Court Opinion

ID: 9548769
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:08:34.457251+00
Date Added: 2024-06-11T15:19:24.740430
License: Public Domain

Davis, J.,
concurring and dissenting: I concur with the majority’s holding that Noller states no cause of action against GMC for tortious interference with a contractual relationship for the reasons set forth in the majority opinion and by the trial court. In all other respects, I respectfully dissent and would affirm the decision of the trial court.
THIRD-PARTY BENEFICIARY
By holding that Noller is an intended beneficiary of the Dealer Sales and Service Agreement (DSSA) between GMC and Beard, the majority disregards settled Kansas law and the clear and unambiguous language of the agreement. Although the majority quotes at length from the Restatement (Second) of Contracts, *30modern treatises on contract law, and Kansas case law, it fails to grapple with the critical issue of whether benefiting Noller or other proposed purchasers of Beard’s dealership was an object of the DSSA. Instead, it bases its decision primarily on three policy grounds: (1) the duty of good faith and fair dealing in every contract; (2) the need to protect persons desiring to acquire the assets of a franchisee in the face of the “increase in franchising throughout Kansas and the United States”; and (3) “an overriding Kansas policy that approval of a written proposal of sale, transfer, or assignment is not to be arbitrarily or unreasonably withheld,” which, according to the majority, is established by K.S.A. 1987 Supp. 8-2416. The majority relies upon these policies to fashion a new cause of action for would-be purchasers of an existing automobile dealership who are rejected by the franchisor:
“Third parties dealing with automobile franchisees have the absolute right to negotiate with the franchisee for the purchase of assets with the expectation the franchisor will be required to faithfully comply with and follow the terms of an existing franchise agreement.” (Emphasis added.)
The policy grounds offered by the majority provide no basis for this unprecedented expansion of the liability of automobile franchisors. The majority’s decision is certain to undermine predictability in commercial transactions, create confusion, and increase litigation.
The test in Kansas for determining whether a beneficiary may enforce a contract is well established. The contract must have as an object some benefit to a third party and that party must be the intended beneficiary. “ ‘Under this test a beneficiary can enforce the contract if he is one who the contracting parties intended should receive a direct benefit from the contract [citation omitted]. . . . Contracting parties are presumed to act for themselves and therefore an intent to benefit a third person must be clearly expressed in the contract [citation omitted].’ ” Cornwell v. Jespersen, 238 Kan. 110, 115-16, 708 P.2d 515 (1985) (quoting Martin v. Edwards, 219 Kan. 466, 473, 548 P.2d 779 [1976]); see Fasse v. Lower Heating & Air Conditioning, Inc., 241 Kan. 387, 389, 736 P.2d 930 (1987).
Not unlike Kansas law, the Restatement (Second) of Contracts § 302 (1979) makes the intent of the parties as expressed in the contract the critical determinant of whether a beneficiary has a right to performance:
*31“§ 302. Intended and Incidental Beneficiaries
“(1) Unless otherwise agreed between promisor and promisee, a beneficiary of a promise is an intended beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either
“(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or
“(b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.
“(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.”
Although the drafters of the Restatement (Second) of Contracts chose not to employ the terms “donee” and “creditor” beneficiaries, they used the traditional classifications as a framework for § 302. Comment b to § 302 notes: “The type of beneficiary covered by Subsection (l)(a) is often referred to as a ‘creditor beneficiary.’ ” Comment c notes that the beneficiary in subsection (l)(b) “is often referred to as a ‘donee beneficiary.’ ” Comment d, “Other intended beneficiaries,” states in part as follows:
“Either a promise to pay the promisee’s debt to a beneficiary [creditor] or a gift promise [donee] involves a manifestation of intention by the promisee and promisor sufficient, in a contractual setting, to make reliance by the beneficiary both reasonable and probable. Other cases may be quite similar in this respect.”
In Cornwell v. Jespersen, the court relied upon the traditional classifications and the Restatement (Second) of Contracts in concluding the plaintiffs were intended beneficiaries of a drilling contract:
“Clearly, if the defendants had fulfilled these duties, ‘the performance of the promise [would have satisfied] an actual [or supposed] or asserted duty of the promisee to the beneficiary.’ Since the defendants assumed duties owed to the plaintiffs by Quadel, the plaintiffs are creditor beneficiaries under the drilling contract and have a right to enforce the same.” 238 Kan. at 118 (quoting 2 Williston on Contracts § 356 (3d ed.1959).
