Filed: Jun. 10, 2002
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 01-3519 _ Stone Motor Company, * * Appellant, * Appeal from the United States * District Court for the Eastern v. * District of Missouri * General Motors Corporation, * * Appellee. * _ Submitted: April 15, 2002 Filed: June 10, 2002 _ Before BOWMAN, RILEY, and MELLOY, Circuit Judges. _ MELLOY, Circuit Judge. The present dispute stems from a 1995 Chevrolet-Geo Dealer Sales and Service Agreement between franchisor General Motors Corporatio
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ No. 01-3519 _ Stone Motor Company, * * Appellant, * Appeal from the United States * District Court for the Eastern v. * District of Missouri * General Motors Corporation, * * Appellee. * _ Submitted: April 15, 2002 Filed: June 10, 2002 _ Before BOWMAN, RILEY, and MELLOY, Circuit Judges. _ MELLOY, Circuit Judge. The present dispute stems from a 1995 Chevrolet-Geo Dealer Sales and Service Agreement between franchisor General Motors Corporation..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 01-3519
___________
Stone Motor Company, *
*
Appellant, * Appeal from the United States
* District Court for the Eastern
v. * District of Missouri
*
General Motors Corporation, *
*
Appellee. *
___________
Submitted: April 15, 2002
Filed: June 10, 2002
___________
Before BOWMAN, RILEY, and MELLOY, Circuit Judges.
___________
MELLOY, Circuit Judge.
The present dispute stems from a 1995 Chevrolet-Geo Dealer Sales and Service
Agreement between franchisor General Motors Corporation (GM) and franchisee
Stone Motor Company (Stone Motor). In 1997, after two years of disappointing
vehicle sales, Stone Motor elected to sell its dealership and franchise. According to
Stone Motor, the dealership failed because GM provided an insufficient number of
vehicles and withheld better-selling models. In 1999, approximately two years after
the sale, Stone Motor instituted the present suit against GM alleging fraud, breach of
contract, prima facie tort, and violation of the Missouri Motor Vehicle Franchise
Practices Act, MO. REV. STAT. § 475.825.1 et seq. (MVFPA).
GM originally moved to dismiss all claims under Federal Rule of Civil
Procedure 12(b)(6). The district court granted GM's motion to dismiss regarding the
fraud, tort, and statutory claims. Thereafter, GM filed an answer in which it asserted
a defense based on a written release. Stone Motor referenced the release in the
original complaint, but GM did not have a copy of the release when filing the answer.
Following receipt of the release through discovery, GM moved for judgment on the
pleadings. Before the district court ruled on GM's motion for judgment on the
pleadings, GM filed a motion seeking summary judgment on the remaining claim for
breach of contract. GM reasserted the release defense in its summary judgment
motion. The district court granted summary judgment without addressing the validity
of the release.
Stone Motor appeals the district court's dismissal of the statutory claims and
grant of summary judgment, but not the dismissal of the fraud or prima facie tort
claims. For the reasons discussed below, the grant of summary judgment and
dismissal of statutory claims are reversed, and the case is remanded to the district
court to conduct the factual findings necessary to determine the validity of the release.
I
In 1995 Stone Motor purchased a Cuba, Missouri, Chevrolet-Geo dealership
and franchise. Prior to the purchase, Stone Motor received inflated historical sales
data from the selling franchisee. Stone Motor purchased the dealership in reliance
on this inflated data and based sales projections for its franchise application on this
data. GM received and approved the franchise application without notifying Stone
Motor that the historical figures were inflated. The failure to correct Stone Motor's
own sales projections served as the foundation for Stone Motor's now-dismissed fraud
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claim. Although Stone Motor did not receive notice regarding the inflated data, GM
did send a letter to Stone Motor advising that the dealership facilities were
substantially larger than facilities for area dealerships having similar sales volume.
In the letter, GM further advised that this heightened capacity would not create an
entitlement to extra inventory.
On September 27, 1995, GM and Stone Motor executed an agreement and a
separately signed, preamble document. The preamble document contained recitations
that described the parties' general goals and objectives. The agreement recognized
that GM had a duty to allocate vehicles among its various dealers and reserved to GM
broad and sole discretion in the selection and allocation of vehicles to Stone Motor.
The agreement did not articulate any quotas or impose on GM a duty to provide any
particular mixture of vehicle models.
