Hall GMC, Inc. v. Crane Carrier Co., 10286

• Decision Date: 17 March 1983
• Docket Number: No. 10286,10286
• Parties: HALL GMC, INC., Plaintiff, Appellee and Cross-Appellant, v. CRANE CARRIER COMPANY, Defendant, Appellant and Cross-Appellee. Civ.
• Court: North Dakota Supreme Court

Page 54

332 N.W.2d 54

HALL GMC, INC., Plaintiff, Appellee and Cross-Appellant, v. CRANE CARRIER COMPANY, Defendant, Appellant and Cross-Appellee.

Civ. No. 10286.

Supreme Court of North Dakota.

March 17, 1983.

Tenneson, Serkland, Lundberg, Erickson & Marcil, and Hanson, Crockett & Anderson, Fargo, for plaintiff, appellee and cross-appellant; argued by Steven K. Aakre, Fargo.

Pancratz, Yuill, Wold, Johnson & Feder, Fargo, for defendant, appellant and cross-appellee; argued by J. Philip Johnson, Fargo.

SAND, Justice.

The defendant, Crane Carrier Company (Crane), appealed from a district court judgment entered on 2 August 1982 in favor of the plaintiff, Hall GMC, Inc. (Hall), in the amount of $52,223.97, together with costs and disbursements in the amount of $264.70, and Hall cross-appealed.

Hall is a truck and parts dealer, with its office located in Fargo, North Dakota, and Crane is a truck and parts manufacturer with its principal office and plant located in Tulsa, Oklahoma. Prior to 13 October 1976 Hall sold, among other items, parts supplied by Crane. On 13 October 1976 Hall, through its president, Gerald M. Hall, entered into a distributor agreement with Crane, through its vice president of sales, Fred M. Burns, whereby Hall agreed to maintain and sell an inventory of Crane vehicles and parts and to maintain service facilities for the repair of Crane vehicles. The agreement permitted termination of the distributorship by four methods, including mutual consent of the parties at any time, or by Hall upon not less than sixty days' prior written notice to Crane.

The issues raised in this appeal and cross-appeal involve the rights and obligations of Hall and Crane resulting from the facts and circumstances leading up to and surrounding Hall's termination of the distributor agreement.

In the fall of 1978 Hall's inventory included three Crane refuse trucks. In October 1978 Hall submitted a written order to Crane for four concrete mixers for delivery in March 1979. The order form and distributor agreement did not provide for cancellation of an order without Crane's consent. Gerald Hall testified that the order was made, in part, because of assurances by Thomas Shumway, regional manager for Crane, that he would continue to assist Hall in transferring and selling its unsold inventory of Crane vehicles.

In January 1979 Hall, through its sales manager, John Kuehl, sent a letter to Crane requesting cancellation of the order for the four concrete mixers, and Shumway contacted Kuehl to discuss the order. Shumway testified that he told Kuehl that the cancellation could not be accepted. Kuehl testified that he recalled Shumway discussing reinstating the order and was left with the impression that the order was not in effect. In any event, an inter-office memo prepared by Crane employees reflected that a change order was entered on 12 January 1979 cancelling the order and that Crane management reinstated the order on 19 January 1979.

In mid-June 1979 the four concrete mixers were ready for delivery and were invoiced to Hall. However, Hall indicated to Crane that it did not want to accept the concrete mixers because it believed the order had been cancelled.

In July 1979 Gerald Hall, met with Shumway in Fargo and a compromise was discussed whereby Hall agreed to return to Crane the earlier-mentioned three unsold refuse trucks still in its inventory in exchange for credit, and Hall agreed to accept the four concrete mixers. The difference between the credit received by Hall for the three refuse trucks and the cost of the four concrete mixers was $44,891.00. The agreement was subject to approval by Shumway's supervisor; however, credit memos reflecting a credit to Hall's account for the refuse trucks were issued by Crane in July 1979. Gerald Hall and James Wade, vice president of Crane, formally agreed to the exchange in September 1979. In October 1979 Hall arranged to have the refuse trucks returned to Crane.

Gerald Hall testified that, at the time of this agreement, he did not intend to terminate the Crane distributorship; however, he began to consider termination later in September because of the downward trend in the economy and because Shumway had been transferred to another region and his replacement was not as helpful in transferring unsold inventory.

In October 1979 Gerald Hall met with his attorney and discussed Hall's legal rights regarding termination of the Crane distributorship. Gerald Hall's attorney advised him, in a written opinion, that, if he decided to terminate the distributorship, the provisions of the distributor agreement and North Dakota Century Code Ch. 51-07 permitted him to return "current" year vehicles to Crane for one hundred percent of the net cost. Hall's attorney recommended that, in order to avoid a question of the meaning of "current," he should exchange 1979 model vehicles for 1980 model vehicles.

