Crim Truck & Tractor Co. v. Navistar International Transportation Corp.

823 S.W.2d 591, 52 A.L.R. 5th 919, 35 Tex. Sup. Ct. J. 342, 1992 Tex. LEXIS 4, 1992 WL 10104

• Court: Texas Supreme Court
• Decided: January 22, 1992
• Docket: D-0092
• Status: Published

Opinions

OPINION

CORNYN, Justice.

The Motion for Rehearing is overruled. The original opinion in this case is withdrawn and the following opinion is substituted therefor.

This case presents the question of whether there is evidence of a confidential relationship, giving rise to a fiduciary duty, between the parties to a franchise agreement. Plaintiffs are the franchisee, Crim Truck and Tractor Company, Travis Crim and Tim Farley (the Crims). The defendant is the franchisor, Navistar International Transportation Corporation (Navis-tar), formerly known as International Harvester Corporation. The trial court rendered judgment for the Crims based on jury findings of breach of contract, breach of fiduciary duty and fraud. The court of appeals found no evidence of a confidential relationship which would give rise to a fiduciary duty. 791 S.W.2d 241, 243. The court of appeals also found no evidence of an actionable misrepresentation, an essential element of the Crims’ fraud cause of action. Id. at 245. The court of appeals, however, found some evidence that Navis-tar breached its contract with the Crims, but reversed the trial court’s judgment because of insufficient evidence to support the damages awarded by the jury on that theory. Id. Consequently, the court remanded the case for a new trial on the contract issues. Because we also find no evidence of a confidential relationship,¹ or of an actionable misrepresentation, we affirm the judgment of the court of appeals.

Crim Truck and Tractor’s relationship with Navistar’s predecessor, International Harvester, began in 1943. The parties enjoyed a mutually beneficial working relationship for years before reducing their agreement to writing in 1958. The written agreement was amended in 1964 and again in 1979. The 1979 revision of the franchise agreement, at issue here, allows the Crims to terminate the franchise at will. However, Navistar could not unilaterally terminate the franchise unless the Crims breached any of eleven conditions of the contract. The contract, furthermore, grants the Crims a reasonable opportunity to cure any claimed breach.

The sometimes stormy² relationship between the parties further deteriorated in September 1983. In 1983 Navistar decided to establish a nationwide dealer communications network to share computerized information between Navistar and all of its dealers. This system was designed to facilitate distribution of supplies among dealers, and the provision of warranty and repair services to customers. Navistar called a meeting of all of its dealers in September 1983 to introduce the dealer communications network system. The Crims declined to send a representative to this meeting.

Thereafter, Navistar asked its dealers to sign and return a sales and service agreement that obligated them to purchase the computer equipment required to implement the dealer communications network system. The Crims elected not to sign the contract. In October 1984, Navistar notified the Crims that it considered participation in the dealer communications network mandatory. Navistar also informed the Crims that it considered them to be in anticipatory breach of the contract, but gave them an opportunity to cure the alleged breach by signing and returning the sales and service agreement by November 26, 1984. The Crims never signed and returned the contract.

Finally, on December 10, 1984, Navistar reiterated its intention to terminate the franchise agreement effective April 1, 1985. Once again the Crims were given an opportunity to sign and return the sales and service agreement before the effective date and avoid termination. Because the Crims did not comply with Navistar’s repeated requests, the franchise was terminated April 1, 1985.

Thereafter, the Crims brought this suit seeking damages for breach of contract, breach of fiduciary duty and fraud. The alleged loss of past and future profits, diminution of the value of the business, loss of investment, mental anguish, and exemplary damages. The trial court rendered judgment in favor of the Crims in accordance with the jury’s verdict. Navistar appealed.

Historically, we have recognized that certain relationships give rise to a “fiduciary” duty as a matter of law.³ See, e.g., Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 513 (1942) (principal/agent); Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786, 787 (1938) (partners). More recently, we have also categorized certain relationships as “special relationships,” giving rise to a tort duty of good faith and fair dealing. See, e.g., Aranda v. Insurance Co. of N. Am., 748 S.W.2d 210, 212-13 (Tex.1988); Arnold v. National County Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex.1987). Although a fiduciary duty encompasses at the very minimum a duty of good faith and fair dealing, the converse is not true. The duty of good faith and fair dealing merely requires the parties to “deal fairly” with one another and does not encompass the often more onerous burden that requires a party to place the interest of the other party before his own, often attributed to a fiduciary duty.

