Kuhl Motor Co. v. Ford Motor Co.

Company, vs. Appellant, Kuhl Motor Ford Motor Com

pany, Respondent.* 3—June June 1955. October 14—November 1955.

* rehearing granted. Motion for a brief oral there was and argument by For the appellant of Milwaukee. A. Schuts W. Shaw, a brief Muskat & there was the respondent

For Quale, John G. all of Milwau- oral argument by Paulsen and kee. facts are disclosed by following

Martin, J. located in city Plaintiff is a corporation complaint. servic- business and selling in the engaged Milwaukee motor is a manufacturer of Defendant vehicles. motor ing vehicles, 1938, accessories. On December and parts, plain- tiff defendant entered into written “Ford and Sales Agree- ment,” it which that could be terminated at provided any- time at the will of either written notice. party by sixty days’ On from the received defendant a April plaintiff notice of its intention terminate the agreement (Exhibit E). Plaintiff alleges: attached, E, That hereto

“6. marked Exhibit writing defendant, has been served plaintiff by contrary 218.01 to the section 16 and provisions (3) paragraphs thereof, statutes, been Wisconsin has done without due unfairly regard equities plaintiff defendant, if just without provocation, and acted upon by court, enjoined unless this will operate put plaintiff will, out of business and confiscate its all and good singular to its irreparable that the cancellation damage; of this fran- chise granted defendant to the plaintiff and by amended, Exhibit A hereto attached as is within the scope and of section purview 218.01 of the (8) paragraph (d) statutes, Wisconsin and that the plaintiff has no adequate at law or remedy by administrative action.” Defendant demurred to the on complaint the grounds it does not (1) state facts to sufficient constitute cause action, and that the court (2) has no jurisdiction of the of the action. subject

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

In the last-named at was page it held: for a fixed “The in this case was not period agreement at at will com- but was terminable time defendant’s any upon with the notice. It is as to pliance requirement beyond conditions the exer- power judiciary engraft cise such a contractual right.

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

“In the instant case it clear that Martin’s dealership was continue no than he either or the Ford Motor longer that its desired to continue and to terminate Company faith, motive, it was intent, to no conditions as to or bad good results, or of advance except requirement notice if such termination was desired Ford Motor Company.” Stats., material, 218.01 so far as

Sec. provides: denied, A license or revoked on “(a) suspended, . . . following grounds: vehicles, Being “16. manufacturer of motor factory branch, distributor, officer, field or representative, agent, any whatsoever of such motor-vehicle manufacturer representative branch, coerce, who has or or or induce factory attempted coerced, automobile enter into any has induced or dealer to manufacturer, branch or with such factory any agreement thereof, other act unfair to said any do representative dealer, to cancel franchise be- any by threatening existing branch, manufacturer, factory such representative tween and said dealei\ thereof manufacturer, branch, distributor, factory Being “17. officer, or agent, any what- representative field representative, branch, motor-vehicle manufacturer of such or factory soever without due to the unfairly, regard has said equities who canceled the franchise of just provocation, and without dealer The nonrenewal of a dealer. franchise or motor-vehicle anv without just or cause shall be provocation agreement selling deemed evasion of this section and shall an an constitute un- fair cancellation.” herein the was in effect at the time agreement

This statute made. was Stats., enacted, was (d), provid-

In 1945 sec. 218.01 (8) ing: firm, violating or corporation

“Penalties. Any person, be deemed this section shall guilty provisions any misdemeanor and shall be thereof punished conviction as follows: or subsection violating (3) (a) Any person persons “(d) of, to, or in lieu the and addition general subsection,

denial, revocation in said or suspension, penalties $5,000 be be a to a fine of not more than or subject or revocation sentence of not more than a suspension year effective served only territory formerly unfairly dealer, or both such fine canceled or revo- suspension cation, that in a area serviced several except metropolitan vehicle, dealers revocation the same motor handling suspension shall not order be applicable to remaining dealers.” 218, Stats.,

