Foley Equipment, Inc. v. Krause Plow Corp., 890379

• Decision Date: 15 May 1990
• Docket Number: No. 890379,890379
• Citation: 456 N.W.2d 121
• Parties: FOLEY EQUIPMENT, INC., Plaintiff and Appellant, v. KRAUSE PLOW CORPORATION, Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 121

456 N.W.2d 121

FOLEY EQUIPMENT, INC., Plaintiff and Appellant, v. KRAUSE PLOW CORPORATION, Defendant and Appellee.

Civ. No. 890379.

Supreme Court of North Dakota.

May 15, 1990.

Lamont, Skowronek & Dobrovolny, Minot, for plaintiff and appellant; argued by Collin P. Dobrovolny.

Pearce & Durick, Bismarck, for defendant and appellee; argued by Lawrence A. Dopson.

GIERKE, Justice.

Foley Equipment, Inc. (Foley), appeals from a district court judgment which ordered Krause Plow Corporation (Krause) to repurchase all Krause manufactured parts remaining in Foley's inventory, not to exceed $4,758, and to pay Foley $130.18 for its costs and disbursements. We affirm.

Foley is a farm implement dealer in Minot, North Dakota, which began business on December 1, 1977, when it purchased an existing implement dealership, L.E. Beeter. When Foley purchased L.E. Beeter, L.E. Beeter's inventory was partially comprised of products manufactured by Krause which L.E. Beeter had carried in its inventory since 1964. After the purchase, Foley desired to continue to sell the Krause line of farm tillage products.

In February of 1978, Foley entered into an initial dealer agreement with Krause which was to continue until August 31, 1978. The agreement provided, among other things, that Krause would sell to Foley all implements, parts and accessories that Foley needed and that Foley would pay for the goods in accordance with Krause's schedule of terms. After entering into the initial dealer agreement, Krause and Foley, on a yearly basis, executed one-year extensions to the dealer agreement until August 31, 1984. At that time, Krause refused to approve an extension agreement for the following year.

Nevertheless, Foley operated without an extension agreement from August 31, 1984, until September of 1985 at which time Krause notified Foley of their termination of the dealership agreement. Foley objected to the termination by requesting reinstatement of his dealer agreement or, in the alternative, demanding that the portion of Foley's parts inventory that was manufactured by Krause be repurchased according to North Dakota law. ¹ Krause responded that North Dakota law did not apply to the dealership agreement and that the basis for the termination was Foley's disregard for its payment obligations to Krause.

Foley then prepared a list of parts to return to Krause. Krause refused to accept a substantial amount of the parts and indicated to Foley that they would be discounting any parts accepted by 20% and 40%. Foley refused to return the parts unless all parts were accepted and discounted according to Section 51-07-01, N.D.C.C. Foley then filed suit against Krause.

After Krause's motion for summary judgment was denied, the case was scheduled for trial. At the bench trial, Foley maintained that Section 51-07-01, N.D.C.C., applied to the facts of the case thus obligating Krause to repurchase any remaining parts from them in accordance with the statute. Additionally, Foley argued that Krause terminated the dealership agreement without cause and in bad faith giving rise to general and special damages pursuant to Section 51-07-01.1, N.D.C.C. ² Foley contended that they suffered damages for a five-year period ³ of $32,524.88 for lost profits on the sale of Krause parts, $17,244 for lost profits on sales of new Krause units, $4,500 for lost profits on additional miscellaneous sales derived from customer traffic generated by Krause purchases, and $58,713.84 for lost profits on sales of non-Krause equipment sold to Krause customers.

Krause contended that Section 51-07-01 did not apply to the dealership agreement. ⁴ Secondly, Krause maintained that they did not renew the dealership agreement with Foley because of credit problems they had been experiencing with Foley. Thus, Krause argued that they had good cause to not renew the agreement thereby making Section 51-07-01.1 inapplicable. Further, Krause argued that the damages sought by Foley were speculative in nature and not based on adequate evidence so as to grant recovery.

The trial court held that Section 51-07-01, N.D.C.C., obligated Krause to repurchase the existing Krause parts in Foley's inventory for $4,758. With regard to Foley's bad faith argument, the trial court found that the history of the Foley dealership indicated "sufficient problems as resulting from the North Dakota economy which justified Krause in terminating the agreement.... I find no bad faith." Further, the court held that all of Foley's alleged damages were speculative and not based on adequate evidence so as to provide certainty as to the nature and extent of damage. This appeal followed.

On appeal, Foley argues for review of three issues. Initially, Foley contends that the trial court erred in finding that Krause did not terminate the dealership agreement in bad faith. Secondly, Foley argues that the trial court erred in finding that their alleged damages were speculative and not based on adequate evidence. Finally, Foley maintains that the 19-month delay from the trial date to the trial court's opinion constitutes an unreasonable delay thereby requiring this Court to employ a de novo standard of review when reviewing the trial court's findings.

Because the issue of whether Krause's termination of the Foley dealership agreement was made in good faith is the dispositive issue on appeal, we decline to address Foley's arguments pertaining to damages and our standard of review.

On appeal, Foley concedes that it was delinquent on its payments to Krause for periods of two months, five months, and 17 months on three pieces of equipment ordered from Krause in September of 1982. Nevertheless, Foley maintains that Krause terminated the dealership agreement in bad faith and without cause for several reasons. Initially, Foley contends that Krause waived the payment delinquencies by renewing their dealership agreement for fiscal years 1983 and 1984 and continuing to sell parts to it even though they were in default on the three equipment notes. Secondly, Foley argues that its payment problems were caused by the decline in the North Dakota farm economy which was something it could not control. Finally, Foley argues that Krause acted in bad faith because they did not warn, state, or provide notice to Foley that the consequences of delinquent payments would be termination of the dealership agreement. Foley contends that if Krause would have told them that their dealership agreement was in jeopardy, arrangements would have been made to rectify the delinquent payments.

On the other hand, Krause maintains that it terminated the dealership agreement in good faith for good cause within the meaning of Section 51-07-01.1, N.D.C.C. In September of 1982, Foley purchased three units from Krause on one-year installment notes which provided for installment payments on March 10, 1983, June 10, 1983, and the final payment on September 10, 1983. Foley failed to make any of the payments called for in the...