After commencing operations under the agreement, GM provided more
vehicles to Stone Motor than it had provided to the prior franchisee. However, GM
did not provide as many vehicles as Stone Motor desired. Further, as a percentage
of the vehicles provided, GM did not provide trucks and sport utility vehicles at the
levels desired by Stone Motor. Finally, Stone Motor identified instances wherein GM
delayed in filling orders, refused to fill an order, or advised Stone Motor to refer a
customer to a different GM dealer. As a result of the dealership's poor economic
performance, Stone Motor elected to sell the dealership and franchise to a dealer in
a nearby town. GM approved the sale of the franchise.
On July 14, 1997, at the closing for the sale of Stone Motor's dealership and
franchise, Virgil Stone, individually and in his capacity as the president of Stone
Motor, signed a release of all claims against GM. The release recited as consideration
"the sum of One Dollar ($1.00) in hand paid by General Motors Corporation,
Chevrolet Motor Division, a Delaware corporation, receipt of which is hereby
acknowledged and other good and valuable consideration . . .". Virgil Stone was
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accompanied at the closing by two attorneys, his personal attorney as well as counsel
for Stone Motor. Stone Motor alleges that no GM representative was present at the
closing. The record is unclear regarding how the release arrived at the closing.
II
It is undisputed that Stone Motor executed the release and that all of Stone
Motor’s allegations relate to events that occurred prior to execution of the release.
As such, there is no dispute that the release bars all of the present claims if the release
is a valid contract. Stone Motor disputes the validity of the release based on theories
of lack of consideration and economic duress.
Stone Motor asserts via affidavit that the recited $1.00 “peppercorn” was
never paid and that no other valuable consideration was exchanged. GM argues that
the parol evidence rule prevents the introduction of evidence to contradict the
release's unambiguous recitation of consideration. GM further argues that, even if
parol evidence were admissible, the approval of Stone Motor's sale of the franchise
to the subsequent franchisee served as the "other good and valuable consideration"
alluded to by the release. Stone Motor counters that the approval was granted prior
to closing and comprised "past consideration" incapable of supporting the later-
signed release.
Missouri contract law provides an exception to the parol evidence rule that
allows parties to introduce extrinsic evidence to rebut recitations of consideration if
the recitation is a "mere recitation" of fact, such as the acknowledgment of payment
received, and is not a part of the terms of the contract itself. In Cit Group/Sales Fin.,
Inc. v. Lark,
906 S.W.2d 865 (Mo. Ct. App. 1995), the Missouri Court of Appeals
stated:
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'[c]onsideration, or lack thereof, may always be shown by extrinsic
evidence in a controversy between the original parties to an agreement
even if the evidence tends to vary the consideration stated in the
agreement.' This exception applies only to contracts in which the named
consideration is a mere recital of a fact of something done, such as the
acknowledgment of the receipt of a payment.
Id. at 868-69 (quoting Rose v. Howard,
670 S.W.2d 142, 145 (Mo. Ct. App. 1984))
(other citations omitted). This Court has previously recognized and discussed
Missouri's exception to the parol evidence rule:
. . . when the recital of a consideration in a written contract can be fairly
regarded as a mere recital, or a statement of the receipt of money, then
such recital may be explained by parol, and the actual consideration for
the contract shown even though to do so may apparently contradict the
recital in the contract. In this class of cases the recital as to the
consideration is regarded in the same light as a receipt for money and
may be explained, or even contradicted by parol; but, if the statement in
a written contract in relation to the consideration shows upon its face
that the expressed consideration is a part of the terms of the contract
itself, then that part of the writing stands as any other part, and it cannot
be contradicted, added to, nor subtracted from, by parol.
Roberts v. Browning,
610 F.2d 528, 535-36 (8th Cir. 1979) (citing Fox Midwest
Theatres, Inc. v. Means,
221 F.2d 173, 177 (8th Cir. 1955), quoting from Pile v.
Bright,
137 S.W. 1017, 1018 (Mo. Ct. App. 1911)).
GM argues that the present recitation is not a "mere recitation" but rather
comprises "a part of the contract itself." We disagree. The present recitation is
precisely the type of inattentive "mere recitation" envisioned by the Missouri courts
that fashioned the exception. Ezo v. St. Louis Smelting & Refining Co.,
87 S.W.2d
1051, 1053 (Mo. Ct. App. 1935) (refusing to apply the exception but stating, "the
statement in an instrument, without more, of a certain amount of money as the
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consideration for the execution of the instrument is indeed frequently to be regarded
as but the inattentive recital of valuable consideration not intended to be specifically
and accurately expressed."). Here, GM and Stone Motor literally employed a "mere
recital" by executing a release without specifically identifying the true value
exchanged or the actual forbearance exercised by either party.
