Dunne Leases Cars & Trucks, Inc. v. Kenworth Truck Co., a Div. of Paccar, Inc.

• Decision Date: 13 October 1983
• Docket Number: No. 80-493-A,80-493-A
• Citation: 466 A.2d 1153
• Parties: DUNNE LEASES CARS & TRUCKS, INC. v. KENWORTH TRUCK COMPANY, a DIVISION OF PACCAR, INC. ppeal.
• Court: Rhode Island Supreme Court

Page 1153

466 A.2d 1153

DUNNE LEASES CARS & TRUCKS, INC. v. KENWORTH TRUCK COMPANY, a DIVISION OF PACCAR, INC.

No. 80-493-Appeal.

Supreme Court of Rhode Island.

Oct. 13, 1983.

Abraham Belilove, Arcaro, Belilove & Kolodney, Providence, for plaintiff.

Richard M. Borod, Edwards & Angell, John D. Deacon, Jr., Edwards & Angell, Providence, for defendant.

OPINION

SHEA, Justice.

This case is before us on appeal by the plaintiff from a judgment entered in the Superior Court denying injunctive relief. We affirm.

The case was heard by a justice of the Superior Court sitting without a jury. The evidence established that beginning in 1970, plaintiff, Dunne Leases Cars & Trucks, Inc. (Dunne), a Rhode Island corporation, and defendant, Kenworth Truck Company, a division of Paccar, Inc. (Kenworth), a foreign corporation, entered into several successive dealership agreements whereby plaintiff was authorized to sell and service heavy-duty truck-tractors and to sell parts manufactured by Kenworth. Two such agreements are of particular interest in this case. One is an agreement effective for three years beginning November 1, 1976, with John M. Dunne, Sr. (Dunne, Senior) as principal. The second is an agreement effective for one year from October 4, 1978 with John M. Dunne, Jr. (Dunne, Junior) as principal.

In 1977, during the term of the three-year agreement, Dunne, Senior, died. Kenworth, relying on the provision that the agreement was one for personal services (as the written contract specifically stated), requested that Dunne, Junior, and Kenworth enter into a new contract. There were two major differences between the new agreement and those that preceded it. First, the new agreement provided for a one-year term instead of a three-year term. The one-year agreement expressly stipulated that the Dunne Motor Vehicle Leasing operation be separated and removed from the Kenworth dealership within six months of the October 4, 1978 date of execution of the agreement. Both business activities, Dunne Leasing and Kenworth, were housed at the time in the same leased facility at 895 Elmwood Avenue, Providence, Rhode Island. Evidence was presented that the facility was crowded, inefficient, cluttered and dirty and lacked lounge facilities and adequate parking space for Kenworth's customers. The Kenworth people wanted space for a display of their goods and merchandise as well as parking and other amenities for their customers and a more attractive, less cluttered facility for Kenworth activities.

The removal or separation of the leasing operation from the Kenworth activity was never accomplished. By letter dated September 28, 1979, Dunne was notified that its agreement with Kenworth, which was to expire October 4, 1979, would not be renewed and that the relationship between the two concerns would be terminated as of December 4, 1979.

Dunne sought injunctive relief, alleging that Kenworth's notice of nonrenewal was invalid; that certain conduct by Kenworth during the negotiations of the one-year agreement was coercive; and that the decision not to renew was without due cause, all in violation of G.L.1956 (1979 Reenactment) § 31-5.1-1. ¹

Dunne obtained a temporary restraining order preventing the termination of business relations until the matter was heard on the merits. After a prolonged trial in Superior Court, the trial justice denied relief. He found that the notice of nonrenewal was valid, that the allegations of coercion were without merit, and that due cause existed for Kenworth's decision not to renew. We affirm.

I Legal Notice of Nonrenewal

The first issue we must consider concerns the notice given by Kenworth of its decision not to renew.

The agreement at issue provided for a term of one year that would terminate October 4, 1979. The notice of nonrenewal was given by letter dated September 28, 1979, which the parties agree was received by Dunne on October 2, 1979. The letter set forth that the dealership agreement that would expire on October 4, 1979, would not be renewed and provided further:

"In order to provide for an orderly phase out of our business relationship, we will continue to operate under the provisions of that agreement until December 4, 1979."

