Mazda Motors of America, Inc. v. Southwestern Motors, Inc.

• Decision Date: 04 January 1979
• Docket Number: No. 51,51
• Citation: 296 N.C. 357,250 S.E.2d 250
• Court: North Carolina Supreme Court
• Parties: MAZDA MOTORS OF AMERICA, INC. v. SOUTHWESTERN MOTORS, INC., d/b/a Mazda of Raleigh.

Page 250

250 S.E.2d 250

296 N.C. 357

MAZDA MOTORS OF AMERICA, INC. v. SOUTHWESTERN MOTORS, INC., d/b/a Mazda of Raleigh.

No. 51.

Supreme Court of North Carolina.

Jan. 4, 1979.

Poyner, Geraghty, Hartsfield & Townsend by John J. Geraghty, David W. Long and Cecil W. Harrison, Jr., Raleigh, for plaintiff-appellant.

Newsom, Graham, Strayhorn, Hedrick, Murray, Bryson & Kennon by Josiah S. Murray, III, and Lewis A. Cheek, Durham, for defendant-appellee.

HUSKINS, Justice:

Plaintiff presents two questions which determine this appeal: (1) Does the 10 July 1974 mutual termination agreement between plaintiff and defendant effectively terminate the automobile dealership between the parties? (2) Does defendant owe plaintiff on account the sum of $8,795.09?

Resolution of the first question requires consideration of G.S. 20-305(6) which provides:

"It shall be unlawful for any manufacturer, factory branch, distributor, or distributor branch, or any field representative, officer, agent, or any representative whatsoever of any of them:

(6) Notwithstanding the terms of any franchise agreement to terminate, cancel, or refuse to renew the franchise of any dealer, without good cause, and unless (i) the dealer and the Commissioner have received written notice of the franchisor's intentions at least 60 days prior to the effective date of such termination, cancellation, or the expiration date of the franchise, setting forth the specific grounds for such action, and (ii) the Commissioner has determined, if requested in writing by the dealer within such 60-day period, and after a hearing on the matter, that there is good cause for the termination, cancellation, or nonrenewal of the franchise, except in the event of fraud, insolvency, closed doors, or failure to function in the ordinary course of business, 15 days' notice shall suffice; provided that in any case where a petition is made to the Commissioner for a determination as to good cause for the termination, cancellation, or nonrenewal of a franchise, the franchise in question shall continue in effect pending the Commissioner's decision . . . ."

Plaintiff contends this statute is not applicable to the voluntary mutual termination agreement under attack by defendant in this case.

Defendant contends the 10 July 1974 mutual termination agreement did not effectively terminate the dealership agreement between the parties. Defendant relies on G.S. 20-305(6) which, "notwithstanding the terms of any franchise agreement," makes it unlawful for a manufacturer to "terminate, cancel, or refuse to renew the franchise of any dealer without good cause" and without giving sixty days' written notice of intention to terminate. Subsection (6) entitles dealers who have received the statutory termination notice to make a written request within the sixty-day notice period for a hearing before the Commissioner of Motor Vehicles on the question whether there was good cause for the termination. In the event of "fraud, insolvency, closed doors, or failure to function in the ordinary course of business," the notice period is reduced to fifteen days. Defendant argues that the notice and hearing provisions of G.S. 20-305(6) are applicable even when manufacturer and dealer enter into a mutual agreement to terminate the franchise. According to defendant, the mutual termination agreement of 10 July 1974 could not lawfully terminate the earlier franchise agreement between plaintiff and defendant on account of plaintiff's failure to give the required statutory notice of termination to both defendant And the Commissioner of Motor Vehicles.

Do the notice and hearing provisions of G.S. 20-305(6) apply to a mutual agreement between dealer and manufacturer to terminate an earlier franchise agreement? In order to answer this question we must interpret the language of G.S. 20-305(6).

The intent of the legislature controls the interpretation of a statute. In re Banks, 295 N.C. 236, 244 S.E.2d 386 (1978); 12 N.C. Index 3d, Statutes, § 5.1. If the language of a statute is free from ambiguity and expresses a single, definite, and sensible meaning, judicial interpretation is unnecessary and the plain meaning of the statute controls. Food House, Inc. v. Coble, Sec. of Revenue, 289 N.C. 123, 221 S.E.2d 297 (1976); Commissioners v. Henderson, 163 N.C. 114, 79 S.E. 442 (1913). Conversely, "where a literal interpretation of the language of a statute will lead to absurd results, or contravene the manifest purpose of the Legislature, as otherwise expressed, the reason and purpose of the law shall control and the strict letter thereof shall be disregarded." State v. Barksdale, 181 N.C. 621, 107 S.E. 505 (1921). See also In re Hardy, 294 N.C. 90, 240 S.E.2d 367 (1978).

Due consideration of the language of G.S. 20-305(6) leads us to conclude that its provisions are free from ambiguity, apply Solely to unilateral franchise terminations by the manufacturer, and do not extend to mutual agreements between manufacturer and dealer to terminate a franchise. The language of G.S. 20-305(6) is expressly couched in terms of the unilateral conduct of the franchisor. The franchisor cannot terminate, cancel, or refuse to renew a franchise unless it has good cause for taking such action and unless it gives written notice to dealer and Commissioner of Motor Vehicles of its "intentions" at least sixty days prior to the date of termination. Moreover, upon being notified of "franchisor's intentions" dealer has the option of requesting a hearing before the Commissioner of Motor Vehicles to determine whether there is good cause for the termination. In effect, the express language of G.S. 20-305(6) imposes substantial curbs on the unilateral actions of a manufacturer with respect to franchise termination. The express language does not cover voluntary mutual termination agreements between manufacturer and dealer.

Such a reading of subsection (6) does not lead to absurd results nor does it contravene the manifest purpose of the statute. Literally read, the language adopted by the General Assembly permits an automobile dealer to voluntarily forego the substantial protection of notice and hearing by signing a mutual termination agreement. Rather than enter into such an agreement, a dealer may require the manufacturer to terminate the franchise in accordance with the provisions of G.S. 20-305(6). Such result does not frustrate the protection afforded a dealer by subsection (6); rather, it represents a legislative determination that a dealer may voluntarily forego the safeguards against franchise termination if in his judgment he deems them unnecessary. It is not for us to question the wisdom of this determination. Commissioners v. Henderson, supra. The meaning of the law is plain and we must apply it as written. In re Poindexter's Estate, 221 N.C. 246, 20 S.E.2d 49 (1942). We note parenthetically that a dealer who enters into a mutual termination agreement with a manufacturer still benefits from the protection offered by the common law defense of economic duress and the specific provisions of G.S. 20-305(2) which make it unlawful for a manufacturer to coerce or attempt to coerce a dealer to enter into an agreement with such manufacturer by threatening to cancel any franchise existing between manufacturer and dealer.

In light of the foregoing conclusions, we neither reach nor decide the constitutional question argued in the briefs. See State v. Blackwell, 246 N.C. 642, 99 S.E.2d 867 (1957); State v. Lueders, 214 N.C. 558, 200 S.E. 22 (1938).

Defendant next contends that it executed the mutual termination agreement of 10 July 1974 under duress and coercion imposed by plaintiff. Defendant alleged, in pertinent part, that plaintiff...