Gage v. General Motors Corp.
| Decision Date | 26 June 1986 |
| Docket Number | No. 84-2426,84-2426 |
| Citation | 796 F.2d 345 |
| Parties | Michael T. GAGE, Plaintiff-Appellant, v. GENERAL MOTORS CORPORATION, a Delaware corporation; Ronald Mayer; and Mike Gage Chevrolet, Inc., a Delaware corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Kenneth S. Fellman of Kissinger & Lansing, P.C., Denver, Colo., for plaintiff-appellant.
Jim Clark of Baker & Hostetler, Denver, Colo., for defendants-appellees.
Before BARRETT, MOORE and ANDERSON, Circuit Judges.
Michael T. Gage (Gage) appeals from an order of the district court granting General Motors Corporation's, et al. (GM) motion to dismiss. Our disposition requires that the facts be developed in detail.
In 1975, Mike Gage Chevrolet, Inc. (MGC), a Delaware corporation, commenced business as a Chevrolet dealership in Broomfield, Colorado. MGC held a GM franchise to sell Chevrolets. GM's Motor Holding Division was MGC's majority shareholder. Ronald Mayer and Raymond Trent, both of whom were GM employees, served on MGC's board of directors. At all times relevant hereto Gage was president of MGC, a minority shareholder of MGC, and the third member of MGC's board of directors.
In May 1981, Gage and one R.D. Spedding executed a "Memorandum of Agreement" for the sale of the dealership with Vernon Small, who was to be the new dealer. Gage did not receive authority from GM, MGC's majority shareholder, or from MGC's board of directors to enter into a contract for the sale of the dealership to Small. (R., Supp. Vol. I at 15.) Without such authority Gage could not validly contract to sell the corporation's assets. Id. The sale to Small was not consummated. The dealership was subsequently sold to Howard Goldstein and Robert Stream with GM's approval.
Gage subsequently sued GM in Colorado state court on June 7, 1982. Within his complaint Gage alleged that (1) GM had breached a fiduciary duty by its refusal to approve the sale of the dealership to Small; (2) GM's conduct interfered with the contractual and business relationship between Small and himself; and (3) GM's conduct breached the Dealer Sales and Service Agreement between GM and himself. Gage sought $100,000.00 in actual damages and $1,000,000.00 in punitive damages.
Gage filed a first amended complaint in state court on January 4, 1983, wherein he realleged the claims of relief set forth in his original complaint and, in addition, alleged that GM's conduct gave rise to constructive fraud and that he was entitled to recover all attorney fees and litigation expenses incurred in the suit.
On April 20, 1983, the state court, after finding that Gage's first amended complaint failed to state a claim for relief, entered an order dismissing it. In so doing the state court found:
4. The first claim for relief is premised on an alleged breach of fiduciary duty by reason of Defendant's failure to approve the sale of the dealerhip [sic] to Vernon Small. Since Gage himself had no authority to sell the assets of the dealership corporation, there was no valid contract on which Defendant could act.
5. The second claim for relief asserts that Defendants wrongfully interfered with the attempts to sell the dealership to Vernon Small. In essence, Plaintiff claims that GM, as majority shareholder and through its employee Mayer, interfered with contractual relations between its own corporation and Vernon Small. This Court has previously ruled that such an assertion does not state a claim for relief.
6. Further, Plaintiff's first and second claims for relief are premised on the contention that General Motors' refusal to permit sale of dealership assets to Small was wrongful and actionable. Under the statutes of Delaware, the state of incorporation of Mike Gage Chevrolet, Inc., as well as under the Colorado statutes, the sale of all corporate assets, not in the ordinary course of business, cannot occur without the approval of the shareholders. 8 Del.Ch.1974, 271; C.R.S.1973, 7-5-112(2). The Delaware Act requires approval of a majority of the stock, while Colorado provides for approval by two-thirds of the outstanding shares. It is therefore, apparent that by exercising its statutory right to vote on any sale of all corporate assets not in the ordinary course of business, General Motors could lawfully prevent a sale here in question to Vernon Small. The exercise of this statutory right cannot subject a shareholder to liability to those who might benefit from such a sale. The decision to sell or not to sell all corporate assets, not in the ordinary course of business, by statute belongs solely to the shareholders and is not reviewable by the courts. Allied Chemical & Dye Corp. v. Steel & Tube Co., 14 Del.Ch. 64, 122 A. 142 (1923); Baron v. Pressed Metals of America, 35 Del.Ch. 581, 123 A.2d 848, 858 (Sup.Ct., 1956).
7. In addition, although General Motors had an absolute legal right to refuse to permit a sale of all assets of Mike Gage Chevrolet, Inc., there is nothing in the complaint to suggest that the proposed sale to Small was ever properly presented to the shareholders for approval. The complaint alleges that the contracts with Small were executed by Mike Gage. There is no indication that these purported contracts were ratified or even presented to the Board of Directors. Mike Gage, as president of Mike Gage Chevrolet, Inc., as a matter of law, lacked authority to enter into the contracts here in question for the sale of all assets to Small. 2A Fletcher, Cyclopedia of Corporations Secs. 605-06. The proper procedure to have followed was to first submit the proposed sale to the Board of Directors for approval and, upon the Board's approval, sumbit [sic] the matter to the shareholders. 8 Del.Ch. 1974, Sec. 271; C.R.S. 1973, 7-5-112(1). The complaint affirmatively shows that this was not done.
