General Motors Corp., Pontiac Motor Div. and Oldsmobile Div. v. Kinlaw

• Decision Date: 31 December 1985
• Docket Number: No. 8510SC217,8510SC217
• Citation: 78 N.C.App. 521,338 S.E.2d 114
• Parties: GENERAL MOTORS CORPORATION, PONTIAC MOTOR DIVISION AND OLDSMOBILE DIVISION v. Samuel Lee KINLAW d/b/a Knox Olds-Pontiac: R.W. Wilkins, Jr., In his official capacity as Commissioner of the Division of Motor Vehicles; and Robert A. Pruett, In his official capacity as Hearing Officer for the Division of Motor Vehicles.
• Court: North Carolina Court of Appeals

Page 114

338 S.E.2d 114

78 N.C.App. 521

GENERAL MOTORS CORPORATION, PONTIAC MOTOR DIVISION AND OLDSMOBILE DIVISION v. Samuel Lee KINLAW d/b/a Knox Olds-Pontiac: R.W. Wilkins Jr., In his official capacity as Commissioner of the Division of Motor Vehicles; and Robert A. Pruett, In his official capacity as Hearing Officer for the Division of Motor Vehicles.

No. 8510SC217.

Court of Appeals of North Carolina.

Dec. 31, 1985.

Poyner, Geraghty, Hartsfield & Townsend by Cecil W. Harrison, Jr., Raleigh, for petitioner-appellant.

Manning, Fulton & Skinner by Howard E. Manning and Charles E. Nichols, Jr., Raleigh, for respondent-appellee.

WHICHARD, Judge.

Petitioner contends the evidence is not sufficient to support the Commissioner's finding that the failure to renew the franchise agreements was without "good cause." Review of a decision by the Commissioner of Motor Vehicles is governed by N.C.Gen.Stat. 150A-51. See N.C.Gen.Stat. 20-300. An agency decision may be reversed or modified if it is "[u]nsupported by substantial evidence ... in view of the entire record as submitted." N.C.Gen.Stat. 150A-51(5). This standard of review is known as the "whole record" test. Thompson v. Board of Education, 292 N.C. 406, 410, 233 S.E.2d 538, 541 (1977). When, in applying this test, reasonable but conflicting views emerge from the evidence, this Court cannot replace the agency's judgment with its own. It must, however, "take into account whatever in the record fairly detracts from the weight" of the evidence which supports the decision. Id. Ultimately it must determine whether the decision has a rational basis in the evidence. In re Rogers, 297 N.C. 48, 65, 253 S.E.2d 912, 922 (1979).

Respondent instituted this proceeding 14 April 1983 by filing a petition pursuant to N.C.Gen.Stat. 20-305 (1978), which provides:

It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:

(6) Notwithstanding the terms of any franchise agreement to terminate, cancel, or refuse to renew the franchise of any dealer, without good cause, and unless (i) the dealer and the Commissioner have received written notice of the franchisor's intentions at least 60 days prior to the effective date of such termination, cancellation, or the expiration date of the franchise, setting forth the specific grounds for such action, and (ii) the Commissioner has determined, if requested in writing by the dealer within such 60-day period, and after a hearing on the matter, that there is good cause for the termination, cancellation, or nonrenewal of the franchise ... provided that in any case where a petition is made to the Commissioner for a determination as to good cause for the termination, cancellation, or nonrenewal of a franchise, the franchise in question shall continue in effect pending the Commissioner's decision....

Effective 6 August 1983, N.C.Gen.Stat. 20-305(6) was amended. 1983 Sess.Laws ch. 704, sec. 25. Rather than substantively changing the statute, many portions of the amendments merely clarified the original intent. See N.C.Gen.Stat. 20-305(6) (1978); N.C.Gen.Stat. 20-305(6) (1983). See also Childers v. Parker's Inc., 274 N.C. 256, 260, 162 S.E.2d 481, 483 (1968) ("In construing a statute with reference to an amendment it is presumed that the legislature intended either (a) to change the substance of the original act, or (b) to clarify the meaning of it."). Much of N.C.Gen.Stat. 20-305(6) (1978) has not been judicially interpreted and, although the statute as amended does not affect litigation pending at the time of its enactment, 1983 Sess.Laws ch. 704, sec. 25, portions of the amendments are helpful in ascertaining the intent of the legislature in enacting the original version. See Investors, Inc. v. Berry, 293 N.C. 688, 695, 239 S.E.2d 566, 570 (1977) ("In interpreting statutes, the primary duty of this Court is to ascertain and effectuate the intent of the Legislature. [L]ight may be shed upon [that] intent ... by reference to subsequent amendments which ... may be interpreted as clarifying it.").