By contrast, in cases where the Missouri courts refused to apply the exception,
the recited consideration was not analogous to a "receipt for money,"
Roberts, 610
F.2d at 536. For example, in Meyer v. Weber,
109 S.W.2d 702 (Mo. Ct. App. 1937),
the Missouri Court of Appeals refused to apply the exception to the parol evidence
rule because the recitation of consideration was a promise of future, ongoing payment
in exchange for the services of certain musicians. Such a recitation of consideration
was a contract term rather than a mere recitation.
Id. at 704-05. Similarly, the
Missouri Court of Appeals refused to apply the exception to a computer equipment
lease where a plaintiff sought to introduce parol evidence to show that the agreement
was intended to relate to certain software not listed within the written instrument's
detailed recitation of leased hardware and software. Cit Group/Sales
Fin., 906
S.W.2d at 868-69. In the present case, the present recitation of one dollar and other
good and valuable consideration does not reflect any attempt by the parties to identify
the true nature of the value exchanged or forbearance exercised.1 As such, Missouri's
exception applies and parol evidence is admissible to test the veracity of the
recitation.
The only evidence in the record regarding the payment of consideration is
contradictory. The contract recites payment and Virgil Stone’s affidavit rebuts the
1
Of course, one dollar generally is sufficient consideration and this Court, like
the courts of Missouri, will not inquire as to the sufficiency of consideration actually
exchanged. However, the issue at hand is not whether the consideration was
sufficient, but rather whether the recited consideration or some other consideration
was actually paid.
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contract. Regarding "other valuable consideration,” GM argues that the release was
signed as a part of the overall sale of the franchise and is therefore supported by the
consideration involved in the transfer of the franchise. Virgil Stone did sign the
release as a part of the sale of the franchise to the subsequent owner. However, the
record indicates that GM provided some type of approval for the sale prior to Virgil
Stone’s execution of the release. Stone Motor argues that the timing of the prior
approval demonstrates that the approval was already in hand and could not serve as
consideration for a later contract. Stone Motor then asserts that the release was
signed “as required by GM." Through this assertion, Stone Motor appears to
contradict itself by conceding that GM's approval was still pending or uncertain at the
time of closing. Suffice it to say, the record is not clear regarding the closing of
Stone Motor's sale and the signing of the release. Accordingly, an evidentiary
hearing is required to determine whether the release is supported by consideration.
Stone Motor argues in the alternative that the release must fail because it was
signed under a state of economic duress caused by GM. Stone Motor's argument
lacks merit. Virgil Stone was accompanied by two attorneys when he signed the
release, his personal attorney and the attorney for Stone Motor. Stone Motor, through
its representative Virgil Stone, was not deprived of its free will. Stone Motor faced
a choice: sign the release and sell the franchise or retain the franchise and seek
available legal remedies. It is undisputed that Stone Motor was represented by
counsel and had ample opportunity to understand its rights. Under such
circumstances, the Eighth Circuit and the courts of Missouri have uniformly rejected
attempts to void contracts under a theory of economic duress. See Schmalz v. Hardy
Salt Co.,
739 S.W.2d 765, 768 (Mo. Ct. App. 1987) ("Where an experienced business
man takes sufficient time, seeks the advice of counsel and understands the content of
what he is signing, he cannot claim the execution of the release is the product of
duress."); see also Anselmo v. Manufacturers Life Ins. Co.,
771 F.2d 417, 420 (8th
Cir. 1985) ("Although he surely confronted a difficult dilemma – accepting the
termination perks or pursuing his legal rights under the employment agreement – the
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fact that the choice was difficult does not mean that he lacked the requisite free will
to make the decision."); see also Landmark North County Bank v. National Cable
Training Ctrs., Inc.,
738 S.W.2d 886, 891 (Mo. Ct. App. 1987) ("To constitute duress,
the victim must have been so acted upon by threats of the person claiming [the]
benefit of the release as to deprive the victim of the mental state essential to the
making of the contract.").
