Nagle Motors, Inc. v. Volkswagen North Central Distributor, Inc.

• Decision Date: 07 June 1971
• Docket Number: No. 37,37
• Citation: 187 N.W.2d 374,51 Wis.2d 413
• Parties: NAGLE MOTORS, INC., Appellant, v. VOLKSWAGEN NORTH CENTRAL DISTRIBUTOR, INC., Respondent.
• Court: Wisconsin Supreme Court

Page 374

187 N.W.2d 374

51 Wis.2d 413

NAGLE MOTORS, INC., Appellant, v. VOLKSWAGEN NORTH CENTRAL DISTRIBUTOR, INC., Respondent.

No. 37.

Supreme Court of Wisconsin.

June 7, 1971.

In 1961 John W. Nagle and Vernon Toulon entered negotiations with Import Motors of Chicago, a wholesale distributor of Volkswagen automobiles, parts, and accessories in six midwestern states, including Wisconsin, for the purpose of securing a Volkswagen dealership franchise. Those negotiations were unsuccessful, but efforts were renewed in 1965. On June 28, 1965, Import Motors issued a letter of intent to grant Nagle and Toulon a. Volkswagen dealership franchise. The letter provided that a corporation would be formed known as Nagle-Toulon, Inc., with Nagle as president, Toulon as vice president and general manager, and Robert Aagaard as secretary. The proposed dealership agreement, which was annexed to the letter, provided for capitalization of approximately $70,000. Nagle was to own 75 percent of the stock in the corporation, and Toulon was to own the other 25 percent. Subsequently, the corporation known as Nagle-Toulon, Inc., was organized under the laws of the State of Wisconsin.

On January 3, 1967, Import Motors was succeeded by Volkswagen North Central Distributor, Inc., a wholly owned subsidiary corporation of Volkswagen of America, organized under Illinois law, as the midwest distributor of Volkswagen automobiles, parts, and accessories. On January 4, 1967, North Central and Nagle-Toulon, Inc., entered into an agreement giving Nagle-Toulon, Inc., a Volkswagen franchise in Middleton, Wisconsin. All negotiations for the agreement had been with Import Motors. The agreement, which was to be effective until December 31, 1967, provided that Nagle and Toulon were to be the sole beneficial owners of the dealership, with Nagle holding an 80 percent beneficial interest and Toulon holding the remaining 20 percent. The agreement provided that Nagle, Toulon, and Aagaard, and only those individuals, would exercise the executive and managerial functions of the dealer. There was to be no change in the beneficial ownership or executive power or responsibility without the prior written consent of North Central. The agreement also provided that the owners' capital in the dealership would be $79,850.

On the same day, January 4, 1967, Nagle-Toulon, Inc., opened for business at its sales and service facility in Middleton. The original capitalization plans of Nagle and Toulon called for the issuance of $50,000 worth of common stock in Nagle-Toulon, Inc., with Nagle to own $40,000 worth and Toulon to own $10,000 worth. In addition, Nagle was to put in $20,000 in cash and receive an owner's note. When business commenced, Nagle had put in his share, but Toulon had put in nothing. At the grand opening, Nagle was informed that the dealer capitalization requirements had been raised by about $9,000. North Central representatives agreed that the money could be retained from earnings over a period of time to build up the capital. Nagle testified that Toulon told the distributor representatives he had not yet purchased any stock, and that the representatives agreed to give him two months to purchase his $10,000 worth. The report of the distributor's representative for that day does not indicate that such a grace period was given, and Robert Downs, the vice president and general manager of North Central denied knowledge that a grace period had been granted.

In June of 1967, when Downs learned that Toulon did not own the required 20 percent of the stock, he called Nagle and Toulon to Chicago for a meeting. Downs insisted that the situation be corrected and that other shortcomings of the dealer also be remedied.

The 80--20 ownership requirements have never been met, although Toulon did purchase $5,000 (of the required $10,000) worth of dealer stock in October of 1967.

The dealership agreement was not renewed in 1968 because of Toulon's failure to obtain 20 percent ownership. However, new dealer objectives were agreed upon for 1968, and the dealer continued to operate under extension provisions in the 1967 agreement.

During 1967 and early 1968, there was a personal dispute between Nagle and Toulon as to how much authority Toulon was to have in managing the business. Downs tried often to reconcile this dispute. Then, on March 2, 1968, Nagle fired Toulon, allegedly for dishonesty in dealing with corporate funds and for poor management. Attempts by Downs to get the two men back together failed. In June of 1968, the name of the dealer was changed to Nagle Motors, Inc., to reflect Toulon's departure, although this name change was not approved by the distributor.