Wé,have also recognized that certain informal relationships may give rise to a fiduciary duty. See, e.g., MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334 (1944). Such informal fiduciary relationships have also been termed “confidential relationships” and may arise “where one person trusts in and relies upon another, whether the relation is a moral, social, domestic or merely personal one”. Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d 256, 261 (1951). Because not every relationship involving a high degree of trust and confidence rises to the stature of a formal fiduciary relationship, the law recognizes the existence of confidential relationships in those cases “in which influence has been acquired and abused, in which confidence has been reposed and betrayed”. Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980). The existence of a confidential relationship is usually a question of fact. See MacDonald, 142 Tex. at 623, 180 S.W.2d at 339; Schiller v. Elick, 150 Tex. 363, 240 S.W.2d 997, 1000 (1951). Although we recognize that the existence of a confidential relationship is ordinarily a question of fact, when the issue is one of no evidence, it becomes a question of law. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex.1962).

The Crims concede that not every franchise agreement creates a fiduciary relationship. But, they argue that the facts here prove a confidential relationship giving rise to an informal fiduciary relationship, imposing the duty on Navistar, not just to seek its own economic interests, but to put the Crims’ interests before its own.⁴

But, this argument clashes with the rule that a party to a contract is free to pursue its own interests, even if it results in a breach of that contract, without incurring tort liability. See Amoco Production Co. v. Alexander, 622 S.W.2d 563, 571 (Tex.1981). The fact that one businessman trusts another, and relies upon his promise to perform a contract, does not rise to a confidential relationship. Consolidated

Gas & Equip. Co. v. Thompson, 405 S.W.2d 383, 336 (Tex.1966); Thigpen v. Locke, 363 S.W.2d 247, 253 (1962). Every contract includes an element of confidence and trust that each party will faithfully perform his obligation under the contract.⁵ Neither is the fact that the relationship has been a cordial one, of long duration, evidence of a confidential relationship.⁶ See Thigpen, 363 S.W.2d at 253.

Travis Crim testified that he believed the relationship with Navistar was one of mutual trust and confidence. However, “mere subjective trust alone is not enough to transform arms-length dealing into a fiduciary relationship.” Thigpen, 363 S.W.2d at 253. Further, the Crims point to language in the contract which they claim articulates a special trust and confidence between these parties beyond that ordinarily found in a contract.⁷ We are unpersuaded that this language was ever intended to inject an element of per-sonal trust and confidence above and beyond that which is ordinarily contemplated by parties to contracts of this type.

As a general rule, all contracts are assignable. Cloughly v. NBC-Bank-Seguin, N.A., 773 S.W.2d 652, 655 (Tex. App. — San Antonio 1989, writ denied); Kirby Forest Indies., Inc. v. Dobbs, 743 S.W.2d 348, 354 (Tex.App. — Beaumont 1987, writ denied); see also Tex.Bus. & Com.Code § 2.210. An exception to this rule is that a contract that relies on the personal trust, confidence, skill, character or credit of the parties, may not be assigned without the consent of the parties. Southern Community Gas Co. v. Houston Natural Gas Corp., 197 S.W.2d 488, 489-90 (Tex.Civ.App. — San Antonio 1946, writ ref’d n.r.e.); see also Moore v. Mohon, 514 S.W.2d 508, 513 (Tex.Civ.App. — Waco 1974, no writ). “Rights arising out of a contract cannot be transferred if they involve a relation of personal confidence such that the party whose agreement conferred those rights must have intended them to be exercised only by him in whom he actually confided.” Mohon, 514 S.W.2d at 513. The Crims’ reliance on the cited contract language as evidence of a confidential relationship is misplaced. Such “boiler plate” language is designed to give the parties some degree of control over with whom they do business, and nothing more. This language was obviously intended to render the franchise agreement unilaterally unassignable.

Alternatively, the Crims urge us, at the very minimum, to impose a common law fiduciary duty on franchisors in the termination of franchise agreements.⁸ However, we find imposition of a common law duty unnecessary under the current statutory scheme controlling this aspect of the franchise relationship. In the most recent amendments to the Texas Motor Vehicle Commission Code, the Legislature has undertaken to regulate many aspects of the relationship at issue here. See Tex.Rev. Civ.Stat.Ann. art. 4413(36) § 5.02 (Vernon Supp.1991).⁹ Wrongful termination of a motor vehicle dealership franchise agreement is now governed by the Texas Motor Vehicle Commission Code. See id. A person who has sustained damages as a result of a violation of these provisions may bring suit under the Texas Deceptive Trade Practices — Consumer Protection Act. Tex.Rev. Civ.Stat.Ann. art. 4413(36) § 6.06 (Vernon Supp.1991). Additionally, since 1956, Congress has imposed a duty of good faith in terminating automobile franchise agreements. 15 U.S.C. §§ 1221-1225 (1988). The federal statute is designed to supplement state common law and statutory rights and duties. Id. § 1225. We see no good reason to add to the existing regulatory scheme by implication of a common law fiduciary duty.