GM argues that, even if the release is infirm, Stone Motor ratified the release
by waiting two years after execution to bring the present action. GM identified no
claims, accounts, or liabilities that it waived or refrained from asserting against Stone
Motor due to the release. The mere passage of time, without demonstration of a
benefit received due to reliance, cannot serve to bind a party to an agreement through
ratification. See, e.g., Diffenderfer v. Heublein, Inc.,
412 F.2d 184, 188 (8th Cir.
1969) (finding employee had ratified agreement naming corporate subsidiary as
employer after employee received salary and expense payments from subsidiary,
borrowed funds from subsidiary without interest, and applied for country club
membership listing subsidiary as employer); Long's Marine Inc. v. Boyland,
899
S.W.2d 945, 947-48 (Mo. Ct. App. 1995) (finding ratification where purchaser of
boat dealership acted in accordance with contract by using facilities and selling
retained inventory);
Schmalz, 739 S.W.2d at 768 (finding former employee ratified
release through acceptance of continued employment for finite term following
execution of release and acceptance of negotiated sum). The only alleged benefit to
Stone Motor identified by GM is the underlying consideration for the release. If this
consideration, in fact, was exchanged, then GM's ratification argument is moot – the
release would have been valid from its inception. On the other hand, if this
consideration was not exchanged, then Stone Motor received no benefit under the
release and GM's ratification argument fails. In either event, the validity of the
release depends upon an evidentiary analysis before the district court.
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Having determined that outstanding questions of fact preclude disposition of
this appeal based on the release, it is necessary to review the district court's dismissal
of Stone Motor's statutory claim and grant of summary judgment.
III
Missouri, like many states, has a motor vehicle franchise practices statute. MO.
REV. STAT. § 407.810-835 (1997).2 The purpose of the MVFPA is to level the
contractual playing field between local franchisees and motor vehicle manufacturers.
G.A. Imports Inc. v. Subaru Mid-America, Inc.,
799 F.2d 1200, 1208 (8th Cir. 1986)
("... in drafting the Franchise Act, the Missouri legislature intended to alter the
relative bargaining positions of the new motor vehicle franchisor and franchisee by
subordinating express contractual language to notions of reasonableness."). Stone
Motor alleges various violations under the MVFPA, specifically, that GM’s conduct
violated: section 407.825.1(1) in that GM’s conduct was capricious, in bad faith, and
unconscionable; section 407.825.1(3) in that GM unreasonably refused to deliver new
motor vehicles in reasonable quantities and within a reasonable time after receipt of
orders for vehicles which, as ordered, were publicly advertised by GM to be available
2
The Missouri legislature amended the MVFPA in 1997. See Mo. Legis. Serv.
516 (1997). The 1997 amendments, coincidentally, were signed into law on the same
day as the closing for Stone Motor's sale of the franchise and dealership. However,
because the effective date of the amendments was 90 days after the end of Missouri's
legislative session, the amendments did not become effective until after Virgil Stone
signed the release. Therefore, the business relationship between Stone Motor and
GM clearly had ceased prior to the effective date of the 1997 amendments. Stone
Motor and the lower court did not distinguish between the current and former
versions of the MVFPA. However, GM correctly noted that one of the sections Stone
Motor relies upon in its complaint, MO. REV. STAT. § 407.825.1(15), did not exist
prior to the 1997 amendments. Accordingly, the district court's dismissal is affirmed
with regard to Stone Motor's claim under section § 407.825.1(15). All citations and
discussion of other relevant portions of the MVFPA relate to the 1997, pre-
amendment version.
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for immediate delivery; and section 407.825.1(9) in that GM imposed unreasonable
standards of performance upon Stone.3
Under Federal Rule of Civil Procedure 12(b)(6), all factual allegations must be
accepted as true and every reasonable inference must be granted in favor of the
complainant. FED. R. CIV. P. 12(b)(6); see also Midwestern Mach., Inc. v. Northwest
Airlines, Inc.,
167 F.3d 439, 441 (8th Cir. 1999); Carney v. Houston,
33 F.3d 893,
894 (8th Cir. 1994). This Court reviews the district court’s grant of a motion to
dismiss de novo. Young v. City of St. Charles, Mo.,
244 F.3d 623, 627 (8th Cir.
3
The cited portions of the MVFPA provide:
The performance, whether by act or omission, by a motor vehicle
franchisor of any or all of the following activities enumerated in this
section are hereby defined as unlawful practices . . .
