Hooters of America, Inc. v. Carolina Wings, Inc.

• Decision Date: 25 May 1995
• Docket Number: No. 93-1759,93-1759
• Citation: 655 So.2d 1231
• Parties: 20 Fla. L. Weekly D1272 HOOTERS OF AMERICA, INC., Hooters of Raleigh, Inc., and Hooters of Charlotte, Inc., Appellants, v. CAROLINA WINGS, INC., and Charlotte Wings, Inc., Appellees.
• Court: Florida District Court of Appeals

Page 1231

655 So.2d 1231

20 Fla. L. Weekly D1272

HOOTERS OF AMERICA, INC., Hooters of Raleigh, Inc., and Hooters of Charlotte, Inc., Appellants, v. CAROLINA WINGS, INC., and Charlotte Wings, Inc., Appellees.

No. 93-1759.

District Court of Appeal of Florida First District.

May 25, 1995.

Rehearing Denied June 29, 1995.

Robert P. Smith and Karen M. Peterson, Hopping, Boyd, Green & Sams, Tallahassee, for appellants.

Stephen D. Busey and Richard R. Thames, Smith, Hulsey & Busey, Jacksonville, for appellees.

LAWRENCE, Judge.

Hooters of America, Inc. (Hooters) appeals a final judgment for damages in the amount of $5,432,565, entered against it and in favor of Carolina Wings, Inc. (Carolina) pursuant to a default. We reverse in part and affirm in part.

Hooters and Carolina entered into a "Development Agreement" (Agreement) in 1988, whereby Carolina purchased "the right of first refusal to participate in the ownership of up to six (6) Hooters' System Restaurants" anywhere in the United States, except for certain defined geographic areas previously the subject of similar agreements with other partners. Hooters and Carolina opened two restaurants pursuant to the Agreement; one was located in Raleigh and the other in Charlotte (Charlotte I). Hooters offered Carolina an opportunity in 1990 and 1991, pursuant to the Agreement, to participate in four additional restaurants: Wilmington, North Carolina; Norcross, Georgia; and Columbia and Myrtle Beach, South Carolina. Carolina rejected these sites as inferior markets. From 1990 through 1992, Hooters opened, without joint venture partners, sixteen restaurants at various locations, including the four rejected by Carolina.

Hooters opened a second restaurant in Charlotte (Charlotte II) in September 1991, located less than seven miles from Charlotte I. Carolina was not offered an opportunity to participate in Charlotte II. Carolina viewed this as a breach of the Agreement and settlement negotiations ensued. Carolina filed suit in May 1992, when negotiations proved unsuccessful.

Carolina's complaint alleged in Count I that Hooters breached the Agreement by failing to offer participation in Charlotte II, when Carolina, at that point, had accepted participation in only two of the six restaurants provided for in the Agreement. Count II alleged that Hooters had breached a covenant not to compete contained in the Agreement, by opening Charlotte II within fifteen miles of Charlotte I.

Hooters and its counsel at that time failed to respond in any manner to the complaint. A default was entered. Hooters was subsequently furnished with an order setting the case for pretrial conference and for non-jury trial on the issue of damages. Again, Hooters failed to appear for the pretrial conference and the non-jury trial. Hooters also failed to respond to or participate in discovery requests and proceedings, including the deposition of its former president who was instrumental in negotiating the Agreement.

The trial court awarded Carolina damages in the total amount of $5,432,565, allocated as follows:

a) Charlotte II--$1,205,022; ¹b) Harborplace--1,770,321;

c) St. Louis--1,546,973;

d) Gwinnett--910,249.

Hooters first appeared in the action within eleven days following entry of the final judgment, by employing Jacksonville counsel for the first time, who filed a timely motion for rehearing and a motion seeking to set aside the default and to vacate the final judgment. The trial court denied both motions following a hearing.

Hooters argues several theories upon which it contends that the trial court committed error. Hooters first claims excusable neglect for its failure to respond prior to the entry of a default. We will not burden the record by reciting the events which resulted in the entry of a default and an award of damages following the non-jury trial. Suffice it to say that it is clear that the trial judge was eminently correct in concluding that Hooters' conduct constituted gross negligence.

Hooters also contends error in the entry of a default because it was entitled to notice of the application for default. We conclude that the trial judge correctly determined that Hooters was not entitled to notice of the application for default pursuant to Rule 1.500(b), Florida Rules of Civil Procedure.

