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Laws-info.com » Cases » Illinois » 4th District Appellate » 2003 » Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp.
Crossroads Ford Truck Sales, Inc. v. Sterling Truck Corp.
State: Illinois
Court: 4th District Appellate
Docket No: 4-02-0931 Rel
Case Date: 06/30/2003

NO. 4-02-0931

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

CROSSROADS FORD TRUCK SALES, INC., a ) Appeal from
Delaware Corporation, ) Circuit Court of
                     Plaintiff-Appellant, ) Sangamon County
                     v. ) No. 01MR643
STERLING TRUCK CORPORATION, a Delaware )
Corporation, ) Honorable
                     Defendant-Appellee. ) Donald M. Cadigan,
) Judge Presiding.

JUSTICE APPLETON delivered the opinion of the court:

Plaintiff, Crossroads Ford Truck Sales, Inc., has afranchise from defendant, Sterling Truck Corporation, to selltrucks and parts manufactured by defendant. In the franchiseagreement (the agreement), plaintiff promises to have an adequateinventory of trucks and parts (by buying the trucks and partsfrom defendant) and enough technicians and tools to service thetrucks. The agreement states that each year, defendant will sendplaintiff an "annual operating requirements addendum" "specifyingcertain operational requirements for [plaintiff's] satisfactionof its commitments in [the] agreement." The agreement requiresplaintiff to sign and comply with the annual addenda and statesthat breach of any provision of the agreement is cause forterminating the franchise.

Plaintiff sought a declaratory judgment that the "HN80Dealer Annual Operating Requirements Addendum" for 2001 (the 2001addendum), as well as the requirement that plaintiff sign andcomply with future annual operating requirements addenda, violated the Motor Vehicle Franchise Act (Act) (815 ILCS 710/1through 32 (West 2000)). Plaintiff sought an injunction againstany further such violations. The parties filed cross-motions fora judgment on the pleadings. The trial court denied plaintiff'smotion and granted defendant's motion.

Plaintiff appeals both rulings, arguing that theaddenda are (1) "coercive" or an "attempt to coerce" within themeaning of section 4(c) of the Act (See 815 ILCS 710/4(c) (West2000)), (2) "unreasonably restrictive" within the meaning ofsection 7 (815 ILCS 710/7 (West 2000)), (3) "arbitrary" and"unconscionable" within the meaning of section 4(b) (815 ILCS710/4(b) (West 2000)), and (4) unilateral modifications of theagreement. We hold that the denial of plaintiff's motion for ajudgment on the pleadings is an interlocutory order and, therefore, not appealable. See Fabian v. Norman, 138 Ill. App. 3d507, 509, 486 N.E.2d 335, 337-38 (1985). We further hold thatthe 2001 addendum and the provision for issuing future addenda donot offend the Act. The 2001 addendum is not a unilateralmodification; it is actually part of the agreement that plaintiffsigned. Plaintiff does not contend that the addenda issued after2001 are substantively unreasonable. Therefore, we hold thatdefendant did not unilaterally modify the agreement, and weaffirm the trial court's judgment.

I. BACKGROUND

Plaintiff is a dealer in medium- and heavy-duty trucks. Defendant, formerly known as HN80 Corporation, is a manufacturerof trucks and parts, which it distributes through a network ofdealers with whom it has entered into franchise agreements.

In September 2001, the parties executed the agreement, entitled "HN80 Corporation Dealer Sales and Service Agreement."In the agreement, defendant appoints plaintiff as an "independentauthorized dealer for HN80 [p]roducts" and gives plaintiff the"right[s] to purchase" defendant's products "for resale" within aspecified geographical "[a]rea of [r]esponsibility" and to"display and use" defendant's "trademarks and service marks."

Defendant's responsibilities, under the agreement, areto provide plaintiff "a fair and equitable share of [defendant's]production of HN80 [p]roducts" and to "make available sales andservice support *** in the form of advertising, sales promotionand sales campaign materials, sales and service training programs***, and service and parts manuals."

Plaintiff's contractual responsibilities fall underthree headings:

"A. Sales

[Plaintiff] shall conscientiously anddiligently promote the sales of HN80[p]roducts and obtain and maintain areasonable share of the market for suchproducts in [plaintiff's] [a]rea of[r]esponsibility. [Plaintiff] shall ***employ adequate, trained, and competentpersonnel, and maintain a suitable inventory of HN80 [p]roducts as may benecessary to fulfill [plaintiff's] obligations under this [a]greement.

