Leibel v. Raynor Mfg. Co.
| Decision Date | 23 June 1978 |
| Citation | 571 S.W.2d 640 |
| Parties | 24 UCC Rep.Serv. 40 James C. LEIBEL, Appellant, v. RAYNOR MANUFACTURING COMPANY, Appellee. |
| Court | Kentucky Court of Appeals |
Todd S. Horstmeyer, Lexington, for appellant.
Charles G. Wylie, Lexington, for appellee.
Before HOWERTON, LESTER and WINTERSHEIMER, JJ.
This is an appeal from a summary judgment dismissing Count I of appellant's three-count complaint. The dismissal of Count I was deemed to be a final, appealable judgment. With this we agree and accept jurisdiction.
The essential facts are that the parties entered into an oral agreement whereby appellant was to have an exclusive dealer-distributorship for appellee's garage doors in a territory extending for a 50-mile radius from Lexington, Kentucky. The agreement was entered into on or about March 1, 1974. The appellee agreed to sell and deliver to the appellant its garage doors, operators and parts at the factory distributor price, and the appellant agreed to sell, install and service Raynor products exclusively, thereby establishing a relationship of dealer-distributor and manufacturer-supplier. There is no real dispute concerning the nature of the relationship.
As a result of the agreement, the appellant borrowed substantial sums of money in order to make certain capital expenditures, purchase an inventory, and to provide working capital for starting the business, including the rental of storage and office space, employment of personnel, and the purchase of a service truck, tools and equipment.
After two years of what appears to have been decreasing sales of Raynor products in the Lexington area, appellee notified the appellant on or about June 30, 1976, that as of that date the relationship was terminated. Appellant was also notified that Helton Overhead Door Sales had been established by the appellee as the new dealer-distributor for the area, and that the appellant would be required to order all future doors operators and parts from the new dealer-distributor.
Appellee's motion for a summary judgment was based on the ground that the agreement was for an indefinite duration, and that it could be terminated at will by either party. The appellant resisted the motion on the theory that he was entitled to reasonable notice of appellee's intention to terminate the agreement.
On April 20, 1977, the circuit court granted the summary judgment and entered its memorandum opinion, setting forth its four reasons for the judgment. Appellant had relied in part upon the provisions regarding sales in the Uniform Commercial Code, and specifically subsections (2) and (3) of KRS 355.2-309. The trial court concluded that the Code, as it applies to the sale of goods, was not intended to apply to the situation in this case. Secondly, the court concluded that even if the Uniform Commercial Code did apply, KRS 355.2-309(2), (3) means merely that actual notice of the termination must be given. Written notice had been given. The court concluded that the additional requirement of "reasonable notification" was not necessary. The opinion next concluded that although there are no Kentucky cases directly on point, Peters Branch of International Shoe Company v. Jones, 247 Ky. 193, 56 S.W.2d 994 (1933), holds that in an exclusive franchise agreement where there was no agreement as to the duration of the contract, either party could terminate the agreement at will, and there was no mention of notice. Finally, the court concluded that if it required reasonable notification for termination of the agreement, it would be making a contract for the parties by stating a time for the duration of the contract.
We disagree with the conclusions of the trial court and hold that reasonable notification is required in order to terminate an on-going oral agreement for the sale of goods in a relationship of manufacturer-supplier and dealer-distributor or franchisee. The summary judgment must therefore be set aside and a determination must be made on the factual issue of whether or not the notification of termination given in this case was reasonable under the circumstances.
Appellant argues that this contract is now controlled by Article II of the Uniform Commercial Code. The opinion of the trial court provided only that, "It is the opinion of the court that the Uniform Commercial Code applies to the sale of goods and is not intended to apply to the type of situation we have in this case." The rule for application of Article II in Kentucky was stated in Buttorff v. United Electronic Laboratories, Inc., Ky., 459 S.W.2d 581 (1970). According to the opinion in Buttorff, supra, we are to look to the real nature of the agreement, the real purpose, and what the parties really intended. It appears that the case Sub judice can be distinguished from Buttorff, supra, on its facts. The relationship in Buttorff, supra, was found to be a contract for personal services, not for the sale of goods or merchandise. Buttorff was actually a commissioned salesman for United Electronics Laboratories' cameras and related equipment.
We must now consider the provisions of the Uniform Commercial Code in order to determine whether or not the article on sales is applicable to the situation at bar. This question has not yet been decided by a Kentucky court.
Article II of the Uniform Commercial Code applies to transactions involving goods and merchandise. "A contract between an automobile manufacturer and an automobile dealer is a contract of sale since it is apparent that its over all purpose and object is to effect the sale of the automobiles manufactured by the manufacturer, and the fact that it may speak in terms of franchises does not change its true character." 1 Anderson, U.C.C. § 2-101:5, p. 201 (2nd ed.) "When a manufacturer sells its product to the public through a local dealer, the transaction is a sale, and the application of the Code is not avoided by describing the relationship as a 'sales distribution' plan." Id., at 202. In relation to the same section of the Code, Anderson also cites a Pennsylvania case which held that, "A dealership contract for the sale of automobile parts is a contract for the sale of goods, even though the contract declares that it is a personal service contract." Cum.Supp., Anderson, U.C.C., p. 174 (2nd ed.) Anderson also cites a California case holding that, "Where a supplier...
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