vs. ) CASE NO. 77-826
Manufacturer. )
Pursuant to notice, an administrative hearing was held before Michael R.N. McDonnell, Hearing Officer for the Division of Administrative Hearings, at 9:00 a.m., on August 22, 1977, in Room 103, Collins Building, Tallahassee, Florida.
Joseph G. Spicola, Jr., appeared as counsel for the Dealer, and Theodore R. Hainline appeared as counsel for the Manufacturer.
Pinellas Truck Sales, Inc. (hereafter Dealer), seeks a determination pursuant to 320.641, Florida Statutes, that its franchise agreement with American Motors Sales Corporation (hereafter Manufacturer) was cancelled unfairly. That the dealer failed to comply with a provision of the franchise agreement is not in dispute. However, Dealer contends, in essence, that Manufacturer waived that non-compliance and that because of the waiver the subsequent cancellation of the franchise agreement was unfair.
Dealer has been engaged in the retail sales of motor vehicles for over fifteen years. In addition to Manufacturer's products, Dealer is franchised to sell GMC products and does so at the same location.
Prior to 1967, Hunt Truck Sales was the franchised Jeep dealer in the Pinellas County, Florida, area. The original franchise agreement was with Kaisar Jeep Sales Corporation whose operations were subsequently taken over by Manufacturer. During the year 1967, the franchise was assumed by Dealer based, in part, on the understanding that one W. C. Mosely actively and substantially participate in the ownership and operation of the business. Mosely signed as Vice-President of Dealer corporation on the original franchise agreement dated October 23, 1967.
A new dealer advance information and facilities report dated November 1, 1967, reflects that F. R. Hunt, Sr., owned 70 percent of Dealer corporation, Mosely 25 percent and J. R. Johnson 5 percent. A similar report dated February 22, 1971, shows Frank Hunt, Jr., 75 percent, and Mosely 25 percent. In the first report, Mosely is listed as Vice-President and in the second, as
President. Frank Hunt, Jr.'s 75 percent consists of stock he controls as executor of his father's, Frank Hunt, Sr.'s, estate.
In 1971, Manufacturer purchased all Jeep operations from Kaiser. The name was subsequently changed to Jeep Sales Corporation. On August 3, 1972, Dealer and Manufacturer entered into a new Dealer Franchise Agreement reflecting Mosely as 100 percent owner and President. No written permission for the ostensible change in ownership was obtained either before or after the refranchising took place.
In fact, Mosely was not a 100 percent owner, but rather was only 25 percent owner with his stock pledged as security for its purchase price. This inaccuracy was perpetuated in a Refranchising Facilities Report dated November 12, 1974, notwithstanding that in an intracompany correspondence dated September 13, 1974, between A. B. Hamrick and C. H. Jackson, it was recognized that Mosely was not 100 percent owner.
Although the memo inaccurately stated that the remaining 75 percent of the stock was "signed over" to Mosely but held by the secretary to Hunt Truck Sales, Inc., until payment, it was recognized that Hunt Truck Sales' connection with Dealer was an asset as a source of considerable management advice and assistance.
The franchise agreements in effect between Dealer and Manufacturer at all times pertinent to this case provided inter alia that Manufacturer could effect immediate termination of the agreements by written notice if there were any change in the specified ownership or management of Dealer without prior written approval of Manufacturer.
On June 1, 1975, Mosely, at the request of Dealer corporation, resigned his position as President and General Manager because of a decline in business.
C. Sherman Wiley was then elected Vice-President, General Manager, and Sales Manager, while Howard F. Brady was elected President. Brady also assumed Mosely's former position as 25 percent owner. These changes were made without prior written approval of Manufacturer.
On June 5, 1975, A. B. Hamrick made an in person contact with Dealer on behalf of Manufacturer. In his report dated the same day, Hamrick notes that Mosely is no longer the manager of Dealer's operations. The report further notes that at the last refranchising (some eight months before) it was explained that Dealer was actually owned by Hunt Truck Sales. The report was routed to, and initialled by, Manufacturer's Zone Manager, Zone Operations Manager, Field Sales Manager, Market Representative Manager, Administration Manager and Vehicle Distribution Manager.