Dunne contends that to be valid and effective under § 31-5.1, the notice of nonrenewal must have been forwarded no later than sixty days before the expiration date of the agreement in question. The operative language of the statute with respect to nonrenewal provides that the dealer shall be notified in writing

"at least sixty (60) days before the contractual term of his franchise or selling agreement expires * * * and in no event shall the contractual term * * * expire * * * prior to the expiration of at least sixty (60) days following such written notice." Section 31-5.1-4(C)(3).

We note that the statute does not require that notice be given at least sixty days in advance of the expressed expiration date of the agreement, which is the position Dunne advocates. The notice requirements of the statute, in our opinion, were intended to give a dealer sixty days' notice before the conclusion of his dealership, whether the conclusion came about by termination or cancellation of the agreement or the nonrenewal of the agreement, as in the case before us.

Dunne has not provided us with any authority for its interpretation of the statute, nor have we found any. Our paramount task in construing a statute is to ascertain the intent behind its enactment and to effectuate that intent whenever it is lawful and within the competence of the Legislature. Kingsley v. Miller, 120 R.I. 372, 388 A.2d 357 (1978). In order to ascertain the legislative intent, we examine the language, nature, and object of the statute. Berthiaume v. School Committee of Woonsocket, 121 R.I. 243, 397 A.2d 889 (1979); Nolan v. Representative Council of Newport, 73 R.I. 498, 57 A.2d 730 (1948). In the construing of a statute, it is also permissible to consider the reasonableness of the result of a particular interpretation. Raymond Construction Co. v. Bisbano, 114 R.I. 1, 326 A.2d 858 (1974); Braman v. Wawaloam Reservation, Inc., 107 R.I. 270, 267 A.2d 410 (1970).

In § 31-5.1-4(C)(3), the first reference to sixty days relates to termination or cancellation, but not to renewals. The second reference provides for separate statutory notice requirements in the event of a nonrenewal, which this case involves. The notice for nonrenewal differs from that involved in termination or cancellation:

"Such manufacturer * * * shall notify a motor vehicle dealer in writing * * * at least sixty (60) days before the contractual term of his * * * selling agreement expires that the same shall not be renewed * * * and in no event shall the contractual term of any such franchise or selling agreement expire * * * prior to the expiration of at least sixty (60) days following such written notice." Section 31-5.1-4(C)(3).

The trial justice held that the statutory language permits two interpretations. One interpretation is that the notice and the sixty-day period must be received and occur before the stated expiration date of the agreement. The second is that the notice of nonrenewal must be received before the expiration date of the agreement with some portion of the sixty-day period commencing before and the remainder running after the expiration date in the agreement. We believe a third interpretation achieves a more reasonable result and accomplishes the legislative intent.

The first interpretation, which is Dunne's position, gives rise to a question of what the obligations of the parties are if the notice of nonrenewal is not given at all within the period covered by the agreement. This interpretation would require continuing the relationship indefinitely, long after the agreement had expired in accordance with its own terms. This would be so even though, as is the case before us, the agreement is silent on the matter of renewal or extension. To deny the manufacturer, with due cause, the right not to renew after giving sixty days' notice is not a reasonable result, nor in our opinion is it a necessary one. We believe that a manufacturer who has given advance notice of sixty days and can establish that its action is not arbitrary but is based on due cause should have the right not to renew.

We agree with the result reached in a decision rendered in the Federal District Court in New Hampshire in a case that examines language in a dealership contract identical to the language before us. Russ Thompson Motors, Inc. v. Chrysler Corp., 425 F.Supp. 1218, 1220 (D.N.H.1977). In that case the manufacturer and the dealer had entered into a one-year agreement that ran from March 31, 1975, to March 31, 1976. It was not renewed, but the relationship continued. Then in July 1976, a sixty-day termination notice was given, and the dealer sought to prevent cancellation by seeking injunctive relief. The court stated:

"The type of selling agreement we have here cannot be terminated unless the manufacturer gives written notice to the dealer at least sixty days before its expiration date. This was not done. The Term Sales Agreement, therefore, was not 'terminated automatically' on [the expiration date]. The statute operated to extend the agreement indefinitely.

When there is no definite contractual period [such as the case before us where the sixty (60) day notice period would extend well beyond the term of the contract] or when a contract is to be terminated before the end of a definite term, the statute requires that a manufacturer notify a dealer in writing of the termination or cancellation 'at least sixty days before the effective date thereof, stating the specific grounds for such termination or cancellation.' " (Emphasis added.) Id. at 1220.

Under the statute, the manufacturer could not terminate or refuse to renew the agreement without sixty days' notice. The statute, in our opinion, extends the agreement by whatever period is...