(1) To engage in any conduct which is capricious, in bad faith, or
unconscionable and which causes damage to a motor vehicle
franchisee or to the public; . . .
(3) To unreasonably refuse to deliver in reasonable quantities and
within a reasonable time after receipt of orders for new motor
vehicles, such motor vehicles as are so ordered and as are covered
by such franchise and as are specifically publicly advertised by
such motor vehicle franchisor to be available for immediate
delivery; provided, however, the failure to deliver any motor
vehicle shall not be considered a violation of sections 407.810 to
407.83; if such failure is due to an act of God, work stoppage, or
delay due to a strike, labor difficulty, shortage of products or
materials, freight delays, embargo, or other cause of which such
motor vehicle franchisor shall have no control; . . .
(9) To impose unreasonable standards of performance upon a motor
vehicle franchisee;
MO. REV. STAT. § 407.825.1 (1997).
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2001) (citing Springdale Educ. Ass'n v. Springdale Sch. Dist.,
133 F.3d 649, 651 (8th
Cir. 1998) and Halfley v. Lohman,
90 F.3d 264, 266 (8th Cir. 1996)). “In
determining whether the district court properly granted the motion, we must accept
all of the allegations set forth in [the plaintiff’s] complaint as true, and we will affirm
only if it appears beyond doubt that he cannot prove any set of facts in support of his
claim which would entitle him to relief." Sisley v. Leyendecker,
260 F.3d 849, 850
(8th Cir. 2001) (citing Carpenter Outdoor Adver. Co. v. City of Fenton,
251 F.3d 686,
688 (8th Cir. 2001)).
In light of this standard, we cannot agree with the district court that Stone
Motor failed to allege facts which, if proven, would support its claims. Stone
Motor's allegations identified delays in association with the delivery of specific
vehicles, the refusal by GM to process orders, and the refusal by GM to supply Stone
Motor with more popular models “in comparable numbers to those supplied to other
Chevrolet-Geo dealers of the same or similar size and/or in the same geographic
region." GM argues that Stone Motor did not draft its allegations with sufficient
specificity. We disagree. To require more of Stone Motor under a Rule 12(b)(6)
analysis would be to ignore the minimal standards inherent in our system of notice
pleading. See FED. R. CIV. P. 8(a).
In the alternative, GM argues that it acted in accordance with the grant of
discretion contained in the agreement, and that the MVFPA cannot impose liability
where a franchisor merely acts in accordance with the terms of a franchise agreement.
This position misconstrues a franchisee's rights under the MVFPA as being merely
coextensive with the franchisee's contractual rights. In fact, the MVFPA provides
rights and remedies additional to those available under contract. "The [MVFPA] thus
contemplates precisely what [the franchisor] objects to: judicial oversight of the
terms of the franchise relationship." G.A.
Imports, 799 F.2d at 1208. Accordingly,
a contractual grant of rights cannot serve as a shield to an MVFPA claim.
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As this Court has previously stated, "... a dismissal under Rule 12(b)(6) should
be granted only in the unusual case in which a plaintiff includes allegations that show,
on the face of the complaint, that there is some insuperable bar to relief."
Schmedding v. Tnemec Co., Inc.,
187 F.3d 862, 864 (8th Cir. 1999). Regarding MO.
REV. STAT. § 407.825.1(15), such an insuperable bar exists because this statutory
subsection did not exist at the time the alleged violation occurred. See Mo. Legis.
Serv. 516 (1997); see also supra Note 2 . Regarding Stone Motor's allegations under
the other cited subsections, no such insuperable bar exists. Accordingly, Stone
Motor's complaint was sufficient to serve its purpose, i.e., to place GM on notice of
the claims being alleged. The district court's dismissal of Stone Motor's claims under
MO. REV. STAT. § 407.825.1(1), (3), and (9) is reversed.
IV
This Court reviews the district court's grant of summary judgment de novo.
Jaurequi v. Carter Mfg. Co., Inc.,
173 F.3d 1076, 1085 (8th Cir. 1999) (citing State
Farm Mut. Auto. Ins. Co. v. Shahan,
141 F.3d 819, 821 (8th Cir. 1998)). Summary
judgment is appropriate if the record, viewed in a light most favorable to the non-
moving party, contains no questions of material fact and demonstrates that the
moving party is entitled to judgment as a matter of law.