This action is anot under ch. proceeding which sets forth administrative be procedure to followed in- voke the for unfair cancellation of a penalties motor-vehicle manufacturer-dealer contract. Plaintiff seeks to termi- enjoin nation of the contract on the that 16 and 17 of ground pars. Stats., sec. 218.01 define and consti- (a), public policy (3) tute a exercise of the valid state to police power pro- hibit unfair cancellations of sales agreements. this

On trial court held: question “The of the state of Wisconsin in legislature enacting was of because of chapter undoubtedly opinion the economic which a motor manufacturer en- advantages over a dealer the latter harsh joys should protected against treatment when manufacturer contract to his exercises under the his cancel sales contract with the dealer. “In acting order deter manufacturer from harshly without cause in his contract with the dealer canceling the legislature said sought accomplish purpose by visiting certain the penalties upon manufacturer if the latter cancels his contract with the dealer without cause. The legislation in is intended to act as a question deterrent harsh against any treatment the of dealer the manufacturer. “There is no indication in the in legislation of question part intent on the

any of the legislature or to de- change clare or void of illegal term the any contract question.” In the attitude of the discussing toward the judiciary .im- contract, of individual’s portance it is right stated in Contracts, Am. Jur., sec. 172: p. “As the of contract is no small of the right private part citizen, the usual most liberty and function important of courts of justice is rather to maintain con- and enforce than tracts to enable thereto to from their parties obli- escape on the gations of unless it pretext public policy, clearly that contravene appears they or the public right wel- public fare. Rules which that a say given agreement void being are against cause ‘if there is one not to be public policy extended be- arbitrarily, which than more another thing public it is men of full policy requires and age under- competent shall have the standing utmost liberty and that contracting, contracts, their when entered into freely and shall voluntarily, be enforced courts of justice.’ The paramount public policy is that freedom to contract is not to be interfered with lightly.” of that

Any must be impairment specificallyexpressed necessarily in a implied legislature statutory prohibi- not left tion and to speculation. rule to be general ap- S., Contracts, this case is expressed C. plied p. J. sec. as follows: that in all

“It would seem cases true rule is that intent, is one and courts will look legislative question to the statute, it, matter language or evil which seeks remedy and wrong prevent, enactment; in its if accomplished sought purpose from all these it is manifest that it was not intended imply void, a or to the courts render act the prohibition prohibited (cid:127)will so hold and will construe the statute accordingly.”

The intent in the of sec. expressed introductory language Stats., 218.01 is that of a (3) measure. No (a), regulatory are in words used 16 and pars. 17 the conclusion requiring that the intended to unfair cancellation of legislature prohibit sales contracts. state that a manufacturer who They simply in such a is under the engages practice penalty inference of administrative And an prescribed procedure. does not fact that the follow from the invalidity necessarily statute The statute must be prescribes penalty. judged by 478, itself as a whole. Estate Peterson 230 Minn. (1950), 59, 42 N. W. 18 A. L. R. 910. Where (2d) (2d) legis- contracts, lature has intended to certain terms impress upon as, instance, for the omnibus clause in automobile coverage contracts, insurance it has so liability expressly provided. here it has But used no unfair can- language “prohibiting” cellations, them “void” or that sales making directing every contract shall contain for cancellation “with provision only or “for cause.” Nor are there just provocation” any specific enforcement of such a insuring provisions “prohibition.” that of a manu- Obviously, recognized legislature to terminate be facturer exercised without might just provo- dealer, cation and without due regard equities but it did not declare invalid clause an such permitting act. it did was to make such act What im- unprofitable by revocation, or fine. As penalty suspension, posing court, the learned trial it is out that the apparent pointed inequality recognized bargaining power legislature an an automobile dealer and economically between powerful such the defendant and that it manufacturer desired to unfair him some cancellation. protection deterring furnish no declaration of in the we see statute. public policy But This court stated Huber Merkel v. Wis. 366, 94 N. W. 354:

“Where laws which are to be enacted in the exer- supposed cise interfere the citizens’ police with power liberty can rights property, they justified only ground that comfort, some they manner secure the or wel- safety, fare of It is on this society. laws are principle drainage Decker, sustained. Donnelly 58 Wis. 17 N. W. 389. And if it conversely, from the law itself appear that its pur- owners, to benefit pose primarily private are con- they demned. In re District, Theresa Drainage 90 Wis.

