Unionvale Sales, Ltd. v. World-Wide Volkswagen Corp.

• Decision Date: 03 June 1969
• Docket Number: No. 67 Civ. 157.,67 Civ. 157.
• Citation: 299 F. Supp. 1365
• Parties: UNIONVALE SALES LTD., Plaintiff, v. WORLD-WIDE VOLKSWAGEN CORP., Volkswagen of America, Inc., Affiliated Financial Corp. and Arthur Stanton, Defendants.
• Court: U.S. District Court — Southern District of New York

299 F. Supp. 1365

UNIONVALE SALES LTD., Plaintiff, v. WORLD-WIDE VOLKSWAGEN CORP., Volkswagen of America, Inc., Affiliated Financial Corp. and Arthur Stanton, Defendants.

No. 67 Civ. 157.

United States District Court S. D. New York.

June 3, 1969.

Wien, Lane, Klein & Malkin, New York City, for plaintiff; James M. Malloy, of counsel.

Mervin Rosenman, New York City, for defendant World-Wide Volkswagen Corp.

MEMORANDUM

POLLACK, District Judge.

The defendant World-Wide Volkswagen Corp. (the "defendant" hereafter), moves for summary judgment in its favor dismissing Count One of the complaint under Rule 56, Fed.R.Civ.P.

Plaintiff, an ex-Volkswagen dealer, sues the moving defendant, its wholesale distributor, for damages claimed for alleged wrongful termination of the dealership.^* The suit is brought under the Dealer's Day in Court Act, enacted in 1956, 15 U.S.C. §§ 1221-1225. To sustain this statutory claim, the plaintiff must show that the defendant wrongfully terminated the plaintiff's franchise as an automobile dealer or otherwise failed to perform the provisions of the franchise in good faith. The term "good faith" is expressly defined in the statute, 15 U.S.C. § 1221(e), as "the duty of each party * * * to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party * * *."

The conduct complained of herein is the defendant's purported demand that plaintiff remove its dealership facilities from La Grangeville, 12 miles outside of Poughkeepsie, to a presumably more suitable location closer to the Poughkeepsie market under alleged threat to put a second dealer in the Poughkeepsie area. The matter of the projected relocation consumed more than a year of discussion, planning and ineffectual proposals; and defendant became increasingly impatient with plaintiff's fruitless attempts to make realistic arrangements to accomplish the desired end.

It was in these circumstances that defendant discovered in the course of a routine car check that, in breach of its trust obligation under the arrangements for financing car sales, the plaintiff had failed to turn over to the defendant's finance company between $39,000 and $46,000 representing the proceeds of approximately 26 cars sold which, under the financing agreement, plaintiff had received in trust. The arrangement was that the finance company purchased the cars for the dealer from the wholesale distributor and the dealer held these cars "in trust" for the finance company until sold and was obligated to hold the proceeds of sales "in trust" and to turn over therefrom to the finance company the wholesale price of the cars sold plus the financing charges.

On learning of the breach, the defendant, allegedly without investigating further or waiting for explanations, wired the plaintiff that "Due to your being out of trust to the extent of approximately forty thousand dollars ($40,000), thereby impairing the financial standing of dealer, pursuant to Article 12(1) (h) of your dealer agreement the undersigned terminates your dealer agreement for cause effective immediately."

The plaintiff contends that defendant terminated its dealership unfairly and inequitably as part of its...