The Crims, in their cross-points in this court, argue that the damages awarded by the jury for mental anguish, loss of investment and as punitive damages are supported by the jury’s findings on the fraud issues, as well as breach of fiduciary duty. The court of appeals found no evidence of a misrepresentation, observing that the only misrepresentations claimed are the terms of the contract themselves. 791 S.W.2d at 245. We agree with the court of appeals.

As a general rule, the failure to perform the terms of a contract is a breach of contract, not a tort. See International Printing Pressmen & Assistants’ Union of N. Am. v. Smith, 145 Tex. 399, 198 S.W.2d 729, 735-36 (1946). However, when one party enters into a contract with no intention of performing, that misrepresentation may give rise to an action in fraud. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex.1986); Stanfield v. O’Boyle, 462 S.W.2d 270, 272 (Tex. 1971); Lone Star Steel Co. v. Scott, 759 S.W.2d 144, 155 (Tex.App. — Texarkana 1988, writ denied). But, a party’s failure to perform a contract, standing alone, is no evidence of that party’s intent not to perform at the time the contract was made. Spoljaric, 708 S.W.2d at 435. A review of this record reveals that there is no evidence that Nav-istar did not intend to perform the terms of the contract at the time it was made in 1979.

For these reasons, we affirm the judgment of the court of appeals remanding the case to the trial court for a new trial only on the contract and related damage issues.

Dissent by MAUZY, J., joined by DOGGETT and GAMMAGE, JJ.

1 . The standard of review for "no evidence” points entails two inquiries. The first addresses the quality of the evidence offered, inquiring whether the evidence offered has a tendency to prove the existence of a material fact. See generally Powers & Ratliff, Another Look at “No Evidence" and "Insufficient Evidence” Points of Error, 69 Tex.L.Rev. 515, 521-23 (1991). The second is quantitative and inquires as to whether there is more than a mere scintilla of probative evidence. Id. We must first address the quality of the evidence offered before we can reach the question of the quantity of the evidence offered.

4 . The trial court submitted the question of the existence of a confidential relationship in terms of a fiduciary duty. The jury was instructed that:

[a] "fiduciary duty” arises from a confidential relationship or when a relationship of trust is placedby [sic] one in another and the one ■ relies on and acts on the representations of the other. Where this relationship of confidence or trust exists, a duty rests on the party in whom the confidence or trust is placed, in entering into any transaction with the other, to make a full disclosure of the other’s rights in the transaction and a full disclosure of all material facts which might affect the other’s decision whether to enter the transaction and to refrain from abusing the confidence or trust by obtaining an advantage to himself at the expense of the confiding or trusting party.

The jury was then asked in special question 3 as to whether a "fiduciary relationship” existed between the Crims and Navistar. If they answered special question 3 affirmatively, the jury was then asked whether Navistar had breached its "fiduciary duty” to the Crims “in connection with the termination of [the Crims’] franchise" in special question 4. Conditioned upon an affirmative response to question 4, special question 5 inquired as to whether the breach of fiduciary duty by Navistar was "made consciously and willfully, or with gross indifference and reckless disregard” for the Crims’ rights. Navistar objected to this submission on the grounds that “as a matter of law, there is no fiduciary relationship” between the parties and "there is no evidence that there is or was a fiduciary relationship” between the parties.

2 . Although both Travis Crim and Tim Farley testified to a generally cordial relationship between the parties, Travis Crim testified that Nav-istar’s predecessor, International Harvester, had threatened termination of the franchise agreement on at least two prior occasions. The first occasion was in 1962, when Travis Crim's father was still running the dealership. This resulted in an exchange of letters threatening legal action between the parties’ attorneys. The last occasion, prior to termination of the franchise agreement, occurred in 1976. At that time, International Harvester decided not to renew the Crims’ franchise agreement. The parties continued to do business under the terms of the expired contract. At the urging of an International Harvester manager, the contract at issue was executed three years later.

3 . We have recognized the difficulty of formulating a definition of the term “fiduciary” that is comprehensive enough to cover all cases. Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 571, 160 S.W.2d 509, 512 (1942). However, we have consistently recognized that a fiduciary duty "contemplates fair dealing and good faith, rather than legal obligation.” Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980); Kinzbach, 138 Tex. at 571, 160 S.W.2d at 512.