N. W. 288. It must that the appear interests of the public restriction, generally require and not the interests of individuals. private State ex rel. Zillmer v. Kreutzberg, Wis. 90 N. W. 1098.” What is the welfare public to be sought served ? This is a business contract for the sale of vehicles, motor its purpose the mutual economic benefit of both dealer and manufacturer. There is to nothing the benefit of inuring in the public of a representation manufacturer a certain by dealer nor is there immoral anything dangerous welfare public in the termination of the between a relationship particular dealer and manufacturer. there While does exist in that re- that the dealer lationship possibility suffer may personal economic loss if the manufacturer it, terminates arbitrarily his loss not does affect the adversely public interest. An in- equality is bargaining power present many contractual but the law does not relationships, attempt equalize by the basic to contract. impairing right Plaintiff cites number of cases which arose out of mora- torium which was enacted legislation during depression. however, Such was legislation, designed protect general welfare; it inured to the benefit of all citizens during period of national emergency. 218.01,

Plaintiff relies for its cause of Stats.,, action sec. on but the statute affords it no Its remedy. purpose being purely dealer benefit automobile the only any particular

regulatory, is the same benefit that all other its receives from provisions exercise effect of unfair deterring receive—its such dealers their to terminate sales right agreements manufacturers of by to take of its advantage at If it desires opportunity will. benefit, it must by that indirect proceed provided receive maintain an action Stats.; but it cannot equity ch. the terms of a contract it voluntarily one of to invalidate action to the for its cause of penalty into by resorting entered measure. aof regulatory provisions affirmed. the Court.—Order By Gehl, I affirm would the sole (concurring). J. that, in far as the statute so construed to au- ground the relief demanded it is unconstitutional by plaintiff, thorize to contract. and void as infringing upon right either, not reserved in “the it is expressly right Although of the inherent of free contract one rights guaranteed as well as the national the citizen our constitution constitution,” Smith, ex rel. Time Ins. State Co. Wis. 65; State ex rel. v. Cary, N. W. Ornstine 135, 105 “The to contract is a Wis. N. W. 792. right prop- both the state constitu- and federal erty right protected tions,” is not stated in either although expressly Law, document, 11 Am. sec. Jur., Constitutional p. 339.

True, is the to make contracts is not absolute. It in the state to certain limitations which may impose its the exercise of police power. clause, in the limitations of the

“Under equal-protection the the state order to the of of justify interposition authority it must that the in- enacting police regulations, appear the as terests of from those public generally distinguished interference, of a class such for it a particular require is rule that cannot be invoked to one class of power protect police citizens another class unless such interference for is against the real of 11 Am. protection society general.” Jur., Con- Law, stitutional sec. 263. p. a is made

When restriction under the of the authority “it that must the interests of power appear police public restriction, and not the require interests of generally pri- Merkel, Huber vate individuals.” Wis.

N. W. 354.

“. . . whether a situation a presents field given legitimate for the exercise the police power restraints placing upon conduct, the use property personal depends upon the situation a whether reasonable presents for the necessity of restraint order imposition promote public welfare, and whether the means bear a adopted reasonable relation to the end to be It sought accomplished. goes without that saying not, in the exercise of its legislature police power, a law expressly prohibited by constitution. pass It is also doctrine, think, we everywhere that accepted laws imposing restraints with the use of interfering property personal in the absence some public liberty, therefor, necessity can- be The cases not sustained. cited emphasize judicial duty function to determine .and whether a given exertion is a reasonable exercise power thereof.” police (Emphasis State ex rel. Carter v. supplied.) Harper, 182 Wis. 451. N. 196 W.

