Groseth Intern., Inc., Matter of

Citation442 N.W.2d 229
Decision Date20 March 1989
Docket NumberNos. 15944,15962,s. 15944
PartiesIn the Matter of the Termination of the Franchise Agreement Between GROSETH INTERNATIONAL, INC., and International Harvester. . Considered on Briefs
CourtSupreme Court of South Dakota

Celia Miner of Brady, Reade & Johnson, Yankton, for appellant, Groseth Intern., Inc.

Robert B. Anderson of May, Adam, Gerdes & Thompson, Pierre, for appellee, Intern. Harvester.

WUEST, Chief Justice.

Groseth International, Inc. (Groseth), a South Dakota corporation, appeals a circuit court order granting the petition of International Harvester (IH) which sought the termination of a franchise agreement between it and Groseth. We affirm the circuit court's decision.

Until 1985, Groseth was a franchised dealer of IH farm equipment located in Yankton, South Dakota. In addition to handling IH's line of farm equipment, Groseth was also a franchised dealer of IH trucks under a separate agreement. This "Dealer Sales/Service Agreement" was entered by the parties on October 21, 1976.

In 1984, Tenneco, Inc. (Tenneco) and its subsidiary, J.I. Case Company (Case), negotiated the purchase of IH's farm equipment division. IH became Navistar International and continued to manufacture and market medium- and heavy-duty trucks. Because Groseth was located in a "conflict area" in which both Case and IH dealerships existed, its farm equipment franchise was terminated. Groseth then brought suit against Tenneco and Case, claiming damages associated with losing the franchise. See Groseth Intern., Inc. v. Tenneco, Inc., 440 N.W.2d 276 (S.D.1989); Groseth Intern., Inc. v. Tenneco, Inc., 410 N.W.2d 159 (S.D.1987). The legal issues raised in the previous action are not related to this appeal.

This appeal stems from IH's seeking to terminate its truck franchise agreement with Groseth. IH sought termination of the franchise agreement because Groseth refused to comply with IH's requirements for a computerized communication system referred to as the "Dealer Communication Network" (DCN). The DCN was designed, in part, to eliminate manual processing of information and to provide more economical and efficient methods of communication between IH and its dealers and between the dealers themselves. Implementation of the DCN partially arose at the request of IH franchisees. As a part of the DCN, each dealer was required to obtain a computer terminal, a display screen and the necessary software. The computer hardware could be purchased through a company designated by IH or through any other private vendor offering equipment which was compatible with the DCN.

On September 19, 1983, IH sent to its dealers, including Groseth, a memorandum which described the requirements for the DCN. All dealers were expected to sign a DCN agreement and be ready to participate in the system within six months of a "roll out meeting." A representative of Groseth attended such a meeting in Sioux Falls, South Dakota on October 10, 1984. Although Groseth initially signed an agreement to become a part of the DCN, it subsequently failed to do so. As a result, IH notified Groseth on May 17, 1985, of its intent to terminate Groseth's franchise. IH cited as its reason for terminating the franchise Groseth's inability to communicate electronically with IH due to Groseth's failing to procure the necessary computer hardware and software. IH contended that Groseth's failure to do so breached certain provisions of the franchise agreement. Groseth had refused to comply with the DCN requirements because of the expense of the system and because of its pending litigation with Tenneco and Case regarding the farm equipment franchise.

IH initially notified Groseth that it would seek termination of the truck franchise if Groseth did not comply with the DCN requirements by October 8, 1985. This deadline was later extended to March 10, 1986. Written application to proceed with the termination of Groseth's truck franchise was made by IH to the South Dakota Department of Commerce and Regulation, Division of Highway Patrol, Office of Dealer Licensing (Department) on January 23, 1986. In its application to the Department, IH requested a hearing to determine whether Groseth's franchise could be terminated under the provisions of SDCL ch. 32-6A. 1 Such a hearing was held on March 11, 1986. A second hearing was held on July 8, 1986, because the recording apparatus used to make the record at the first hearing failed. Representing Groseth at this hearing were Clifford and Carol Groseth. They appeared without the assistance of legal counsel.

