Tri-County Retreading, Inc. v. Bandag Inc.

• Decision Date: 20 April 1993
• Docket Number: TRI-COUNTY,No. 62457,62457
• Citation: 851 S.W.2d 780
• Parties: RETREADING, INC., a corporation, Plaintiff/Appellant, v. BANDAG, INCORPORATED, an Iowa corporation, and Andrew Sisler, Defendants/Respondents.
• Court: Missouri Court of Appeals

Page 780

851 S.W.2d 780

TRI-COUNTY RETREADING, INC., a corporation, Plaintiff/Appellant, v. BANDAG, INCORPORATED, an Iowa corporation, and Andrew Sisler, Defendants/Respondents.

No. 62457.

Missouri Court of Appeals,

Eastern District,

Division Three.

April 20, 1993.

Kim Roger Moore, Perryville, for plaintiff/appellant.

Michael A. Bowen, Milwaukee, WI, Thomas Blumeyer Weaver, St. Louis, for defendants/respondents.

GARY M. GAERTNER, Presiding Judge.

Appellant, Tri-County Retreading, Inc., appeals from an entry of summary judgment on a contract action in favor of respondents, Bandag, Incorporated and Andrew Sisler. We affirm.

The parties entered into a Franchise Agreement on October 3, 1983, whereby appellant received the right to utilize a tire retreading method for truck and bus tires developed and promoted by respondent, Bandag. Pursuant to the agreement, respondents had access to regular reports regarding appellant's financial status. Respondents received two financial statements from appellant in 1989: one dated June 30, 1989; the other dated October 19, 1989. These statements indicated that appellant's liabilities exceeded its assets. Indeed, appellant admits the financial statements established a net operating loss for the year 1988 of over $41,000.00. In addition, it was concluded that during the first six months of 1989, appellant was operating at a loss of over $51,000.00.

Besides being insolvent and operating at a loss, appellant also admitted to being behind in payments to respondent, Bandag, and other vendors. Appellant concedes there were times when its payments to Bandag were as much as 120 days past due.

In July, 1989, Andrew Sisler, a representative for Bandag, spoke with appellant regarding a renewal of the Franchise Agreement as the previous contract was nearing its expiration. On September 6, 1989, Bandag's credit department approved appellant for a franchise renewal. However, on October 9th of the same year, Mr. Sisler informed appellant that because of Bandag's concern regarding appellant's financial condition, the franchise would be terminated. Appellant received formal notification of the franchise termination in a letter dated October 31, 1989, with such termination effective 30 days from the date of the notice. Appellant was offered the opportunity to stave off the termination by curing its default and paying Bandag over $72,000.00 within that 30 days. Appellant was unable to do so.

Shortly before October 25th, appellant placed an order to purchase rubber from Bandag. On the 25th, appellant received a phone call from Bandag's credit department approving the order. However, on October 26th, appellant was contacted by another Bandag representative who informed appellant that the order had been refused. Because of this refusal, appellant was forced to turn away customers as it did not have the necessary rubber for retreading.

In addition to the facts above, appellant submitted affidavits in opposition to respondents' motion for summary judgment from which the following facts were adduced: Randy Politte, a Tri-County employee at the time of the franchise termination, testified in his affidavit that Paul Long from Tires & Treads, a Bandag franchise in competition with appellant, called him on October 9 and 10, 1989, and offered him a job at Tires & Treads. Mr. Long indicated the offer was forthcoming as he had heard from respondent, Andrew Sisler, that appellant was losing its franchise.

Jerry McKalip, also a Tri-County employee at the time of the franchise termination, testified in his affidavit that on October 9, 1989, Paul Long and Jim Carroll of Tires & Treads approached him and asked if he was going to "need" a job.

Michael Parks from Ryder Trucks, a customer of appellant, testified in his affidavit that on or about October 10, 1989, respondent, Andrew Sisler, indicated to him "Tri- County Retreading may no longer be a franchise of Bandag," and Larry Fortney, president and co-owner of Tri-County, "did not know at that time that his franchise may be terminated." Mr. Parks also testified in his affidavit that around October 16, 1989, respondent, Andrew Sisler, called him and told him "Tri-County may be losing their (sic) franchise and would be unable to do [Ryder's] capping." Based on those conversations with Mr. Sisler, Mr. Parks stopped doing business with appellant and "started using F & J" for his recapping work.

