Barrand, Inc. v. Whataburger, Inc.

• Decision Date: 29 December 2006
• Docket Number: No. 13-05-142-CV.,13-05-142-CV.
• Citation: 214 S.W.3d 122
• Parties: BARRAND, INC., et al., Appellants, v. WHATABURGER, INC., Appellee.
• Court: Texas Court of Appeals

214 S.W.3d 122

BARRAND, INC., et al., Appellants, v. WHATABURGER, INC., Appellee.

No. 13-05-142-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

December 29, 2006.

William Fred Hagans, Kendall C. Montgomery, Jennifer Rustay, Hagans, Bobb & Burdine, Houston, Jacob G. Munoz, William Robert Anderson, III, Darrell L. Barger, Hartline, Dacus, Barger, Dreyer, Corpus Christi, Vincent L. Marable, III, Paul Webb, P.C., Wharton, Juan J. "Chuy" Hinojosa, Hinojosa & Powell, McAllen, James J. Scheske, David C. Lawrence, Akin Gump Strauss Hauer & Feld, Austin, Court D. Smith, Crouch & Ramey, LLP, Dallas, for appellants.

Brian Smith, Austin, Hubert A. Crouch, III, Crouch & Ramey, III, Dallas, Jorge C. Rangel, The Rangel Law Firm, Russell H. McMains, Law Office of Russell H. McMains, Corpus Christi, for appellee.

Before Justices HINOJOSA, RODRIGUEZ, and GARZA.

OPINION

Opinion by Justice GARZA.

This appeal is taken from a final summary judgment entered in favor of Whataburger, Inc. against BurgerWorks, Inc., Carmel Davis, and Denise Sumrall (collectively "BurgerWorks") and against Barrand, Inc., John R. Brown, and Barbara Brown (collectively "Barrand"). On appeal, BurgerWorks and Barrand contend that the trial court erred in granting summary judgment in favor of Whataburger. We hold that Whataburger established its entitlement to judgment as a matter of law on its claim for declaratory relief and the counterclaims asserted against it. We further hold that BurgerWorks and Barrand failed to demonstrate that Whataburger was not entitled to summary judgment as a matter of law. Accordingly, we affirm the judgment of the trial court.

I. Background

This is a franchise dispute. Whataburger operates fast food restaurants specializing in the sale of hamburgers and related products using Whataburger's proprietary marks and information ("the Whataburger System"). Through various franchise agreements and other contracts, Whataburger has also authorized other parties to participate in the Whataburger System. Although considered a successful commercial endeavor by those involved, discord developed among the participants of the Whataburger franchise system following the discovery of an ostensibly improper rebate program between Whataburger and the suppliers that sell goods to Whataburger's franchisees. This discovery led to a lawsuit by various franchisees, including BurgerWorks and Barrand, who sought restitution and punitive damages for what they perceived to be an illegal kick-back scheme. The parties settled the lawsuit before trial.

This case is a dispute over the terms of the settlement agreement. Because each franchisee involved in the lawsuit executed an individual settlement agreement with Whataburger, this case involves multiple contracts with different settlement amounts. In large part, however, the contracts are functionally equivalent, using the same language and terms. For ease of reference, we will refer to the agreements collectively as the "Settlement Agreement."

The Settlement Agreement provides cash reimbursements to the franchisees. It also includes an agreement to amend existing franchise agreements. Pursuant to the Settlement Agreement, Whataburger and the franchisees executed new franchise agreements (collectively "the Modified Franchise Agreement") with new terms, including new terms of duration. Under the Modified Franchise Agreement, the franchisees are granted the right to operate restaurants under the Whataburger System for an initial ten-year period. At the conclusion of the initial ten-year period, the franchisees have the option to renew their franchise agreements for an additional five-year period. At the conclusion of the five-year period, the franchisees may elect to renew their agreements for an additional five-year period. Neither the Settlement Agreement nor the Modified Franchise Agreement contains terms for contract renewal beyond the two optional five-year terms. Thus, the total duration possible under the contracts is twenty years.

In 2002, Whataburger sued the Franchisees for a declaratory judgment. Whataburger's live petition requested that the trial court make the following judicial declarations: (1) "that Whataburger has no legal obligation to grant any new franchise locations and/or franchise agreements pursuant to the Settlement Agreements, or otherwise"; (2) "that Whataburger has no obligation to grant new franchise agreements to the Franchise Defendants relative to their current locations at the end of their contractual terms"; and (3) "that Whataburger has fulfilled all of its obligations under the Settlement Agreements."

