Miller Enterprises, Inc. v. Dog N' Cat Pet Centers of America, Inc.

• Decision Date: 25 October 1989
• Docket Number: No. 890097,P,No. 9,9,890097
• Citation: 447 N.W.2d 639
• Parties: MILLER ENTERPRISES, INC., a North Dakota Corporation, d/b/a Dog N' Cat Pet Centerlaintiff and Appellee, v. DOG N' CAT PET CENTERS OF AMERICA, INC., Defendant and Appellant. Civ.
• Court: North Dakota Supreme Court

Page 639

447 N.W.2d 639

MILLER ENTERPRISES, INC., a North Dakota Corporation, d/b/a Dog N' Cat Pet Center No. 9, Plaintiff and Appellee, v. DOG N' CAT PET CENTERS OF AMERICA, INC., Defendant and Appellant.

Civ. No. 890097.

Supreme Court of North Dakota.

Oct. 25, 1989.

Maury C. Thompson of Christensen & Thompson, Bismarck, for plaintiff and appellee.

Kathryn L. Dietz (argued) and Larry D. Orvik of Dietz & Little, Bismarck, for defendant and appellant.

VANDE WALLE, Justice.

Dog N' Cat Pet Centers of America, Inc., appealed from a judgment of the district court of Burleigh County rescinding its franchise agreement with Jim Miller and his corporation, Miller Enterprises, Inc., on the basis of fraud. We affirm.

Dog N' Cat is a Colorado corporation with its principal place of business in Denver. In 1977, a former North Dakota resident named Steve Hintgen opened the first Dog N' Cat pet store in Colorado Springs, Colorado. Hintgen's business subsequently grew so that by 1985 he owned and operated five stores in the Colorado area. Encouraged by the growth of his pet-store business, Hintgen incorporated Dog N' Cat in early 1985 with the intention of selling franchises. At the time of its incorporation Dog N' Cat was a relatively small corporation operated by Hintgen, a shareholder named Michael Bernstone, and a few assistants including Jerri Raetz.

When Dog N' Cat became licensed to sell franchises, Hintgen contacted Don Miller, a Grand Forks, North Dakota, resident who had employed Hintgen in his retail grocery business when Hintgen was living in North Dakota. Hintgen told Don Miller he thought Columbia Mall in Grand Forks would be an ideal location for a Dog N' Cat franchise. Don Miller told his son, Tom, about Hintgen's proposal. Eventually, Tom Miller entered into a franchise agreement with Hintgen to operate a Dog N' Cat franchise in Columbia Mall. Don Miller also placed Hintgen in contact with his brother, Jim Miller, who was residing in Bismarck, North Dakota.

During May of 1985, Hintgen and Jim Miller began discussing the possibility of opening a Dog N' Cat franchise in Bismarck. Jim Miller had no previous experience or training in the pet business. Hintgen was aware of this, and was also aware that Miller was relying on Dog N' Cat to provide him with the necessary training to operate a pet store. In July of 1985, Jim Miller and Dog N' Cat entered into a written agreement in which Dog N' Cat granted Miller a franchise to operate a pet store in Bismarck. Hintgen's separate agreements with Tom Miller and Jim Miller constituted the first two sales of Dog N' Cat franchises.

Jim Miller, in return for his Dog N' Cat franchise, agreed to pay a franchise fee of $18,500 and royalty payments calculated on a percentage of his monthly gross receipts. The franchise agreement also contained two key provisions. The first provision required the franchisor, Dog N' Cat, to provide a specific, two-week formal training program to its franchisees prior to the opening of a franchise business. ¹ The second provision required the franchisor to provide the franchisee with reasonable operating assistance, including answering telephone and written inquiries.

After the execution of the franchise agreement, Hintgen negotiated a lease for Jim Miller at the Kirkwood Mall in Bismarck. Dog N' Cat also provided assistance to Miller by acquiring architectural drawings, supervising contractors, and ordering merchandise. Jim Miller's store was scheduled to open on the day after Thanksgiving in November of 1985.

Prior to the date set for his opening, Jim Miller traveled to Grand Forks to receive some initial training at Tom Miller's store in Columbia Mall. Hintgen sent his assistant, Jerri Raetz, to Grand Forks to supervise the training. Raetz spent half an hour reading from a lengthy training manual supplied by Dog N' Cat to Jim and Tom Miller. The rest of the two-day session was spent stocking Tom Miller's shelves and readying the store for his opening, which had been delayed due to construction.

Jim Miller's next opportunity for training occurred a week prior to the opening of his store in Kirkwood Plaza when Hintgen traveled to Bismarck to render some pre-opening assistance. Despite the fact that Jim Miller was in possession of the Dog N' Cat training manual, Hintgen spent no time going over it with Miller. During the week, Hintgen and Jim Miller helped the contractors finish the store's construction, set up shelves and fixtures, and stocked the shelves with merchandise. Hintgen also aided Miller with employee interviews, and worked with him regarding advertising. Hintgen left Bismarck prior to Miller's opening, but sent his assistant, Jerri Raetz, to Bismarck to be with Miller during the opening.