On Jnauary 27, 1969, North Central served Nagle Motors with a notice that its dealership would be terminated effective March 31, 1969. A copy of the termination notice was forwarded to Commissioner James Karns of the Department of Transportation, Division of Motor Vehicles.

On March 11, 1969, Nagle Motors, Inc., commenced the instant action against Volkswagen North Central Distributor, Inc., for a permanent injunction to prevent cancellation of its dealer franchise. The parties stipulated that during the pendency of the action in the trial court they would continue the existing contractual relationship. Trial without a jury was held, and on December 30, 1969, a memorandum decision was rendered in which the court found that termination had not been unfair, 'without due regard to the equities of said dealer and without just provocation,' within the meaning of sec. 218.01(3) (a) 17, Stats. The dealer's post-verdict motions were denied, and judgment was entered dismissing the complaint. The dealer appealed from the judgment.

Aagaard, Nichol & Wyngaard, Madison, for appellant.

William F. Nelson, Stafford, Rosenbaum, Rieser & Hansen, Madison, for respondent; David N. McBride, Ross, Hardies, O'Keefe, Babcock, McDugald & Parsons, Chicago, Ill., of counsel.

Wheeler, Van Sickle, Day & Anderson, Madison, amicus curiae.

HEFFERNAN, Justice.

Although Nagle Motors is the plaintiff in this equitable action that seeks to restrain the distributor from cancelling the dealer's franchise, the appellant (the dealer) asserts that, under the Wisconsin statutes, the respondent (the distributor) is precluded from defending itself in the Wisconsin courts because it has not secured a certifiate of authority pursuant to the Wisconsin corporation law.

The dealer takes the position that secs. 180.847(1) and 218.01(2)(bd) 3, Stats., construed together, exclude the distributor from the courts.

Sec. 180.847(1), Stats., provides:

'No foreign corporation transacting business in this state without a certificate of authority, if a certificate of authority is required under this chapter, shall be permitted to maintain or defend a civil action or special proceeding in any court of this state, until such corporation has obtained a certificate of authority * * *.' (Emphasis supplied.)

Sec. 218.01(2)(bd) 3, Stats., provides:

'* * * The obtaining of a license under s. 218.01 (Motor Vehicle Dealers Law) shall conclusively establish that such * * * distributor * * * is doing business in this state and shall subject the licensee to all provisions of the Wisconsin statutes regulating * * * distributors.' (Emphasis supplied.)

The argument of the dealer is simply that, since the distributor has a license under sec. 218.01, Stats., it is conclusively established that it is 'doing business,' and that 'doing business,' as the term is used in sec. 218.01(2)(bd) 3, is synonymous with 'transacting business' under sec. 180.847(1), and, hence, the distributor is precluded by the operation of the latter statute from defending itself in the Wisconsin courts.

A visual inspection of the statutes makes it apparent that the appellant's simplistic logic does not establish the conclusion urged. Sec. 180.847(1), Stats., penalizes a corporation by withholding the privilege of using Wisconsin courts only in the event 'a certificate of authority is required under this chapter.' (Emphasis supplied.) No showing has been made in the trial court that the Wisconsin Business Corporation Law 'requires' that North Central be so certified by the Secretary of State. It is thus apparent that the term, 'transacting business,' as used in sec. 180.847(1) is subject to other qualifications and conditions set forth in other portions of ch. 180.

We therefore cannot assume, even though we had no other clarifying guidelines, that the terms, 'transacting business' and 'doing business,' are to be read interchangeably in these differing contexts.

Moreover, the two statutes have entirely different purposes.

The annotations to sec. 180.847(1), Stats., 22 Wis.Stats. Annot. 298, make it clear that the purpose of that statute was to facilitate the collection of a registration fee. It is apparent that this portion of sec. 180.847 no longer has any function in respect to the acquisition of jurisdiction over a foreign corporation, since the jurisdictional aspects are treated in secs. 180.847(4) and 262.06(5).

Sec. 218.01(2)(bd) 3, Stats., is, however, clearly a jurisdictional statute. On its face, it subjects a licensee 'to all provisions of the Wisconsin statutes regulating * * * distributors.' The bill-drafting history provides parallel proof of the purpose of the statute. The original draft of the statute, as appears in the bill jacket, provides:

'* * * for purposes of doing business in this state (the distributor) shall submit to the jurisdiction of the (motor vehicle) department as to all the provisions of the Wisconsin statutes regulating * * * distributors.'

Subsequent draft revisions indicate that the meaning was broadened to include not only the motor vehicle division's jurisdiction, but the jurisdiction of all Wisconsin statutes regulating the distribution of automobiles.

The purpose of sec. 218.01(2)(bd) 3, Stats., was to provide a jurisdictional basis for...