Buono Sales, Inc. v. Chrysler Motors Corp.

363 F.2d 43

• Court: Court of Appeals for the Third Circuit
• Decided: July 14, 1966
• Docket: No. 15523
• Status: Published

Opinions

OPINION

Before STALEY, Chief Judge, and McLAUGHLIN, KALODNER, HASTIE, FORMAN, GANEY, SMITH and FREEDMAN, Circuit Judges.

McLAUGHLIN, Circuit Judge.

This is one of nine suits by New Jersey DeSoto passenger automobile direct dealers for Chrysler Motors Corporation, a corporation of the State of Delaware with its principal place of business in Michigan, against said Chrysler Motors Corporation and Chrysler Corporation, also a corporation of the State of Delaware with its principal place of business in Michigan. The said nine plaintiffs are all New Jersey corporations with their principal offices in said state. It was agreed in the case that the separate entities of the defendant corporations be disregarded and that the acts of both be deemed the acts of Chrysler Corporation. This resulted in the dropping of the second, third and fifth causes of action. The parties also stipulated in the district court and on this appeal that, because all nine cases are similar in law and fact, the determination in the present appeal will apply to the other eight appeals. The district judge, sitting without a jury, decided in favor of the defendants and plaintiff appeals.

Plaintiff has been selling Chrysler products since approximately 1935. Since 1953 it has had a direct dealer agreement with Chrysler with respect to DeSoto and Plymouth passenger automobiles. On or about November 18, 1960 Chrysler discontinued its production of DeSoto passenger automobiles. In its notification to plaintiff of that course it made no pretension that it was acting in accordance with the agreement. A reading of the contract readily reveals the reason for this. It is completely a self-serving Chrysler product. It was drawn by Chrysler and on several occasions revised by that concern. It is what was the admittedly uniform Chrysler, DeSoto-Plymouth agency contract used by Chrysler with its over sixteen hundred such dealers. It takes elaborate precaution to protect Chrysler in the event of any contemplated exigency. It is very clear from the contract itself that the thought that sometime in the future Chrysler might abandon the manufacture of DeSoto passenger automobiles was plainly not within Chrysler’s thinking when it entered into its dealer agreements with Buono and the others. Had it been intended that the contract include Chrysler’s right to close out its DeSoto business if and when it chose to do so, nothing could have been easier than to say so. It is beyond belief that Chrysler endeavored to provide for that contingency by subterfuge. Chrysler was unquestionably the dominating party to the agreement with the dealers taking whatever arrangement Chrysler chose to give them. Deceiving its dealers from the beginning as to what would have been an all important element of the agreement, hardly fits that situation or indeed into the basic picture of an outstanding American industry. As appears from the record this matter arises wholly from a radical corporate determination, for whatever the reason, to cut its production losses on DeSoto immediately. The inevitable collateral consequences of that move, the damage claims of its dealers, etc., if then bothered about at all, undoubtedly were regarded as the lesser evil which could be handled later.

The defense has done all that could be accomplished in meticulously dredging out of the contract every stray bit of language that can possibly lend some support to the hastily assumed, unwarranted position of the defendant. Taken as a whole, which is the way the contract admittedly must be construed, or even isolating fragments of it as is attempted, there is not one word in the document to suggest that the manufacturer reserved the right to stop making DeSoto automobiles for any reason or no reason. The intention of the parties is set out succinctly in the first introductory paragraph which reads:

‘‘The purpose of the relationship established by this agreement is to provide a means for the sale and service of De Soto and Plymouth passenger cars and De Soto and Plymouth car parts and accessories in a manner that will best serve the interests of the retail customer and be of benefit to DIRECT DEALER and DE SOTO-PLYMOUTH.”

The same purpose is stated in Paragraph 5 which makes the agreement “ * * * the entire agreement betiveen the parties relating to the purchase by DIRECT DEALER of new De Soto and Plymouth passenger cars and De Soto and Plymouth passenger car parts and accessories from DE SOTO-PLYMOUTH for resale, and it cancels and supersedes all earlier agreements, written or oral, between DE SOTO-PLYMOUTH or Chrysler Corporation and DIRECT DEALER relating to the purchase by DIRECT DEALER of De Soto and Plymouth passenger cars and De Soto and Plymouth passenger car parts and accessories.” (Emphasis supplied).