In November 1979 Gerald Hall asked Wade to change the Manufacturer's Statement of Origin ¹ (MSO) for each of the four concrete mixers from 1979 models to 1980 models. Gerald Hall testified that he wanted the model year changed because the sale of 1980 models would be easier and because he would have a better chance to have Crane repurchase the 1980 models if he chose to terminate the distributorship.

On 14 December 1979 Crane issued "corrected" MSO's designating the concrete mixers as 1980 models. This correction was a paper transaction and did not involve any physical changes to the vehicles. On 19 December 1979 Hall issued a check for $44,891.00 payable to Crane for the difference between the credit received on the three refuse trucks and the cost of the four concrete mixers.

Gerald Hall testified that in late January 1980 he decided to terminate the Hall distributorship of Crane vehicles, and he sent a letter of "mutual termination" dated 22 January 1980 to Wade. Hall's letter included a copy of his attorney's written opinion discussed earlier herein. Crane, through its general counsel, responded with a letter dated 20 February 1980 declining to consent to Hall's "mutual termination." Hall responded with a letter dated 25 February 1980 notifying Crane of its unilateral termination of the distributor agreement, specifically citing NDCC Sec. 51-07-01. Hall's letter stated that it was returning the four mixers which were still in Crane's possession. Hall's letter further stated that the total sum of $174,529.00, representing one hundred percent of the net cost of the four concrete mixers, was due from Crane and that upon receipt of Crane's check Hall would return the MSO's for the four concrete mixers to Crane.

Counsel for Crane informed Hall that, notwithstanding North Dakota law and the distributor agreement, Crane did not believe it was under an obligation to repurchase the four mixer trucks and refused to pay Hall the $174,529.00.

Hall initiated an action against Crane alleging that it paid Crane $174,529.00 for the four concrete mixers with money borrowed from General Motors Acceptance Corporation (GMAC) and that, pursuant to the distributor agreement and NDCC Ch. 51-07, Crane owed and refused to pay Hall one hundred percent of the net cost ($174,529.00) for the four "current" model concrete mixers.

On 20 November 1980 the court ordered both Crane and Hall to exert their best efforts to sell the four concrete mixers. All four concrete mixers were separately sold. As each concrete mixer was sold, the cost of each mixer was paid to GMAC to reduce Hall's loan balance. ²

The trial court awarded Hall damages in the amount of $52,223.97 for the interest paid by Hall on its inventory financing of the four concrete mixers with GMAC for the period beginning 60 days after the letter of mutual termination dated 22 January 1980. The trial court also awarded Hall the proceeds, including interest, from the sale of the mixers held in the trust account by counsel for Crane (see fn. 2); however, those proceeds were set off against the award of damages to Hall. Judgment was entered on 2 August 1982. Crane appealed from the judgment and Hall cross-appealed.

The resolution of several of the issues involved in this appeal requires us to initially note our statutory provisions concerning the cancellation or discontinuance of a distributorship. When a distributor agreement is cancelled or discontinued, NDCC Sec. 51-07-01 ³ requires the manufacturer (Crane) to pay the retailer (Hall) "a sum equal to one hundred percent of the net cost of all current unused complete ... trucks," and, "upon payment of [that sum] ... the title to such ... trucks ... shall pass to the manufacturer." This statutory provision essentially requires a manufacturer to repurchase from the retailer the "current" model trucks upon termination of a distributorship.

CRANE'S APPEAL

Crane contended the trial court erred in finding that Hall did not act fraudulently in terminating the distributor agreement.

Our statutory definition of fraud includes actual fraud and constructive fraud. NDCC Sec. 9-03-07. Actual fraud includes the suppression of that which is true by one having knowledge or belief of the fact; a promise made without any intention of performing it; or any other act fitted to deceive. NDCC Sec. 9-03-08. Constructive fraud includes actions done without fraudulent intent but which are misleading. NDCC Sec. 9-03-09.

Crane contended that Hall's actions in exchanging the three refuse trucks for four concrete mixers and requesting correction of the MSO's to reflect that the concrete mixers were 1980 models and not 1979 models, constituted actual or constructive fraud because those actions were done with no intention by Hall to continue the distributorship and, instead, were done to intentionally deceive or mislead Crane so that, upon termination, Hall could receive one hundred percent of the net cost of the current model trucks. ⁴

The existence of actual fraud is treated as a question of fact to be decided by the...