B. Service

[Plaintiff] shall provide in its [a]reaof [r]esponsibility prompt, reliable[,]and effective service to all owners andpurchasers of HN80 [p]roducts. *** Inaccordance with the [defendant's] standards, [plaintiff] shall establish andmaintain complete service facilities,including adequate parts inventory, andemploy competent, trained personnel asmay be necessary to fulfill[plaintiff's] responsibilities underthis [a]greement.

C. Dealer Annual Operating Requirements

Without limiting [defendant's] or[plaintiff's] obligations under this[a]greement, [plaintiff] has signed the[']HN80 Dealer Annual Operating Requirements Addendum.['] [Plaintiff] shallsign a revised [']HN80 Dealer AnnualOperating Requirements Addendum['] eachyear. [Plaintiff] agrees to operate itsdealership in accordance with and infulfillment of the requirements of the[']HN80 Dealer Annual Operating Requirements Addendum,['] which specifies certain operational requirements for[plaintiff's] satisfaction of its commitments made in this [a]greement. Failure of [plaintiff] to sign the revised [']Dealer Annual OperatingRequirements Addendum['] shall not relieve [plaintiff] of any of its obligations under this [a]greement."

In paragraph VII, entitled "Additional Provisions," theagreement provides:

"[Defendant's] [']Standard Provisions['] forthis [']HN80 Dealer Sales and Service Agreement['] *** [and] the [']HN80 Annual Operating Requirements Addendum['] *** are made apart of this [a]greement as though they werefully set forth herein, and any other ***addenda are likewise made a part of this[a]greement when executed ***."

Paragraph X of the "Standard Provisions," entitled"Promotion and Sale of HN80 Products," reiterates plaintiff'scommitments to "carry in stock an adequate inventory of unsoldnew HN80 [v]ehicles" and "carry an inventory of parts in accordance with [defendant's] minimum inventory requirements." "HN80[p]roducts" means "HN80 [v]ehicles and [p]arts." "HN80[v]ehicles" means "the new trucks *** which [defendant], in itssole discretion, offers for sale to [plaintiff]." "Parts" means"parts sold by [defendant]."

In paragraph XIII of the "Standard Provisions," entitled, "Dealership Facilities, Personnel, Locations, and Identification," plaintiff "commits to *** keep competent personnel insufficient numbers to enable [plaintiff] to meet its *** serviceand customer satisfaction responsibilities under this[a]greement."

Paragraph XV of the "Standard Provisions," entitled"Termination," specifies the conditions under which defendant mayterminate the agreement. With 30 days' written notice, defendantmay terminate the agreement because of a "[b]reach or violationby [plaintiff] of any term or provision of this [a]greement." With 120 days' notice, defendant may terminate the agreementbecause of plaintiff's "fail[ure] to satisfactorily perform itssales and promotion responsibilities[] under the provisions of[p]aragraph X."

Paragraph XVIII(E) of the "Standard Provisions,"entitled "Sole Agreement and Amendments," provides, in part:

"This [a]greement constitutes the entireagreement between the parties relating to theHN80 sales and service, and no understanding,amendment, modification, alteration[,] orwaiver not expressly set forth or providedfor in this [a]greement shall be valid unlessin each instance such understanding, amendment, alteration, modification, or waiver isexpressed in a written instrument executed bythe duly authorized officers of [defendant]and [plaintiff], and such instrument specifically refers to this [a]greement and specifically states an intent to amend, alter, ormodify this [a]greement."

Robert W. Richards, defendant's director of dealeroperations, sent plaintiff the 2001 addendum as an enclosure to aletter dated July 3, 2001. The 2001 addendum required plaintiffto purchase $1,375,000 in parts and maintain an inventory of 15trucks and $400,000 in parts. It also required plaintiff to havespecified tools and "employ a minimum of two service technicianson each shift of operation."

Both the agreement and the 2001 addendum had blanklines for plaintiff's signature. Plaintiff signed the agreementon September 5, 2001, but never signed the 2001 addendum.

After denying plaintiff's motion for a judgment on thepleadings, the trial court granted defendant's cross-motion, fortwo reasons: (1) the parties' agreement specifically providedthat defendant would annually submit to plaintiff an operatingrequirements addendum, and (2) the process of submitting suchaddenda to dealers did not violate Illinois law.

This appeal followed.