The last subparagraph of Paragraph 5 categorically notes that “this agreement does not have an expiration date.” (Emphasis supplied). Chrysler is therefore given the right to amend the agreement as it “deems advisable”, “provided that DeSoto-Plymouth makes the same amendment in DeSoto-Plymouth Direct Dealer Agreements generally. The amendment will be set out in a notice signed by the President or Vice-President of Chrysler Motors Corporation. Thirty-five (35) days after delivery of the Notice to the Direct Dealer this agreement will be deemed to be amended in the manner and to the extent set forth in the notice.” No attempt was ever made to amend the notice by following the procedure called for by Paragraph 5 or otherwise.

Paragraph 5 also makes it an agreement term that “DeSoto-Plymouth may terminate it individually only as provided for in Paragraph 21.” (Emphasis supplied). The latter, regarding this, reads:

“DE SOTO-PLYMOUTH may terminate this agreement on not less than ninety (90) days’ written notice on (1) the failure of DIRECT DEALER to perform fully any of DIRECT DEALER’S undertakings and obligations in Paragraphs 7 through 10 and Paragraph 14 of this agreement, or (2) the death of any person listed in Paragraph 2 of this agreement, other than the death of DIRECT DEALER if he is an individual, or the failure of any such person so listed to continue his active and substantial participation in the management of DIRECT DEALER’S organization, or (3) a misrepresentation of or change in any of the ownership interests listed in Paragraph 3 of this agreement resulting in a transfer of majority control or interest in the capital stock or partnership interest of DIRECT DEALER, unless DE SOTO-PLYMOUTH has given written approval to such change, or (4), a disagreement, dispute or controversy between or among principals, partners, managers, officers or stockholders of DIRECT DEALER that, in the opinion of DE SOTO-PLYMOUTH, may affect adversely the operation, management or business of DIRECT DEALER, or (5) the conviction of DIRECT DEALER, or a partner, principal stockholder, officer or manager of DIRECT DEALER of any crime that, in DE SOTO-PLYMOUTH’S opinion, may affect adversely the operation or business of DIRECT DEALER or the name, good will, or reputation of DE SOTO-PLYMOUTH, De Soto or Plymouth products or DIRECT DEALER.”

None of the listed situations, because of which DeSoto-Plymouth could terminate its contract with the nine plaintiff dealers, ever occurred and there is no claim to the contrary. Despite makeweight quibbling on behalf of the appel-lee again there is an utter absence of any mysterious or ambiguous wordage respecting Chrysler’s right to end the agreement. Actions or conduct, slight or grievous, on the part of the dealer to which Chrysler took exception gave the latter the right to terminate. Confessedly none of the dealers was or could be so charged.

Continuing the futile search to find a valid pretext for Chrysler we are told that Paragraph 10 takes care of this. The part of a sentence relied on is “ * * nor will anything in this agreement obligate DE SOTO-PLYMOUTH to deliver to DIRECT DEALER any particular number of new De Soto or Plymouth passenger cars.” This it is contended “insulates appellee from liability for discontinuance of DeSoto production whether appellee’s action is characterized either as contract modification or contract termination, depending upon the dealer affected.” And in, the same paragraph it is further urged that the phrase “De Soto-Plymouth will not be liable for delay or non delivery of products ordered * * * ” exonerated the manufacturer from liability to the dealers “even in the absence of the rights of discontinuance and amendment” and “ * * * regardless of the existence of good faith or other contractual rights.” The proposition is put forth as supported by F. H. McClintock Co. v. Truxell Sales & Service, 297 Mich. 284, 297 N.W. 493 (1941). That decision, for whatever it may be worth, has no application to the admitted facts before us.