I am not convinced that the interests of the public require that Ford be any particular agency continued in business. I that of the not believe the welfare do would be public affected of the “XYZ” the substitution Ford Motor Company the Kuhl Motor its for I doubt I Company agent. that the interests could be convinced public would the cancellation of Kuhl affected contract and Ford’s a substitute franchise. I grant omission doubt that can is be said that affected public because solely Ford properly is institution and Kuhl small If large relatively one. the contract is to be held size of the parties relative a become at what does contracting party controlling, stage terminate that it may too to be to require large permitted notice, is the a and when its contract giving sixty-day too to be allowed to con- other to be considered small party terms sent that cancellation be so made although by may no- to terminate it is without given contract tice? that Mr.

I am authorized to say Broadfoot Justice in this join concurring opinion. Mr. Justice Steinle I from must dissent respectfully {dissenting). Currie, J. in this case. Sec. 218.01 (a) the court’s (3) opinion Stats., that an automobile manufacturer’s license provides denied, transact business in Wisconsin bemay suspended, “has without or revoked where such manufacturer unfairly, due to the said dealer and without regard equities just deal- canceled the motor vehicle provocation, any franchise to, that in er." Sec. 218.01 addition or (8) (d) provides of, denial, of the license lieu revocation suspension, of an automobile manufacturer who violates 17 of sec. par. 218.01 such manufacturer “be to a (3) (a), $5,000.” than The state has thus fine of not more made clear that the unfair cancellation of a dealer’s fran- crystal chise without and without the deal- considering provocation of this state. er’s is public policy equities against B. Spies In Menominee River Co. v. L. & C. Augustus N. 147 Wis. 132 W. in an Co. (1912), Mr. the court stated: Timlin, opinion Justice a for made violation of statute or perform- “A contract will ance an act which is statute is void and prohibited by This true whether not be enforced court. there is and a merely penalty prohibition.” prohibition in Guard- with approval was quoted The above quotation Bank Mut. Savings ian v. Guardian Agency The latest 79, L. R. 1356. 115 A. 279 N. W. Wis. was made subject court on this of our pronouncement 436, 267 Wis. Nat. Bank Ripon (1954), v. First Pedrick 154, declared: it was 439, wherein 66 N. W. (2d) “ . . . violates if it policy public ‘An is against agreement 663, Contracts, statute, p. .’ 12 Am. Jur., . . some public not or uphold will recognize ‘. . . courts of justice sec. 167. which, tendency, or in its object, operation, transaction any welfare, sound to to the be prejudicial public is calculated to is whether parties The test to civic honesty. or morality, the law or inimi- inhibited by something have stipulated for Id., with, to, welfare.’ pp. or inconsistent public cal the com- according 663. (Italics ours.) Unquestionably, for inhibited something by here parties stipulated plaint the executor law, aby namely, appointment corporate the estate. Agreements against public for attorney ‘. . . cannot or law be enforced prohibited public policy by other, either one against directly asking party them effect or indirectly by court to into dam- carry claiming breach them.’ 12 for Am. ages compensation Jur., Contracts, 715, sec. 209.” p. states that secs.

The 218.01 majority opinion (3) (a) Stats., do not and 218.01 unfair (8) (d), expressly prohibit manufacturers, contracts auto cancellation of dealers’ but manufacturers who in such to a only subject engage practice for same be so advanced doing. argument might penalty state, of the criminal statutes of this which do many against from certain words acts people doing not express prohibit if acts a do such will they perform but state only penalty 346.06 of officers (1) relating bribery be inflicted. Sec. offer, corruptly Any person shall (1). give, who Sec. 346.06 executive, administrative, judicial, any legislative, promise town, state, any county, city, village, or of officer of the or other district, municipal corporation or or of other subdivision school SOO

anis of such of criminal example type However, statute. is doubtful if anyone would have the temerity seriously contend that a contract to bribe an officerwould not be illegal and against public policy.

