Old Country Toyota Corp. v. Toyota Motor Distributors, Inc.

966 F. Supp. 167, 34 U.C.C. Rep. Serv. 2d (West) 918, 1997 U.S. Dist. LEXIS 7898, 1997 WL 304504
CourtDistrict Court, E.D. New York
DecidedMarch 27, 1997
Docket93 CV 5768(TCP)
StatusPublished
Cited by9 cases

This text of 966 F. Supp. 167 (Old Country Toyota Corp. v. Toyota Motor Distributors, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Old Country Toyota Corp. v. Toyota Motor Distributors, Inc., 966 F. Supp. 167, 34 U.C.C. Rep. Serv. 2d (West) 918, 1997 U.S. Dist. LEXIS 7898, 1997 WL 304504 (E.D.N.Y. 1997).

Opinion

MEMORANDUM AND ORDER

PLATT, District Judge.

Defendants TOYOTA MOTOR DISTRIBUTORS, INC. and TOYOTA MOTOR SALES, U.S.A., INC. (collectively “Toyota”) move for summary judgment pursuant to Federal Rule of Civil Procedure 56. Toyota argues that three of the four causes of action remaining in plaintiffs’ OLD COUNTRY TOYOTA CORP. (“Old Country”) and JOHN BUCALO’s Second Amended Complaint are barred by the applicable statute of limitations and that plaintiffs’ fourth cause of action is barred by the statute of frauds.

BACKGROUND

Old Country, a corporation of which Bucalo was vice president and manager, was a franchise dealer of Toyota motor vehicles. Buca-lo and others in his family owned all of Old Country’s stock until the company sold its assets to John Staluppi on 2 October 1989.

A Toyota Dealer Sales and Services Agreement (“Dealer Agreement”) governed Old Country’s relationship with Toyota. Pursuant to the Dealer Agreement, Toyota sold motor vehicles to Old Country for re-sale to the general public.

Plaintiffs’ first, second, and fifth causes of action allege that Toyota breached the Dealer Agreement by failing to allocate vehicles to Old Country in accordance with the terms of the Agreement. Any such breaches would have taken place prior to the 2 October 1989 sale to Staluppi. Plaintiffs also assert a right to have received a reasonable quantity of vehicles under New York’s Franchised Motor Vehicle Dealer Act. Veh. & Traf. L. §§ 460-72. Plaintiffs’ sixth cause of action alleges that Toyota reneged on an oral agreement entered into on 28 September 1989, to allow Bucalo to become part of the new dealership as a shareholder and general manager upon completion of the sale to Staluppi.

Toyota argues that plaintiffs’ claims relating to the Dealer Agreement are barred by the four year statute of limitations applicable to sale of goods contracts under the Uniform Commercial Code (“UCC”). UCC § 2-725. Toyota asserts that, in addition to being time barred, Bucalo’s claim for breach of the alleged oral agreement is barred by the UCC’s statute of frauds. UCC § 2-201(1).

DISCUSSION

A. Breach of the Dealer Agreement

Federal courts sitting in diversity are required to follow the statute of limitations rules of the forum state, Guaranty Trust Co. v. York, 326 U.S. 99, 110, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079 (1945), in this ease New York.

Given a sufficient factual record, a district judge properly may determine as a matter of law whether an agreement falls under the UCC. Triangle Underwriters, Inc. v. Honeywell Inc., 604 F.2d 737, 742 (2d Cir.1979). A contract is one for “‘service’ rather than ‘sales’ when ‘service predominates,’ and the sale of items is ‘incidental.’ ” Triangle, 604 F.2d at 742 (citation omitted). A contract must be considered one for sales when services are “ ‘merely incidental or collateral to the sale of goods.’” Id. at 743 (citation omitted).