Tom Reinert from Federal Leasing, a customer of appellant, testified in his deposition that in early- to mid-October, 1989, Andrew Sisler visited him and told him that "they're [Tri-County] in big financial problems," and that "any rubber that I had involved with Tri-County Retreading could be in a locked door situation, anything that I had there I need to get out of there before, you know, they shut down." Mr. Reinert testified that he interpreted the statements made by Mr. Sisler to mean that Tri-County was going bankrupt. When he asked Mr. Sisler about it, Mr. Sisler said, "I just advise you to get your tires." Mr. Reinert also testified in his deposition that appellant's competitors approached him indicating that appellant was having financial problems.

Appellant filed suit in the Circuit Court of Jefferson County on January 16, 1990, alleging breach of contract, breach of duty of good faith, defamation, and tortious interference. Respondents filed a motion for summary judgment on January 30, 1992. Said motion was called and heard on May 28, 1992. On June 15, 1992, the court issued its Findings of Facts and Conclusions of Law sustaining the motion. This appeal ensued.

In reviewing an entry of summary judgment, we view the record in the light most favorable to the party against whom summary judgment was entered. Meyer v. Enoch, 807 S.W.2d 156, 158 (Mo.App., E.D.1991). We must determine whether any genuine issue of material fact exists which could require a trial. Id. We will affirm the judgment if it is sustainable as a matter of law under any theory. Id.

Appellant first contends the trial court erred in finding that Bandag was not required to give 60 days' notice of the termination of the Franchise Agreement. Appellant refers us to Section XI(c)(1) of the Franchise Agreement which requires a 60 day notice by Bandag in the event of a contract termination. However, Bandag argues that the Franchise Agreement was terminated pursuant to Section XI(c)(5) of the Agreement which required only a 30-day notice of termination.

The two relevant provisions of the contract state as follows:

(c) BANDAG shall have the option and right to terminate this Agreement, effective upon giving notice to FRANCHISEE:

1. In the event FRANCHISEE defaults in the performance of any agreement or undertaking in this Agreement and such default is not remedied to BANDAG'S satisfaction within sixty (60) days after written demand for correction, provided that in the case of continuing, repetitive, or subsequent default by FRANCHISEE of the same provision (s) for which prior written demand for correction has been given, BANDAG shall have the right to give notice of termination without demand for correction.

* * * * * *

5. In the event FRANCHISEE, upon thirty (30) days written notice, shall fail to duly pay all amounts due for materials, equipment, apparatus, and supplies sold to FRANCHISEE by BANDAG.

Bandag opted to terminate the Agreement pursuant to Section XI(c)(5) requiring only a 30-day notification. Bandag sent correspondence to appellant and, according to the Agreement, gave appellant the opportunity to avoid cancellation of the contract by providing payment in full of all outstanding balances. However, as appellant was unable to do so, Bandag terminated the contract.

We find all of Bandag's actions acceptable under the terms of the Franchise Agreement. We read subsection (c)(1) to address termination of the Agreement based on a general default not covered by a specific provision under subsection (c). Whereas, subsection (c)(5) specifically addresses defaults due to failure to pay amounts due and owing to Bandag and requires only a 30-day notice of termination. It is a well-accepted rule in Missouri that where one contract clause is general and inclusive, and another is more limited and specific, the more specific clause acts to modify and pro tanto nullify the more general clause. In re Marriage of Buchmiller, 566 S.W.2d 256, 259 (Mo.App., St.L.D.1978); Surface v. Ranger Insurance Company, 526 S.W.2d 44, 48 (Mo.App., Spfld.D.1975). Point denied.

Appellant's next point alleges error in the granting of summary judgment on the breach of duty of good faith and fair dealing claim raised by appellant. Appellant asserts that because of the parties' relationship under the Franchise Agreement, these duties were owed by Bandag to appellant. As such, argues appellant, there was a genuine issue of fact as to Bandag's lack of honesty in fact in failing to deliver the rubber ordered by appellant and in soliciting appellant's customers away from appellant.

We first note that Section XX of the Franchise Agreement established that the Agreement was to be "governed by and interpreted under the laws of the State of Iowa." Missouri recognizes that contracting parties may choose the state whose law will govern the interpretation of their contractual rights and duties. Nakao v. Nakao, 602 S.W.2d 223, 226 (Mo.App., S.D.1980). So long as application of the chosen law is not contrary to a fundamental policy of Missouri, we will honor the parties' choice of law provision. State ex rel. Geil v. Corcoran, 623 S.W.2d 555, 556 (Mo.App., E.D.1981); Comerio v. Beatrice Foods Co., 595 F.Supp. 918, 921 (E.D.Mo.1984).

Our research into Iowa law for cases sustaining claims regarding a breach of the implied covenant of good faith and fair dealing in franchise agreements has left us empty-handed. There is Iowa caselaw holding that an employer must have acted in good faith in the discharge of an at-will...