOTOR CO.

No. 97.

Circuit Court of Appeals, Second Circuit.

December 30, 1940.

Oswald Vischi, of New York City (Daru, Hellman & Winter and Daniel S. Levy, all of New York City, on the brief), for plaintiff-appellant.

Edward E. Weadock, of New York City (Hurd, Hamlin & Hubbell, Vincent W. Farley, and Henry M. Noe, all of New York City, on the brief), for defendant-appellee.

Before L. HAND, CHASE, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

This is a controversy between a former Ford automobile dealer and the Ford Motor Company, arising out of the allegedly unjustifiable termination of that relation by the latter. To show its right to relief herein the plaintiff dealer sets forth three causes of action: one founded on a written agreement between the parties, purporting to govern their relations as "Dealer" and "Company"; another founded on oral promises alleged to have been made by Ford regional officials, that the "dealership" contract would not be terminated without cause; and the third, on further oral promises to allocate to the plaintiff more profitable territory as soon as available. The action was originally brought in the Supreme Court of New York and was removed by defendant to the federal court for diversity of citizenship. The complaint contained also two other causes of action. One, for conspiracy against other defendants, was not removed. Another, for breach of an option agreement for repurchase of Ford products on termination of the dealership relation, was upheld on the pleadings by the court below and is not before us. The appeal concerns the dismissal of the three causes of action first stated, upon defendant's motion for summary judgment, and upon extensive affidavits of both parties. We shall consider each of these three causes, in order.

I. The written agreement between the parties is in the standard form of Ford dealership contracts. Its major provisions are stated at some length in the opinion of the court below, D.C.E.D.N.Y., 30 F.Supp. 917, 919, 920; and many provisions are also quoted in Buggs v. Ford Motor Co., 7 Cir., 113 F.2d 618, 620. It provides that the "Company agrees to sell and Dealer agrees to purchase Ford automobiles" and other products, "subject to the right reserved to Company to sell to other Dealers and direct to retail purchasers in any part of the United States without obligations for any commission to Dealer on any such sale." The Company's sales to dealer are "at such net list price, or at such discounts from published list prices as are from time to time fixed by Company," and "List Prices" are subject to change even as to the price of products "shipped, or paid for but not in transit." There are also several terms relating to the methods of shipment and payment, and many relating to the manner in which the dealership business should be conducted. It is agreed that the law of Michigan should govern construction of the contract. No formula is stated for determining a minimum or maximum amount of products which the Company is obligated to sell, or the dealer to buy, nor is a period fixed for the duration of the agreement; but a paragraph entitled "Termination" states: "This agreement may be terminated at any time at the will of either party by written notice to the other party given either by registered mail or by personal delivery, and such termination shall also operate to cancel all orders theretofore received by Company and not delivered."

It is not disputed that four and a half years after the inception of this dealership, notice of termination was duly given by the Company. Plaintiff contends, however, that such termination was malicious, in bad faith, and contrary to the custom of the trade, and therefore wrongful; in its complaint and affidavits it makes a showing of substantial loss. Defendant stands firmly on its unqualified power to terminate, irrespective of its reasons for doing so, though its affidavits do challenge the charges of malice and bad faith.

Exactly the same termination clause in the same form of contract has been construed to give Ford an unqualified power to terminate the relationship in Buggs v. Ford Motor Co., supra; Ford Motor Co. v. Kirkmyer Motor Co., 4 Cir., 65 F.2d 1001; and Ford Motor Co. v. Alexander Motor Co., 223 Ky. 16, 2 S.W.2d 1031. See also Maddox Motor Co. v. Ford Motor Co., Tex.Com.App., 23 S.W.2d 333; Ford Motor Co. v. Maddox Motor Co., 123 Tex. 608, 73 S.W.2d 517; Motor Car Supply Co. v. General Household Utilities Co., 4 Cir., 80 F.2d 167; and Terre Haute Brewing Co. v. Dugan, 8 Cir., 102 F.2d 425. Other cases are cited and discussed in the Buggs case and in the opinion below. These precedents vary slightly in the legal doctrine they apply. In the Buggs case the contract was held valid and binding throughout, with the power of termination effective and applicable; while in the Kirkmyer and Dugan cases the contract was said to be void for want of mutuality, except as to sales already made. See also Willard, Sutherland & Co. v. United States, 262 U. S. 489, 43 S.Ct. 592, 67 L.Ed. 1086. For our present purposes these theories lead to identical results, thought the first would appear appropriate. The Dugan case makes reference to, though it does not apply, a special Missouri doctrine that an "agent" who has incurred expense induced by his appointment may recover it if he has not had sufficient opportunity to recoup it from the business — a doctrine seemingly not applicable where the relationship has already endured for some time.