II. ANALYSIS

A. Standard of Review

A trial court should enter a judgment on the pleadingsonly if the record reveals no genuine issue of material fact andthe moving party is entitled to the judgment as a matter of law. M.A.K. v. Rush-Presbyterian-St. Luke's Medical Center, 198 Ill.2d 249, 255, 764 N.E.2d 1, 4 (2001). In ruling on the motion,the trial court should consider only the facts apparent from theface of the pleadings, judicial admissions in the record, andmatters of which it may take judicial notice. M.A.K., 198 Ill.2d at 255, 764 N.E.2d at 4. The trial court must accept as truethe well-pleaded facts in the nonmovant's pleadings as well asreasonable inferences from those facts. XLP Corp. v. County ofLake, 317 Ill. App. 3d 881, 884-85, 743 N.E.2d 162, 165 (2000). We review the judgment de novo, asking whether any genuine issueof material fact exists and, if not, whether the prevailing partyis entitled to a judgment as a matter of law. XLP Corp., 317Ill. App. 3d at 885, 743 N.E.2d at 165-66.

We also use a de novo standard of review in construingstatutes. In re Marriage of Beyer, 324 Ill. App. 3d 305, 309,753 N.E.2d 1032, 1036 (2001).

B. Coercion

In its brief, plaintiff characterizes itself as a"[m]otor vehicle dealer" within the meaning of section 2(h) ofthe Act (815 ILCS 710/2(h) (West 2000)) and defendant as a"[m]anufacturer" within the meaning of section 2(b) (815 ILCS710/2(b) (West 2000)). Defendant does not disagree. As a"manufacturer," defendant must conform to sections 4(c)(1) and(c)(3) of the Act, which provide:

"It shall be deemed a violation for amanufacturer *** to coerce, or attempt tocoerce, any motor vehicle dealer:

(1) to accept, buy[,] or order anymotor vehicle or vehicles, *** parts[,]*** or any other commodity or commodities *** which such motor vehicle dealerhas not voluntarily ordered or requested***; or to require a motor vehicle dealer to accept, buy, order[,] or purchasesuch items in order to obtain any motorvehicle or vehicles or any other commodity or commodities which have been ordered or requested by such motor vehicledealer;

* * *

(3) to order for anyone any parts,accessories, equipment, machinery,tools, appliances[,] or any commoditywhatsoever ***." (Emphases added.) 815ILCS 710/4(c)(1), (c)(3) (West 2000).

Plaintiff argues that section 8 of the Act makessections 4(c)(1) and (c)(3) applicable to the agreement itself. Section 8 provides: "The provisions of this Act shall apply toall written or oral agreements between a manufacturer *** with[sic] a motor vehicle dealer[,] including, but not limited to,*** the franchise agreement *** and all such other agreements inwhich the manufacturer *** has any direct or indirect interest." 815 ILCS 710/8 (West 2000). According to plaintiff, even thoughthe parties contractually agreed that defendant could requireplaintiff to order a reasonable amount of vehicles and parts,sections 4(c)(1) and (c)(3) invalidate that contractual provisionbecause the provision is "coercive." Contractual provisions thatviolate public policy expressed in statutory law are unenforceable and void. People ex rel. Callahan v. Marshall Field & Co.,83 Ill. App. 3d 811, 818, 404 N.E.2d 368, 373 (1980). Plaintiffargues that by virtue of a severability clause in the agreement,the rest of the agreement survives.

Defendant observes that under plaintiff's interpretation of section 4(c), defendant could not demand that plaintifforder so much as one vehicle or one part, even though plaintiffpromised to maintain a "suitable inventory." Boldly embracingthat reductio ad absurdum, plaintiff replies that defendant iscorrect. Plaintiff suggests, however, that defendant's dilemmais not as dire as it might first appear, because defendant stillhas the option of terminating the franchise for "good cause,"after giving the statutorily required notice. See 815 ILCS710/4(d)(6) (West 2000). Section 2(v) of the Act defines "[g]oodcause" as "facts establishing commercial reasonableness in lawfulor privileged competition and business practices as defined atcommon law." 815 ILCS 710/2(v) (West 2000). Plaintiff furtherpoints out that dealers have an incentive to order enough vehicles and parts to run a viable dealership and turn a profit.

If it is permissible, under the Act, for a manufacturerto send an underperforming dealer a "nasty surprise" in the formof a notice of termination, we do not understand why it isimpermissible to require the dealer to acknowledge the standardsof performance the dealer must meet under the contract, therebypreventing a "nasty surprise." While arguing it is "coercion" torequire a dealer to sign and comply with annual addenda, plaintiff concedes it is perfectly legal for a manufacturer to communicate to a dealer the manufacturer's "expectations" or "goals." Given plaintiff's understanding of "coercion," we do not see howthe former method of influencing the dealer is inherently more"coercive" than the latter method. The same potential outcomelooms ahead for the nonfulfillment of an addendum or an expectation: termination of the franchise, subject to commercialreasonableness.

