Forest Home Dodge, Inc. v. Karns

• Decision Date: 30 November 1965
• Parties: FOREST HOME DODGE, INC., et al., Petitioners-Respondents, v. James L. KARNS, Comm'r., MVD of Wisconsin, Respondent-Appellant, Doering Motor Co. et al., Respondents.
• Court: Wisconsin Supreme Court

Page 214

138 N.W.2d 214

29 Wis.2d 78

FOREST HOME DODGE, INC., et al., Petitioners-Respondents, v. James L. KARNS, Comm'r., MVD of Wisconsin, Respondent-Appellant, Doering Motor Co. et al., Respondents.

Supreme Court of Wisconsin.

Nov. 30, 1965.

Rehearing Denied Feb. 1, 1966.

Bronson C. La Follette, Atty. Gen., Le Roy L. Dalton, Asst. Atty. Gen., Madison, for appellant.

Whyte, Hirschboeck, Minahan, Harding & Harland, Milwaukee (Victor M. Harding, Richard D. Silberman, Milwaukee, of counsel), Hart, Kraege, Jackman & Wightman, W. L. Jackman, Madison, of counsel, for petitioner-respondents Wheeler, Van Sickle, Day & Goodman, Madison, Amicus Curiae for Wis. Automotive Trades Assn.

HEFFERNAN, Justice.

'Qui facit per alium facit per se.'

'Broom's Legal Maxims, p. 639

London, 1911

This being an appeal from the decision of an administrative agency, the courts are governed by the provisions of sec. 227.20, Stats. That portion of the statutes allows a decision to be reversed or modified if the appellant is prejudiced as the result of the administrative findings, inferences, conclusions, or decisions, being unsupported by substantial evidence in view of the record as a whole. The same statute also directs the courts to accord due weight to the experience, technical competence, and specialized knowledge of the agency involved.

At the time of the hearing before the commissioner, it was agreed that there were but two issues. They are (1) is Forest Home a replacement dealership for Earl Smith Agency, and (2) have the objecting dealers 'who constitute the presently enfranchised dealers complied with the agreed requirements of the manufacturer for adequate representation.' In addition, the applicant, Forest Home, objected to the ruling that the application of Forest Home was, in fact, that of a manufacturer.

In the event this was not a 'dealer application of a manufacturer,' sec. 218.01(3)(f), Stats., is not applicable. We conclude, however, that the application made in the name of Forest Home was the 'dealer application of a manufacturer.'

The statute, however, is not unambiguous. It is, therefore, necessary to construe it in light of its purpose, and consideration must be given to statutes that are in pari-materia. Sec. 218.01(3), Stats., is a part of the Wisconsin Auto Dealership Law, which was enacted in 1935 (Chapter 474, Laws of 1935). Implicit in this law is the recognition of the gross disparity of bargaining power between the manufacturer of automobiles and the local retailer. It was enacted in recognition of the long history of the abuse of dealers by manufacturers. Kuhl Motor Co. v. Ford Motor Co. (1955), 270 Wis. 488, 71 N.W.2d 420, 55 A.L.R.2d 467. These laws deal with the relationship between auto manufacturers and auto dealers. The purpose of the law is to furnish the dealer with some protection against unfair treatment by the manufacturer. Sec. 218.01(3)(f) was enacted into law in 1955 (Chapter 364, Laws of 1955). Earlier enactments had guarded against specific evils occasioned by what the legisture considered the unfair or overreaching tactics of manufacturers, e. g., forced acceptance of unordered autos or parts (218.01(3)(a)(15)); coercion or unfair treatment through threat of cancellation (218.01(3)(a)(16)); unfair cancellation or refusal to renew franchises, or without due regard to the equities of the dealer (218.01(3)(a)(17)).

We agree with the attorney general that the legislative history clearly shows that sec. 218.01(3)(f), Stats., was a part of this general pattern of regulation, and that it was designed to prevent the manufacturer from accomplishing indirectly by new, manufacturer-controlled dealerships what the law did not permit to be done directly. With superior resources to spend on facilities, advertising, etc., and with no problem in placing orders with a distributor or manufacturer, a dealer who, in fact, is a manufacturer or controlled by a manufacturer is at a distinct advantage and can use that advantage to accomplish by indirection what is otherwise prohibited by law.

The ambiguity of the statute should be resolved in a manner that will effectuate the legislative intent. Bearing in mind the purpose of sec. 218.01(3)(f), Stats., as shown by its history and place in the context of the law regulating manufacturers, it is apparent that it is a remedial statute and should be construed to effect its purpose.

