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WILDERNESS INDUSTRIES MARYLAND v. COMMONWEALTH PENNSYLVANIA (03/30/81)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: March 30, 1981.

WILDERNESS INDUSTRIES OF MARYLAND, INC., PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, STATE BOARD OF MOTOR VEHICLE MANUFACTURERS, DEALERS AND SALESMEN AND DEAN FOUNTAIN CAMPER SALES, RESPONDENTS

Appeal from the Order of the State Board of Motor Vehicle Manufacturers, Dealers and Salesmen in case of Dean Fountain Camper Sales v. Wilderness Industries of Maryland, No. 78-MV-21.

COUNSEL

David R. Bahl, McCormick, Reeder, Nicholas, Sarno, Bahl & Knecht, for petitioner.

Marjorree Aderson, Assistant Attorney General, with her James J. Kutz, Chief Counsel, and Harvey Bartle, III, Attorney General, for respondent, State Board of Motor Vehicle Manufacturers, Dealers and Salesmen.

Clarence D. Bell, Jr., for respondent, Dean Fountain Camper Sales.

Judges Rogers, Craig and Palladino, sitting as a panel of three. Opinion by Judge Palladino. This decision was reached prior to the expiration of the term of office of Judge Wilkinson, Jr.

Author: Palladino

[ 58 Pa. Commw. Page 128]

This is an appeal from an order of the State Board of Motor Vehicle Manufacturers, Dealers and Salesmen (Board) dated February 27, 1980, which suspended the

[ 58 Pa. Commw. Page 129]

    motor vehicle manufacturer's license of Wilderness Industries of Maryland, Inc. (petitioner). The basis for the suspension was a conclusion by the Board that petitioner had violated Section 4(2)(xi) of the Motor Vehicle Manufacturer's, Dealer's and Salesmen's License Act (Act), Act of December 21, 1973, P.L. 412, 63 P.S. § 805(2)(xi), reenacting and amending Section 5 of the Motor Vehicle Salesmen's License Act, Act of September 9, 1965, P.L. 499, as amended, 63 P.S. § 805, which requires 60 days advance notice by a motor vehicle manufacturer of the intention to cancel the franchise of any motor vehicle dealer.*fn1 We affirm.

The initial proceeding was brought before the Board on the complaint of Dean Fountain Camper Sales (Dean Fountain), which objected to the cancellation of its dealership franchise by petitioner.

The Board, inter alia, made the following findings of fact:

6. On or about August 1, 1974, [petitioner] and [Dean Fountain] agreed to designate [Dean Fountain] a mobile home

[ 58 Pa. Commw. Page 130]

    dealer authorized to sell the [petitioner's] products. Thereafter, [Dean Fountain] immediately began the sale of [petitioner's] mobile homes. . . .

7. On or about May 7, 1975, [Dean Fountain] submitted to the [petitioner] a dealership application and financial statement. . . .

8. Neither [Dean Fountain] or [petitioner] executed a written document setting forth the terms or obligations for possessing and operating a dealership authorized to merchandise the [petitioner's] product. . . .

12. On March 25, 1977, [petitioner] issued a letter to [Dean Fountain] indicating that [Dean Fountain] was placed on probation for the following reasons:

'1. Failure to adequately inventory the Wilderness Travel Trailer. You now have only five new Wilderness Travel Trailers in stock.

'2. Very poor market penetration in your area, only 6.7% in Delaware County for 1976, whereas Prowler, our nearest competition, has over 21% in the same county. Reference R. L. Polk.

'3. The low interest you display in keeping your dealership with Wilderness.'

The letter also informed [Dean Fountain] that a discussion involving the probable severing of [Dean Fountain's] dealership/manufacturer relationship would be pursued if he did not boost the dealership's stock by April 25, 1977. . . .

14. On December 16, 1977, [petitioner] issued to [Dean Fountain] a letter immediately terminating the dealer/manufacturer's relationship. The reasons for termination are as follows:

'1. Failure to adequately inventory the Wilderness Travel Trailers. You have not inventoried

[ 58 Pa. Commw. Page 131]

    the required minimum inventory and you now have only three new Wilderness Trailers in stock which is not a representative stock of our line.

'2. The low interest you still display in keeping your dealership with Wilderness.' . . .

