Opinion ID: 1655319
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Heading Rank: 1

Heading: Construction of Iowa Code section 322A.12 (1981).

Text: Plaintiffs contend that the revocation of Beckman Chevrolet's Iowa dealer's license did not constitute a substantial breach of the agreements because Iowa Code section 322A.12 (1981) automatically transferred to Carson Motors all of its rights under the GM franchises. That statute provides: Notwithstanding the terms, provisions, or conditions of any agreement or franchise, subject to the provisions of subsection 2 of section 322A.11, in the event of the sale or transfer of ownership of the franchisee's dealership by sale or transfer of the business or by stock transfer or in the event of change in the executive management of the franchisee's dealership the franchiser shall give effect to such a change in the franchise unless the transfer of the franchisee's license under chapter 322 is denied or the new owner is unable to obtain a license under said chapter, as the case may be. The trial court found section 322A.12 inapplicable here for two reasons. It found that the transaction involved only a sale of assets, not a sale of the dealership or franchise, and it then found: The agreement between the parties also contemplated all along that the defendant would make application for and obtain his own franchises from the various divisions of General Motors. We need not decide whether the form of this transactiona sale of business assetsfell outside the scope of section 322A.12, because we agree with the second reason given by the trial court. The agreements clearly expressed the parties' intent that interim operation of the business would be conducted under the established license and franchises of Beckman Chevrolet. A principal purpose of the interim agreement was to continue the existing operation until approval of buyer as dealer by Chevrolet, Pontiac and Buick divisions of GM, and the sales agreement explicitly provided that closing of the sales transaction was conditioned upon buyer receiving a signed dealer sales and service agreement from said divisions of General Motors. Even though the interim agreement extended the time for obtaining such franchise agreements beyond the June 15 deadline of the sales agreement, the parties' agreements contemplated that there would be no completed sale unless and until Carson Motors received from GM and its divisions its own signed franchise agreements. The parties entered into the interim agreement because they understood it would take from six weeks to two months for Carson Motors to obtain appropriate franchises. It had taken that long for Beckman Chevrolet to obtain its own franchise agreements two years earlier. The trial court correctly ascertained from the written contracts the intent of the parties that section 322A.12 would not apply to this transaction. See Iowa R.App.P. 14(f)(14) (in construing written contracts, the intent of the parties must control and is determined by what the contract says). The parties did not intend that Carson Motors would obtain its franchises by operation of law; they intended that Carson Motors would obtain its own franchise agreements from GM and its divisions before the sale could be completed. Iowa Code chapter 322A was primarily designed to assure the public that motor vehicle franchisers would not, without good cause, terminate or discontinue dealerships or open additional dealerships in any Iowa community. The preamble to chapter 322 discloses that the statute was enacted to provide for fair trade practices by motor vehicle franchisers. 1970 Iowa Acts ch. 1160, p. 206. See Iowa Code § 4.6 (1981) (in construing a statute we properly may consider its legislative history, including the object sought to be attained as reflected in the preamble or statement of policy). The statute entitles the seller and purchaser of a dealership to obtain injunctive relief compelling a franchiser to recognize a change in the franchise. See Buckwalter Motors, Inc. v. General Motors Corp., 593 F.Supp. 628, 633 (S.D.Iowa 1984). But the statute's target was franchisers, not sellers or buyers of dealerships. Carson Motors had a right, not affected by the statute, to rely on those provisions of its sales and interim agreements with Beckman Chevrolet which conditioned its obligation to close the transaction upon Buyer receiving a signed dealer sales and service agreement from the GM divisions with whom Beckman had franchise agreements. The trial court did not err in deciding that Iowa Code section 322A.12 (1981) had no application to the circumstances of this case.