Kuhl Motor Co. v. Ford Motor Co.

Currie, J.

{dissenting). I must respectfully dissent from the court’s opinion in this case. Sec. 218.01 (3) (a) 17, Stats., provides that an automobile manufacturer’s license to transact business in Wisconsin may be denied, suspended, or revoked where such manufacturer “has unfairly, without due regard to the equities of said dealer and without just provocation, canceled the franchise of any motor vehicle dealer." Sec. 218.01 (8) (d) provides that in addition to, or in lieu of, the denial, suspension, or revocation of the license of an automobile manufacturer who violates par. 17 of sec. 218.01 (3) (a), such manufacturer may “be subject to a fine of not more than $5,000.” The state has thus made it crystal clear that the unfair cancellation of a dealer’s franchise without provocation and without considering the dealer’s equities is against the public policy of this state.

In Menominee River B. Co. v. Augustus Spies L. & C. Co. (1912), 147 Wis. 559, 571 , 132 N. W. 1118 , in an opinion by Mr. Justice Timlin, the court stated:

“A contract made in violation of a statute or for performance of an act which is prohibited by statute is void and will not be enforced by the court. This is true whether there is a prohibition and a penalty or merely a prohibition.”

*499 The above quotation was quoted with approval in Guardian Agency v. Guardian Mut. Savings Bank (1938), 227 Wis. 550, 559 , 279 N. W. 79 , 115 A. L. R. 1356. The latest pronouncement of our court on this subject was made in Pedrick v. First Nat. Bank of Ripon (1954), 267 Wis. 436, 439 , 66 N. W. (2d) 154 , wherein it was declared:

“ ‘An agreement is against public policy if it . . . violates some public statute, . . .’ 12 Am. Jur., Contracts, p. 663, sec. 167. ‘. . . courts of justice will not recognize or uphold any transaction which, in its object, operation, or tendency, is calculated to be prejudicial to the public welfare, to sound morality, or to civic honesty. The test is whether the parties have stipulated for something inhibited by the law or inimical to, or inconsistent with, the public welfare.’ Id., pp. 662, 663. (Italics ours.) Unquestionably, according to the complaint the parties here stipulated for something inhibited by the law, namely, the appointment by a corporate executor of the attorney for the estate. Agreements against public policy or prohibited by public law ‘. . . cannot be enforced by one party against the other, either directly by asking the court to carry them into effect or indirectly by claiming damages or compensation for breach of them.’ 12 Am. Jur., Contracts, p. 715, sec. 209.”

The majority opinion states that secs. 218.01 (3) (a) 17, and 218.01 (8) (d), Stats., do not expressly prohibit unfair cancellation of dealers’ contracts by auto manufacturers, but only subject manufacturers who engage in such practice to a penalty for so doing. The same argument might be advanced against many of the criminal statutes of this state, which do not in express words prohibit people from doing certain acts but only state that if they do perform such acts a penalty will be inflicted. Sec. 346.06 (1) 1 relating to bribery of officers *500 is an example of such type of criminal statute. However, it is doubtful if anyone would have the temerity to seriously contend that a contract to bribe an officer would not be illegal and against public policy.

Par. 17 of sec. 218.01 (3) (a), Stats., was enacted in 1937, and the dealer’s contract entered into between the defendant and the plaintiff corporation was executed on December 12, 1938. Any dealer’s franchise contract entered into between an automobile manufacturer and a Wisconsin dealer applicable to business to be transacted in Wisconsin would be subject to the provisions of such statute, and any provision of such contract which violated the statute would be against public policy and void under the authorities above cited. If the provision of the agreement permitting the Ford Motor Company to terminate the franchise upon sixty days’ advance notice is to be interpreted as authorizing the Ford Motor Company to unfairly cancel the same without just provocation, then such provision would be void. On the other hand, if such termination provision of the contract can be interpreted in the light of the statute as being operative upon giving the sixty-day notice so as to permit a cancellation upon *501 any ground except one which contravened the statute, then such cancellation clause would not be void in toto. It is this latter interpretation which the law favors and which I believe should be adopted by this court.