Though to the Court’s mind whether a dealership agreement properly falls under the UCC presents a difficult question, “New York courts explicitly have ruled that [the UCC] applies to a dealership agreement.” Wallach Marine Corp. v. Donzi Marine Corp., 675 F.Supp. 838, 840 (S.D.N.Y.1987) (Sweet, J.) (citing Crabtree Automotive, Inc. v. BMW of N. Am., 105 A.D.2d 825, 482 N.Y.S.2d 28, 29 (App.Div.1984) (holding oral agreement to approve sale of BMW dealership void under UCC); Swerdloff v. Mobil Oil Corp., 74 A.D.2d 258, 427 N.Y.S.2d 266, 267 (App.Div.1980) (holding oral promise to grant dealership void under UCC)). Though neither cited case analyzed the terms of the *169 agreements at issue, the policy impetus behind Judge Sweet’s holding is compelling: “since franchising presently accounts for at least twenty percent of all retail business,” it would be “anomalous” for ongoing franchise sales agreements not to be covered by the UCC. Wallach Marine, 675 F.Supp, at 840 (citations omitted) (holding oral franchise agreement unenforceable under UCC Statute of Frauds). Indeed, the meaning of “goods” under the UCC must be given broad scope “so as to carry out the underlying purpose of the Code of achieving uniformity in commercial transactions.” Coca-Cola Bottling Co. v. Coca-Cola Co., 696 F.Supp. 57, 85 (D.Del.1988), aff 'd, 988 F.2d 386 (3d Cir.), cert. denied, 510 U.S. 908, 114 S.Ct. 289, 126 L.Ed.2d 239 (1993). Consistent with that purpose, the Appellate Division has concluded that the granting of a franchise, as well as the franchisor’s consent to the transfer of a franchise, are sales agreements covered by the UCC. Crabtree, 482 N.Y.S.2d at 29.

Courts “in virtually every jurisdiction that ha[ve] addressed this issue ha[ve] concluded” that dealership agreements are “predominantly for the sale of goods.” American Suzuki Motor Corp. v. Bill Kummer, Inc., 65 F.3d 1381, 1386 (7th Cir.1995); see also Paulson, Inc. v. Bromar, Inc., 775 F.Supp. 1329, 1333 (D.Hawai'i 1991) (finding that sixteen jurisdictions have determined that the UCC applies to distributorship agreements). Notwithstanding such conclusions, this Court believes that, given their variety, the prudent course is to analyze the facts and terms peculiar to each agreement to determine whether it falls under the UCC. The Second Circuit’s approach in a related context supports this conclusion. See North Am. Leisure Corp. v. A & B Duplicators, Ltd., 468 F.2d 695, 697-98 (2d Cir.1972) (analyzing surrounding facts to determine that, in “essence,” oral manufacturing agreement analogous to publishing agreement and thus not “sales” contract). See also Wagstaff v. Protective Apparel Corp. of Am., Inc., 760 F.2d 1074, 1076-77 (10th Cir.1985) (analyzing facts to conclude distributorship agreement not “sale of goods” contract); Wells v. 10-X Mfg. Co., 609 F.2d 248, 254-55 (6th Cir.1979) (find-, ing manufacturing agreement not sales contract based on fact analysis). In addition to agreement provisions and surrounding facts, courts have considered both agreement titles, Triangle Underwriters, 604 F.2d at 743, and the face of the complaint, J.I. Hass Co., Inc. v. Kristal Assoc., Inc., 127 A.D.2d 541, 512 N.Y.S.2d 104, 105 (App.Div.1987), to reach their conclusions.

At bottom, the purpose of the Dealer Agreement was to provide for and regulate the ongoing sale of cars to Old Country. The prominence of the word “sales” and its location in the Agreement’s title — “Toyota Dealer Sales and Service Agreement” — are revealing.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Sleepy's LLC v. Select Comfort Wholesale Corp.
133 F. Supp. 3d 483 (E.D. New York, 2015)
Good Luck Product Co. v. Crystal Cove Seafood Corp.
60 F. Supp. 3d 365 (E.D. New York, 2014)
KSW Mechanical Services v. Johnson Controls, Inc.
992 F. Supp. 2d 135 (E.D. New York, 2014)
Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc.
770 N.E.2d 177 (Illinois Supreme Court, 2002)

Cite This Page — Counsel Stack

Bluebook (online)
966 F. Supp. 167, 34 U.C.C. Rep. Serv. 2d (West) 918, 1997 U.S. Dist. LEXIS 7898, 1997 WL 304504, Counsel Stack Legal Research, https://law.counselstack.com/opinion/old-country-toyota-corp-v-toyota-motor-distributors-inc-nyed-1997.