Par. 17 of sec. Stats., 218.01 (3) (a), was enacted 1937, and the dealer’s contract entered into between the de- fendant and plaintiff corporation was executed on Decem- ber 1938. dealer’s Any franchise contract entered into an between automobile manufacturer and a Wisconsin dealer to business to be transacted in applicable Wisconsin would statute, such provisions and any provi- sion of such contract which violated the statute would be and void under the public policy against authorities above If the of the cited. provision agreement the permitting Ford terminate the Motor to franchise Company upon sixty days’ is be notice to as interpreted advance authorizing the Ford cancel Motor the same unfairly Company without just then such would be provision void. On the provocation, other hand, termination if such of the provision contract can be in the statute as light being interpreted operative upon notice so as to sixty-day permit the cancellation giving upon appointment, therein, or his election and after either or before after qualified or shall seat, have been have taken shall his any he gift money, action, any goods, thing in personal or gratuity, or or real value, any any thing pecuniary of or or or property, personal other prospective, present or with intent to vote, advantage, influence his upon any question, matter, or action judgment, cause, opinion, or pending then or may by be which proceeding which law come capacity, in official any before him his brought or be such officer corruptly accept any or gift, receive such gratuity, money, who shall action, personal property, or real any or thing goods, thing of value, pecuniary personal or any such other advantage, present or any agreement or vote, under prospective, understanding that his thereby be action should so opinion, judgment, influenced shall imprisonment prison in the by state not punished more than be five year, or fine not exceeding than one one nor less thousand years hundred dollars. nor than two less dollars statute, which contravened then one the any ground except not clause would be void in toto. It is this such cancellation be- latter which the law favors and which I interpretation be lieve should this court. adopted if The in effect holds that the statute majority opinion as automobile manufacturers were be construed prohibiting franchise contracts with deal- from into Wisconsin entering ers, restrict the of the manufacturer to right which would same, be as the statute would unconstitutional cancel the amendment. The reason the Fourteenth advanced violating con- conclusion is that interference with the for such exercise state of can tract only grounded welfare, and the stat- general its police power promote but enacted the interest of public was not general ute citizens, viz., small class of auto to benefit only particular dealers. court, 1887, as supreme early States United 123 U. Ct. Kansas S. 8 Sup.

Mugler laid down doctrine overriding expressly L. Ed. nor contracts defense impairment existing neither without a defense just compensation of property the taking its when done under the authority state the acts if is otherwise exercised. validly that power power police extent of the United power discussing police In v. in Berman Parker 348 U. S. court (1954), supreme States 98, 27, L. Ed. declared: 32, 99 26, 75 Ct. Sup. health, morality, safety, peace quiet,

“Public public are some of the more ex- conspicuous and order—these law of the to traditional application police power the of amples the merely Yet illustrate they scope affairs. municipal of not delimit it.” and do (Emphasis supplied.) power of the the latest United States pronouncements One of the exercise police power by court toward supreme ), Lee Co. found Williamson v. Optical (1955 is be states 502 488, 483, 563,

348 U. S. 75 Ct. 99 L. Ed. Sup. it wherein was stated:

“The is day when this court uses the gone due-process clause of the Fourteenth amendment strike down state laws, conditions, business and regulatory of industrial because unwise, they may improvident, out of harmony with a school of particular thought. [Citing We empha- cases.] size what Chief again Illinois, said in Munn Waite Justice 113, 94 U. S. L. Ed. ‘For 77], protection against [24 abuses must legislatures resort people to the polls, not ” courts.' seem clear reasonably

It would that one of the chief objec- 218.01, sec. Stats., tives of legislature enacting in so far it seeks to regulate as between dealings automobile dealers, is to fair which, manufacturers and promote dealing, course, is exercise police legitimate power. Petition 25, ex rel. Attorney State General (1936), Wis. of N. 633. In reason stating W. for such underlying con- it difficult to clusion would be improve upon forceful Hughes of Mr. Chief in his dissent language Justice ex Tipaldo v. New York rel. Moorehead 298 U. S. 1347, 80 L. Ed. 103 A. L. R Ct. Sup. 1445: occasion to consider the frequent have had limitations

“We it of contract. While is liberty highly important pre- interference, from and abuse, liberty arbitrary capricious serve its prevent it also otherwise it necessary could all to override interests and in the public be used thus end freedom of which is destroy very opportunity designed to safeguard.” fact that the to be benefited persons by this regulatory citizens, to one our dealers, are confined class of

measure auto the same not militate against being legitimate does exercise the Connecticut court As police power. recently stated

to o CO 288, 297, in Amsel v. Brooks 141 Conn. 106 Atl. 1234, 1241: R. 45 A. L. (2d) (2d) “A statute which is otherwise within police power serves a is not unconstitutional public purpose be- merely cause it benefits a number incidentally limited of persons.” of