Hooters argues three additional grounds for relief, beyond the issue of whether a default was properly entered, which we restate and address as follows: (1) that Carolina so abused and misused the pleading and default process that the only remedy is to vacate the judgment and begin the entire process anew; (2) that Carolina was not entitled to a judgment for damages because the complaint failed to state a cause of action, in that the Agreement on its face contradicted the allegations in the complaint; and (3) that even if Count I stated a cause of action, the damages awarded were beyond the allegations pleaded in the complaint. ²

As to the first ground, we are not persuaded that Carolina has so abused and misused the pleading and default process that the entire process should be set aside and begun anew. With respect to the second and third grounds, Carolina concedes that each ground involves a separate and distinct principle of law. Although similar in nature, failure to state a cause of action is not the same as recovering damages on a cause of action not pleaded at all. Hooters argues that the allegations in the complaint so conflicted with the plain language of the Agreement, which was incorporated by reference, that the complaint failed to state a cause of action for breach of contract. We agree with the trial judge who admitted extrinsic evidence on the subject, that the Agreement is sufficiently ambiguous as to render the issue a question of fact rather than a question of law. Neumann v. Brigman, 475 So.2d 1247 (Fla. 2d DCA 1985).

We do find merit however, in Hooters' third ground, as it relates to Count I, that damages may not be awarded which are not supported by the allegations contained in the complaint. An elementary principle of law provides that a party against whom a default has been properly entered admits the truth of the well-pleaded allegations of the complaint as to liability. It is also elementary that damages will be awarded only to the extent supported by the well-pleaded allegations of the complaint. A party may rely upon these principles. Henry P. Trawick, Jr., Florida Practice and Procedure Sec. 25-4, at 381 (1994). This court in Freeman v. Freeman, 447 So.2d 963, 964 (1st DCA 1984) held:

A defendant against whom a default is entered admits only the well-pleaded facts and acquiesces only in the relief specifically prayed for. The award of relief not sought by the pleadings is error.

(Citation omitted.) To like effect are decisions in Tutwiler Cadillac, Inc. v. Brockett, 551 So.2d 1270 (1st DCA 1989); Board of Regents v. Stinson-Head, Inc., 504 So.2d 1374 (Fla. 4th DCA 1987); Bay Products Corp. v. Winters, 341 So.2d 240 (Fla. 3d DCA 1976); see also Alan Neuman Productions, Inc. v. Albright, 862 F.2d 1388 (9th Cir.1988).

Carolina does not take issue with this principle of law. Rather, it argues that its pleading is adequate to support the award of damages for all four of the restaurants involved. We therefore address the adequacy of Count I of Carolina's complaint, the pertinent provisions of which are recited as follows:

5. On August 29, 1988, Hooters and Carolina Wings entered into a Development Agreement (the "Development Agreement") by which, in consideration for Carolina Wings' payment of $50,000, Hooters granted to Carolina Wings "the right of first refusal to participate in the ownership of up to six (6) Hooters' System Restaurants." A copy of the Development Agreement is attached as Exhibit A.

....

11. Pursuant to Paragraph 1 of the Development Agreement, Hooters is contractually obligated to offer to Carolina Wings a right of first refusal to participate in the ownership of up to six Hooters restaurants.

12. In accordance with this contractual obligation, Hooters has offered to Carolina Wings and Carolina Wings has accepted the opportunity to participate in the development and ownership of two restaurants, the First Charlotte Hooters and the Raleigh Hooters.

13. Subsequently, however, Hooters developed and operates, through its wholly owned subsidiary Hooters of Charlotte II, Inc., a competing Hooters restaurant in Charlotte, North Carolina (the "Second Charlotte Hooters") without offering to Carolina Wings the right to participate in its ownership.

14. Hooters' failure to offer to Carolina Wings the opportunity to joint venture with it in the ownership of the Second Charlotte Hooters constitutes a breach of the Development Agreement.

15. Carolina Wings is willing, ready and able to participate in the ownership and operation of the Second Charlotte Hooters.

....

18. Carolina Wings has been damaged by Hooters' breach of the Development Agreement in an amount exceeding $10,000.

The entire count is void of any mention or reference to the Hooters restaurants located at Harborplace, Gwinnett, or St. Louis. A single breach (Charlotte II) is alleged, and damages are claimed, founded only upon the same single breach. A fair and objective reading of Count I leads to the conclusion that the only restaurant at issue was Charlotte II. It follows that the only damages sought and allowable were those resulting from Hooters' alleged failure to permit Carolina's participation in Charlotte II. Because Carolina had the right to participate in only four additional restaurants (even under their view of the contract provisions), Hooters would have been required to guess as to the identity of the four additional restaurants, since Hooters opened an additional sixteen restaurants during this time, four of which were rejected by Carolina. Even then, for Carolina to have been entitled to damages under any circumstance, it would have had to affirmatively elect...