Noller conceded in oral argument that he is not a donee beneficiary of the DSSA. Rather, he contended below and contends on appeal that he is a creditor beneficiary. Unlike the defendants’ promise in Cornwell, GMC’s promise not to arbitrarily refuse to agree to a proposed change or sale of Beard’s dealership does not satisfy “ ‘an actual [or supposed] or asserted duty of the promisee [Beard] to the beneficiary [Noller].’ ” 238 Kan. at 118.
Noller argues that GMC assumed Beard’s duty to assemble the *32necessary information for his approval as a franchisee. The buy-sell agreement between Beard and Noller does not expressly obligate Beard to gather information about Noller for submission to GMC. Even if Beard owed Noller such a duty, GMC did not agree to assume it. Paragraph Fourth of the DSSA states: “Dealer agrees to provide in the form requested and in a timely manner all applications and information customarily requested by General Motors to evaluate the proposed change or sale. General Motors agrees to consider all factors requested by Dealer.” (Emphasis added.) The trial court properly rejected Noller’s contention that he is a creditor beneficiary.
The majority opinion recognizes that Noller is neither a donee nor a creditor beneficiary, but nevertheless concludes that he is an intended beneficiary of the DSSA. In reaching this conclusion, the majority applies a “reasonable person” test advocated by Professors Calamari and Perillo:
“Would a reasonable person in the position of the promisor conclude that the promisee manifested an intention that the promisor’s promised performance was sought at least in part for the benefit of the alleged beneficiary, and, assuming 'that the answer to the first question is in the affirmative, would a reasonable person in the position of the promisee conclude that the promisor acquiesced in the intention of the promisee?”
The obligation of this court is to follow existing Kansas law. “The construction of a written instrument is a question of law, and the instrument may be construed and its legal effect determined by an appellate court.” Kennedy & Mitchell, Inc. v. Anadarko Prod. Co., 243 Kan. 130, 133, 754 P.2d 803 (1988) (citing Peterson v. Midland Nat’l Bank, 242 Kan. 266, Syl. ¶ 1, 747 P.2d 159 [1987]). “The intention of the parties and the meaning of the contract are to be determined from the instrument itself where the terms are plain and unambiguous.” Fasse v. Lower Heating & Air Conditioning, Inc., 241 Kan. at 391 (citing First Nat’l Bank & Trust Co. v. Lygrisse, 231 Kan. 595, 647 P.2d 1268 [1982]); see Cornwell v. Jespersen, 238 Kan. at 116.
The DSSA clearly and unambiguously expresses the parties’ intent to act only for themselves and not to benefit Noller or any other potential buyer or transferee. The DSSA provides: “This is a personal service contract setting forth the rights and obligations of Dealer and its approved owners and managers and of General Motors relating to the sale and service of GMC Truck *33motor vehicles and related parts and accessories.” (Emphasis added.) The agreement further provides: “Neither this Agreement nor any right or responsibility under this Agreement may be transferred, assigned, delegated or sold by Dealer.”
Even ignoring the clear and unambiguous language of the DSSA and applying the majority’s “reasonable person” test, I conclude that Noller is an incidental, not an intended, beneficiary. No reasonable person in the position of GMC would conclude that Beard manifested an intention that GMC’s promised performance was sought at least in part for the benefit of Noller, nor would a reasonable person in the position of Beard conclude that GMC acquiesced in such an intention. The purpose of the DSSA was to establish a dealership for the mutual benefit of Beard and GMC. In contemplating the agreement, both parties recognized that Beard might desire to sell his assets in the future. The provisions for change of ownership benefited both parties: Beard, by increasing the value of the franchise and making his assets more readily negotiable, and GMC, by facilitating continuity of operations by another qualified dealer. In addition, GMC’s promise not to arbitrarily refuse to approve a change or sale of the dealership constituted a recognition of its obligations to Beard under K.S.A. 1987 Supp. 8-2416.
Noller has failed to demonstrate any detrimental reliance on GMC’s promise not to arbitrarily refuse to approve a change or sale of Beard’s dealership. “The right of a third party beneficiary rests chiefly upon the fact that the contract will create reasonable expectations on his part and will induce him to change his position in reliance.” 4 Corbin on Contracts § 775 (1951). Restatement (Second) of Contracts § 90 (1979) emphasizes the importance of detrimental reliance in determining whether recognition of a right to performance in the beneficiary is appropriate:
“A promise which the promisor should reasonably expect to induce action or forebearance on the part of the promisee or a third person and which does induce such action or forebearance is binding if injustice can be avoided only by enforcement of the promise.” (Emphasis added.)