8. The third claim for relief is based on an agreement entitled "General Motors Dealer Sales and Service Agreement" executed by GM and Mike Gage Chevrolet, Inc. Plaintiff alleges that such agreement requires GM to purchase the dealership assets if it refuses to approve a sale of those assets to a third party. Because GM refused to purchase the dealership assets after failing to approve the sale to Small, Gage asserts that GM breached the Dealer Sales and Service Agreement. The Agreement itself is before the Court on the pleadings in this case. Since the Agreement is in writing its construction and operation are issues of law for the Court to determine. The Agreement contains no language imposing any obligation on GM to purchase the dealership assets upon disapproval of a sale. The Agreement states only that GM has an option or right of first refusal to purchase the assets if a proposed sale is disapproved. There is no ambiguity to be construed against GM. Under the clear language of the contract, an election not to exercise the right of first refusal cannot constitute a breach of the Agreement.
(R., Supp. Vol. I at pp. 15-18 (emphasis supplied).)
On June 14, 1984, new counsel for Gage filed a second amended complaint in state court wherein Gage realleged the claims in his first amended complaint, and in addition, alleged an "interference with prospective business advantage." (R., Supp. Vol. I at p. 24.)
On March 26, 1984, the state court entered an order granting Gage's motion to dismiss his second amended complaint without prejudice after Gage's counsel stated:
For the record, plaintiff's counsel states as an officer of this court, that he was not aware of the potential federal claim until five days prior to the filing deadline for the second amended complaint, and the only reason for filing the motion to dismiss without prejudice is plaintiff's desire to bring his claim under 15 U.S.C. Sec. 1221 et seq. (Federal Automobile Dealer's Day in Court Act.)
On May 21, 1984, Gage filed a complaint in federal district court. He alleged, as he had previously in state court, claims for (1) breach of fiduciary duties, (2) interference with contractual relationship, and (3) interference with prospective business advantage. In addition Gage alleged, for the first time, that GM's conduct was violative of the federal Automobile Dealers Day in Court Act (ADDCA) and Colorado's Dealer's Day In Court Act (CDDCA), C.R.S. 1973, 12-6-120, et seq. GM moved to dismiss for failure to state a claim upon which relief could be granted.
On September 26, 1984, the federal district court entered an order dismissing Gage's complaint for failure to state a claim upon which relief could be granted. In so doing the court found:
4. The present complaint does not state a claim for relief under the federal Dealer's Day in Court Act. Under this statute, it is necessary to plea [sic] and prove facts showing coercion, intimidation or threats by the Defendant. Under Delaware law, as well as under Colorado law, General Motors, as the majority shareholder of the dealership corporation, had a legal right not to approve a sale of the corporate assets to Small and to approve the sale to other purchasers. The exercise of these legal rights cannot amount to coercion, intimidation or threats as a matter of law.
5. The requirements of the Colorado Dealer's Day in Court Act are substantially the same as those under the federal statute and, therefore, to sustain a claim pursuant to the state Act, the Plaintiff must plead and prove coercion, intimidation or threats. As I have previously indicated in connection with the federal Dealer's claim, General Motors, as majority shareholder, of Mike Gage Chevrolet, Inc., had a right to reject the proposed sale of assets to Small and to direct a sale of such assets to some other party. As a result, the complaint states no claim under the state Dealer's Day in Court Act.
6. As to the third, fourth and fifth claims for relief, it is clear that Plaintiff did not have authority to enter into a binding contract for the sale...
To continue reading
Request your trial
-
Mason v. Texaco, Inc.
...reflects little more than the policy of judicial efficiency that underlies law of the case principles generally. Gage v. General Motors Corp., 796 F.2d 345, 349 (10th Cir.1986). By contrast, Texaco's successful challenge on appeal vacated the jury's finding of liability and the issues under......
-
Chrysler Credit Corp. v. Country Chrysler, Inc.
...injustice." Arizona v. California, 460 U.S. 605, 618 n. 8, 103 S.Ct. 1382, 1391 n. 8, 75 L.Ed.2d 318 (1983). See Gage v. General Motors, 796 F.2d 345, 349-50 (10th Cir.1988). Certainly, this standard is far more deferential than direct appellate review. But Dalton only held that there was a......
-
Mayer v. Bernalillo Cnty.
...1995). The law of the case doctrine is intended to prevent "continued re-argument of issues already decided," Gage v. Gen. Motors Corp., 796 F.2d 345, 349 (10th Cir. 1986), and to preserve scarce court resources -- to avoid "in short, Dickens's Jarndyce v. Jarndyce syndrome." McIlravy v. Ke......
-
U.S. v. Power Engineering Co.
...of issues already decided.'" McIlravy v. Kerr-McGee Coal Corp., 204 F.3d 1031, 1035 (10th Cir.2000) (quoting Gage v. General Motors Corp., 796 F.2d 345, 349 (10th Cir.1986) (citations omitted)). The doctrine is, however, "only a rule of practice in the courts and not a limit on their power.......