Throughout the fourteen months preceding the termination notice, Manufacturer not only was fully aware of the ownership/management change but also continued to provide its products to Dealer for retail sale and to otherwise treat Dealer as having full franchise status.
On January 12, 1976, Manufacturer offered to extend Dealers franchise term to a ten year period on the recommendation of the zone manager. This written offer was dated over seven months after Manufacturer was made aware of Dealer's change in ownership and management on June 5, 1975. It stated that Manufacturer's intent was to "ensure the stability of our relationship" and that upon acceptance, Manufacturer would "complete the signatures." The extension was accepted by dealer.
At the time of acceptance, C. Sherman Wiley, Dealer's vice-president, general manager and sales manager called Mr. Cargill, Manufacturer's district sales manager, who advised Wiley to sign the acceptance and that the necessary refranchising papers would then be forwarded for the inclusion of new ownership and management data.
Between the time of the ownership and management change and the time of termination, Dealer had communicated the substance of the change to six agents of Manufacturer. Although a letter from Dealer's "corporate" attorney verifying the change was requested by Manufacturer, the reason for termination was the failure to obtain prior written approval for the change and not the failure to obtain the letter.
CONCLUSIONS OF LAW
The fact that Dealer did not obtain prior written approval from Manufacturer for the management and ownership change is uncontroverted. It follows that there was a breach of the provision of the franchise agreement requiring such approval. However, the question to be resolved in this case is whether a waiver of the breach has occurred. For if one has, the subsequent attempted termination of the franchise on the grounds of the waived conduct would be unfair.
Waiver has been defined as an intentional relinquishment of a known right, or the voluntary relinquishment of a known right, or conduct which warrants an inference of the relinquishment of a known right. When such a waiver is implied from conduct, the acts, conduct, or circumstances relied upon to show waiver must make out a clear case, and a waiver will not be held to arise simply from forbearance for a reasonable time. Fireman's Fund Insurance Co. vs. Vogel, 197 So.2d 20 (Fla. 2d DCA 1967).
In Rader v. Prather, 130 So. 15 (Fla. 1930), the Florida Supreme Court held:
If there has been a breach of the agreement sufficient to cause a forfeiture, and the party entitled thereto, either expressly or by his conduct, waives it or acquiesces in it, he will be precluded from enforcing the forfeiture, and equity will aid the defaulting party by relieving against it, if necessary. (at 17)
In this case a determination is to be made as to whether the termination was unfair, that is to say, whether it was equitable. If a court of equity would, on these facts, relieve the party in technical breach from the forfeiture then it can be said that the forfeiture is unfair.
The facts in this case make out a clear case of the intentional relinquishment of a known right, and it is so concluded. It must be emphasized that the breach consisted of the failure to obtain approval in writing before the change in management and ownership. Notwithstanding full knowledge of the change, Manufacturer took no termination action for some fourteen months. During that time, Manufacturer requested a letter verifying the change, offered to extend Dealer's contract to ten years and otherwise treated Dealer as enjoying full franchise status.
If manufacturer had intended to exercise its right to rescind the contract it would have done so before engaging in a course of conduct which so clearly constituted a waiver of its right of termination. There are no facts which support Manufacturer's reservation of the right of termination. It is, therefore
RECOMMENDED that the termination of Dealer's franchise be declared to be unfair.
DONE and ENTERED this 14th day of October, 1977, in Tallahassee, Florida.
MICHAEL R. N. McDONNELL
Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304
Joseph G. Spicola, Jr., Esquire Spicola & Larkin, P.A.
Theodore R. Hainline, Esquire American National Bank Building 1415 East Sunrise Boulevard
Ft. Lauderdale, Florida 33338