Comment c to § 90 states as follows:
“c. Reliance by third persons.
“If a promise is made to one party for the benefit of another, it is often foreseeable that the beneficiary will rely on the promise. Enforcement of the promise in such cases rests upon the same basis and depends on the same factors *34as in cases of reliance by the promisee. Justifiable reliance by third persons who are not beneficiaries is less likely, but may sometimes reinforce the claim of the promisee or beneficiary.” (Emphasis added.)
The majority provides virtually no explanation for its conclusion that Noller is an intended beneficiary of the DSSA, but simply states: “It is further clear that both Beard and GMC concluded the provisions were for the benefit of an intended class of ultimate purchasers of Beard’s assets and applicants for a GMC Truck franchise. Noller fits perfectly into this classification of intended beneficiaries of the DSSA agreement.” Apparently, the majority bases its conclusion on the effect of GMC’s promise, which is to benefit proposed purchasers of the dealership, including Noller.
By basing its conclusion that Noller is an intended beneficiary of the DSSA on the effect of GMC’s promise not to arbitrarily refuse to approve a proposed change or sale, the majority fails to confront the critical issue of whether benefiting proposed purchasers was an object of the DSSA. Cornwell v. Jespersen, 238 Kan. at 115. Unquestionably, GMC’s performance of its promise would have benefited Noller. But this fact alone does not entitle Noller to enforce the DSSA. Rather, recognition of a right of performance in Noller must be “appropriate to effectuate the intention of the parties.” Restatement (Second) of Contracts § 302(1). Otherwise, Noller is merely an incidental, not an intended, beneficiary of the agreement.
Nothing in the DSSA or in the record on appeal supports the conclusion that benefiting Noller or any other proposed purchaser was an object, rather than merely a consequence, of GMC’s promise not to arbitrarily refuse to approve a change or sale of the dealership. Rather, the clear and unambiguous language of the DSSA demonstrates that the parties did not contract with the intent of benefiting a third person. Contracting parties are presumed to act for themselves absent a clear expression of intent to the contrary. Cornwell v. Jespersen, 238 Kan. at 116. Therefore, I conclude that Noller is an incidental, not an intended, beneficiary of the DSSA.
The majority’s holding that Noller has a right to performance of the DSSA is based primarily on policy grounds. Comment d to Restatement (Second) of Contracts § 302 sanctions consideration of procedural convenience and a policy “[w]here there is doubt whether [the beneficiary’s] reliance would be reasonable.” The *35comment states, “In some cases an overriding policy, which may be embodied in a statute, requires recognition of [a right to performance in the beneficiary] without regard to the intention of the parties.”
The majority asserts that GMC’s duty of good faith and fair dealing extends to Noller, that the “increase in franchising throughout Kansas and the United States” necessitates that the courts protect persons desiring to acquire the assets of a franchisee, and thatK.S.A. 1987 Supp. 8-2416 establishes “an overriding Kansas policy that approval of a written proposal of sale, transfer, or assignment [of a vehicle dealer franchise] is not to be arbitrarily or unreasonably withheld.” On the basis of these alleged policies, the majority boldly concludes: “Third parties dealing with an automobile franchisee have the absolute right to negotiate with the franchisee for the purchase of assets with the expectation the franchisor will be required to faithfully comply with and follow the terms of an existing franchise agreement.” (Emphasis added.)
The majority distorts the duty of good faith and fair dealing by using it to justify its conclusion that Noller has “the absolute right” to enforce the DSSA. The duty of good faith and fair dealing arises from contract and imposes upon each party obligations to cooperate in performing the contract, and not to act intentionally or purposely to prevent the other party’s performance. See Bonanza, Inc. v. McLean, 242 Kan. 209, 222, 747 P.2d 792 (1987). The majority’s reliance on the duty of good faith and fair dealing is inappropriate because the duty assumes what the majority sets out to prove: namely, that Noller has a right to performance of the DSSA. Like GMC’s promise not to arbitrarily refuse to approve a change or sale of dealership, GMC’s duty of good faith and fair dealing extends to Noller only if Noller is an intended beneficiary of the DSSA. For the reasons stated above, Noller is an incidental, not an intended, beneficiary of the agreement.
