Home / Fulltext Opinions / Supreme Court of Virginia / WARD'S EQUIPMENT, INC., ET AL. v. NEW HOLLAND NORTH AMERICA, INC. (59726)





October 31, 1997

Record No. 962544






Charles L. McCormick, III, Judge

Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Kinser, JJ., and Whiting, Senior Justice

In this controversy arising from a written contract between a
manufacturer and a dealer in farm equipment, the case turns upon
whether a party suing for damages may allege facts that
essentially reform the contract and thereby withstand demurrer.

In June 1995, appellants Ward’s Equipment, Inc., Carl Ward,
and Anne Ward (collectively, the dealer) sued appellee New
Holland North America, Inc., successor to Ford New Holland, Inc.
(the manufacturer or the company). The dealer is a Virginia
corporation with its principal place of business in South Boston.
The manufacturer is a Delaware corporation with its principal
place of business in New Holland, Pennsylvania.

In a "bill of complaint" filed on the chancery side
of the court below, the dealer sought compensatory and punitive
damages for alleged breaches of contract and alleged tortious
activity, and asked for a trial by jury. Attached as the only
exhibit to the dealer’s pleading is a letter dated October 3,
1994 from the manufacturer to the dealer discussing the parties’
obligations under a Dealer Agreement. The dealer did not
incorporate the terms of the Dealer Agreement in its "bill
of complaint."

Responding, the manufacturer filed a demurrer and a motion
craving oyer. Among the grounds of the demurrer, the manufacturer
asserted the trial court "lacks equity jurisdiction in that
Plaintiffs have a complete and adequate remedy at law." The
trial court never was asked to rule on this ground.

In the motion craving oyer, the manufacturer asserted that the
dealer’s complaint "identifies and characterizes, but fails
to include, the written Dealer Agreement" between the
parties dated August 14, 1987. The motion further stated:
"It is necessary and proper for the Dealer Agreement and
Schedule C thereto to be produced, oyer taken of it and that it
becomes per se a matter of record for the
consideration of this Court on New Holland’s demurrer, and for
all other purposes as if copied at large in Plaintiffs’ Bill of
Complaint." Concluding, the manufacturer asked the court to
order a complete copy of the Dealer Agreement filed, to be
"deemed an exhibit to Plaintiffs’ Bill of Complaint."
The motion was unopposed and was granted during a July 1996
hearing on the demurrer.

Following oral argument, the trial court sustained the
demurrer and denied the dealer’s motion for leave to file an
amended complaint. We awarded the dealer an appeal from the trial
court’s September 1996 final order dismissing the action with

Settled criteria governing a trial court’s consideration of a
demurrer should be reviewed. A demurrer admits the truth of all
properly pleaded material facts. "All reasonable factual
inferences fairly and justly drawn from the facts alleged must be
considered in aid of the pleading. However, a demurrer does not
admit the correctness of the pleader’s conclusions of law." Fox
v. Custis, 236 Va. 69, 71, 372 S.E.2d 373, 374 (1988).

When a demurrant’s motion craving oyer has been granted, the
court in ruling on the demurrer may properly consider the facts
alleged as amplified by any written agreement added to the record
on the motion. Hechler Chevrolet, Inc. v. General
Motors Corp.
, 230 Va. 396, 398, 337 S.E.2d 744, 746 (1985).
Furthermore, and significant in this appeal, a court considering
a demurrer may ignore a party’s factual allegations contradicted
by the terms of authentic, unambiguous documents that properly
are a part of the pleadings. See Fun v. Virginia
Military Inst.
, 245 Va. 249, 253, 427 S.E.2d 181, 183 (1993).

No useful purpose will be served by summarizing in detail the
dealer’s 105-paragraph, 29-page complaint. It is sufficient to
observe that the dealer mounts a broadside attack on the
manufacturer as the result of a business decision made by the
manufacturer and expressed in the October 3 letter, a so-called
"attrition letter."

In that letter, the dealer was notified that the
manufacturer’s "current market representation plan
contemplates no dealer at your Dealer Location. While we will
continue to do business as normal with you under the terms of the
Dealer Agreement, we will not consent to the sale or assignment
of your Dealer Agreement. . . ."

The dealer alleged that, at the time of this notice, it was
negotiating a purchase agreement with a Ward family member, and
that the notice severely restricted or eliminated the dealer’s
ability to consummate the contemplated transaction. The dealer
also alleged that shortly after sending the attrition letter, the
manufacturer entered into an agreement with one of the dealer’s
competitors, located 15 miles from the dealer, to begin selling
equipment previously available in its trade area only at the
dealer’s location.

