Toulon v. Nagle

• Decision Date: 06 March 1975
• Docket Number: No. 270,270
• Parties: , 16 UCC Rep.Serv. 1120 Vernon E. TOULON, Appellant, v. John W. NAGLE, Respondent. (1974).
• Court: Wisconsin Supreme Court

Page 480

226 N.W.2d 480

67 Wis.2d 233, 16 UCC Rep.Serv. 1120

Vernon E. TOULON, Appellant, v. John W. NAGLE, Respondent.

No. 270 (1974).

Supreme Court of Wisconsin.

March 6, 1975.

LaFollette, Sinykin, Anderson & Abrahamson, Madison, for appellant; by Earl Munson, Jr., Madison, of counsel.

John M. Wiley, Wausau, for respondent.

CONNOR T. HANSEN, Justice.

Nagle Motors, Inc., was an automobile dealership established for the purpose of selling and servicing of Volkswagen automobiles. This case is a sequel to Nagle Motors v. Volkswagen N.C. Distributor (1971), 51 Wis.2d 413, 187 N.W.2d 374. In that case the dealer sought a permanent injunction to prevent cancellation of the dealer's franchise. Judgment was entered dismissing the complaint. The dealer appealed and the judgment was affirmed. On the instant appeal we only set forth those additional facts necessary to resolve the issues presented.

In 1961, appellant, Toulon, and respondent, Nagle, whom appellant had sought primarily as a financial contributor, attempted unsuccessfully to obtain a dealership franchise for the sale of Volkswagens in Middleton, Wisconsin. In 1964, however, Toulon was offered the opportunity to obtain the franchise, and he again sought Nagle as a financial contributor to the venture.

Toulon testified that pursuant to negotiations between the parties, it was agreed that a corporation would be formed with a capitalization of $50,000, $40,000 of which would be contributed by Nagle, and $10,000 by Toulon. The ownership was to be split 75--25 percent, respectively, as Toulon was to receive $2,500 worth of stock as a finder's fee and for setting up the dealership. Toulon further testified that he was to be given five years in which to purchase, at the original investment rate, 50 percent of the corporate stock, at a total cost to the appellant of $22,500. Nagle, in addition to supplying most of the capital, was to buy the land and construct a building which he would in turn lease to the corporation.

In November, 1964, the parties applied for the dealership, stating in their applications that Nagle was going to invest $40,000, and Toulon $10,000. The capitalization of the corporation was established on the basis of the amount required during the negotiations in 1961. A letter of intent was obtained from the Volkswagen distributor (hereinafter VW) in June, 1965, indicating that the parties could go ahead and set up the dealership. However, the letter raised the required capitalization to approximately $70,000. The letter also stated as a condition to the franchise that the ownership was to be split 75 and 25 percent to Nagle and Toulon, respectively.

In order to meet the increased capital requirement, Nagle agreed to loan $20,000 to the corporation on an installment note to be paid back out of the corporate profits.

The corporation was formed and, after some delays, the dealership opened on January 4, 1967. Nagle executed the loan and purchased his stock. Toulon, however, did not have the funds required for his investment, having spent what he intended to invest on his living expenses during the delays in getting the dealership open. When the actual franchise was received, the ownership requirements had been altered to 80--20 percent, and the capitalization requirement had been increased to approximately $79,000.

Robert W. Aagaard, Nagle's personal lawyer and the lawyer and secretary for the corporation, testified for Nagle, that he thought the ownership requirements had been altered by VW because Toulon was unable to make his contribution. He was unsure, however, of the exact reasons for the change. Toulon testified that it was changed at the request of Nagle who did not wish Toulon to have the benefit of the finder's fee until he was able to purchase half of the stock.

Again, because of the increased capitalization requirement and because Toulon had yet to purchase his stock, Nagle loaned the corporation an additional $5,000, on a demand note, on September 1, 1967.

Pressure was applied by VW in the summer of 1967, to get the equitable ownership of the corporation to the level specified in the franchise. Toulon attempted to purchase $5,000 worth of stock, but the first check was returned for insufficient funds. He was then able to borrow some money, drew a $1,000 advance on his salary from the corporation and purchased the $5,000 worth of stock. The salary draw was repaid to the corporation by making an additional loan, pledging the stock as security.

In October, 1967, the parties, in consultation with VW, agreed upon objectives for the year 1968. Included therein was a need to improve the cash position of the dealership. On January 4, 1968, Nagle, on a demand note, loaned the corporation an additional $35,500.

