On appeal from Superior Court of New Jersey, Chancery Division, Bergen County.
Dreier, Bilder and Gruccio. The opinion of the court was delivered by Dreier, J.A.D.
The parties have cross-appealed from a judgment of the Chancery Division dated March 18, 1985, determining that defendant, Jaguar, Rover, Triumph, Inc. (Jaguar) breached its franchise agreement with plaintiff Winer Motors, Inc. (Winer). The trial judge denied injunctive relief but awarded plaintiff $175,000 compensatory damages for the reasons set forth in his comprehensive letter opinion dated February 15, 1985.
We will only briefly review the facts since they are adequately stated in the opinion below, and our difficulty with the
conclusions reached by the trial judge relate more to the application of the prevailing law to the facts he found.
In 1980 Winer was primarily a Chevrolet dealership, although it also marketed M.G.'s, Triumphs, and Jaguars. That year Winer sold 600 to 650 Chevrolets, 150 to 200 Triumphs and M.G.'s and 15 to 20 Jaguars. In 1981 defendant discontinued its M.G. and Triumph lines. But even without the discontinuance of these two profitable lines, Winer was experiencing financial difficulties. Its principals agreed, contingent upon General Motors approval, to sell the stock in the corporation to its Director of Operations, Matt Corvo. Corvo was then a fourteen-year employee and the dealership's general manager. Corvo and two partners, Gary Johnson and Carmine Lemme, determined to buy out the Winer brothers who owned all of the stock in the dealership. The dealership was sufficiently in debt that the purchase price was $10 plus the assumption of the corporate indebtedness. The purchasers' expected capital infusion was approximately $600,000. Of the three, the financial backing was to come mostly from Carmine Lemme, a sophisticated investor with reputed assets of approximately $10,000,000.
The existing franchise agreement, which was to expire December 31, 1981, contained two provisions controlling this transaction, both quoted in the trial court's opinion. Section 33 required the consent of Jaguar to a transfer of more than 10% of the corporate stock, Jaguar reserving the right to terminate the agreement if a transfer were made without its consent. Jaguar, however, committed itself "not to withhold its consent if it is reasonably assured that the Dealer's business will not be adversely affected or its financial condition impaired." The paragraph also referred to 30 days' written notice of cancellation which was required if the transfer were made without Jaguar's consent, or if the consent were conditional, without the conditions having been satisfied. Section 34 similarly provided for a cancellation of the agreement upon a change in the "operating head" of the dealership, named in the agreement as
Harold Winer. If the operating head were to leave, Jaguar was "entitled to full particulars and may condition its acceptance of the successor on a satisfactory trial period."
From October 1981 when Jaguar was first informed of the potential sale, through the date of the transfer of the stock in the dealership, March 25, 1982 (immediately following the Chevrolet Division of General Motors' consent to the stock transfer), there was frequent interaction between the parties. This contact was described by the trial judge as "a continued failure [on the part of Winer] to fulfill promises made to Jaguar or to carry out the instructions of Jaguar," and a "continued failure [on the part of Jaguar] to articulate to Winer the standards it was employing in evaluating the franchise transfer application or to articulate what it deemed to be the current relationship between Jaguar and Winer."
On appeal, Jaguar asserts that in fact it did articulate the standards,*fn1 and Winer contends that notwithstanding certain defaults, it substantially complied with the various ad hoc requirements placed upon it by Jaguar.*fn2 Although Jaguar
ostensibly terminated its agreement 30 days after the March closing, i.e., in late April 1982, it continued to deal with Winer as if Winer were a franchisee through the spring, summer and fall of 1982, until October 25, 1982, when as stated by the trial judge, "Winer was informed by Jaguar that its application to continue as a Jaguar dealer had been denied." We accept the October date found by the trial judge as the final termination of the franchise arrangement. The trial judge also gave due weight to a letter of Gary Johnson sent to Jackling on August 13, 1982 wherein Johnson acknowledged the many deficiencies of his partners ...