Thus, arising from this climate of keen business competition,
the dealer sought damages in a 12-count complaint. Many of the
counts have been abandoned; those still viable are labelled
"Breach of Contract," "De Facto Termination,"
"Fraud and Misrepresentation," "Estoppel,"
"Violation of Michigan Statutes," and "Violation
of Virginia Statutes."

On appeal, the dealer contends the trial court erred in
sustaining the demurrer "by considering questions of fact
not in the record." There is no merit to this contention.

The dealer points to a comment made by the trial judge from
the bench during the course of sustaining the demurrer. The court
said the complaint failed to allege the manufacturer had engaged
in any conduct that was not "authorized" or
"anticipated" under the terms of the unambiguous August
1987 contract. This observation did not amount to a consideration
of facts not of record. Rather, the ruling demonstrates that the
trial court followed the foregoing criteria, which apply when a
contract is part of the pleadings. The court merely was
describing a situation in which the dealer has ignored the
contract’s language in asserting claims that the contract

Next, the dealer argues the trial court erred by ignoring
facts it alleged in support of its assertion that the
manufacturer breached the contract. The dealer asserted the
contract breach occurred when the manufacturer
"terminated" the dealership without cause, unreasonably
withheld consent to the dealer’s sale or assignment of the
dealership, failed to deliver equipment to it in a timely manner,
encroached upon its "exclusive market area," and sought
to replace it with a competitor. The trial court was justified in
refusing to accept these factual allegations as true because they
are refuted by the terms of the authentic, unambiguous documents
that are a part of the pleadings.

The contract in issue consists of a two-page "Dealer
Agreement" and a nine-page document labelled "Dealer
Agreement Standard Provisions" to which is attached three
pages of "schedules." The contract provides, "This
agreement shall be governed by and interpreted in accordance with
the laws of the State of Michigan."

The law of Michigan is the same as Virginia’s on the subject
of contract interpretation. A contract must be construed as
written and as a whole with all parts being harmonized whenever
possible. Associated Truck Lines, Inc. v. Baer, 77
N.W.2d 384, 386 (Mich. 1956); Paramount Termite Control Co.
v. Rector, 238 Va. 171, 174, 380 S.E.2d 922, 925 (1989).

Relevant to the dealer’s breach-of-contract argument, the
Agreement makes clear that the dealer’s appointment is as a
"nonexclusive authorized dealer" and that likewise the
dealer’s trade area, designated in the contract as "Primary
Area of Responsibility," (PAR) is not exclusive to the
dealer. Indeed, paragraph 18(a) of the Standard Provisions gives
the manufacturer the absolute right to alter the dealer’s PAR and
to appoint additional dealers within that area.

Additionally, the dealer’s claim that it has been
"terminated" is contradicted by the plain language of
the contract as amplified by the attrition letter. Consistent
with the manufacturer’s absolute rights set forth in paragraph
18(a), the letter clearly explained that it was "not a
termination notice," indicating the manufacturer would
continue to do business as normal with the dealer.

Also, the dealer did not have the absolute right to sell or
assign the dealership. Even though paragraph 18(d) acknowledges
that the dealer "may sell" the dealership, this right
is constrained by paragraph 18(c), which provides: "The
Company . . . may refuse to appoint as an authorized
dealer any purchaser or prospective purchaser of any of the
shares or assets of the Dealer."

Also, the plain language of the Dealer Agreement refutes any
factual allegation that the company breached the contract for
failure to deliver equipment in a timely manner. Paragraph 7(b)
of the Standard Provisions provides that the company’s supplier
"shall not be responsible for . . . delays in
shipments" of equipment.

Next, the dealer argues the trial court erred by "failing
to consider" counts in the complaint alleging
"fraudulent misrepresentation, promissory estoppel, and
violation of the Michigan and Virginia franchise laws."
Under this argument, the dealer contends the trial court erred
"in failing to imply the covenant of good faith and fair
dealing into the parties’ agreement." There is no merit to
this contention.

In Michigan, as in Virginia, when parties to a contract create
valid and binding rights, an implied covenant of good faith and
fair dealing is inapplicable to those rights. This is so under
either the common law or the Uniform Commercial Code (even
assuming a dealership agreement is a contract for the sale of
goods). Generally, such a covenant cannot be the vehicle for
rewriting an unambiguous contract in order to create duties that
do not otherwise exist. Hubbard Chevrolet Co. v. General
Motors Corp.
, 873 F.2d 873, 876-77 (5th Cir.), cert. denied,
493 U.S. 978 (1989) (applying Michigan law); Charles E. Brauer
v. NationsBank, 251 Va. 28, 35, 466 S.E.2d 382,
386 (1996). See also Mich. Comp. Laws
? 440.1203 (1994); Va. Code ? 8.1-203.

