Chalmers v. Toyota Motor Sales, USA, Inc., 95-891

• Decision Date: 16 December 1996
• Docket Number: No. 95-891,95-891
• Citation: 935 S.W.2d 258,326 Ark. 895
• Parties: , 1996-2 Trade Cases P 71,656 Hugh CHALMERS, et al., Appellants, v. TOYOTA MOTOR SALES, USA, INC., et al., Appellees.
• Court: Arkansas Supreme Court

Page 258

935 S.W.2d 258

326 Ark. 895, 1996-2 Trade Cases P 71,656

Hugh CHALMERS, et al., Appellants, v. TOYOTA MOTOR SALES, USA, INC., et al., Appellees.

No. 95-891.

Supreme Court of Arkansas.

Dec. 16, 1996.

David M. Hargis, Little Rock, for appellant.

David L. Williams, Little Rock, for Gulf States Toyota.

Max Hendrick, III, Steven A. Wood, Houston, TX, David M. Powell, Little Rock, Stephen G. Morrison, Columbia, SC, for Toyota Motor Sales.

ROAF, Justice.

The appellants filed suit against the appellees for breach of contract, breach of implied contractual covenants of good faith and fair dealing, fraud, interference of contract, violation of the Arkansas Unfair Practices Act, and violation of the Arkansas Franchise Practices Act. The trial court granted summary judgment for the appellees, holding that the Unfair Practices Act did not apply to interstate price discrimination and that the remaining claims were barred by the applicable statutes of limitations. On appeal, the appellants argue that the trial court erred in applying the statutes of limitations because fraudulent concealment and the Continuing Tort doctrine served to toll the running of the statutes. The appellants further contend that the trial court erred in finding that the Arkansas Unfair Practices Act did not apply to their claims. We find no error and affirm.

Appellee Toyota Motor Sales, USA, Inc. ("TMS") is the exclusive importer for Toyota vehicles in the continental United States. TMS uses a system of twelve multi-state distribution regions, and sells imported and domestically produced vehicles to these regional distributors. The vehicles are in turn sold by the twelve distributors to Toyota dealers in their regions.

Appellee Gulf States Toyota ("GST") is a privately owned corporation and is the regional distributor for the states of Texas, Oklahoma, Mississippi, Louisiana, and Arkansas. Only GST and one other regional distributor are not owned by TMS. Appellee Steve Woods is a former GST employee who served as its district sales manager responsible for the state of Arkansas during 1989-1993. Appellee Toyota Motor Distributors ("TMD") is a wholly owned subsidiary of TMS and is the regional distributor for Tennessee and several other states.

The appellants Hugh Chalmers Chevrolet-Cadillac-Toyota, Inc., and its owners, Hugh B. Chalmers, and Hugh B. Chalmers, Jr. ("the Chalmers"), are located in West Memphis, Arkansas, and became a Toyota dealership in 1976 by entering into a Toyota Dealer Agreement with GST.

On February 6, 1987, Hugh Chalmers wrote a letter to the president of GST expressing dissatisfaction with its vehicle distribution policy. Chalmers complained of an inequitable distribution of Toyotas which had increased over the past several years and asserted that TMD and GST were engaged in different marketing strategies. Chalmers complained that Toyota's distribution boundaries resulted in an injustice to his dealership because he could not participate in the programs and promotions advertised by TMD in the Memphis area.

Chalmers later voiced his concerns to TMS. On October 4, 1989, Chalmers wrote a letter to a vice-president of TMS and stated that the Memphis dealerships had an unfair advantage because of a dual pricing policy between the two regions and that this discriminatory practice was causing him to lose both new car sales and personnel. In the ensuing years, Chalmers continued to correspond with TMS and GST regarding the difficulties created by the Arkansas-Tennessee distribution boundary.

The Chalmers filed suit against the appellees on August 27, 1993. They asserted six claims for relief: 1) frustration of contract performance, prevention and breach of contract; 2) fraud, misrepresentation and deceit; 3) interference with contract rights and expectations; 4) destruction of competition through price discrimination; 5) violation of Arkansas franchise law, and 6) punitive damages. The Chalmers allege that the appellees acted conspiratorially and as agents of one another in engaging in the unlawful actions. They allege that TMS allowed GST and Woods to force dealers within GST's region to accept vehicles loaded with option and accessory packages not required of the Memphis dealers, and that the resulting pricing disparity destroyed their ability to compete in their economic market. The complaint further asserted that the conspiracy and pricing disparity had begun at an earlier, unknown time but that "the effects were not perceived by the Chalmers until late 1989."