Under section 2(v), the common law provides the standard for determining commercial reasonableness. By negativecorollary, it can provide the standard for commercial unreasonableness as well. The common law regards coercion as commercially unreasonable behavior. We can ascertain, from the commonlaw, what coercion is and is not. "Coercion" and "duress" haveessentially the same meaning: overpowering another's free willby imposition, oppression, or undue influence. In re Marriage ofFlynn, 232 Ill. App. 3d 394, 401, 597 N.E.2d 709, 713 (1992). Ademand is not duress unless it is "wrongful" in the sense that itviolates the law, a contract, or morality. Carlile v. Snap-onTools, 271 Ill. App. 3d 833, 840, 648 N.E.2d 317, 322 (1995). "Duress cannot be predicated upon a demand which is lawful orupon one's doing or threatening to do that which one has a legalright to do ***." Carlile, 271 Ill. App. 3d at 840, 648 N.E.2dat 322.

Plaintiff argues that under section 4(c), the partiescould not validly stipulate, in their agreement, that defendantcould require plaintiff each year to purchase a specified quantity of trucks and parts. Such a provision, plaintiff argues,would be "coercive," even if the required quantity of trucks andparts were reasonable. That argument begs the question of what"coercion" is. "Coercion" does not mean "compulsion" or "constraint" in every shape and form, such as demanding that someoneperform a contract. Under the common law, "coercion" is awrongful demand (Carlile, 271 Ill. App. 3d at 840, 648 N.E.2d at322)--which necessarily excludes a demand to fulfill promises onefreely made in an arm's-length agreement.

When prohibiting "coercion" in section 4(c), thelegislature surely assumed that franchisees, by and large, wouldbe responsible business persons willing to perform the promisesthey made in the franchise agreement (or else, one would think,they would not have entered into the agreement in the firstplace). Because the legislature assumed that franchisees wouldwillingly fulfill the contractual promises they willingly made,the legislature must not have intended "coercion" to include ademand to perform a contract.

In the agreement, plaintiff promises to (1) "carry instock an adequate inventory of unsold new HN80 [v]ehicles," (2)"carry an inventory of parts in accordance with [defendant's]minimum[-]inventory requirements," (3) "keep competent personnelin sufficient numbers," and (4) "maintain complete servicefacilities." Plaintiff could have had no doubt what constituted,for 2001, an "adequate inventory," a "sufficient number" ofpersonnel, and "complete service facilities" within the meaningof defendant's offer, because defendant sent the 2001 addendum toplaintiff two months before the parties signed the agreement. Paragraph VII of the agreement expressly incorporates the 2001addendum--whether plaintiff signs the 2001 addendum or not. According to paragraph VII, future addenda are incorporated intothe agreement only if the parties sign them, but signing the 2001addendum is not a condition of its incorporation into the agreement.

The 2001 addendum has a line for plaintiff's signature,which plaintiff left blank. Signing the 2001 addendum, however,was not the only permissible way to manifest acceptance of it;plaintiff accepted the 2001 addendum by signing the agreement,which expressly incorporated the 2001 addendum. The agreement ispredominantly for the sale of goods and, therefore, comes withinarticle 2 of the Uniform Commercial Code-Sales (UCC) (810 ILCS5/2-101 through 2-725 (West 2000)). See Belleville Toyota, Inc.v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 352-53, 770N.E.2d 177, 194-95 (2002). Section 2-206(1)(a) of the UCCprovides: "Unless otherwise unambiguously indicated by thelanguage or circumstances[,] *** an offer to make a contractshall be construed as inviting acceptance in any manner and byany medium reasonable in the circumstances." (Emphasis added.) 810 ILCS 5/2-206(1)(a) (West 2000). Because defendant's offerdid not say, clearly or otherwise, that signing the 2001 addendumwas the only permissible way to accept it, plaintiff could acceptthe 2001 addendum by signing the agreement, of which the 2001addendum was expressly a part. The signature line in the 2001addendum was merely a suggested, rather than a clearly prescribed, means of manifesting acceptance of the 2001 addendum. See Calo, Inc. v. AMF Pinspotters, Inc., 31 Ill. App. 2d 2, 9,176 N.E.2d 1, 5 (1961); Restatement (Second) of Contracts

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