We reject summarily the dealer’s contention the trial court
erred in dismissing the fraud claim. We apply Virginia law
because fraud is a tort. Generalized, nonspecific allegations,
such as those contained in this complaint, are insufficient to
state a valid claim of fraud. Tuscarora, Inc. v. B.V.A.
Credit Corp.
, 218 Va. 849, 858, 241 S.E.2d 778, 783 (1978).

There is no merit to the dealer’s contention that a
"claim of promissory estoppel can be made under Virginia
law." This Court has not recognized the doctrine, and today
we decide that it should not be adopted in the Commonwealth. W.J.
Schafer Assoc., Inc.
v. Cordant, Inc., 254 Va. ___,
___ S.E.2d ___ (1997).

Further, the dealer erroneously contends the trial court
failed "to address or consider the question of the
application of Michigan law." The relevance of Michigan law
was debated during argument of counsel and the court plainly
stated in the judgment order that the "clear and unambiguous
terms of the Dealer Agreement gave full authority to [the
manufacturer], under either Virginia or Michigan law, to do the
acts which Plaintiffs complain of in their Bill of

And, the trial court did not err by rejecting the dealer’s
argument and by ruling that the Michigan Franchise Investment
Law, Mich. Comp. Laws, ?? 445.1501, et seq.
(1989), does not govern this case. When a contract contains a
choice of law provision, the chosen jurisdiction’s statutory law,
as opposed to its common law, will not control when the statutes
by their own terms do not apply. Peugeot Motors of America,
v. Eastern Auto Distributors, Inc., 892 F.2d 355,
358 (4th Cir. 1989), cert. denied, 497 U.S. 1005

In the present case, the Michigan franchise law is
inapplicable because it contains a geographic limitation; it
applies only to franchises "made" in Michigan. See
Mich. Comp. Laws ? 445.1504; Hacienda Mexican
v. Hacienda Franchise Group, 489 N.W.2d
108, 111 (Mich. App. 1992). Under paragraph (2) of the statute, a
franchise agreement is "made" in Michigan "when an
offer to sell is made" there, or if "an offer to buy is
accepted" there, or "if the franchisee is
domiciled" there, or if "the franchised business is or
will be operated" there.

Here, the dealer does not allege that the Agreement was made
in Michigan, that the dealer was offered the agreement in
Michigan, that it accepted the Agreement in Michigan, that the
dealer is domiciled in Michigan, or that the dealer’s business
will be operated in Michigan. Rather, the dealer alleges that it
is a Virginia corporation with its principal place of business in
South Boston, and that the manufacturer is a Delaware corporation
with its principal place of business in Pennsylvania. The
dealer’s own allegations demonstrate that the Michigan franchise
law cannot apply to this case.

Moreover, the trial court did not err in rejecting the
dealer’s argument that Virginia’s Retail Franchising Act, Code
?? 13.1-557, et seq., is applicable here.
For the purpose of this argument, we will assume the Act is
relevant, rather than the statutes regarding farm machinery
dealerships found in Code ?? 59.1-344, et seq.
The franchising act is applicable if the "franchisee is
required to pay, directly or indirectly, a franchise fee,"
Code ? 13.1-559(A)(b)(3), that is, "a fee or charge
for the right to enter into or maintain a business under a
franchise, including a payment or deposit for goods, services,
rights, or training." ? 13.1-559(A)(g).

In effect, the dealer alleges it paid a franchise fee. It
asserts it "is required to purchase training videos and
programs; make payments for the use of cooperative advertising;
and purchase tools, parts, and other goods and/or services"
from the manufacturer.

These factual assertions are directly contradicted by the
contract. Paragraph 18(c) plainly states: "The Dealer has
not paid any fee for this agreement." Thus, the trial court
did not have to accept as true the dealer’s allegations regarding
payment of fees for videos and other services.

Finally, the dealer argues that the trial court erred in
refusing to grant the motion for leave to amend the complaint. We
hold the court did not abuse its discretion in so ruling. A trial
court may properly deny a motion for leave to amend when it is
apparent that such an amendment would accomplish nothing more
than provide opportunity for reargument of questions already
decided. Hechler Chevrolet, 230 Va. at 403, 337 S.E.2d at
749. This is such a case.

Consequently, we conclude there is no error in the judgment
appealed from, and it will be