Whiteis v. Yamaha International Corp.

531 F.2d 968
CourtCourt of Appeals for the Tenth Circuit
DecidedMarch 9, 1976
DocketNos. 75-1036 and 75-1037
StatusPublished
Cited by2 cases

This text of 531 F.2d 968 (Whiteis v. Yamaha International Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Whiteis v. Yamaha International Corp., 531 F.2d 968 (10th Cir. 1976).

Opinion

HILL, Circuit Judge.

This action was commenced by appellee, Harold G. Whiteis, to recover damages resulting from the cancellation of his franchises to sell Yamaha motorcycles. After a trial to the court, judgment was entered against appellant, Yamaha International Corporation, in the amount of $100,000. The trial court found Yamaha acted in bad faith in violation of its obligations under the franchise contracts and under Okl.Stat. Ann. tit. 47, § 561 et seq. (Supp.1975-76).1 Yamaha has appealed the judgment against it and Whiteis has cross-appealed from the denial of attorney’s fees and punitive damages. We affirm on all issues except attorney’s fees.

In 1962 Whiteis was granted an exclusive franchise to sell Yamaha motorcycles in Tulsa County, Oklahoma. The franchise agreement was oral and was the only agreement between the parties until 1964. There is evidence that in 1964 Yamaha changed its policy of granting exclusive territorial franchises to a policy of granting only dealership site franchises. Early that year Yamaha mailed Whiteis a written franchise agreement. Because the proposed agreement said nothing about his exclusive franchise area, Whiteis refused to sign. Some weeks later, at a national sales conference, Whiteis met with Yamaha’s regional and national sales managers. The national sales manager told Whiteis the only purpose of the written agreement was to satisfy the requirements of Oklahoma law for the authorization of motor vehicle dealers and in no way affected their prior oral agreement for an exclusive franchise. The confrontation was repeated in 1965 when Whiteis again refused to sign a written franchise agreement without further assurance he still had the exclusive franchise. This time a new national sales manager made the same representation to Whiteis.

In subsequent years Whiteis signed written agreements without question. By 1969, the date of the last written agreements, there were written franchise agreements in effect for four separate dealership locations. Each stated that no exclusive territory was assigned to Whiteis, and each stated it superseded all prior agreements and [970]*970was the only agreement between the parties. The agreements provided for cancellation by either party without cause upon giving 30 days written notice.

During the period from 1963 through 1970 Whiteis’ business grew and prospered in varying degrees. He won several awards and sales contest trips for outstanding performance as a dealer. His operation peaked in 1970 with gross sales exceeding $400,000 and net profits over $45,000.

In 1971 Yamaha undertook a deliberate campaign to get rid of Whiteis as a dealer. This effort was allegedly prompted by a letter of complaint against Whiteis received by Yamaha from 18 former Whiteis customers. The trial court found there was “no evidence, whatsoever, that it was a genuine, authentic letter of complaint.” There was evidence indicating it was phony. Yamaha did not investigate the supposed complaint, but directed its district sales manager, Larry Murphy, to document any and all possible reasons to terminate Whiteis. Murphy compiled his reasons and sent them to Yamaha with requests for cancellations. Yamaha then cancelled the franchises for three of Whiteis’ four dealership locations. The trial court found the reasons submitted by Murphy were not the true reasons he requested the cancellations; he requested them because he was directed to do so by Yamaha’s national sales manager. Murphy testified he did not know why Yamaha wanted to get rid of Whiteis unless it was because he had an exclusive franchise. At about this time Yamaha did franchise another dealer in Tulsa. This dealer received extensive financial support for racing, an important means of motorcycle advertising, and was able to get popular models for sale which were unavailable to Whiteis.

At trial Whiteis relied heavily on a breach of the oral agreement for an exclusive franchise as a basis for recovery. Much of Yamaha’s argument on appeal is directed to the oral agreement. Yamaha argues it is either unenforceable because of the statute of frauds or is superseded and extinguished by the subsequent written agreements which provided for termination at any time without cause. These arguments, however, do not go to the legal basis of the trial court’s judgment. The trial court held the oral agreement was not within the statute of frauds, but held it made no difference to the outcome of the case whether or not it was abrogated by the written agreements. Even under the theory most favorable to Yamaha, there were valid written contracts granting the franchises. The judgment was based on the wrongful cancellation of these franchises, not on a breach of the exclusive franchise agreement. Therefore, we need not discuss the issues relating to the validity of the oral contract for an exclusive franchise.

The trial court found Yamaha violated the good faith obligation implied in the contracts and the good faith requirements specifically imposed on motor vehicle manufacturers and distributors by Okl.Stat. Ann. tit. 47, § 561 et seq. (Supp.1975-76), in cancelling, terminating or failing to renew a franchise. We are doubtful whether the trial court’s judgment could be sustained on contractual good faith grounds, but are convinced it may be upheld on statutory grounds. It has been the general rule that courts would not inquire into the reasons for termination when the contract reserved the power to terminate without cause, and Oklahoma courts have apparently followed this rule. Ford Motorcar Co. v. Rackley, 65 Okl. 288, 166 P. 427 (1917). See also Ritter v. Perma-Stone Co., 325 P.2d 442 (Okl.1958); Adalex Laboratories v. Krawitz, 270 P.2d 346 (Okl.1954).

The shortcomings of the general rule were felt most keenly in cases involving arbitrary termination of dealer’s franchises. Through a manufacturer’s caprice, a dealer could be denied the opportunity to reap the profits from a substantial initial investment.2 Because of the difficulties in applying the concept of contractual good faith to [971]*971contracts terminable without cause, statutes have been enacted to protect motor vehicle dealers.3 One such enactment is Okl.Stat.Ann. tit. 47, § 561 et seq. The Oklahoma statutes impose a duty of good faith on manufacturers and distributors in cancelling, terminating or failing to renew a franchise and provide that the dealer shall be compensated for any damages sustained from a wrongful termination. The evidence of bad faith is abundant in this case, and the Oklahoma Statutes entitle Whiteis to recover damages from Yamaha.

Yamaha contends the evidence failed to establish a basis for the award of damages. In support of its contention Yamaha points out that of the three dealerships for which the franchises were cancelled, none was an operative business at the time. While this may be technically true, it does not reflect the substance of Whiteis’ dealings with Yamaha or the true status of his business before the cancellations.

Whiteis’ first dealership, opened in late 1962 or early 1963, was known as Tulsa Cycle Sports, 1701 Charles Page Boulevard. It was closed in 1971 when a major construction project closed the street. Whiteis owned the building and planned to reopen it when the street was finished. Some parts, counters and equipment were left in the building at the time of trial.

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