The majority opinion in effect holds that if the statute were to be construed as prohibiting automobile manufacturers from entering into franchise contracts with Wisconsin dealers, which would restrict the right of the manufacturer to cancel the same, the statute would be unconstitutional as violating the Fourteenth amendment. The reason advanced for such conclusion is that interference with the right to contract can only be grounded upon the exercise by the state of its police power to promote the general welfare, and the statute was not enacted in the interest of the general public but only to benefit a particular small class of citizens, viz., auto dealers.

The United States supreme court, as early as 1887, in Mugler v. Kansas (1887), 123 U. S. 623 , 8 Sup. Ct. 273, 31 L. Ed. 205 , expressly laid down the overriding doctrine that neither the defense of impairment of existing contracts nor the taking of property without just compensation is a defense to the acts of the state when done under the authority of its police power if that power is otherwise validly exercised.

In discussing the extent of the police power the United States supreme court in Berman v. Parker (1954), 348 U. S. 26, 32 , 75 Sup. Ct. 98, 99 L. Ed. 27 , declared:

“Public safety, public health, morality, peace and quiet, law and order — these are some of the more conspicuous examples of the traditional application of the police power to municipal affairs. Yet they merely illustrate the scope of the power and do not delimit it.” (Emphasis supplied.)

One of the latest pronouncements of the United States supreme court toward the exercise of police power by the states is to be found in Williamson v. Lee Optical Co. (1955 ), *502 348 U. S. 483, 488 , 75 Sup. Ct. 461, 464, 99 L. Ed. 563 , wherein it was stated:

“The day is gone when this court uses the due-process clause of the Fourteenth amendment to strike down state laws, regulatory of business and industrial conditions, because they may be unwise, improvident, or out of harmony with a particular school of thought. [Citing cases.] We emphasize again what Chief Justice Waite said in Munn v. Illinois, 94 U. S. 113, 134 [ 24 L. Ed. 77 ], ‘For protection against abuses by legislatures the people must resort to the polls, not to the courts.' ”

It would seem reasonably clear that one of the chief objectives of the legislature in enacting sec. 218.01, Stats., in so far as it seeks to regulate the dealings between automobile manufacturers and dealers, is to promote fair dealing, which, of course, is a legitimate exercise of police power. Petition of State ex rel. Attorney General (1936), 220 Wis. 25 , 264 N. W. 633 . In stating the underlying reason for such conclusion it would be difficult to improve upon the forceful language of Mr. Chief Justice Hughes in his dissent in Moorehead v. New York ex rel. Tipaldo (1936), 298 U. S. 587, 627 , 56 Sup. Ct. 918, 80 L. Ed. 1347 , 103 A. L. R 1445:

“We have had frequent occasion to consider the limitations of liberty of contract. While it is highly important to preserve that liberty from arbitrary and capricious interference, it is also necessary to prevent its abuse, as otherwise it could be used to override all public interests and thus in the end destroy the very freedom of opportunity which it is designed to safeguard.”

The fact that the persons to be benefited by this regulatory measure are confined to one class of our citizens, auto dealers, does not militate against the same being a legitimate exercise of the police power. As the Connecticut court recently stated *503 in Amsel v. Brooks (1954), 141 Conn. 288, 297 , 106 Atl. (2d) 152, 157, 45 A. L. R. (2d) 1234, 1241:

“A statute which is otherwise within the police power or serves a public purpose is not unconstitutional merely because it incidentally benefits a limited number of persons.”