Based on the above findings, the Board concluded as a matter of law that the probation letter of March 25, 1977 did not constitute adequate notice of petitioner's intent to terminate a franchise as required by Section 4(2)(xi) of the Act and that therefore petitioner's termination letter of December 16, 1977, amounted to a termination without prior notification in violation of the Act.

Petitioner first argues that the Board lacked jurisdiction to act in this case because no franchise existed between petitioner and the motor vehicle dealer, Dean Fountain. This contention is based on the language in Section 4(2)(xi) which requires 60 days advance notice before a manufacturer can cancel "the franchise of any distributor." Petitioner maintains that the relationship was merely contractual in nature and not equivalent to a franchise since no written document establishing the right and obligations of the parties was ever executed and petitioner exercised only minimal control over Dean Fountain's business. We disagree.

The Pennsylvania Supreme Court has defined a franchise relationship in the following manner:

In its simplest terms, a franchise is a license from the owner of a trademark or trade name permitting another to sell a product or service under the name or mark. More broadly stated, the franchise has evolved into an elaborate agreement by which the franchisee undertakes to conduct a business or sell a product or service in accordance with methods and procedures

[ 58 Pa. Commw. Page 132]

    prescribed by the franchisor, and the franchisor undertakes to assist the franchisee through advertising, promotion and other advisory services.

Atlantic Richfield Co. v. Razumic, 480 Pa. 366, 374, 390 A.2d 736, 740 (1978) (quoting Piercing Pagoda, Inc. v. Hoffner, 465 Pa. 500, 508-09, 351 A.2d 207, 211 (1976)).*fn2

In Witmer v. Exxon Corp., 260 Pa. Superior Ct. 537, 394 A.2d 1276 (1978), the Superior Court analyzed the definition of franchise set out in Razumic and concluded that the lack of a written agreement did not necessarily prevent a business relationship from being termed a franchise. Rather, the Superior Court found the actual business practices of the parties and the degree of control exercised by one party over the other party's business to be the cornerstones of a franchise relationship.

We must agree with the Superior Court that under the standards set out in Razumic, a franchise relationship may be found to exist even in the absence of a written agreement to that effect so long as the evidence shows that the business conduct of those involved conforms in actual practice to that of a franchise relationship.

Despite the absence of a written franchise agreement, it is clear from the record below that the actual business practices between petitioner and Dean Fountain evidence all the essential components of a franchise relationship. Accordingly, we see no merit to petitioner's argument that in the absence of a formal written agreement no franchise relationship could exist for purposes of the Act.

[ 58 Pa. Commw. Page 133]

Petitioner's other argument worthy of note is that it has complied in substance, though not in strict form, with the 60 day advance notice of termination required by the Act. Specifically, petitioner argues that its letter of March 25, 1977, placing Dean Fountain on probation and threatening termination at an unspecified later date, satisfies the notice requirement. This argument is also unpersuasive.

Section 4(2)(xi) is quite explicit that advance notice of termination must be given unless "such notice would not be in the public interest." Petitioner has not alleged that advance notice would not have been in the public interest in this case. Further, it is clear that the letter of March 25, 1977, did not amount to advance notice of termination because it merely warned of the possibility of termination in the future if certain conditions were not complied with by April 25, 1977. Where, as here, the words of a statute are clear and unambiguous, we are not empowered to disregard the letter of the statute under the pretext of pursuing its spirit. Statutory Construction Act of 1972, 1 Pa. C.S. § 1921(b). Rather, the statute must be given its plain and obvious meaning. Commonwealth v. Rieck Investment Corp., 419 Pa. 52, 213 A.2d 277 (1965); City of Pittsburgh v. Royston Service, Inc., 37 Pa. Commonwealth Ct. 394, 390 A.2d 896 (1978). We conclude, therefore, that petitioner has not given proper notice of termination as required by Section 4(2)(xi) of the Act.

Accordingly, the order of the Board suspending petitioner's manufacturer's license is affirmed to the extent outlined in the foregoing opinion.*fn3

[ 58 Pa. Commw. Page 134]

Order

And Now, March 30, 1981, the order of the State Board of Motor Vehicle Manufacturers, Dealers and Salesmen, dated February 27, 1980, docketed at No. 78-MV-21, is affirmed insofar as it suspends petitioner's manufacturer's license for failure to provide proper notice of termination of the dealership franchise of Dean Fountain Camper Sales.

This decision was reached prior to the expiration of the term of office of Judge Wilkinson, Jr.

Disposition

Affirmed in part.


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