Jaurequi, 173 F.3d at 1085.
The moving party bears the burden of showing both the absence of a genuine issue
of material fact and an entitlement to judgment as a matter of law. Anderson v.
Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986); Matsushita Elec. Indus. Co. v.
Zenith Radio Corp.,
475 U.S. 574, 586-87 (1986); see also FED. R. CIV. P. 56(c).
Once the moving party has met its burden, the non-moving party may not rest on the
allegations of his pleadings, but must set forth specific facts, by affidavit or other
evidence, showing that a genuine issue of material fact exists. FED. R. CIV. P. 56(e).
Stone Motor relies primarily upon the affidavit of Virgil Stone to assert that
GM failed to fill orders in a timely fashion, provided an insufficient quantity of
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vehicles, withheld desirable, fast-selling models, failed to provide inventory
comparable to the inventory at nearby GM dealerships, refused to process orders, and
instructed Stone Motor to send customers to other GM franchisees. Using these
factual allegations, Stone Motor presents two separate breach of contract theories.
The first theory alleges a specific duty and a breach of that duty. Under this theory,
Stone alleges certain parol documents (such as Stone Motor's franchise application)
imposed on GM a duty to provide a specific number of vehicles. Under the second
theory of liability, Stone Motor alleges a breach of the general duty of good faith and
fair dealing that is implied by Missouri law under every contract.
The district court correctly rejected Stone Motor's first argument. Even
assuming that GM somehow ratified Stone Motor's preliminary documents and
initially became bound to provide vehicles in numbers consistent with Stone Motor's
sales projections, any such duty was superceded by the later written agreement which
contained an unambiguous merger clause (at section 17.11 of the Standard Provisions
Dealer Sales and Service Agreement). There is no dispute that section 6.1 of the
agreement accords broad discretion to GM to allocate vehicles among its various
dealers.4 Accordingly, the preliminary documents relied upon by Stone Motor are
4
The agreement in the present case provides:
Division will endeavor to distribute new Motor Vehicles among its
dealers in a fair and equitable manner. Many factors affect the
availability and distribution of Motor Vehicles to dealers including
component availability, and production capacity, sales potential in
Dealer’s Area of Primary Responsibility, varying consumer demand,
weather and transportation conditions, governmental regulations, and
other conditions beyond the control of General Motors. Division
reserves to itself discretion in accepting orders and distributing Motor
Vehicles, and its judgments and decisions are final. Upon written
request, Division will advise Dealer of the total number of new Motor
Vehicles, by series, sold to Dealers in Dealer’s Zone or Branch during
the preceding month.
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parol evidence that cannot be used to establish a quota system contrary to the clear
and express allocation of discretion contained in the agreement. Clearly Canadian
Beverage Corp. v. American Winery, Inc.,
257 F.3d 880, 889 (8th Cir. 2001)
(applying Missouri law); see also Union Elec. Co. v. Consolidated Coal, Co.,
188
F.3d 998, 1002 (8th Cir. 1999) (applying Missouri law).
However, this does not end our analysis. Missouri law5 implies a duty of good
faith in every contract:
‘Every contract imposes upon each party a duty of good faith and fair
dealing in its performance and enforcement.’ That duty prevents one
party to the contract from exercising a judgment conferred by the
express terms of [the] agreement in such a manner as to evade the spirit
of the transaction or so as to deny the other party the expected benefit of
the contract.
Amecks, Inc. v. Southwestern Bell Tel. Co.,
937 S.W.2d 240, 243 (Mo. Ct. App.
1996) (quoting Wulfing v. Kansas City S. Indus., Inc.,
842 S.W.2d 133, 157 (Mo. Ct.
App. 1992) and RESTATEMENT (SECOND) OF CONTRACTS § 205 (1981)). The district
court correctly held that the general, implied duty of good faith was incapable of
altering the express terms of the agreement which clearly vested discretion in this area
solely with GM. “[T]he covenant cannot give rise to new obligations not otherwise
contained in a contract’s express terms.” Comprehensive Care Corp. v. RehabCare
Corp.,
98 F.3d 1063, 1066 (8th Cir. 1996) (citing Glass v. Mancuso,
444 S.W.2d 467-
68 (Mo. 1969)). As this Court has previously held:
Appellee’s Appendix at 209, Dealer Sales and Service Agreement § 6.1.