The dispositive answer to the above assertion that Paragraph 10 gives De-Soto-Plymouth the right to permanently stop DeSoto production is found right in Paragraph 10 and in the identical sentence from which the above quotations were taken out of context. Paragraph 10 is captioned “Orders”. It provides the method by which the dealer orders the cars and for the strong control granted Chrysler over its deliveries. The paragraph reads:

“DE SOTO-PLYMOUTH agrees to ship De Soto and Plymouth passenger cars and De Soto and Plymouth passenger car parts and accessories to DIRECT DEALER only on DIRECT DEALER’S order.

“DIRECT DEALER agrees to submit to DE SOTO-PLYMOUTH current orders for De Soto and Plymouth passenger cars and De Soto and Plymouth passenger car parts and accessories, and estimates of DIRECT DEALER’S future passenger car requirements at such times and for such periods as DÉ SOTO-PLYMOUTH reasonably may request for the mutual benefit of dealers and DE SOTO-PLYMOUTH. DIRECT DEALER will submit such orders and estimates on forms DE SOTO-PLYMOUTH provides. All orders are subject to acceptance by DE SOTO-PLYMOUTH, which may be in whole or in part. DE SOTO-PLYMOUTH will use its best efforts to fill accepted orders for De Soto and Plymouth passenger cars and De Soto and Plymouth passenger car parts and accessories; however, DE SOTO-PLYMOUTH will not be liable for delay or nondelivery of products ordered nor will anything in this agreement obligate DE SOTO-PLYMOUTH to deliver to DIRECT DEALER any particular number of new De Soto or Plymouth passenger cars.”

It is an understatement to say that Paragraph 10 simply outlines the running order and delivery part of the DeSoto-Plymouth dealer relationship. It is pretty much under the domination of the manufacturer with respect to the number of cars it allots a dealer but Paragraph 10 cannot be tricked up into presenting any right to Chrysler to end its making of DeSoto passenger cars. It contains the rules for a functioning business and though strongly hedged around nevertheless DeSoto-Plymouth pledges as part of the continuing association with its dealer that it “ * * * will use its best efforts to fill accepted orders for De Soto and Plymouth passenger cars and DeSoto and Plymouth accessories; * (Emphasis supplied.) Appellee is expressly and properly reluctant to resort to this argument which possesses no merit whatsoever.

Paragraph 28 of the agreement is mentioned as another ground for Chrysler ending the DeSoto passenger car. That is titled “Inability to Perform”. It reads:

“In addition to any other exemption from liability specifically provided for in this agreement, neither DIRECT DEALER nor DE SOTO-PLYMOUTH will be liable for failure to perform its part of this agreement when the failure is due to fire, flood, strikes or other labor disputes, accident, war, riot, insurrection, acts of government, governmental regulation or other circumstances beyond the control of the parties.”

This time the clause “ * * * other circumstances beyond the control of the parties” is removed from the paragraph and is construed to mean that if Chrysler for business circumstances as it claims or any other circumstances thoroughly foreign to the title, text and purport of 28 decides to finish with its manufacture of DeSotos it may do so. The catch-all language relied upon is limited to the kind of events specifically named. It will not serve as a convenient umbrella to cover the entirely unrelated good or bad business conditions and practice alleged. This contract by its terms is to be under Michigan law. The latter follows the general rule mentioned. Hamilton v. Stephans, 240 Mich. 228, 215 N.W. 321 (1927); Quisle v. Brezner, 212 Mich. 254, 180 N.W. 467 (1920); Park Building Co. v. George P. Yost Fur Co., 208 Mich. 349, 175 N.W. 431 (1919).

Finally there is Paragraph 20 upon which the district court principally depended in deciding in favor of the defendant. The title of 20 and its text reads:

“20.

CHANGE OF MODELS, PARTS AND ACCESSORIES DECLARED OBSOLETE OR DISCONTINUED

“DE SOTO-PLYMOUTH at any time may discontinue any models, lines or body styles and may revise, change or modify their construction or classification. All orders will refer to models, lines and body styles in production at the time DE SOTO-PLYMOUTH receives the orders unless DIRECT DEALER specifies otherwise. DE SOTO-PLYMOUTH at any time may declare obsolete or discontinue any or all parts, accessories and other merchandise. DE SOTO-PLYMOUTH may act under this Paragraph 20 without notice and, except as set forth in Paragraph 13 of this agreement, without any obligation to DIRECT DEALER by reason of DIRECT DEALER’S previous purchases.”

