Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Kinser, JJ., and Whiting, Senior Justice
WARD'S EQUIPMENT,
INC., ET AL.
OPINION BY JUSTICE A. CHRISTIAN COMPTON
v. Record No. 962544 October 31, 1997
NEW HOLLAND NORTH AMERICA, INC.
FROM THE CIRCUIT COURT OF HALIFAX COUNTY
Charles L. McCormick, III, Judge
In this controversy arising from a written contract between
a manufacturer and a dealer in farm equipment, the case turns
upon whether a party suing for damages may allege facts that
essentially reform the contract and thereby withstand demurrer.
In June 1995, appellants Ward's Equipment, Inc., Carl Ward,
and Anne Ward (collectively, the dealer) sued appellee New
Holland North America, Inc., successor to Ford New Holland, Inc.
(the manufacturer or the company). The dealer is a Virginia
corporation with its principal place of business in South Boston.
The manufacturer is a Delaware corporation with its principal
place of business in New Holland, Pennsylvania.
In a "bill of complaint" filed on the chancery side of the
court below, the dealer sought compensatory and punitive damages
for alleged breaches of contract and alleged tortious activity,
and asked for a trial by jury. Attached as the only exhibit to
the dealer's pleading is a letter dated October 3, 1994 from the
manufacturer to the dealer discussing the parties' obligations
under a Dealer Agreement. The dealer did not incorporate the
terms of the Dealer Agreement in its "bill of complaint."
Responding, the manufacturer filed a demurrer and a motion
craving oyer. Among the grounds of the demurrer, the
manufacturer asserted the trial court "lacks equity jurisdiction
in that Plaintiffs have a complete and adequate remedy at law."
The trial court never was asked to rule on this ground.
In the motion craving oyer, the manufacturer asserted that
the dealer's complaint "identifies and characterizes, but fails
to include, the written Dealer Agreement" between the parties
dated August 14, 1987. The motion further stated: "It is
necessary and proper for the Dealer Agreement and Schedule C
thereto to be produced, oyer taken of it and that it becomes per
se a matter of record for the consideration of this Court on New
Holland's demurrer, and for all other purposes as if copied at
large in Plaintiffs' Bill of Complaint." Concluding, the
manufacturer asked the court to order a complete copy of the
Dealer Agreement filed, to be "deemed an exhibit to Plaintiffs'
Bill of Complaint." The motion was unopposed and was granted
during a July 1996 hearing on the demurrer.
Following oral argument, the trial court sustained the
demurrer and denied the dealer's motion for leave to file an
amended complaint. We awarded the dealer an appeal from the
trial court's September 1996 final order dismissing the action
with prejudice.
Settled criteria governing a trial court's consideration of
a demurrer should be reviewed. A demurrer admits the truth of
all properly pleaded material facts. "All reasonable factual
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inferences fairly and justly drawn from the facts alleged must be
considered in aid of the pleading. However, a demurrer does not
admit the correctness of the pleader's conclusions of law." Fox
v. Custis, 236 Va. 69, 71, 372 S.E.2d 373, 374 (1988).
When a demurrant's motion craving oyer has been granted, the
court in ruling on the demurrer may properly consider the facts
alleged as amplified by any written agreement added to the record
on the motion. Hechler Chevrolet, Inc. v. General Motors Corp.,
230 Va. 396, 398, 337 S.E.2d 744, 746 (1985). Furthermore, and
significant in this appeal, a court considering a demurrer may
ignore a party's factual allegations contradicted by the terms of
authentic, unambiguous documents that properly are a part of the
pleadings. See Fun v. Virginia Military Inst., 245 Va. 249, 253,
427 S.E.2d 181, 183 (1993).
No useful purpose will be served by summarizing in detail
the dealer's 105-paragraph, 29-page complaint. It is sufficient
to observe that the dealer mounts a broadside attack on the
manufacturer as the result of a business decision made by the
manufacturer and expressed in the October 3 letter, a so-called
"attrition letter."
In that letter, the dealer was notified that the
manufacturer's "current market representation plan contemplates
no dealer at your Dealer Location. While we will continue to do
business as normal with you under the terms of the Dealer
Agreement, we will not consent to the sale or assignment of your
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Dealer Agreement. . . ."
The dealer alleged that, at the time of this notice, it was
negotiating a purchase agreement with a Ward family member, and
that the notice severely restricted or eliminated the dealer's
ability to consummate the contemplated transaction. The dealer
also alleged that shortly after sending the attrition letter, the
manufacturer entered into an agreement with one of the dealer's
competitors, located 15 miles from the dealer, to begin selling
equipment previously available in its trade area only at the
dealer's location.