5
Although the agreement specifies that Michigan law should apply, neither
party attempted to assert Michigan law below, and neither party disputes the
application of Missouri law at this stage of the proceedings.
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... the covenant acts merely as a gap filler to deal with circumstances not
contemplated by the parties at the time of contracting. Since good faith
is merely a way of effectuating the parties['] intent in unforeseen
circumstances, the implied covenant has nothing to do with the
enforcement of terms actually negotiated and cannot block [the] use of
terms that actually appear in the contract.
United States v. Basin Elec. Power Coop.,
248 F.3d 781, 796 (8th Cir. 2001) (internal
citations and quotations omitted). Accordingly, Stone Motor cannot establish an
entitlement to a specific number of vehicles through arguments based on the duty of
good faith.
Having correctly determined that the general duty of good faith and fair dealing
could not "trump" the agreement's clear allocation of discretion to GM by creating a
duty to deliver vehicles according to a stated quota, the district court ended its
analysis and determined that summary judgment was appropriate. We disagree. To
create a genuine question of material fact regarding breach of the duty of good faith,
Stone Motor was not required, as argued by GM, to establish an entitlement to receive
a specific number of vehicles. Rather, Stone Motor merely needed to present
evidence tending to demonstrate that GM exercised its discretion "so as to evade the
spirit of the transaction or so as to deny the other party the expected benefit of the
contract."
Amecks, 937 S.W.2d at 243.
As the moving party, GM bears the burden of demonstrating that there exist no
questions of material fact. GM has failed to meet this burden. Rather than defending
its exercise of discretion under the agreement and presenting evidence to explain the
performance deficiencies identified in Virgil Stone's affidavit, GM merely asserted
that the grant of unilateral discretion was a shield against any claims for breach of
good faith. Under Missouri law, "the implied duty of one party to a cooperate with
the other party to a contract to enable performance and achievement of expected
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benefits is an enforceable right." Koger v. Hartford Life Ins. Co.,
28 S.W.3d 405, 412
(Mo. Ct. App. 2000) (internal citations omitted). GM enjoyed broad discretion under
the agreement. Consequently, Stone Motor was not entitled to receive everything that
it desired. However, in light of the restrictions imposed by both Missouri contract
law and the MVFPA, Stone Motor was entitled to have GM exercise its discretion in
good faith. Stone Motor introduced evidence via affidavit which, if accepted as true
and viewed in a light most favorable to Stone Motor, could support claims for breach
of the duty of good faith. GM did not provide evidence to rebut Stone Motor's
assertions.6 Consequently, we find that GM has failed to prove an absence of genuine
6
GM argues that it satisfied the duty of good faith and fair dealing by adhering
to an objective vehicle allocation formula. In fact, GM presented no evidence to
support these arguments and, accordingly, Stone Motor need not rebut these
assertions to survive summary judgment. GM's attorney, while deposing Virgil
Stone, introduced the concept of GM's objective vehicle allocation system – the "turn
and earn" system – under which GM purportedly allocates vehicles based partly on
a dealership's ability to sell cars quickly. GM presented no evidence regarding such
a system. GM's attorney alluded to such a system and Virgil Stone admitted that he
did not know whether GM had used such a system regarding the allocation of
vehicles to Stone Motor. Attorney statements are not evidence. Further, even if the
statement of GM's attorney served as evidence, GM did not expand on this issue or
present evidence tending to show that GM had, in fact, employed such a system in
this instance. The exchange is detailed below:
Q. [Attorney for GM] You understand, do you not, that the way the
allocation system works, it depends in part on the rate at which vehicles
are sold?
A. [Virgil Stone] Chevrolet's terminology of turn and earn? Is that what
you're talking about?
Q. Yes.
A. Yes sir.
Q. All right. And you don't know at what rate your – you don't know the
rate at which the other dealers that you're talking about had sold their
vehicles previously, do you?
A. I don't know the rate?
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questions of material fact. Accordingly, the district court’s grant of summary
judgment on Stone Motor’s claim for breach of the duty of good faith and fair dealing
is reversed.
Accordingly, the judgment of the district court is reversed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
Q. And you don't know whether or not GM assigned vehicles to your dealer
in accordance with its own formula or not, do you?
A. I don't know that.
Deposition Transcript of Virgil Stone at 83-84.
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