The majority offers no reason why “the increase in franchising” requires special efforts by the courts to protect would-be purchasers of existing automobile dealerships. Indeed, by holding as it does, the majority substitutes its judgment for that of the legislature. In K.S.A. 1987 Supp. 8-2416, the legislature has prohibited a manufacturer or distributor of vehicles from arbi*36trarily or unreasonably withholding approval of a dealer’s proposal to sell, transfer, or assign the dealer’s business. The legislature, however, has extended protection only to vehicle dealers, not to potential purchasers or other transferees. Likewise, federal legislation protects only automobile dealers. See 15 U.S.C. § 1221 et seq. (1982). The legislature’s refusal to extend statutory rights to would-be purchasers of vehicle dealerships undermines the majority’s assertion that “an overriding Kansas policy” vests in Noller “the absolute right” to enforce the DSSA.
By eschewing a careful consideration of the intent of the parties to the DSSA and relying instead on policy, the majority has embarked upon an uncertain course without a fixed destination. The “absolute right” decreed by the majority subjects automobile franchisors who reject a proposed purchase of an existing dealership to unprecedented liability. An increase of litigation is certain to occur. Moreover, courts will find limiting the majority’s holding to automobile franchises difficult; the policies of good faith and fair dealing and protection of persons desiring to acquire the assets of a franchisee are general enough to apply to all types of franchises. Faced with the uncertainty created by the majority opinion, franchisors will chill at the thought of doing business in Kansas.
In my opinion, the approach to third-party beneficiaries in prior Kansas case law provides certainty and predictability. Under Kansas law and the Restatement (Second) of Contracts, Noller is an incidental beneficiary of DSSA.
TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS ADVANTAGE
In Turner v. Halliburton Co., 240 Kan. 1, 12, 722 P.2d 1106 (1986), the court recognized a cause of action for tortious interference with a prospective business advantage or relationship:
“The requirements for this tort were recently set forth in Maxwell v. Southwest Nat. Bank, Wichita, Kan., 593 F. Supp. 250, 253 (D. Kan. 1984), as: (1) the existence of a business relationship or expectancy with the probability of future economic benefit to the plaintiff; (2) knowledge of the relationship or expectancy by the defendant; (3) that, except for the conduct of the defendant, plaintiff was reasonably certain to have continued the relationship or realized the expectancy; (4) intentional misconduct by defendant; and (5) damages suffered by plaintiff as a direct or proximate result of defendant’s misconduct.” 240 Kan. at 12.
In Turner, the plaintiff claimed that his past employer had tortiously interfered with his relationship with a prospective *37employer by informing the prospective employer that he had been terminated for theft. The central issue was whether the past employer’s communications were justified.
The majority correctly points out that generally the issue of justification is a factual one. It then holds that summary judgment was inappropriate because factual questions remain about whether GMC’s refusal to approve Noller as a GMC dealer was justified.
The issue of justification is material only if the plaintiff states a claim upon which relief may be granted. In this case, the trial court, relying upon Restatement (Second) of Torts § 766B (1977), concluded that the “tort only arises where there has been interference into a relationship between the plaintiff and a third person.” Noller’s allegation that GMC interfered with the prospective dealer agreement does not state a claim upon which relief may be granted because the agreement would have involved only GMC and Noller, not a third person.
Noller contends the trial court erred by granting summary judgment to GMC because, in addition to alleging interference with his expectancy of becoming a GMC dealer, he alleged interference with existing and prospective contractual relations with third parties, specifically with Beard (buy-sell agreement) and persons who would have become his GMC truck customers.
The provisions of the Beard-Noller buy-sell agreement negate as a matter of law Noller’s claim of tortious interference with prospective business advantage. The buy-sell agreement and, thus, Noller’s expectancy of future economic benefit were subject to the following condition precedent:
“The agreement [to purchase Beard’s assets] is conditioned upon approval of this agreement by GMC Truck & Coach Division of General Motors Corporation, Pontiac, Michigan.”
Noller had no “business relationship or expectancy with the probability of future economic benefit” without GMC’s approval of the buy-sell agreement.
GMC agreed in the DSSA with Beard not to “arbitrarily refuse to agree to such proposed change or sale.” Noller, however, is not an intended beneficiary of the DSSA and may not rely on the DSSA to support his tortious interference claim.
Noller’s claim of tortious interference fails to state a claim upon which relief may be granted. Therefore, factual questions *38regarding justification are immaterial. I would affirm the trial court’s grant of summary judgment.