Kuhl Motor Co. v. Ford Motor Co.

71 N.W.2d 420, 270 Wis. 488, 55 A.L.R. 2d 467, 1955 Wisc. LEXIS 293

• Court: Wisconsin Supreme Court
• Decided: November 8, 1955
• Status: Published

Opinions

Martin, J.

The following facts are disclosed by the complaint. Plaintiff is a corporation located in the city of Milwaukee engaged in the business of selling and servicing motor vehicles. Defendant is a manufacturer of motor vehicles, parts, and accessories. On December 12, 1938, plaintiff and defendant entered into a written “Ford Sales Agreement,” which provided that it could be terminated at anytime at the will of either party by sixty days’ written notice. On April 17, 1954, plaintiff received from the defendant a notice of its intention to terminate the agreement (Exhibit E). Plaintiff alleges:

“6. That the writing hereto attached, marked Exhibit E, has been served upon the plaintiff by the defendant, contrary to the provisions of section 218.01 (3) paragraphs 16 and 17 thereof, of the Wisconsin statutes, in that it has been done unfairly without due regard to the equities of the plaintiff and without just provocation, and if acted upon by the defendant, unless enjoined by this court, will operate to put the plaintiff out of business and confiscate its good will, all and singular to its irreparable damage; that the cancellation of this franchise granted by the defendant to the plaintiff in and by Exhibit A hereto attached as amended, is within the scope and purview of section 218.01 (8) paragraph (d) of the Wisconsin statutes, and that the plaintiff has no adequate remedy at law or by administrative action.”

Defendant demurred to the complaint on the grounds (1) that it does not state facts sufficient to constitute a cause of action, and (2) that the court has no jurisdiction of the subject of the action.

It was held by the trial court, first, that, disregarding sec. 218.01, Stats., the agreement of December 12, 1938, was valid and the notice of April 17, 1954, effectively terminated said agreement, basing its opinion on Bushwick-Decatur Motors, Inc., v. Ford Motor Co. (2d Cir. 1940), 116 Fed. (2d) 675; Buggs v. Ford Motor Co. (7th Cir. 1940), 113 Fed. (2d) 618; Biever Motor Car Co. v. Chrysler Corp. (2d Cir. 1952), 199 Fed. (2d) 758; and Martin v. Ford Motor Co. (D. C. Mich. 1950), 93 Fed. Supp. 920.

In the last-named case, at page 921, it was held:

“The agreement in this case was not for a fixed period but was terminable at any time at defendant’s will upon compliance with the requirement as to notice. It is beyond the power of the judiciary to engraft conditions upon the exercise of such a contractual right.

“The court concurs with the holding in Bushwick-Decatur Motors, Inc. v. Ford Motor Co., 2 Cir., 1940, 116 F. (2d) 675, as properly applying the law of Michigan with respect to the right of termination under a similar agreement, and with the holdings in Buggs v. Ford Motor Co., 7 Cir., 1940, 113 F. (2d) 618. . . .

“In the instant case it is clear that Martin’s dealership was to continue no longer than either he or the Ford Motor Company desired it to continue and that its right to terminate it was subject to no conditions as to good or bad faith, motive, intent, or results, except as to the requirement of advance notice if such termination was desired by the Ford Motor Company.”

Sec. 218.01 (3), Stats., so far as material, provides:

“(a) A license may be denied, suspended, or revoked on the following grounds: . . .

“16. Being a manufacturer of motor vehicles, factory branch, distributor, field representative, officer, agent, or any representative whatsoever of such motor-vehicle manufacturer or factory branch, who has attempted to induce or coerce, or has induced or coerced, any automobile dealer to enter into any agreement with such manufacturer, factory branch or representative thereof, or to do any other act unfair to said dealer, by threatening to cancel any franchise existing between such manufacturer, factory branch, or representative thereof and said dealei\

“17. Being a manufacturer, factory branch, distributor, field representative, officer, agent, or any representative whatsoever of such motor-vehicle manufacturer or factory branch, who has unfairly, without due regard to the equities of said dealer and without just provocation, canceled the franchise of anv motor-vehicle dealer. The nonrenewal of a franchise or selling agreement without just provocation or cause shall be deemed an evasion of this section and shall constitute an unfair cancellation.”

This statute was in effect at the time the agreement herein was made.

In 1945 sec. 218.01 (8) (d), Stats., was enacted, providing:

“Penalties. Any person, firm, or corporation violating any of the provisions of this section shall be deemed guilty of misdemeanor and upon conviction thereof shall be punished as follows:

“(d) Any person or persons violating subsection (3) (a) 15, 16, and 17, may in addition to, or in lieu of, the general denial, suspension, or revocation penalties in said subsection, be subject to a fine of not more than $5,000 or be subject to a suspension or revocation sentence of not more than a year effective only in the territory formerly served by the unfairly canceled dealer, or by both such fine and suspension or revocation, except that in a metropolitan area serviced by several dealers handling the same motor vehicle, the suspension or revocation order shall not be applicable to the remaining dealers.”

This action is not a proceeding under ch. 218, Stats., which sets forth the administrative procedure to be followed to invoke the penalties for unfair cancellation of a motor-vehicle manufacturer-dealer contract. Plaintiff seeks to enjoin termination of the contract on the ground that pars. 16 and 17 of sec. 218.01 (3) (a), Stats., define public policy and constitute a valid exercise of the police power of the state to prohibit unfair cancellations of sales agreements.