5 .The majority of other jurisdictions have rejected the imposition of general fiduciary duties on the franchise relationship. Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 485 (5th Cir.1984) (applying Louisiana law); Bain v. Champlin Petroleum Co., 692 F.2d 43, 48 (8th Cir.1982) (applying South Dakota law); Murphy v. White Hen Pantry Co., 691 F.2d 350, 354-55 (7th Cir.1982) (applying Wisconsin law); Carter Equip. Co. v. lohn Deere Indus. Equip. Co., 681 F.2d 386, 390 (5th Cir.1982) (applying Mississippi law); Coca-Cola Bottling Co. v. Coca-Cola Co., 696 F.Supp. 57, 74-75 (D.Del.1988); General Business Mach. v. National Semiconductor Data-checker/DTS, 664 F.Supp. 1422, 1425-26 (D.Utah 1987); Power Motive Corp. v. Mannes-mann Demag Corp., 617 F.Supp. 1048, 1051-52 (D.Colo.1985) (applying Ohio law); Picture Lake Campground, Inc. v. Holiday Inns, Inc., 497 F.Supp. 858, 869 (E.D.Va.1980); Newark Motor Inn Coip. v. Holiday Inns, Inc., 472 F.Supp. 1143, 1151-53 (D.NJ.1979); Weight Watchers of Quebec Ltd. v. Weight Watchers Inti Inc., 398 F.Supp. 1047, 1053-54 (E.D.N.Y.1975). Several of those jurisdictions that have rejected imposition of general fiduciary duties in this context have also recognized that fiduciary duties may independently arise because of the nature of the relationship of the parties without regard to the underlying contract between the parties. Carter Equip. Co., 681 F.2d at 390-91; Coca-Cola Bottling Co., 696 F.Supp. at 74-75; General Business Mach., 664 F.Supp. at 1425-26. Others have recognized an implied contractual duty of good faith and fair dealing in franchise agreements arising out of a general duty of good faith and fair dealing implied in all contracts. Cambee's Furniture, Inc. v. Doughboy Recreational, Inc., 825 F.2d 167, 171 (8th Cir.1987); Domed Stadium, Til F.2d at 485; Bain, 692 F.2d at 48; Murphy, 691 F.2d at 355; Coca-Cola Bottling Co., 696 F.Supp. at 75; ABA Distrib., Inc. v. Adolph Coors Co., 542 F.Supp. 1272, 1285-86 (W.D.Mo.1982); Picture Lake Campground, Inc., 497 F.Supp. at 869; Newark Motor Inn Corp., 472 F.Supp. at 1151. We, however, have specifically rejected the implication of a general duty of good faith and fair dealing in all contracts. English v. Fischer, 660 S.W.2d 521, 522 (Tex. 1983). In any event, a breach of this contractual duty of good faith and fair dealing gives rise only to a cause of action for breach of contract and does not give rise to an independent tort cause of action. Picture Lake Campground, Inc., 497 F.Supp. at 869.

6 . The dissent in the court of appeals cites testimony from Travis Crim that "he and his father had always done the things requested by the Franchisor_” 791 S.W.2d at 247. The record reveals that the Crims followed the requests made by the franchisor on two occasions. The first instance occurred in 1947, when the elder Crim moved the dealership location and built a prototype building suggested by International Harvester. Travis Crim testified that the building and land remained the property of his family. Additionally, several years earlier the Crims purchased computer software recommended by International Harvester. We find nothing extraordinary about these requests in the context of the franchise agreement. But, this is not evidence of a confidential relationship.

The dissent also points to the fact that Navis-tar’s predecessor had held out the Crims as an excellent dealership with whom they hoped to continue a long and fruitful relationship. Id. This is based on events that occurred in 1947 during the "grand opening” of the new dealership facility. On that occasion, International Harvester purchased an ad in an area newspaper congratulating the Crims on their new building and complimenting them on their performance. Likewise, this one occurrence thirty-eight years prior to termination of the franchise agreement is no evidence of a confidential relationship.

7 . The "General Provisions" section of the contract between the parties contains paragraph 34, which beside a margin notation of "Parties Bound, Effect of Partial Invalidity and Assignment” (emphasis supplied), provides in part;

This is a personal agreement, involving mutual confidence and trust, and it may not be assigned by either party without the written consent of the other party, except that [Navis-tar] may, however, assign the agreement to any of its subsidiary or affiliated corporations, without the consent of the [Crims].

8 . Amici Curiae, Texas Automobile Dealers Association, National Automobile Dealers Association, and Southwest Association (the Associations), urge us to engraft a tort duty of good faith and fair dealing into all franchise agreements. They contend that the franchisee/franchisor relationship should be deemed a special relationship because of the franchisor’s disproportionate bargaining power and control inherent in the typical franchise agreement. We disagree. We find no evidence in this case that the franchisor exerted control over its franchisee’s business comparable to that exerted by an insurer over its insured’s claim. See Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 481 (Tex.App. — Corpus Christi 1989, writ denied). The Associations argue that significant abuse of power and control by franchisors will go unre-dressed unless a common law duty of good faith and fair dealing is engrafted into franchise agreements by law. Under the current statutory scheme in effect today these concerns are unfounded.

9 . Those portions of the amendments regulating franchise termination or nonrenewal became effective June 16, 1989, and thus are inapplicable to the termination in the present case which occurred April 1, 1985 and the suit subsequently filed based thereon in 1987.