While all citizens the state are entitled to be pro- others, tected unfair this not does mean against dealing that.the must one all unfair legislature sweep prohibit to and cannot dealing proceed piecemeal remedy particular which manifest themselves in of unfair dealing particu- types it neces- or industries. On this is only lar point occupations Co., Lee v. Optical from Williamson further sary quote : U. S. 488) supra (348 the equal- held that violated court district “Secondly, to subject amendment the Fourteenth clause of

protection of as sec. 3 exempt, this system regulatory dpticians The prob does, of ready-to-wear glasses. all act sellers one, admitting perennial classification of lem legislative bemay in the same field Evils no definition. of doctrinaire different requiring and proportions, dimensions of different Texas, v. Tigner think. may so the legislature remedies. Or Ct. 879, Ed. Or the 1124], 84 L. Sup. U. S. [60 time, itself 'at 'a addressing take step one reform may most acute to legisla which seems the problem phase Examiners, 294 S. 608 Dental U. Semler tive mind. The 1086], L. legislature Ed. Ct. Sup. [55 there, remedy neglect field and of one one apply select phase 335 U. L. v. American Sash Co. S. A. F. the others. ing Ed. 93 L. prohibition Ct. Sup. 222]. [69 than the invidious clause no further goes the equal-protection discrimination.” exer- in favor of legislature convincing argument

A automobile dealers protect power state’s police cising manufac- on automobile part dealing unfair against 503a in

turers is statement Mr. provided following Justice in in his Ford Motor Co. v. dissenting opinion United Black 93, 335 States U. S. Ct. L. Ed. Sup. 24: entered,

“At the time the were Ford made and decrees States, all sold about 25 Chrysler cent of cars in the United per cent and General Motors 44 cent. Ford per per and the others sell to about dealers four billion dollars’ worth of cars cash on The yearly, dealers then requiring delivery. sell to retail About customers. of the per cent retail sales are on credit. Dealers not to sell other makes of permitted Ford’s, M.’s, cars are dependent G. wholly or Chrysler’s favorable treatment for their business lives. The dealer agen- cies are for year, one but the contracts can agency be can- celed on short notice and without cause. The dealers are thus economic dependents company whose cars sell.” they

The instant us reaches on the appeal I pleadings. would reverse with directions to overrule the demurrer so that a trial be had on the issue of fact of might whether the reasons the Ford Motor underlying Company’s cancel the attempt unfair, franchise were without due plaintiff’s regard plain- and tiff’s without equities, just provocation. am authorized state that Mr. Chief

I Faiechild Justice and Mr. join this dissent. Brown Justice A motion for was on rehearing granted September and oral was heard argument October 1955. For the there was brief oral and appellant argument by A. W. Schütz Milwaukee. Shaw,

For the there was brief respondent Muskat & Paulsen, Quale, John argument by oral G. all of Milwau- kee.

A brief filed Rieselbach was & Nelson of Milwaukee, as curiae. amicus

503b 8, 1955 : was filed November following opinion Mr. Broadfoot reargument). Per Curiam (on Justice concurrence the concur- his he withdraws announces now he joins prior and that dissenting ring opinion this, such now reason of prior dissenting opinion By opinion. case. in this Mr. Mar- opinion majority becomes Justice Gehl, and Mr. dissent Steinle Mr. tin, Justice Justice stated in the reasons ma- already for the original therefrom concurring opinions. jority The order is vacated. mandate from appealed

The previous reversed, with and cause remanded directions to overrule demurrer.

Case Details

Case Name: Kuhl Motor Co. v. Ford Motor Co.

Court Name: Wisconsin Supreme Court

Date Published: Nov 8, 1955

Citation: 71 N.W.2d 420

Court Abbreviation: Wis.