Joe Dwyer, Inc. v. Jaguar Cars, Inc.

• Decision Date: 31 May 1988
• Docket Number: Docket No. 89762
• Parties: JOE DWYER, INC., a Michigan corporation, Plaintiff-Appellee Cross-Appellant, v. JAGUAR CARS, INC., a Delaware corporation, previously known as British Leyland Motors, Inc., Defendant-Appellant Cross-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 311

423 N.W.2d 311

167 Mich.App. 672

JOE DWYER, INC., a Michigan corporation, Plaintiff-Appellee Cross-Appellant, v. JAGUAR CARS, INC., a Delaware corporation, previously known

as British Leyland Motors, Inc.,

Defendant-Appellant Cross-Appellee.

Docket No. 89762.

Court of Appeals of Michigan.

Submitted Jan. 12, 1988.

Decided April 5, 1988.

Released for Publication May 31, 1988.

Barnett, Knight, Preston, Falvay, Drolet & Freeman by Bruce Knight, Bloomfield Hills, for plaintiff-appellee cross-appellant.

Vandeveer, Garzia, Tonkin, Kerr, Heaphy, Moore, Sills & Poling, P.C. by John J. Lynch, Birmingham, and Robert D. Brignall, Detroit, for defendant-appellant cross-appellee.

Before J.H. GILLIS, P.J., and WEAVER and ALLEN, ^* JJ.

PER CURIAM.

Defendant appeals by leave granted from the trial court's order denying defendant's motion for summary disposition and granting plaintiff's motion for summary disposition because it ruled that M.C.L. Sec. 445.1571; M.S.A. Sec. 19.856(31) applied to the parties' dealer agreement which was entered into before the effective date of that statute but terminated after its effective date. Plaintiff cross-appeals. We reverse the trial court's order denying defendant's motion for summary disposition and granting plaintiff's motion. We affirm the trial court's decision denying plaintiff's cross-motion for summary disposition as to damages.

Plaintiff and defendant have entered into dealer franchise agreements since 1960 whereby plaintiff was a new car dealer for defendant's Triumph automobiles. These agreements were renewed annually. In June of 1980, defendant notified plaintiff that, after December, 1981, Triumphs would no longer be manufactured for sale in the United States because sales were poor. Plaintiff and defendant's last franchise agreement extended from January 1, 1981, to December 31, 1981. Plaintiff claims that the agreement was formally executed on July 14, 1981. Paragraph 36 of that agreement provided:

"Upon termination of this Agreement by either party, or upon its expiration without renewal the Company will repurchase from the Dealer at the net price paid by the Dealer, less a deduction for any damage and less any rebates or allowances:

"(a) All new and unused vehicles of the current or preceding model year bought from the Company;

"(b) All new spare parts (see Sec. 4) and special tools which were (i) purchased by the Dealer from the Company within the preceding twelve months, or (ii) included on any parts stocking list recommended to the Dealer by the Company;

"(c) Signs carrying the names of Vehicle Lines, on the basis of a reasonable adjustment to the original price reflecting the period of use and current condition.

"Proof may be required that any such property is owned by the Dealer and is free of liens or encumbrances, and matters may be settled directly with any lender holding a security interest in such property."

Defendant claimed that on August 27, 1981, its president wrote to all United States dealers, including plaintiff, and offered them two options: (1) to discontinue relations with defendant, after which defendant would repurchase all Triumph automobiles and all nonobsolete parts as well as inventory or (2) to continue as authorized parts and service dealers for Triumph for certain other incentives. Defendant claims that plaintiff never responded to this offer.

Even so, plaintiff continued to sell parts for and to service Triumphs. On October 12, 1982, plaintiff wrote defendant asking to terminate its relationship with defendant. On December 3, 1982, defendant's counsel wrote to plaintiff and informed plaintiff that defendant accepted its termination notice, effective December 12, 1982, and agreed to repurchase parts pursuant to paragraph 36 of the 1981 dealership agreement and to repurchase its "inventory of stocking parts at current dealer prices less a 40% handling charge." Defendant's counsel's letter further informed plaintiff that M.C.L. Sec. 445.1571; M.S.A. Sec. 19.856(31), which was passed after the 1981 dealership agreement became effective, did not apply because its application would alter the substantive provisions of that agreement.

M.C.L. Sec. 445.1571; M.S.A. Sec. 19.856(31) (hereinafter Sec. 11) was given immediate effect by the Legislature on July 19, 1981, and provided:

"(1) Upon the termination, cancellation, nonrenewal, or discontinuance of any dealer agreement, the new motor vehicle dealer shall be allowed fair and reasonable compensation by the manufacturer or distributor for the following:

"(a) New current model year motor vehicle inventory purchased from the manufacturer or distributor, which has not been materially altered, substantially damaged, or driven for more than 300 miles.