The appellees moved for partial summary judgment on the alleged violations of the Arkansas Unfair Practices Act. The trial court granted this motion, finding that the act did not apply to interstate price discrimination. Chalmers then filed an amended complaint which alleged additional violations of the Arkansas Franchise Practices Act. The appellees again moved for summary judgment, raising multiple defenses. The trial court granted the motions and dismissed all claims against the appellees, finding that the applicable statutes of limitations barred the remaining claims. The Chalmers appeal the granting of the summary judgments.

1. Statute of limitations.

The Chalmers first argue that the trial court erred in its application of the statutory limitations periods as a bar to their claims. This court has said that the standard for review of a grant of summary judgment is whether the evidentiary items presented by the moving party in support of the motion left a question of material fact unanswered and, if not, whether the moving party is entitled to judgment as a matter of law. National Bank of Commerce v. Quirk, 323 Ark. 769, 918 S.W.2d 138 (1996). The court views all proof in the light most favorable to the party opposing the motion, resolving all doubts and inferences against the moving party. Id. However, once the moving party makes a prima facie showing of entitlement, the responding party must meet proof with proof in order to demonstrate that there is remaining a genuine issue of material fact. Mount Olive Water Ass'n v. City of Fayetteville, 313 Ark. 606, 856 S.W.2d 864 (1993). The response and supporting material must set forth specific facts showing that there is a genuine issue for trial. Id.

The claims asserted by the Chalmers involve two limitations periods. The statute of limitations for breach of a written contract is five years. Ark.Code Ann. § 16-56-111(b) (Michie Repl.1995). The remaining claims of the Chalmers are governed by the three-year statute of limitations found at Ark.Code Ann. § 16-56-105(3) (Michie 1987). Hampton v. Taylor, 318 Ark. 771, 887 S.W.2d 535 (1994) (fraud); Bankston v. Davis, 262 Ark. 635, 559 S.W.2d 714 (1978) (interference with contract); Winston v. Robinson, 270 Ark. 996, 606 S.W.2d 757 (1980) (liability imposed by statute). The limitations period found in Ark.Code Ann. § 16-56-105(3) begins to run when there is a complete and present cause of action, Courtney v. First Nat'l Bank, 300 Ark. 498, 780 S.W.2d 536 (1989), and, in the absence of concealment of the wrong, when the injury occurs, not when it is discovered. Hampton, supra.

The litigation in the present case was begun on August 27, 1993, therefore the applicable statutes of limitations would act to bar the Chalmers' if they knew or reasonably should have known about their breach-of-contract claim on or before August 27, 1988, and on or before August 27, 1990, with respect to the remaining causes of action.

A. Fraudulent concealment.

Although the Chalmers had a contractual relationship with GST, on appeal, they do not argue that the five-year statute of limitations applies to their claims against GST or any of the other appellees. In their brief, the Chalmers primarily assert that the statutes of limitations on their claims should have been tolled because of fraudulent concealment (including offers of settlement and cure), and the doctrine of continuing tort. They further present extensive factual information concerning Toyota sales, investigations into Toyota's operations in the United States, devaluation of the dollar against the yen and other matters as bearing on the issue of whether they could have reasonably discovered the alleged wrongful acts before the expiration of the limitations periods.

When the running of the statute of limitations is raised as a defense, the defendant has the burden of affirmatively pleading this defense. First Pyramid Life Ins. Co. v. Stoltz, 311 Ark. 313, 843 S.W.2d 842 (1992), cert. denied, 510 U.S. 908, 114 S.Ct. 290, 126 L.Ed.2d 239 (1993). However, once it is clear from the face of the complaint that the action is barred by the applicable limitations period, the burden shifts to the plaintiff to prove by a preponderance of the evidence that the statute of limitations was in fact tolled. Id.; Cleveland v. Gravel Ridge Sanitary Sewer Imp. Dist. No. 213, 274 Ark. 330, 625 S.W.2d 446 (1981).

Fraud suspends the running of the statute of limitations, and the suspension remains in effect until the party having the cause of action discovers the fraud or should have discovered it by the exercise of reasonable diligence. First Pyramid, supra. We have stated the following as the "classic language" on this subject:

No mere ignorance on the part of the plaintiff of his rights, nor the mere silence of one who is under no obligation to speak, will prevent the statute bar. There must be some positive act of fraud, something so furtively planned and secretly executed as to keep the plaintiff's cause of action concealed or perpetrated in a way that it conceals itself. And if the plaintiff, by reasonable diligence, might have detected the fraud he is presumed to have had reasonable knowledge of it.

First Pyramid, supra. (quoting Wilson v. GECAL, 311 Ark. 84, 841 S.W.2d 619 (1992)).

In discussing when a negligent act occurs to begin the three-year statute of limitations, we have noted that "[a]t times, the beginning of...