On this question the trial court held:

“The legislature of the state of Wisconsin in enacting chapter 218 undoubtedly was of the opinion that because of the economic advantages which a motor manufacturer enjoys over a dealer the latter should be protected against harsh treatment when a manufacturer exercises his right under the contract to cancel his sales contract with the dealer.

“In order to deter the manufacturer from acting harshly or without cause in canceling his contract with the dealer the legislature sought to accomplish said purpose by visiting certain penalties upon the manufacturer if the latter cancels his contract with the dealer without cause. The legislation in question is intended to act as a deterrent against any harsh treatment of the dealer by the manufacturer.

“There is no indication in the legislation in question of any intent on the part of the legislature to change or to declare illegal or void any term of the contract in question.”

In discussing the attitude of the judiciary toward the .importance of the individual’s right to contract, it is stated in 12 Am. Jur., Contracts, p. 670, sec. 172:

“As the right of private contract is no small part of the liberty of the citizen, the usual and most important function of courts of justice is rather to maintain and enforce contracts than to enable parties thereto to escape from their obligations on the pretext of public policy, unless it clearly appears that they contravene public right or the public welfare. Rules which say that a given agreement is void as being against public policy are not to be extended arbitrarily, because ‘if there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts, when entered into freely and voluntarily, shall be enforced by courts of justice.’ The paramount public policy is that freedom to contract is not to be interfered with lightly.”

Any impairment of that right must be specifically expressed or necessarily implied by the legislature in a statutory prohibition and not left to speculation. The general rule to be applied in this case is expressed in 17 C. J. S., Contracts, p. 558, sec. 202, as follows:

“It would seem that in all cases the true rule is that the question is one of legislative intent, and the courts will look to the language of the statute, the subject matter of it, the wrong or evil which it seeks to remedy or prevent, and the purpose sought to be accomplished in its enactment; and if from all these it is manifest that it was not intended to imply a prohibition or to render the prohibited act void, the courts •will so hold and will construe the statute accordingly.”

The intent expressed in the introductory language of sec. 218.01 (3) (a), Stats., is that of a regulatory measure. No words are used in pars. 16 and 17 requiring the conclusion that the legislature intended to prohibit unfair cancellation of sales contracts. They simply state that a manufacturer who engages in such a practice is subject to penalty under the prescribed administrative procedure. And an inference of invalidity does not necessarily follow from the fact that the statute prescribes a penalty. The statute must be judged by itself as a whole. Estate of Peterson (1950), 230 Minn. 478, 42 N. W. (2d) 59, 18 A. L. R. (2d) 910. Where the legislature has intended to impress certain terms upon contracts, as, for instance, the omnibus coverage clause in automobile liability insurance contracts, it has expressly so provided. But here it has used no language “prohibiting” unfair cancellations, making them “void” or directing that every sales contract shall contain provision for cancellation only “with just provocation” or “for cause.” Nor are there any specific provisions insuring enforcement of such a “prohibition.” Obviously, the legislature recognized that the right of a manufacturer to terminate might be exercised without just provocation and without due regard to the equities of the dealer, but it did not declare invalid a clause permitting such an act. What it did was to make such act unprofitable by imposing the penalty of suspension, revocation, or fine. As pointed out by the learned trial court, it is apparent that the legislature recognized the inequality in bargaining power between an automobile dealer and an economically powerful manufacturer such as the defendant and that it desired to furnish him some protection by deterring unfair cancellation.

But we see no declaration of public policy in the statute. This court stated in Huber v. Merkel (1903), 117 Wis. 355, 366, 94 N. W. 354:

“Where laws which are supposed to be enacted in the exercise of the police power interfere with the citizens’ liberty or rights of property, they can only be justified upon the ground that they in some manner secure the comfort, safety, or welfare of society. It is on this principle that drainage laws are sustained. Donnelly v. Decker, 58 Wis. 461, 17 N. W. 389. And conversely, if it appear from the law itself that its purpose is primarily to benefit private owners, they are condemned. In re Theresa Drainage District, 90 Wis. 301, 63 N. W. 288. It must appear that the interests of the public generally require the restriction, and not the interests of private individuals. State ex rel. Zillmer v. Kreutzberg, 114 Wis. 530, 90 N. W. 1098.”

What is the public welfare sought to be served ? This is a business contract for the sale of motor vehicles, its purpose the mutual economic benefit of both dealer and manufacturer. There is nothing inuring to the benefit of the public in the representation of a manufacturer by a certain dealer nor is there anything immoral or dangerous to the public welfare in the termination of the relationship between a particular dealer and manufacturer. While there does exist in that relationship the possibility that the dealer may suffer personal economic loss if the manufacturer arbitrarily terminates it, his loss does not adversely affect the public interest. An inequality of bargaining power is present in many contractual relationships, but the law does not attempt to equalize it by impairing the basic right to contract.

Plaintiff cites a number of cases which arose out of moratorium legislation which was enacted during the depression. Such legislation, however, was designed to protect the general welfare; it inured to the benefit of all citizens during a period of national emergency.

Plaintiff relies for its cause of action on sec. 218.01, Stats.,, but the statute affords it no remedy. Its purpose being purely regulatory, the only benefit any particular automobile dealer receives from its provisions is the same benefit that all other such dealers receive — its effect of deterring unfair exercise by manufacturers of their right to terminate sales agreements at will. If it desires to take advantage of its opportunity to receive that indirect benefit, it must proceed as provided by ch. 218, Stats.; but it cannot maintain an action in equity to invalidate one of the terms of a contract it voluntarily entered into by resorting for its cause of action to the penalty provisions of a regulatory measure.

By the Court. — Order affirmed.