Thus, arising from this climate of keen business
competition, the dealer sought damages in a 12-count complaint.
Many of the counts have been abandoned; those still viable are
labelled "Breach of Contract," "De Facto Termination," "Fraud and
Misrepresentation," "Estoppel," "Violation of Michigan Statutes,"
and "Violation of Virginia Statutes."
On appeal, the dealer contends the trial court erred in
sustaining the demurrer "by considering questions of fact not in
the record." There is no merit to this contention.
The dealer points to a comment made by the trial judge from
the bench during the course of sustaining the demurrer. The
court said the complaint failed to allege the manufacturer had
engaged in any conduct that was not "authorized" or "anticipated"
under the terms of the unambiguous August 1987 contract. This
observation did not amount to a consideration of facts not of
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record. Rather, the ruling demonstrates that the trial court
followed the foregoing criteria, which apply when a contract is
part of the pleadings. The court merely was describing a
situation in which the dealer has ignored the contract's language
in asserting claims that the contract refutes.
Next, the dealer argues the trial court erred by ignoring
facts it alleged in support of its assertion that the
manufacturer breached the contract. The dealer asserted the
contract breach occurred when the manufacturer "terminated" the
dealership without cause, unreasonably withheld consent to the
dealer's sale or assignment of the dealership, failed to deliver
equipment to it in a timely manner, encroached upon its
"exclusive market area," and sought to replace it with a
competitor. The trial court was justified in refusing to accept
these factual allegations as true because they are refuted by the
terms of the authentic, unambiguous documents that are a part of
the pleadings.
The contract in issue consists of a two-page "Dealer
Agreement" and a nine-page document labelled "Dealer Agreement
Standard Provisions" to which is attached three pages of
"schedules." The contract provides, "This agreement shall be
governed by and interpreted in accordance with the laws of the
State of Michigan."
The law of Michigan is the same as Virginia's on the subject
of contract interpretation. A contract must be construed as
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written and as a whole with all parts being harmonized whenever
possible. Associated Truck Lines, Inc. v. Baer, 77 N.W.2d 384,
386 (Mich. 1956); Paramount Termite Control Co. v. Rector, 238
Va. 171, 174, 380 S.E.2d 922, 925 (1989).
Relevant to the dealer's breach-of-contract argument, the
Agreement makes clear that the dealer's appointment is as a
"nonexclusive authorized dealer" and that likewise the dealer's
trade area, designated in the contract as "Primary Area of
Responsibility," (PAR) is not exclusive to the dealer. Indeed,
paragraph 18(a) of the Standard Provisions gives the manufacturer
the absolute right to alter the dealer's PAR and to appoint
additional dealers within that area.
Additionally, the dealer's claim that it has been
"terminated" is contradicted by the plain language of the
contract as amplified by the attrition letter. Consistent with
the manufacturer's absolute rights set forth in paragraph 18(a),
the letter clearly explained that it was "not a termination
notice," indicating the manufacturer would continue to do
business as normal with the dealer.
Also, the dealer did not have the absolute right to sell or
assign the dealership. Even though paragraph 18(d) acknowledges
that the dealer "may sell" the dealership, this right is
constrained by paragraph 18(c), which provides: "The Company
. . . may refuse to appoint as an authorized dealer any purchaser
or prospective purchaser of any of the shares or assets of the
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Dealer."
Also, the plain language of the Dealer Agreement refutes any
factual allegation that the company breached the contract for
failure to deliver equipment in a timely manner. Paragraph 7(b)
of the Standard Provisions provides that the company's supplier
"shall not be responsible for . . . delays in shipments" of
equipment.
Next, the dealer argues the trial court erred by "failing to
consider" counts in the complaint alleging "fraudulent
misrepresentation, promissory estoppel, and violation of the
Michigan and Virginia franchise laws." Under this argument, the
dealer contends the trial court erred "in failing to imply the
covenant of good faith and fair dealing into the parties'
agreement." There is no merit to this contention.
In Michigan, as in Virginia, when parties to a contract
create valid and binding rights, an implied covenant of good
faith and fair dealing is inapplicable to those rights. This is
so under either the common law or the Uniform Commercial Code
(even assuming a dealership agreement is a contract for the sale
of goods). Generally, such a covenant cannot be the vehicle for
rewriting an unambiguous contract in order to create duties that
do not otherwise exist. Hubbard Chevrolet Co. v. General Motors
Corp., 873 F.2d 873, 876-77 (5th Cir.), cert. denied, 493 U.S.