'The construction of the statute should be made with reference to the purpose of the statute, or in the light thereof, and in harmony and conformity therewith, in order to aid, advance, promote, subserve, support, and effectuate such aim, design, motive, end, aspirations, or object.' 50 Am.Jur., Statutes, p. 286, sec. 303.

It is obvious on its face that the statute in question at least includes the situation where the manufacturer is itself the applicant. In view of the purpose of the statute, however, it would be naive to assume that its effect was limited to this situation.

The statute if so interpreted would be, in effect, useless and would be contrary to the general tenor of the entire statutory scheme that indirect coercion is prohibited. The whole framework of the law shows that the manufacturer, with his superior bargaining power, is not to be unsupervised in his dealings with the small independent dealer; and that the state, acting through the motor vehicle department, must see to it that the elements of fairness and freedom in bargaining between the parties continues to exist. We cannot, in view of the clearly expressed legislative intent, assume that the law passed was intended as a nullity to be evaded by operating through an individual under contract to the manufacturer or by the device of a subsidiary corporation.

We conclude, therefore, that the conduct prohibited by sec. 218.01(3)(f), Stats., includes the situation in the instant case where there is an objective showing that the manufacturer controls the license applicant. There need be no showing that there is an intent to evade the statute or that the particular transaction is intended to further unfair treatment of the dealers by the manufacturer. It is enough that the facts adduced at the hearing are sufficient to show that in effect the applicant is the creature of the manufacturer. It is enough to show the element of control. A review of the evidence reveals that there was substantial evidence to support the commissioner's conclusion.

The original application by Forest Home revealed that it was owned 100% by Chrysler Motors, a wholly-owned subsidiary of the Chrysler Corporation. At the hearings, all witnesses were employees of Chrysler Motors, not of the corporation ostensibly seeking the license. When a change was made in the corporate ownership and a Mr. Caldwell purchased 25% of the stock, it was a communication on the letterhead of Chrysler Motors that informed the Commissioner of that fact. It was admitted that Chrysler Motors continued to own 75% of the stock of Forest Home. It is clear from the evidence that the effect of these intercorporate holdings was to vest control of Forest Home in the manufacturer, the Chrysler Corporation, in direct contravention of the statute if, in fact, the existing dealers were living up to the manufacturer's agreed requirements. No finding of fact is required to support the commissioner's conclusion in this regard. The ultimate fact of manufacturer control is uncontroverted by the evidence. Additionally, where the evidence is clear and convincing, this court, or the trial court, can supply a finding of fact where it might be required. Barnes v. State (1964), 25 Wis.2d 116, 122, 130 N.W.2d 264.

The petitioners (Forest Home and Chrysler Motors) argue, however, that this is a mere financing device to 'assist otherwise qualified new dealers who lack sufficient capital in becoming established through temporary capital financing arrangements.' They point to the case of National Bond Finance Co. v. General Motors Corp. (W. D. Missouri 1964), 238 F.Supp. 248, in support of their position. That case has no relevancy to the instant one. The National Bond Case involved a situation wherein the finance company was a creditor of the General Motors dealer. It sought to 'pierce the corporate veil' in a common law creditor's action to hold General Motors liable for the debts of the dealer on the basis that General Motors was a stockholder. General Motors successfully defended by showing that the dealer was contractually obligated to buy out General Motors' interest in the dealership. The dealer was obligated 'to apply all of his dividends and at least 50% of his bonus' to purchase the stock held by General Motors.

There is no doubt that this constituted a bona fide attempt by General Motors to finance an independent dealer. The contract provided for mandatory termination of financial control. This is unlike the mere option that was given to Mr. Caldwell in the case before the court. We do not by thus distinguishing the case imply that a bona fide temporary financing as used by General Motors satisfies the requirements of the statute. We refer to this case to distinguish the petitioner-respondents' argument. In National Bond an attempt was made to 'pierce the corporate veil' and to set it aside as a nullity. We do not do so, nor is it necessary to 'pierce the corporate veil' in this opinion. Rather, we expressly recognize the separate corporate entities, but in addition recognize that the succession of corporate stockholdings vest majority ownership and, hence, control of Forest Home in the Chrysler Corporation so as to constitute a 'dealer application of a manufacturer.'

Sec. 218.01(3)(f), Stats., has been construed to be applicable to new dealerships only and not to dealerships that are mere replacements. No such exception appears on the face of the statute, and this construction has been reached in the practical administration of the statute by the commissioner....