In December, 1967, Nagle proposed a written stock option agreement which was rejected by Toulon. Toulon testified that it differed from their agreement in that the proposed option required that the 50 percent be purchased from the corporation rather than from Nagle, costing, therefore, $35,000 rather than $17,500, in addition to his current holdings as the original agreement would have required. The proposed agreement was also conditional on Toulon remaining an employee of the corporation, unlike the original agreement.

Because the ownership provisions of the franchise agreement had not been met, and because Toulon and Nagle were in a dispute over several aspects of how the business was being run, VW did not issue a new franchise at the beginning of 1968. A meeting was held in late February, 1968, to try to resolve the differences. At this meeting, Toulon announced that he was prepared to purchase 50 percent of the business. A meeting was scheduled for March 2, 1968, to conduct the sale. On that day, however, after Nagle, lawyer Aagaard, and the corporation bookkeeper had spent the previous evening going over the cash accounts with regard to Toulon's withdrawals, Nagle fired Toulon.

On March 5, 1968, at a further meeting with the parties and VW, Toulon tendered an offer to purchase $5,000 worth of stock from the corporation and $12,500 for 150 shares of Nagle's stock, which would have given Toulon a 50 percent interest. Nagle summarily rejected the offer without reading it. Richard P. Whitehill, a friend of Toulon, testified that he was ready on that date to loan the money for the purchase and would have loaned up to $40,000.

It was undisputed that the corporation exceeded the sales goals set for it in the first year by VW an produced an after tax profit in 1967, of $14,548. Before the difficulties arose, it was anticipated by both parties that 1968 would prove to be a better year. Thomas McGann, the subsequent purchaser of the dealership from VW after VW canceled the franchise in 1969, testified as to the profitability of the dealership after being qualified as an expert by Toulon. Based on the assumption that the two parties would continue to cooperate and that the cash shown needed by the 1968 dealer objectives was available, McGann opined that they could have expected to make about $20,000 after taxes in 1968. McGann's own profit from the dealership in 1972 was 29.6 percent of his invested capital and he expected that to increase to 40 percent in the upcoming year.

The tax returns for the corporation for 1968, 1969, and 1970, showed a taxable gain of $3,105 in the first year and losses of $21,457 and $2,161 in the remaining two years. During these years the dealership was being run solely by Nagle who was totally inexperienced in running an auto dealership when the venture started. We note the 1969 income tax return, the year of the largest loss, shows a $30,000 deduction for 'PROFESSIONAL FEES' and a similar deduction in 1970 of approximately $10,000. Gross income increased in the first two years and was slightly less in the last year, a partial year.

The following issues are dispositive of this appeal:

APPEAL:

Were Nagle's postverdict motions timely made?

Was the jury's damage verdict excessive?

CROSS APPEAL:

Are the jury's answers to specified special verdict questions supported by sufficient credible evidence?

Should judgment be entered for Nagle notwithstanding the verdict?

We deem it essential to first consider the timeliness of Nagle's postverdict motions as that question is of threshold importance. We will then discuss the cross-appeal issues, and lastly the issue of whether the jury awarded excessive damages.

TIMELINESS OF NAGLE'S POSTVERDICT MOTIONS.

Toulon contends that Nagle's motions after verdict were not made and decided within the two-month time limit of sec. 270.49, Stats., and no written order extending the time for cause was made by the trial court.

The verdict was rendered on January 24, 1972. The record shows that the date for postverdict motions was ordered by the court to be April 7, 1972. The order was made in open court with both parties present. The cause for the extension of time was to permit transcription of the record and absence of the judge due to vacation.

On February 11, 1972, the parties were sent a notice by the clerk rescheduling the motions to April 21, 1972. The notice did not recite that the extension was by order of the court and it failed to state any cause for the extension. The transcript was completed on March 24, 1972, and Toulon's motion for judgment on the verdict was made on April 7, 1972, the date originally scheduled. Nagle's motions were not filed until April 11, 1972. Subsequent extensions were made by the court for cause after April 21, 1972, and are not contested by Toulon.

Under this sequence of events relating to the extension of time on the filing and determination of motions, the trial court ultimately granted Nagle's motion for a new trial on the issue of damages with an option to Toulon, pursuant to Powers v. Allstate Ins. Co. (1960), 10 Wis.2d 78, 102 N.W.2d 393, but denied the rest of Nagle's motions.

We find the decision of the trial...