978 (1989) (applying Michigan law); Charles E. Brauer Co. v.
NationsBank, 251 Va. 28, 35, 466 S.E.2d 382, 386 (1996). See
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also Mich. Comp. Laws § 440.1203 (1994); Va. Code § 8.1-203.
We reject summarily the dealer's contention the trial court
erred in dismissing the fraud claim. We apply Virginia law
because fraud is a tort. Generalized, nonspecific allegations,
such as those contained in this complaint, are insufficient to
state a valid claim of fraud. Tuscarora, Inc. v. B.V.A. Credit
Corp., 218 Va. 849, 858, 241 S.E.2d 778, 783 (1978).
There is no merit to the dealer's contention that a "claim
of promissory estoppel can be made under Virginia law." This
Court has not recognized the doctrine, and today we decide that
it should not be adopted in the Commonwealth. W.J. Schafer
Assoc., Inc. v. Cordant, Inc., 254 Va. ___, ___ S.E.2d ___
(1997).
Further, the dealer erroneously contends the trial court
failed "to address or consider the question of the application of
Michigan law." The relevance of Michigan law was debated during
argument of counsel and the court plainly stated in the judgment
order that the "clear and unambiguous terms of the Dealer
Agreement gave full authority to [the manufacturer], under either
Virginia or Michigan law, to do the acts which Plaintiffs
complain of in their Bill of Complaint."
And, the trial court did not err by rejecting the dealer's
argument and by ruling that the Michigan Franchise Investment
Law, Mich. Comp. Laws, §§ 445.1501, et seq. (1989), does not
govern this case. When a contract contains a choice of law
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provision, the chosen jurisdiction's statutory law, as opposed to
its common law, will not control when the statutes by their own
terms do not apply. Peugeot Motors of America, Inc. v. Eastern
Auto Distributors, Inc., 892 F.2d 355, 358 (4th Cir. 1989), cert.
denied, 497 U.S. 1005 (1990).
In the present case, the Michigan franchise law is
inapplicable because it contains a geographic limitation; it
applies only to franchises "made" in Michigan. See Mich. Comp.
Laws § 445.1504; Hacienda Mexican Restaurants v. Hacienda
Franchise Group, 489 N.W.2d 108, 111 (Mich. App. 1992). Under
paragraph (2) of the statute, a franchise agreement is "made" in
Michigan "when an offer to sell is made" there, or if "an offer
to buy is accepted" there, or "if the franchisee is domiciled"
there, or if "the franchised business is or will be operated"
there.
Here, the dealer does not allege that the Agreement was made
in Michigan, that the dealer was offered the agreement in
Michigan, that it accepted the Agreement in Michigan, that the
dealer is domiciled in Michigan, or that the dealer's business
will be operated in Michigan. Rather, the dealer alleges that it
is a Virginia corporation with its principal place of business in
South Boston, and that the manufacturer is a Delaware corporation
with its principal place of business in Pennsylvania. The
dealer's own allegations demonstrate that the Michigan franchise
law cannot apply to this case.
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Moreover, the trial court did not err in rejecting the
dealer's argument that Virginia's Retail Franchising Act, Code
§§ 13.1-557, et seq., is applicable here. For the purpose of
this argument, we will assume the Act is relevant, rather than
the statutes regarding farm machinery dealerships found in Code
§§ 59.1-344, et seq. The franchising act is applicable if the
"franchisee is required to pay, directly or indirectly, a
franchise fee," Code § 13.1-559(A)(b)(3), that is, "a fee or
charge for the right to enter into or maintain a business under a
franchise, including a payment or deposit for goods, services,
rights, or training." § 13.1-559(A)(g).
In effect, the dealer alleges it paid a franchise fee. It
asserts it "is required to purchase training videos and programs;
make payments for the use of cooperative advertising; and
purchase tools, parts, and other goods and/or services" from the
manufacturer.
These factual assertions are directly contradicted by the
contract. Paragraph 18(c) plainly states: "The Dealer has not
paid any fee for this agreement." Thus, the trial court did not
have to accept as true the dealer's allegations regarding payment
of fees for videos and other services.
Finally, the dealer argues that the trial court erred in
refusing to grant the motion for leave to amend the complaint.
We hold the court did not abuse its discretion in so ruling. A
trial court may properly deny a motion for leave to amend when it
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is apparent that such an amendment would accomplish nothing more
than provide opportunity for reargument of questions already
decided. Hechler Chevrolet, 230 Va. at 403, 337 S.E.2d at 749.
This is such a case.
Consequently, we conclude there is no error in the judgment
appealed from, and it will be
Affirmed.
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