Goodyear Tire & Rubber Co. v. Tualatin Tire & Auto, Inc.

• Decision Date: 27 July 1994
• Citation: 879 P.2d 193,129 Or.App. 206
• Court: Oregon Court of Appeals
• Parties: The GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation, Appellant-Cross-Respondent, v. TUALATIN TIRE & AUTO, INC., an Oregon corporation, Respondent-Cross-Appellant. C89-0099CV; CA A73536.

Page 193

879 P.2d 193

129 Or.App. 206

The GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation, Appellant-Cross-Respondent, v. TUALATIN TIRE & AUTO, INC., an Oregon corporation,

Respondent-Cross-Appellant.

C89-0099CV; CA A73536.

Court of Appeals of Oregon.

Argued and Submitted June 18, 1993.

Decided July 27, 1994.

[129 Or.App. 207-A] Gregory A. Chaimov, Portland, argued the cause for appellant-cross-respondent. With him on the briefs were Linda L. Marshall and Miller, Nash, Wiener, Hager & Carlsen.

Kim E. Hoyt, Salem, argued the cause for respondent-cross-appellant. With her on the briefs were William D. Brandt and Ferder, Ogdahl, Brandt & Casebeer, Salem, and Mark E. Griffin and Griffin & McCandlish, Portland.

Before ROSSMAN, P.J., RICHARDSON, C.J., and LEESON, J.

RICHARDSON, Chief Judge.

This case involves multiple claims between a franchisor, Goodyear Tire & Rubber Company (Goodyear), and its franchisee, Tualatin Tire & Auto, Inc. (Tualatin Tire). Goodyear appeals and Tualatin Tire cross-appeals from a judgment awarding both parties damages. We reverse and remand on the appeal, and affirm in part and reverse in part on the cross-appeal.

Goodyear manufactures and sells tires. In August, 1986, Marvin Kiehm met with a representative of Goodyear to discuss its franchise program for tire dealerships. Marvin had experience in the automotive industry and wanted to establish a family business with his daughter, Ava. Over the next two months, Marvin met with representatives of Goodyear, discussed possible dealership locations and signed a letter of intent. Thereafter, Marvin and Ava attended a Goodyear training program in Ohio. In January, 1987, the Kiehms moved from California to Oregon. In March of the same year, they formed defendant corporation, Tualatin Tire, for the purpose of doing business as a Goodyear franchise.

Over the course of Marvin's initial discussions with Goodyear, Goodyear made numerous representations regarding the terms of the franchise agreement, the sublease of the building already leased to Goodyear and the equipment lease, which were part of Goodyear's franchise program. Several of the terms, however, turned out to be different than described. Initially, Goodyear represented that Marvin would need "at least $50,000" of unencumbered capital. Later, it required $75,000. Marvin also believed that the realty sublease was a "pass-through lease," that is, that the sublease would contain the same terms as the master lease that Goodyear held on the store. When Marvin received the sublease and the franchise agreement, he learned that the sublease did not have the same terms. Most significantly, the period of the sublease was considerably shorter than that of the master lease. An undisclosed one percent administrative fee had also been added to the sublease, and the first year's property taxes had not been prorated as agreed.

Marvin disputed the terms of the sublease and the franchise agreement and refused to sign them. Despite this fact, Tualatin Tire opened for business in March, 1987. The following month, while Marvin was out of town, Ava, also an officer of Tualatin Tire, signed the sublease and the franchise agreement on the assurances of Goodyear representatives that the disputes had been resolved. The disputes had not been resolved, and Marvin, who still disputed the terms of the agreements, refused to pay rent on the sublease. In response, Goodyear stopped providing Tualatin Tire with technical and marketing support. Negotiations between the parties faltered several months later.

Goodyear brought this action to recover possession of the tire store and to recover sums due under the leases and on an open account. Tualatin Tire asserted counterclaims for breach of contract, common law fraud, and violations of the California Franchise Investment Law (CFIL), the Oregon Franchise Act (OFA) and the Oregon Unlawful Trade Practices Act (UTPA). ¹ The trial court granted summary judgment for Goodyear on its wrongful detainer claim and awarded it possession of the store. That judgment is not part of this appeal. ² The trial court also directed a verdict against Tualatin Tire on its UTPA and breach of contract claims.

The remaining claims were submitted to the jury, which returned verdicts for both parties. The jury found for Goodyear on its claims for nonpayment of rent on the realty sublease, nonpayment of rent on the equipment lease, and on the open account. On a post-verdict motion, the trial court also awarded Goodyear prejudgment interest on its claims for rent. The jury returned verdicts for Tualatin Tire on the CFIL claim ($74,000), the OFA claim ($112,000) and the common law fraud claim ($260,000). The court granted Goodyear's motion to compel Tualatin Tire to elect a remedy, and Tualatin Tire chose the $260,000 common law fraud award. The trial court also awarded Tualatin Tire attorney fees and costs pursuant to the OFA. ORS 650.020(3).