While all the citizens of the state are entitled to be protected against unfair dealing by others, this does not mean that.the legislature must by one sweep prohibit all unfair dealing and cannot proceed piecemeal to remedy particular types of unfair dealing which manifest themselves in particular occupations or industries. On this point it is only necessary to quote further from Williamson v. Lee Optical Co., supra ( 348 U. S. 488 ) :

“Secondly, the district court held that it violated the equal-protection clause of the Fourteenth amendment to subject dpticians to this regulatory system and to exempt, as sec. 3 of the act does, all sellers of ready-to-wear glasses. The problem of legislative classification is a perennial one, admitting of no doctrinaire definition. Evils in the same field may be of different dimensions and proportions, requiring different remedies. Or so the legislature may think. Tigner v. Texas, 310 U. S. 141 [60 Sup. Ct. 879, 84 L. Ed. 1124 ], Or the reform may take one step 'at 'a time, addressing itself to the phase of the problem which seems most acute to the legislative mind. Semler v. Dental Examiners, 294 U. S. 608 [55 Sup. Ct. 570, 79 L. Ed. 1086 ], The legislature may select one phase of one field and apply a remedy there, neglecting the others. A. F. of L. v. American Sash Co. 335 U. S. 538 [69 Sup. Ct. 258, 93 L. Ed. 222 ]. The prohibition of the equal-protection clause goes no further than the invidious discrimination.”

A convincing argument in favor of the legislature exercising the state’s police power to protect automobile dealers against unfair dealing on the part of automobile manufac *503a turers is provided in the following statement by Mr. Justice Black in his dissenting opinion in Ford Motor Co. v. United States (1948), 335 U. S. 303, 323 , 69 Sup. Ct. 93, 93 L. Ed. 24 :

For the appellant there was a brief and oral argument by A. W. Schütz of Milwaukee.

For the respondent there was a brief by Shaw, Muskat & Paulsen, and oral argument by John G. Quale, all of Milwaukee.

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

“At the time the decrees were entered, Ford made and sold about 25 per cent of all cars in the United States, Chrysler 25 per cent and General Motors 44 per cent. Ford and the others sell to dealers about four billion dollars’ worth of cars yearly, requiring cash on delivery. The dealers then sell to retail customers. About 60 per cent of the retail sales are on credit. Dealers not permitted to sell other makes of cars are wholly dependent upon Ford’s, G. M.’s, or Chrysler’s favorable treatment for their business lives. The dealer agencies are for one year, but the agency contracts can be canceled on short notice and without cause. The dealers are thus economic dependents of the company whose cars they sell.”

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

I am authorized to state that Mr. Chief Justice Faiechild and Mr. Justice Brown join in this dissent.

A motion for rehearing was granted on September 16, 1955, and oral argument was heard October 14, 1955.

*503b The following opinion was filed November 8, 1955 :

Per Curiam

(on reargument). Mr. Justice Broadfoot announces that he withdraws his concurrence in the concurring opinion and that he now joins in the prior dissenting opinion. By reason of this, such prior dissenting opinion now becomes the majority opinion in this case. Mr. Justice Martin, Mr. Justice Gehl, and Mr. Justice Steinle dissent therefrom for the reasons already stated in the original majority and concurring opinions.

The previous mandate is vacated. The order appealed from is reversed, and cause remanded with directions to overrule the demurrer.

Sec. 346.06 (1). Any person who shall corruptly give, offer, or promise to any executive, judicial, legislative, administrative, or other officer of the state, or of any county, town, city, village, school district, or of other municipal corporation or subdivision *500 therein, after his election or appointment, and either before or after he shall have been qualified or shall have taken his seat, any gift or gratuity, or any money, goods, thing in action, personal or real property, or any thing of value, or any pecuniary or other personal advantage, present or prospective, with intent to influence his vote, opinion, judgment, or action upon any question, matter, cause, or proceeding which may then be pending or which may by law come or be brought before him in his official capacity, and any such officer who shall corruptly accept or receive any such gift, gratuity, money, goods, thing in action, personal or real property, or any thing of value, or any such pecuniary or other personal advantage, present or prospective, under any agreement or understanding that his vote, opinion, judgment, or action should be thereby so influenced shall be punished by imprisonment in the state prison not more than five years nor less than one year, or by fine not exceeding one thousand dollars nor less than two hundred dollars.