Walker v. Ford Motor Company

• Decision Date: 17 April 1965
• Docket Number: Civ. A. No. 1779.
• Citation: 241 F. Supp. 526
• Parties: E. R. WALKER, Sr., and E. R. Walker, Jr., partners, d/b/a Cocke County Motor Company, and E. R. Walker, Jr., successor to the partnership, d/b/a Cocke County Motor Company, Plaintiffs, v. FORD MOTOR COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Tennessee

241 F. Supp. 526

E. R. WALKER, Sr., and E. R. Walker, Jr., partners, d/b/a Cocke County Motor Company, and E. R. Walker, Jr., successor to the partnership, d/b/a Cocke County Motor Company, Plaintiffs, v. FORD MOTOR COMPANY, Defendant.

Civ. A. No. 1779.

United States District Court E. D. Tennessee, Northeastern Division.

April 17, 1965.

COPYRIGHT MATERIAL OMITTED

Myers & Myers, Newport, Tenn., Fred Myers, Newport, Tenn., of counsel, for plaintiffs.

Bass, Berry & Sims, Nashville, Tenn., Cecil Sims, Nashville, Tenn., of counsel, for defendant.

NEESE, District Judge.

This is an action for damages for the alleged wrongful cancellation by the defendant of the plaintiffs' automobile dealership franchise, 15 U.S.C. §§ 1221-1225, and for damages for breach of the franchise contract, 28 U.S.C. § 1332. It was commenced as a jury trial; because of the illness of a juror when no alternate was available, however, the plaintiffs withdrew their demand for a jury and, with the concurrence of the defendant, the action was submitted to the Court for adjudication on the transcript of the testimony and briefs. At the time of the procedural change, the Court had under advisement the defendant's motion for a directed verdict as to the alleged wrongful cancellation of the franchise involved.

For about thirty years prior to 1947, Mr. E. R. Walker, Sr. was the franchised dealer for the defendant's products in Newport and Cocke County, Tennessee. In the latter year, Mr. Walker's son and co-plaintiff, Mr. E. R. Walker, Jr., joined him as a partner in the agency. The franchise of the partnership was renewed by an agreement under date of February 1, 1955, which said contract forms the basis of this litigation.

The defendant advised the partnership by letter of March 18, 1957 that its performance was unsatisfactory and that the defendant was not offering the partnership the new standard franchise agreement which was being offered to most of its dealers. This notification was followed, on September 3, 1957, by notice from the defendant that the franchise was being terminated under the terms and provisions of the aforesaid 1955 agreement. The Walkers were advised that they might avail themselves of certain procedures to have the cancellation organizationally reviewed. The partnership availed itself of these procedures, and the effective date of the cancellation was stayed during the defendant's review.

After the review, and under date of March 24, 1958, the plaintiffs were advised that the defendant had cancelled their franchise, effective on June 28, 1958. Thereupon, on May 23, 1958, the plaintiffs instituted proceedings with a state administrative board, under Tennessee statutes, asserting in their pleadings that the defendant had theretofore cancelled the franchise of the plaintiffs. There was a stay of execution of the cancellation pending the administrative proceedings before the state board. After the hiatus brought about by the state proceedings,¹ on May 4, 1961, the defendant notified the plaintiffs that its prior termination of their franchise as of June 28, 1958 "* * * is now effective and final. * * *" Less than three years thereafter, but almost six years after the terminal date set forth by the defendant, the plaintiffs instituted this action. The defendant pleaded the statute of limitations of three years for judicial actions under the Dealer's Day in Court Act. 15 U.S.C. § 1223.

The plaintiffs contend that the statute aforesaid was tolled by the further agreement of Mr. D. C. Burdette, district sales manager for the defendant in the area which includes Cocke County, Tennessee. It is insisted that Mr. Burdette agreed with the plaintiffs that the termination of the franchise agreement as of June 28, 1958 was extended until the conclusion of the state proceedings aforementioned. "* * * There can be no controversy but that a written contract may be modified or amended, after it is made, by the express agreement of the parties to it either in writing or by parol, or by the acts of the parties which evince a meeting of their minds in agreement to modify its terms upon any particular point. * * *." Hotchner v. Neon Products, C. A.6th (1947), 163 F.2d 672, 676 1. The plaintiffs contend further that they were prevented from bringing an action such as this under the federal statutes until the resolution of the controversy between the parties under Tennessee law.

In pertinent part, paragraph E of the 1955 agreement between the parties provides that the "* * * Dealer acknowledges notice that no one except certain of defendant's officials named therein, not including any district sales manager is authorized to execute this agreement or any agreement relating to the subject matter hereof on behalf of the Company, or in any manner to enlarge, vary or modify its terms * * * and they only by an instrument in writing. * * *" The plaintiff Mr. Walker, Jr. conceded that he knew at the time of the purported agreement with Mr. Burdette, that Mr. Burdette was not authorized to enlarge, vary or modify the terms of the 1955 agreement on behalf of the defendant.

One who deals with an agent knowing that he is circumscribed in his authority, and that the agent's act transcends his powers, cannot hold the principal. Arnold v. Locomotive Engineers, etc., C. A. Tenn. (1946), 30 Tenn.App. 166, 172 4, 204 S.W.2d 191; and, a principal is not bound by its agent's act beyond the limitations of the agent's authority, where a third person, relying on such act, actually knows, or should know, of such limitations. Rule v. Brotherhood's Relief, etc., C.A.Tenn. (1952), 36 Tenn.App. 20, 30 5, 251 S.W.2d 309. Mr. Walker, Jr. was aware, in addition, that the purported enlargement of the contract of the parties by Mr. Burdette, being verbal, was contrary to the provisions of the contract which required any such modification to be by an instrument in writing.

The plaintiffs also contend that the defendant is estopped to deny Mr. Burdette's unauthorized verbal agreement by reasons of the fact that the defendant continued to do business with them on a manufacturer-dealer basis subsequent to June 28, 1958, and that this constituted a ratification of Mr. Burdette's act by the defendant. However, it is provided in sec. 27 of the 1955 contract, inter alia, that "* * * In the event either party has any business relations with the other party after termination of this agreement, such relations shall not be construed as a renewal of this agreement or as a waiver of such termination. * *" There was no evidence presented herein tending...