N.C.Gen.Stat. 20-305(6) (1983) reads, in pertinent part,

a. Notwithstanding the terms, provisions or conditions of any franchise or the terms or provisions of any waiver, good cause shall exist for the purposes of a termination, cancellation or nonrenewal when:

1. There is a failure by the new motor vehicle dealer to comply with a provision of the franchise which provision is both reasonable and of material significance to the franchise relationship....

2. If the failure by the new motor vehicle dealer, defined in 1 above, relates to the performance of the new motor vehicle dealer in sales or service, then good cause shall be defined as the failure of the new motor vehicle dealer to comply with reasonable performance criteria established by the manufacturer if the new motor vehicle dealer was apprised by the manufacturer in writing of such failure; and ... the new motor vehicle dealer's failure was not primarily due to economic or market factors within the dealer's relevant market area which were beyond the dealer's control.

b. The manufacturer shall have the burden of proof under this section.

We find the above provisions indicative of legislative intent in the original enactment of N.C.Gen.Stat. 20-305(6) (1978), and we therefore consider them in analyzing the Commissioner's decision. Thus, to prove that poor sales performance constitutes good cause for its failure to renew respondent's franchise agreements, petitioner must demonstrate that:

1. Respondent failed to comply with a provision of the franchise agreements which required satisfactory sales performance;

2. Petitioner's performance standards are reasonable; and

3. Respondent's failure was not due primarily to economic or market factors beyond his control.

The "Dealer Sales and Service Agreement," which outlines the rights and obligations of petitioner and respondent, provides that respondent "is responsible for: (a) actively and effectively selling ... new Motor Vehicles to customers of Dealer; and (b) actively and effectively promoting, through Dealer's own advertising and sales promotion activities, the purchase and use of new Motor Vehicles...." Thus, nothing else appearing, respondent's poor sales performance could constitute good cause for petitioner's nonrenewal.

Having reviewed the record as a whole, however, we find substantial evidence to support the Commissioner's determination that petitioner's failure to renew the agreements was without cause. The Commissioner found that during the period in question respondent's sales performance was affected by high interest rates, rising unemployment, and a general economic recession. Respondent testified that as a result of rising interest rates the cost of maintaining a large inventory rose dramatically. The manager of the sales finance department for Wachovia Bank testified that his department's financing of automobiles, automobile dealers, and automobile agencies dropped off by as much as forty percent during 1980, 1981 and 1982. A salesman for Knox Olds-Pontiac testified that during the same period other dealerships in the area significantly reduced their inventories. The director of Industrial and Agricultural Development for Robeson County testified regarding the county's generally high unemployment rate and various industrial layoffs and shut-downs, all of which could have affected the demand for new automobiles. According to respondent, to remain in business under these economic conditions he had to reduce inventory, cut back on sales staff, and in general "pull back and hold in...."

In addition the Commissioner determined that petitioner's distribution system was partially responsible for respondent's poor sales performance. Respondent testified that Robeson County is generally an agricultural community; as a result, consumers tend to purchase cars in the fall after having received money for their crops. During the months of August, September and October petitioner distributes its new model cars according to a "controlled distribution" system. The number of cars a dealer receives is based on the number sold by that dealer from January through July. Thus, respondent was unable to stock cars in periods of high demand.

Petitioner maintains that its evidence refutes the proposition that respondent's sales performance was the result of poor economic conditions. Petitioner's evidence establishes that from 1979-82 respondent's sales were below national, regional, and local sales figures, while the sales of two nearby Oldsmobile/Pontiac dealerships, affected by economic conditions similar to those affecting respondent's dealership, were above the same sales standards. In addition petitioner's evidence established that during all relevant periods more Oldsmobiles and Pontiacs were purchased in respondent's area of primary responsibility than were sold by respondents. Thus, according to petitioner, respondent was not fully servicing the demand for Oldsmobiles and Pontiacs within his area of primary responsibility.

Petitioner assesses the performance of its dealerships by comparing an individual dealer's market penetration with national, regional and local levels of market penetration. A dealership's market penetration is determined by dividing the number of cars it sold by the total number of cars sold in its area of primary responsibility. Petitioner's national, regional, and local market penetrations are comparisons between the number of all cars sold in a given market and the number of Oldsmobiles and Pontiacs sold in the same market.

Throughout its dealings with respondent, petitioner maintained that respondent had to achieve a market penetration in its area of primary responsibility equal to national and regional (North and South Carolina) levels. These levels do not necessarily reflect...