With this weight of precedent, in the light of the clear intent of the parties, we feel constrained to hold that defendant had ended its obligations under the contract. But plaintiff contends that the law of Michigan is otherwise and cites therefor J. R. Watkins Co. v. Rich, 254 Mich. 82, 235 N.W. 845, 846, holding that a power of termination, extended to "either of the parties" "at any time by giving the other party notice thereof," of a contract with a definite and stated duration did not authorize termination in the absence of "good faith." We do not find that this contention has been considered in the cited cases, though at least in the Buggs case the contract contained the provision before us here that the law of Michigan should govern its construction.

In the Rich case, a sales agent, substantially indebted to his principal, obtained the latter's assent to an extension of the agency and the debts for another year on condition that the former would procure several sureties on his written obligation to pay both the past debts and those arising in the course of the extended agency. After the agent had done so, but before he had had opportunity to make sales by the profit from which he could retire part of the old debts, the principal took advantage of the termination clause and sued the sureties for the entire amount due. Recovery was denied for lack of "good faith" in the termination. But in spite of the citing of "satisfaction" cases, such as Holton v. Monarch Motor Car Co., 202 Mich. 271, 168 N.W. 539, "good faith" here seems to have meant an original intention to offer the agent a fair opportunity, without which the contract would obviously have been void for fraud in its inception. Compare 45 Harv.L.Rev. 378 and 17 Corn.L.Q. 479. Only such an interpretation will prevent a conflict with the earlier decisions it did not overrule, which held a sales agency terminable entirely at the discretion of the parties merely for lack of any expressly fixed duration. Fuchs v. Standard Thermometer Co., 178 Mich. 37, 144 N.W. 484; Garlock v. Motz Tire & Rubber Co., 192 Mich. 665, 159 N.W. 344. In the Rich case the contract was for a definite period from its execution May 8, 1928, until March 1, 1929. Here the agreement was without stated duration except for the provision making it terminable at any time "at the will of either party." The difference in language alone might not be a sufficient basis for distinguishing the case; but that difference, coupled with the rather clear indication of fraud and its inconsistency otherwise with Michigan precedents, leads us to view it as not a binding authority upon us here.

With a power of termination at will here so unmistakably expressed, we certainly cannot assert that a limitation of good faith was anything the parties had in mind. Such a limitation can be read into the agreement only as an overriding requirement of public policy. This seems an extreme step for judges to take. The onerous nature of the contract for the successful dealer and the hardship which cancellation may bring him have caused some writers to advocate it, however; and an occasional case has seized upon elements of overreaching to come to such a result on particular facts. See, for example, Philadelphia Storage Battery Co. v. Mutual Tire Stores, 161 S.C. 487, 159 S.E. 825; the criticism of this case in 45 Harv.L.Rev. 378 and the answering arguments in 17 Corn.L.Q. 479 (and see also 31 Col.L.Rev. 830, 840, 842) well indicate the opposing views. But, generally speaking, the situation arises from the strong bargaining position which economic factors give the great automobile manufacturing companies: the dealers are not misled or imposed upon, but accept as nonetheless advantageous an agreement in form bilateral, in fact one-sided. To attempt to redress this balance by judicial action without legislative authority appears to us a doubtful policy. We have not proper facilities to weigh economic factors, nor have we before us a showing of the supposed needs which may lead the manufacturers to require these seemingly harsh bargains. In the Buggs case the court had before it a recent Wisconsin statute, St.1937, § 218.01(3) (a) 17, providing for suspension or revocation of a license of a manufacturer who had "unfairly, without due regard to the equities of said dealer and without just provocation," canceled the dealer's...