HOLIDAY HOSPITALITY FRANCHISING v. Grant

Decision Date28 January 2004
Docket NumberNo. 38,103-CA.,38,103-CA.
Citation865 So.2d 257
PartiesHOLIDAY HOSPITALITY FRANCHISING, INC. f/k/a Holiday Inns Franchising, Inc., Plaintiffs-Appellees v. Joe Bailey GRANT and Gail L. Grant, Defendants-Appellants.
CourtCourt of Appeal of Louisiana — District of US

Hayes, Harkey, Smith & Cascio by Thomas M. Hayes, III, Monroe, for Appellants.

H. Herbert Hobgood, Monroe, for Appellees.

Before WILLIAMS, CARAWAY and PEATROSS, JJ.

CARAWAY, J.

Following a default judgment against them rendered in the State of Georgia, the appellants challenge the enforcement of the judgment in this state asserting that the Georgia court lacked personal jurisdiction over them. The contract underlying the dispute was a license or franchise agreement which one appellant executed with a national hotel chain headquartered in Georgia. The other appellant acted as the guarantor of the agreement. The trial court found that minimum contacts were established by both appellants with the forum state. For the following reasons, we affirm the judgment against the original licensee appellant, but reverse the judgment against the guarantor.

Facts

Joe Bailey Grant and Gail Grant appeal the trial court's judgment in favor of Holiday Hospitality Franchising, Inc., f/k/a Holiday Inns Franchising, Inc. ("Holiday"), recognizing and making executory a Georgia default judgment against them under the Uniform Enforcement of Foreign Judgments Act ("UEFJA"). La. R.S. 13:4241, et seq. The Louisiana trial court found that the Grants had sufficient minimum contacts with the State of Georgia to permit its exercise of jurisdiction over them, and that the judgment was valid, thus entitled to the full faith and credit accorded judgments of sister states under the federal constitution.

The Georgia default judgment noted that the proceedings arose from several contracts between the parties, including a 1994 Holiday Inn license agreement, as amended in 1996, and defendants' personal guaranties of that contract. The judgment, for $1,092,329.02, stated that the amount consisted of unpaid monthly fees, liquidated damages, interest and attorney's fees.

The record shows that the business relationship between Holiday Inns Franchising, Inc. and Joe Bailey Grant ("Grant") was one of franchisor/licensor and franchisee/licensee, respectively, pursuant to which Grant operated the Holiday Inn in Monroe, Louisiana. On December 14, 1994, Holiday and Grant entered a "Renewal License Agreement" (the "1994 Agreement") detailing the specific terms of the franchise. Holiday licensed its "hotel management system" for a ten year term in exchange for Grant's monthly payments of a percentage of the hotel's revenue stream to Holiday. The contract provided that Grant would furnish monthly statements and remittances thereunder, as well as quarterly and annual financial statements subject to review and audit by Holiday in connection with his operation of the Holiday Inn. Gail Grant's separate guaranty was appended to the 1994 Agreement.

The 1994 Agreement provided that the contract "shall be deemed made and entered into in the State of Georgia, and shall be governed and construed under and in accordance with the laws of the State of Georgia." Grant specifically acknowledged that by entering the agreement, he had "sought, voluntarily accepted and become associated with Licensor who is headquartered in Atlanta, Georgia." The Georgia choice of law designation "permits, but does not require that all suits concerning this License shall be filed in the State of Georgia."

On July 22, 1996, Holiday and Grant amended the 1994 Agreement to substitute a new licensee. The amendment recited that Grant was required to change the licensee's name because the hotel was in the process of being refinanced. Investor Inns Limited Partnership, a Louisiana limited partnership ("Investor Inns"), was substituted as the licensee. Investor Inns was comprised of a general corporate partner, Investor Inns, Inc., wholly-owned by Grant, and a limited corporate partner, Sara Gail, Inc., also wholly-owned by Grant. The 1994 Agreement contemplated that a licensee who was a natural person could transfer the license, as follows:

(2) If Licensee is a natural person, he may, without the consent of Licensor, upon 30 days' prior written notice to Licensor, transfer the license to a corporation entirely owned by him, provided that:
(a) adequate provision is made for the management of the Hotel; and
(b) the transferee executes a new license agreement for the unexpired term of this License, on the standard form then being used to license new Hotels under the System, except the fees charged then shall be the same as those contained herein including any adjustments to such fees as may have been implemented from time to time in accordance with the terms of this License; and
(c) the Licensee guarantees, in Licensor's usual form, the performance of the new licensee's obligations hereunder.