On appeal, Goodyear makes ten assignments of error. In its first six assignments, it argues that the trial court erred in refusing to withdraw from the jury's consideration six of the 13 allegations of misrepresentation supporting Tualatin Tire's fraud, CFIL and OFA claims, because no evidence in the record supported those allegations. Goodyear further contends that under Whinston v. Kaiser Foundation Hospital, 309 Or. 350, 788 P.2d 428 (1990), those claims should be remanded for a new trial, because it is impossible to discern from the jury's verdict whether it relied on only those allegations that were supported by the evidence.

Tualatin Tire answers that Goodyear is not entitled to reversal of the judgment and a new trial because it did not move for a new trial when it moved for judgment n.o.v. It argues that, under Whinston v. Kaiser Foundation Hospital, supra, a motion for a new trial is mandatory to obtain relief of a new trial if one or more of the allegations should have been stricken. Because that is so, Tualatin Tire argues, we should not address the first six assignments of error.

In Whinston, three allegations of negligence were submitted to a jury, which returned a verdict in favor of the plaintiff. The defendant moved for a judgment n.o.v. and in the alternative for a new trial. The trial court granted the judgment n.o.v. for lack of evidence. The Supreme Court concluded that there was some evidence to support one of the allegations and that the judgment n.o.v. was, therefore, not properly granted. The court concluded, however, that the defendant's motion to strike certain allegations should have been allowed. The court then restated the rule set out in Pavlik v. Albertson's, Inc., 253 Or. 370, 454 P.2d 852 (1969):

"If the court cannot determine whether the verdict was based on an allegation supported by the evidence or on one unsupported by the evidence, the result is a new trial." 309 Or. at 359, 788 P.2d 428.

The court went on to explain the predicate action for taking advantage of the "Pavlik " rule:

"To avail oneself of the Pavlik rule, a party must have taken some action at trial to remove the unsupported allegation from the jury's purview. The rationale for this proposition is 'the general rule of appellate procedure that an appellate court will not consider a question on appeal unless it has been first presented to and ruled upon by the lower court.' " 309 Or at 359, 788 P.2d 428. (Citation omitted.)

The court in Whinston then discussed the alternative motion for new trial that the trial court had not ruled upon and determined, on the basis of Pavlik, that the motion for new trial should have been granted.

The court in Whinston discussed the motion for new trial because of the procedural posture of the case and not because it was a preservation requirement. Here, Goodyear moved for a directed verdict and then made motions to strike the specific allegations that it assigns as erroneously considered by the jury. That action was sufficient to preserve the issues for our review and to obtain a new trial pursuant to the rule of Pavlik if any of the allegations were not supported by the evidence. Whinston v. Kaiser Foundation Hospital, supra, 309 Or. at 360, n. 11, 788 P.2d 428.

We turn to the merits of Goodyear's first six assignments. Goodyear argues that there was not any evidence to support the following allegations of misrepresentation: That it misrepresented Tualatin Tire's obligation to pay property taxes; that it misrepresented the amount of unencumbered capital that Tualatin Tire would need to establish the franchise; that it failed to disclose the administrative fee in the realty sublease; that it misrepresented the advertising support it would provide; that it misrepresented product adjustments it would make; and, that it misrepresented the technical support it would provide.

We review to determine whether there is any evidence in the record from which the jury might conclude that the allegations were true. Brown v. J.C. Penney Co., 297 Or. 695, 705, 688 P.2d 811 (1984). As the non-moving party, Tualatin Tire is entitled to the benefit of all favorable evidence and reasonable inferences. Brown v. J.C. Penney Co., supra.

To recover for common law fraud, a party must establish: (1) a representation; (2) its falsity; (3) its materiality; (4) the speaker's knowledge of its falsity or ignorance of its truth; (5) the speaker's intent that the representation should be acted upon by the hearer in the manner reasonably contemplated; (6) the hearer's ignorance of the representation's falsity; (7) the hearer's reliance on the truth of the representation; (8) the hearer's right to rely thereon; and (9) the hearer's consequent and proximate injury. Webb v. Clark, 274 Or. 387, 391, 546 P.2d 1078 (1976). In addition, if the representation is a promise, there must be proof that Goodyear either did not intend to perform when it made the promise or that it made the promise with reckless disregard for whether it could...