At the time of the second hearing, 727 of IH's 734 dealers had complied with the DCN requirements. Of the seven dealers who had not complied, three were new dealers who were taking steps toward meeting the requirements and three were dealers who were involved in bankruptcy proceedings. The seventh dealer, of course, was Groseth. The record further shows that the only function of which the DCN was capable at the time of the hearing was parts ordering. This task also could have been accomplished by telephonic or written orders. The other services for which the DCN was designed, such as truck ordering, warranty submissions, customer complaints and general communication between IH and the dealers as well as among the dealers themselves, were still in the developmental stages. This developmental process was expected to take an additional fifteen months.

The Department determined that Groseth had not breached the Dealer Sales/Service Agreement. Consequently, the Department dismissed IH's petition seeking to terminate Groseth's franchise, concluding that IH failed to show good cause for termination. IH appealed the Department's decision to the circuit court. Thereafter, Groseth filed a motion to dismiss IH's appeal, claiming that the circuit court lacked jurisdiction in the matter. Groseth contended that the circuit court never acquired jurisdiction to hear IH's appeal because service of the notice of appeal upon Groseth was defective. The circuit court denied Groseth's motion to dismiss. It also reversed the Department's decision, holding that Groseth, by refusing to become a part of the DCN, failed to substantially comply with the requirements imposed by the franchise agreement. The circuit court further held that the DCN requirements were both essential and reasonable. It concluded that Groseth's failure to comply with these requirements constituted an independent basis upon which good cause for termination had been shown.

Groseth now appeals the circuit court's decision to this court. It contends that the circuit court erred in refusing to dismiss IH's appeal for lack of jurisdiction. Groseth also claims that the circuit court erred in holding that IH had shown good cause to terminate Groseth's truck franchise. IH, having complied with the notice of review requirements contained in SDCL 15-26A-22, asks this court to review that portion of the circuit court's decision which held that IH waived the issue of anticipatory breach of the franchise agreement.

We disagree with Groseth's contention that the circuit court erred in refusing to dismiss IH's appeal. Groseth asserts that notice of appeal in this matter was improperly served. It claims that the requirements of SDCL 1-26-31 which regard serving of a notice of appeal are satisfied only by personal service or service by registered or certified mail. Although Groseth actually received within the statutorily prescribed time period IH's notice of appeal, it argues nonetheless that notice was served improperly because it arrived via ordinary, first class mail. 2

The statute upon which Groseth principally relies, SDCL 1-26-31, reads as follows:

An appeal shall be taken by serving a notice of appeal upon the adverse party and upon the agency which rendered the decision, and by filing the same, or a certified copy, with proof of such service in the office of the clerk of courts of the county in which the venue of the appeal is set, within thirty days after the agency served notice of the final decision or, if a rehearing is authorized by law and is requested, within thirty days after notice has been served of the decision thereon. Service required by this section may be performed by registered or certified mail and is complete when the material to be served is deposited with the United States postal service.

We note that only the last sentence of this statute pertains to serving a notice of appeal. The operative verb in said sentence is "may be performed." Ordinarily, the word "may" in a statute is given a permissive or discretionary meaning. It is not obligatory or mandatory as is the word "shall." 3 See Person v. Peterson, 296 N.W.2d 537 (S.D.1980); Tubbs v. Linn, 75 S.D. 566, 70 N.W.2d 372 (1955); 2A Sutherland Stat. Const. Sec. 57.03 at 643-44 (4th ed 1984); Sutton, Use of "Shall" in Statutes, 4 J. MARSHALL L.Q. 204 (1938), reprinted in 1A Sutherland Stat Const. 691 (4th ed. 1985). The clear language of SDCL 1-26-31 therefore indicates that proper service of a notice of appeal from an administrative proceeding is not limited to service by registered or certified mail. We believe that service of such notices of appeal also may be accomplished in the same manner by which a summons and complaint, as well as other pleadings, are served, i.e., personal service or service by ordinary, first class mail. See ...

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