Another guaranty, signed by both Grants, was also included with the 1996 amendment. This guaranty warranted the performance of the new licensee's obligations under the 1994 Agreement. The guaranty further provided that it would be governed and construed under the laws of the State of Georgia.

Holiday filed suit in Louisiana under the UEFJA for recognition of the judgment it obtained against the Grants in Georgia. The trial court found that the Georgia judgment was entitled to full faith and credit. Thereafter, the Grants sought to nullify the judgment, alleging that the State of Georgia lacked jurisdiction over them. After the trial court initially granted Holiday's motion to strike the petition for nullity, the Grants appealed.1 This court's opinion concluded that the Grants were entitled to the opportunity to present evidence that Georgia lacked jurisdiction over them and remanded the proceeding to the trial court with instructions to schedule a contradictory hearing to consider the Grants' arguments. Joe Bailey Grant was the only witness who testified at the hearing on remand. The substantive portion of the direct examination consisted of the following:

Q. Did you or your wife ever travel to Georgia to contact (sic) any business with Holiday Hospitality?
A. No.
Q. Did you otherwise have any minimal contact with Georgia (sic) Hospitality?
A. No, sir.
Q. I mean Holiday Hospitality.
A. No.
* * *
Q. Where was the 1994 license agreement... signed?
A. Monroe, Louisiana.

On cross-examination, Grant indicated that the Holiday Inn had been managed by his family prior to 1994. He testified that he was the president of the hotel's general partner, Investor Inns, Inc., and that was the capacity in which he communicated with and remitted funds to Holiday pursuant to the license agreement. Although he denied ever sending money to Holiday personally, he admitted communicating with them "as an operator" and that he had originally been the individual licensee. Grant also admitted to having negotiations with Holiday when the financial problems of Investor Inns developed. The only evidence presented concerning Mrs. Grant was Mr. Grant's testimony that neither he nor she had ever been domiciled in the State of Georgia.

Following trial, in written reasons, the trial court found that a business relationship existed between Holiday and Grant which predated the 1994 license agreement, that the Grants had minimum contacts with Georgia sufficient to afford that state personal jurisdiction over them, and that the Georgia judgment rendered against them was valid and entitled to full faith and credit in Louisiana. However, the award for attorney's fees in the initial Louisiana judgment was stricken and the court ordered that the Louisiana judgment making the Georgia judgment executory be corrected to parallel the Georgia judgment. It is from this judgment that the Grants appeal.

Discussion

The United States Constitution provides that full faith and credit shall be given in each state to the public acts, records and judicial proceedings of every other state. U.S. Const. art. IV § 1. The basic constitutional principles of Full Faith and Credit and Due Process which govern the Grants' attack on the Georgia judgment were discussed by this court in Dunn v. Mortenson, 36,878 (La.App.2d Cir.3/5/03), 839 So.2d 1007, 1011, as follows:

The structure of our nation of states, each possessing equal sovereign powers, however, dictates some basic limitations of the full faith and credit principle. It is established that a court in one state, when asked to give effect to the judgment of a court in another state, "may constitutionally inquire into the foreign court's jurisdiction to render that judgment." Durfee v. Duke, 375 U.S. 106, 84 S.Ct. 242, 11 L.Ed.2d 186 (1963).
* * *
If that foreign court did not have jurisdiction over the subject matter or the relevant parties, full faith and credit need not be given to the sister state's judgment. Nevada v. Hall, 440 U.S. 410, 99 S.Ct. 1182, 59 L.Ed.2d 416 (1979).
The Supreme Court has held that, "it is axiomatic that a judgment must be supported by a proper showing of jurisdiction over the subject matter and over the relevant parties." Underwriters Nat. Assur. Co. v. North Carolina Life and Acc. and Health Ins. Guaranty Ass'n, 455 U.S. 691, 102 S.Ct. 1357, 71 L.Ed.2d 558, (1982). "The requirement that a court have personal jurisdiction recognizes and protects an individual liberty interest, which flows from the Due Process Clause." Schultz v. Doyle, 00-0926 (La.1/17/01), 776 So.2d 1158. The test for personal jurisdiction requires that "the maintenance of the suit ... not offend traditional notions of fair play and substantial justice." International Shoe Company v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). "However minimal the burden of defending in a foreign tribunal, a defendant may not be called upon to do so unless he has the `minimum contacts' with that state that are a prerequisite to its existence of power over
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