The defense view is that the words in the text “models”, “lines”, “body styles” individually or together mean the De-Soto passenger automobile. This is especially emphasized with respect to the word “lines”. The title of 20, its opening sentence and every word of the balance of the paragraph are the strongest possible refutation of this far fetched assumption. In the district court it was finally accepted that “model” meant year of make and that “body style” referred to a particular kind of automobile as a two-door or a four-door, hardtop or convertible. The defense seemingly on the theory that the word “line” needed testimony to clarify it called the president of Chrysler Corporation as a witness. He gave evidence as follows:

Q. The fifteen page of this progress report of November 26 [1958], marked P-7 for identification, Mr. Quinn would you read the paragraph under “De Soto,” one paragraph? A. The De Soto product plan is progressing within the framework outlined in the previous report. The names of the two model lines have been decided, Fireflite for the low line, Adventurer for the high line. The product planning letter has been issued, which details all the major specifications for the revised De Soto line.

Q. And the Fireflight De Soto was considered the low line of the De Soto passenger car, isn’t that so? A. Yes, sir.

Q. And the Adventurer was considered the high line? A. Yes, sir.

Q. But they were both considered lines within the De Soto passenger car framework? A. That’s what the bulletin says.”

There was really no need of the above testimony. The contract is plenary proof that “line” or “lines” in that paper, as the Chrysler witness had to verify, merely designated a type or types of DeSoto passenger car or automobile. The latter designation is repeated thirty times in the agreement. It is the generic term for the Chrysler DeSoto automobile. The word “line” or “lines” does not appear in the agreement at all as meaning the DeSoto passenger automobile complex. It was precisely used to designate types of DeSoto cars and, in the same double agreement, types of Plymouth automobiles. The thought is advanced that the use of plurals in “models, lines or body styles” is significant and shows that the words “all ‘lines’ could be discontinued”, in effect allows discontinuance of all production of the DeSoto. It is beyond belief to countenance the final close out of the manufacture of the DeSoto automobile on that foundation. It must be recorded in passing that the above Paragraph 20 does not allow the discontinuance by DeSoto Plymouth of all models, lines and body styles. The paragraph actually says “DeSoto Plymouth at any time may discontinue any models, lines and body styles * * (Emphasis supplied). The paragraph goes on about its business of further stating other governing details of the manufacturer-dealer operation. There is not the slightest inference that it has to do with other than that and certainly nothing to convey the impression that under it Chrysler is granted the right of effective termination. It is perhaps fitting that the very next paragraph of the contract, number 21, which has already been discussed, is captioned “Termination”.

It is noteworthy that the representation that in the critical period DeSoto sales suffered an extremely serious decline due to the shift in consumer tastes from the middle priced car field to the lower priced and foreign car fields, according to the defense itself in the answer, is only “one of the reasons given for the discontinuance of the DeSoto passenger automobile * * Another reason stressed for discontinuance was that since 1957 there had been “persistent reports of its discontinuance. These widely circulated reports had an adverse effect upon our mutual ability to merchandise this fine product in a successful manner.” No mention is made as to whether those reports had validity. And there is no allusion at all to whether there were any intrinsic management problems or whether there were vital management changes thereafter.

The contract under Paragraph 21 could be terminated by a direct dealer on “not less than thirty (30) days’ written notice.” It was Chrysler management who intentionally drew the agreement without an expiration date and gave to itself certain named rights for termination as set out above in Paragraph 21. It was expressly because of this that Chrysler in Paragraph 5 reserved' to itself the right to amend the agreement as it “deems advisable” by taking certain procedural steps. That portion of Paragraph 5 is worth repeating. It reads:

“Since this agreement does not have an expiration date and DE SOTO-PLYMOUTH may terminate it individually only as provided in Paragraph 21, and since circumstances may exist that DE SOTO-PLYMOUTH believes require amending all De Soto-Plymoth Direct Dealer Agreements, DE SOTO-PLYMOUTH will have the right to amend this agreement to the extent that DE SOTO-PLYMOUTH deems advisable, provided that DE SOTO-PLYMOUTH makes the same amendment in De Soto-Plymouth Direct Dealer Agreements generally. The amendment will be set out in a notice signed by the President or a Vice-President of Chrysler Motors Corporation. Thirty-five (35) days after delivery of the notice to DIRECT DEALER, this agreement will be deemed to be amended in the manner and to the extent set forth in the notice.”

