Interpretive Opinion No. 71 / 26F
State of California Department of Corporations
Anthony R. Pierno, Commissioner
In reply refer to: File No. _____
This interpretive opinion is issued by the Commissioner of Corporations pursuant to section 31510 of the franchise investment law. It is applicable only to the transaction identified in the request therefor, and may not be relied upon in connection with any other transaction.
Mr. David I. Freed
Attorney at Law
Fouke, Wertsch & Hayes
111 Sutter, Suite 2240
San Francisco, CA 94104
Dear Mr. Freed:
The request for an interpretive opinion contained in your letter dated March 26, 1971 has been considered by the Commissioner. Your letter raises the question whether the Assignment and Assumption of Dealer Agreement as described therein between Mr. Seymour M. Lederman and Sy's Auto Repair, Inc, a California corporation ( "Sy's " ), is exempt from the registration requirement of Section 31110 of the Franchise Investment Law by virtue of Section 31102. On the assumption stated below, this question is answered in the affirmative.
It appears that Mr. Lederman on August 1, 1964, entered into a dealer agreement with Automotive Engineering Company of San Francisco, a California corporation ( "Automotive" ) By this agreement, he was granted the nonexclusive right, subject to the provisions set forth therein, to use the name "Automotive Engineering" in his business and to purchase from Automotive for resale, rebuilt engines and automotive parts and to resell these articles in accordance with a plan prescribed in the agreement. Under the agreement, various payments were stipulated to be made by Mr. Lederman to Automotive, including payments for products and rental of leased premises.
You have represented that at this time, Mr. Lederman proposes to transfer and assign all of his right, title and interest in, to and under this agreement to Sy's, and Sy's will agree to assume all obligations imposed upon Mr. Lederman by the terms of the agreement. The assignment will be made with the consent of Automotive.
Section 31110 of the Law imposes a registration requirement upon the offer or sale of any franchise in this state unless an exemption is available. Section 31102 of the Law provides such an exemption for, among other things, the offer or sale of a franchise by, a franchisee for his own account, if the sale is not effected by or through a franchisor. That section further provides that a sale is not effected by or through a franchisor merely because a franchisor has a right to approve or disapprove a different franchisee.
Accordingly, assuming that the agreement between Mr. Lederman and Automotive is a franchise, if the sale of that franchise to Sy's is not effected by or through Automotive, it is our opinion that, under the circumstances described in your letter, the proposed Assignment and Assumption of the Dealer Agreement submitted to us is exempt from the registration requirement of the Franchise Investment Law by virtue of Section 31102.
Dated: San Francisco California
April 15, 1971
By order of
ANTHONY R. PIERNO
Commissioner of Corporations
HANS A. MATTES
Office of Policy