The Franchisees responded and asserted counterclaims against Whataburger for declaratory relief, breach of contract, breach of the implied covenant of good faith and fair dealing, promissory estoppel, fraud, and negligent misrepresentation.

In a traditional motion for summary judgment, see Tex.R. Civ. P. 166a, Whataburger argued that the Settlement Agreement is unambiguous and requested summary judgment on the following grounds: (1) "[n]o provision of the Settlement Agreement obligates or requires Whataburger to grant new franchise locations and/or franchise agreements"; (2) "[n]o provision of the Settlement Agreement obligates or requires Whataburger to grant new franchise agreements relative to their current locations at the end of the contractual terms"; (3) "Whataburger has fulfilled all of its obligations under the Settlement Agreement"; and (4) "Whataburger has complied with its obligations under the Area Development Agreement and the Area Development Agreement does not require Whataburger to grant new store development to Barrand outside of the defined Development Area." The motion also argued that "summary judgment for Whataburger will necessarily dispose of all claims and counterclaims. . . ."

BurgerWorks and Barrand filed written responses to Whataburger's motion for summary judgment. In addition, Barrand filed a cross-motion for traditional summary judgment. Barrand's motion asked that the trial court declare that "the [Settlement] Agreement must be read to require . . . [Whataburger] not to unreasonably withhold its consent to new franchise locations requested by . . . [the Franchisees] and grant such franchises on the form of the Modified Franchise Agreement and consistent with all terms and provisions of the Settlement Agreement."

The trial court granted the motion filed by Whataburger and denied the motion filed by Barrand. The trial court subsequently entered a final judgment stating that Whataburger's motion for summary judgment was granted in its entirety as to the affirmative claims made by Whataburger and the counterclaims asserted by BurgerWorks and Barrand.

BurgerWorks and Barrand now appeal to this Court. They have filed separate briefs, raising substantially similar issues. They both complain that summary judgment for Whataburger was improper. In doing so, they contend that the trial court erred in interpreting the terms of the Settlement Agreement and the Modified Franchise Agreement. They contend that the contracts obligate Whataburger to renew franchise agreements for existing restaurants and to grant requests for new franchise locations that are reasonable. They also raise an alternative argument that the contracts are ambiguous, thus precluding summary judgment for Whataburger.

For purposes of this opinion, the briefs are different in at least one respect necessitating individual treatment: the brief for BurgerWorks argues that summary judgment was improper because fact issues exist on several affirmative defenses asserted by BurgerWorks, whereas Barrand's brief argues that summary judgment was improper because fact issues exist on Barrand's counterclaims. These arguments will be addressed separately. Finally, before proceeding to the merits of the appeal, we note that the issues raised by BurgerWorks and Barrand will be consolidated and addressed in the following order: (1) whether the trial court erred in granting summary judgment on Whataburger's claim that it has no obligation to renew contracts for existing restaurants; (2) whether the trial court erred in granting summary judgment on Whataburger's claim that it has no obligation to grant requests for new franchise locations; (3) whether the trial court erred in granting summary judgment on Whataburger's claim that it has no continuing obligations under the Settlement Agreement; (4) whether the trial court erred in granting summary judgment for Whataburger on Barrand's counterclaims; (5) whether the affirmative defenses asserted by BurgerWorks present fact issues precluding summary judgment for Whataburger; and (6) whether the trial court erred in excluding testimony by a damages expert for BurgerWorks and Barrand.

II. Standard of Review

Appellate courts review summary judgments de novo. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994); Tex. Commerce Bank-Rio Grande Valley, N.A. v. Correa, 28 S.W.3d 723, 726 (Tex.App.-Corpus Christi 2000, pet. denied). When both sides move for summary judgment and the trial court grants one side's motion without specifying its reasons, as in this case, the appellate court must review the motions and evidence and render the judgment that the trial court should have rendered. Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex.1997).

III. Analysis of Summary Judgment on Whataburger's Action for Declaratory Judgment

The interpretation of an unambiguous contract is a question of law for the court to decide. N.M. Uranium, Inc. v. Moser, 587 S.W.2d 809, 814 (Tex.Civ. App.-Corpus Christi 1979, writ ref'd n.r.e.); see also Perry v. Houston Indep. Sch. Dist., 902 S.W.2d 544, 547 (Tex.App.-Houston [1st Dist.] 1995, writ dism'd w.o.j.). Unambiguous contracts are enforced as written. See, e.g., Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). When a contract contains an ambiguity, the granting of a motion for...