"(b) Supplies and parts inventory purchased from the manufacturer or distributor and listed in the manufacturer's or distributor's current parts catalog.

"(c) Equipment, furnishings, and signs purchased from the manufacturer or distributor.

"(d) Special tools purchased from the manufacturer or distributor within 3 years of the date of termination, cancellation, nonrenewal, or discontinuance.

"(2) Upon the termination, cancellation, nonrenewal, or discontinuance of a dealer agreement by the manufacturer or distributor, the manufacturer or distributor shall also pay to the new motor vehicle dealer a sum equal to the current, fair rental value of his or her established place of business for a period of 1 year from the effective date of termination, cancellation, nonrenewal, or discontinuance, or the remainder of the lease, whichever is less. However, the payment required by this subsection shall not apply to any termination, cancellation, nonrenewal, or discontinuance made pursuant to section 10(c)."

Section 11 was amended effective November 1, 1983.

On November 10, 1983, plaintiff filed suit against defendant, alleging that M.C.L. Sec. 445.1571; M.S.A. Sec. 19.856(31) applied. Defendant moved for summary disposition, alleging that plaintiff had failed to state a cause of action upon which relief could be granted because Sec. 11 did not apply to agreements entered into before July 19, 1981. Moreover, defendant alleged that Sec. 11 did not apply to plaintiff's decision to service Triumphs and to sell Triumph parts in 1982 because there was no written contract between plaintiff and defendant concerning the sale of new motor vehicles. See M.C.L. Sec. 445.1562; M.S.A. Sec. 19.856(22). Plaintiff then moved for summary disposition claiming that Sec. 11 applied to its 1981 agreement with defendant. Plaintiff further claimed that the Franchise Investment Law, M.C.L. Sec. 445.1501 et seq.; M.S.A. Sec. 19.854(1) et seq., applied to its 1982 sales of Triumph parts and servicing of Triumphs. Plaintiff contends that defendant failed to comply with the Franchise Investment Law because it failed to file notice of its intention to offer for sale a parts and service franchise. M.C.L. Sec. 445.1507a(1); M.S.A. Sec. 19.854(7a)(1). In the alternative, plaintiff claimed that its 1981 franchise agreement was renewed by the parties' conduct in 1982 and, therefore, Sec. 11 applied. Defendant responded that the Franchise Investment Law did not apply because plaintiff had not raised the issue in its pleadings or moved to amend its complaint.

On September 17, 1985, plaintiff moved to amend its complaint to allege a violation of the Franchise Investment Law. The trial court issued its order and opinion on October 10, 1985. The court held that Sec. 11 did apply to the parties' 1981 agreement. The trial court declined to address plaintiff's allegation that the Franchise Investment Law applied because plaintiff had not raised that issue in its pleadings and, therefore, that issue was not properly before the court. Finally, the court denied plaintiff's motion for summary disposition as to damages because there was a genuine issue of material fact as to the amount of damages due. On January 31, 1986, plaintiff's motion to amend its complaint was granted.

At the time the trial court heard the parties' motions for summary disposition, there were conflicting United States District Court decisions on the issue of whether Sec. 11 applied to agreements entered into before its effective date. In Dale Baker Oldsmobile, Inc. v. Fiat Motors of North America, No. G83-1045 CA 1 (W.D.Mich., Nov. 2, 1984), Judge Douglas Hillman held that Sec. 11 did not apply to dealer agreements entered into before its effective date but terminated thereafter; however, in Eastern Sport Car Sales, Inc. v. Fiat Motors of North America, No. 84-4738 (E.D.Mich., Jan. 4, 1985) (order granting motion for summary judgment), Judge Robert DeMascio disagreed and applied Sec. 11 to contracts executed before its effective date.

Because the federal court decisions conflicted, the trial court followed this Court's decision in Anderson's Vehicle Sales, Inc. v. OMC-Lincoln, 93 Mich.App. 404, 287 N.W.2d 247 (1979). In Anderson's, the plaintiff and the defendant had a year-to-year dealer agreement which was terminable upon thirty days written notice. The defendant sent the plaintiff timely notice that its dealership agreement would be terminated on August 5, 1978. On July 11, 1978, the Legislature enacted a dealer agreement statute which required sixty days written notice and good cause for valid termination. The trial court held that the statute, which was effective immediately, did not apply to agreements entered into prior to its effective date. This Court reversed. This Court held that there was no retroactivity problem because the statute prohibited termination of the dealer agreement, not notice of termination, and, because the termination occurred after the statute became effective, the statute applied. Moreover, this Court held that the words of the statute (i.e., "[n]otwithstanding the terms, provisions, or conditions of a dealer agreement") along with the language giving the statute...