Jim Miller's store opening was far from smooth. During Miller's initial day of business a number of tanks of fish died, two dogs died while others had contracted parvo virus, and various birds and hamsters died from shipping diseases. In addition to receiving a number of complaints from customers, Miller's store gave refunds to individuals who had bought stressed fish, and paid veterinarian bills of persons who purchased sick dogs.

Subsequent to his store opening, many of Jim Miller's problems began to fade due in a large part to advice and training supplied by various pet-supply salesmen and distributors who had contacted Miller's store. Although Hintgen had given Jim Miller a Dog N' Cat telephone number in Colorado to contact when problems arose, Miller and his employees were often unable to reach anyone at Dog N' Cat when they used the number. Furthermore, messages left on Dog N' Cat's answering machine were not always returned.

In January of 1986, nearly two months after his store opening, Jim Miller attended a five-day training conference in Colorado Springs sponsored by Dog N' Cat. The conference involved a number of individuals from various pet-supply businesses who conveyed information to the participants on their companies' products and supplies. An advertising executive also gave a presentation on methods of advertising. At the completion of the conference, Dog N' Cat awarded Jim Miller a certificate of training indicating completion of Dog N' Cat's training program.

In late 1986, Jim Miller began to disassociate his pet store from Dog N' Cat. ² Miller stopped making his monthly royalty payments to Dog N' Cat, and also refused to pay $8,500 of the original franchise fee which was still outstanding. On March 5, 1987, Dog N' Cat sent a letter to Miller complaining about his failure to abide by the franchise agreement. Shortly thereafter, Miller commenced this action seeking to declare the franchise agreement null and void on the basis of fraud.

Dog N' Cat moved for a partial summary judgment or partial judgment on the pleadings contending that Miller failed to allege fraud with particularity in his complaint. Moreover, in moving for summary judgment, Dog N' Cat attached to its brief a portion of the deposition of Jim Miller. Dog N' Cat contended that the excerpt showed no factual basis for an action for fraud. Miller opposed Dog N' Cat's motion and the trial court entered an order denying Dog N' Cat's motion for summary judgment.

After a bench trial, the trial court issued an oral memorandum opinion in which it found that Dog N' Cat had committed actual fraud as defined under Section 9-03-08(4), N.D.C.C. ³ Specifically, the trial court entered findings which demonstrated that Dog N' Cat made contractual promises of training and assistance without an intent to perform them. The trial court ordered that the franchise agreement be terminated with neither of the parties having any further rights or obligations thereunder. A judgment was entered and Dog N' Cat filed a timely notice of appeal to this court.

Dog N' Cat raises two issues on appeal: Dog N' Cat contends that the trial court erred in denying its motion for summary judgment or judgment on the pleadings; Dog N' Cat also argues that the trial court clearly erred in finding actual fraud.

Under Rule 56, N.D.R.Civ.P., a summary judgment should be granted only if it appears that there are no genuine issues of material fact or any conflicting inferences which may be drawn from those facts. ⁴ See Rule 56(c), N.D.R.Civ.P.; Production Credit Ass'n of Minot v. Klein, 385 N.W.2d 485 (N.D.1986); Poyzer v. Amenia Seed and Grain Co., 381 N.W.2d 192 (N.D.1986). The party moving for a summary judgment has the burden to demonstrate clearly that there is no genuine issue of material fact. Binstock v. Tschider, 374 N.W.2d 81 (N.D.1985); Latendresse v. Latendresse, 294 N.W.2d 742 (N.D.1980). In considering a motion for summary judgment the court may examine the pleadings, depositions, admissions, affidavits, interrogatories, and inferences to be drawn therefrom to determine whether summary judgment is appropriate. Everett Drill. Vent. v. Knutson Flying Serv. 338 N.W.2d 662 (N.D.1983); First Nat. Bank of Hettinger v. Clark, 332 N.W.2d 264 (N.D.1983). In doing so, the court must view the evidence in a light most favorable to the party opposing the motion, and that party will be given the benefit of all favorable inferences which can reasonably be drawn from the evidence. See Stokka v. Cass Cty. Elec. Co-op., Inc., 373 N.W.2d 911 (N.D.1985); Everett Drill. Vent. v. Knutson Flying Serv., supra.

Dog N' Cat first contends that because Miller did not allege fraud with particularity in his complaint, the trial court erred in failing to grant its summary-judgment motion. Paragraph 6 of Miller's complaint stated:

"That there was misrepresentation and fraud in the inducement by the Defendant in getting the Plaintiff to sign said agreement. That had the Plaintiff been fully advised as to the actual services and assistance which would be provided by the Defendant, the Plaintiff would not have entered into the agreement."

Paragraphs 7 and 8 of the complaint further detailed the lack of...