The above eliminates any guessing as to what sort of contract is before us. The dealer could terminate it on not less than thirty days’ notice. Chrysler could terminate it only for certain stated reasons concerning the dealer. Chrysler could also amend the agreement as it “deems advisable” by simply following notice provisions of Paragraph 5. None of those eventualities occurred. We do not pass finally upon whether Chrysler under the “deems advisable” grant could so amend the contract as to include its discontinuance of the manufacture of DeSoto passenger cars which would in effect terminate the agreement under the guise of amending it. There was no endeavor by Chrysler to bring its action within that clause either at the time of its discontinuance of DeSotos or since. However, there is some late argument to this court urging that the taking by the dealers of Chrysler’s allowance to DeSoto dealers of a $300 credit on unsold cars is a waiver by the dealers of the contract involved here. That contention did not appear in the original answer or until the last pretrial conference. It certainly was not pressed to the district judge who correctly held that:

“It is plaintiff’s contention in count one of its complaint that Chrysler’s discontinuance of the DeSoto automobile constituted a breach of this Agreement. Chrysler, on the other hand, in addition to other reasons advanced to justify its action, takes the position that the Agreement, by its very terms, gave it the right to discontinue the DeSoto, without notice, and without any obligation to plaintiff. The problem thus boils down to one of interpretation and construction of the Agreement in question.”

The credit allowance which readily fits in, as appellant mentions, with the manufacturer’s ordinary allowance to its dealers on unsold cars, was never the subject of any agreement, formal or otherwise, whereby the dealer accepts the rebates and waives its contract. There is no mention of that intention in Chrysler’s telegram or letter of discontinuance. This is merely another example of the intensive defense exploration for something to bolster its position. It is entirely without merit.

The contract before us is clear. Its unmistakable intent is to protect Chrysler as to its dealers in every foreseen contingency. It does not by its terms or impliedly give Chrysler the naked right to discontinue without contract cause, manufacturing and distributing to its dealers DeSoto automobiles. In so doing Chrysler broke the contract.

Tortious Interference

Appellant, representative of the dealer plaintiff claims, also sues for tortious interference in its business by defendant.

The facts are not disputed. Following its discontinuance of the manufacture of the DeSoto automobile, defendant sent to all plaintiff’s DeSoto owner customers literature telling of its discontinuance of the DeSoto and that, inter alia, “He [your dependable Dodge dealer] is best qualified to give your DeSoto the genuine factory improved service it deserves.” This was excused by the district court as “a lawful method of competition”; “at most mere puffing”. The court held that “Chrysler did not commit an act so unjustifiable or unreasonable as to constitute a tortious interference with plaintiff’s business and economical advantage.” The court and the parties rightly agree that New Jersey law governs the issue in this instance. Under that law the defendant’s carefully planned method of enticing plaintiff’s DeSoto customers away from plaintiff and to defendant’s active Dodge and Chrysler dealers was tortious interference with plaintiff’s business. Louis Kamm, Inc. v. Flink, 113 N.J.L. 582, 175 A. 62, 99 A.L.R. 1 (Ct. E & A 1934); Sustick v. Slatina, 48 N.J.Super. 134, 137 A.2d 54 (App.Div.1957) ; Brenner & Co. v. Perl, 72 N.J.Super. 160, 178 A. 2d 19 (App.Div.1962); Raymond v. Cregar, 72 N.J.Super. 73, 178 A.2d 29 (App.Div.1962) mod. 38 N.J. 472, 185 A.2d 856 (1962); Louis Schlesinger Co. v. Rice, 4 N.J. 169, 181, 72 A.2d 197 (1950).

The judgment of the district court will be reversed on both counts and the case remanded to that court for entry of judgment in favor of the plaintiff on both counts and for trial as to damages on both counts.