Red Roof Inns v. Murat Holdings, L.L.C., 05-05-00240-CV.

• Decision Date: 16 April 2007
• Docket Number: No. 05-05-00240-CV.,05-05-00240-CV.
• Citation: 223 S.W.3d 676
• Parties: RED ROOF INNS, INC. and Accor Economy Lodging, Inc., Appellants, v. MURAT HOLDINGS, L.L.C., Appellee.
• Court: Texas Court of Appeals

223 S.W.3d 676

RED ROOF INNS, INC. and Accor Economy Lodging, Inc., Appellants, v. MURAT HOLDINGS, L.L.C., Appellee.

No. 05-05-00240-CV.

Court of Appeals of Texas, Dallas.

April 16, 2007.

Rehearing Overruled June 8, 2007.

Scott P. Stolley, Thompson & Knight, LLP, Dallas, for Appellant.

John W. Bickel, II, Bickel, II, Bickel & Brewer, Dallas, for Appellee.

Before Justices WRIGHT, BRIDGES, and LANG.

OPINION ON REHEARING

Opinion by Justice WRIGHT.

We withdraw this Court's opinion dated August 25, 2006 and vacate the judgment of the same date. This is now the opinion of the Court.

Before the Court are three motions for rehearing filed by Red Roof Inns, Inc., Accor Economy Lodging, Inc., and Murat Holdings, L.L.C. We grant the motion for rehearing filed by cross-appellee Accor Economy Lodging, Inc.

Red Roof Inns, Inc. and Accor Economy Lodging, Inc. (AEL) (collectivley "Red Roof") appeal a judgment following a jury trial. In six points of error, Red Roof contends generally: (1) the evidence is legally insufficient to support the jury's finding that Murat performed its obligations under the franchise agreement; (2) the evidence is legally insufficient to support the jury's finding that Red Roof breached the franchise agreement; (3) the trial court erred in submitting certain instructions in the charge; and (4) the trial court erred in its submission of the charge with respect to damages.

By way of cross-appeal, Murat complains of the trial court's summary judgment on its tort and statutory claims. In four cross-points of error, Murat contends the trial court erred in granting summary judgment on its claims for: (1) tortious interference; (2) violation of the Louisiana Unfair Trade Practices Act; (3) fraud and negligent misrepresentation; and (4) breach of fiduciary duty.

We sustain Red Roof's third point of error with respect to charge error, reverse the trial court's judgment, and remand this case for a new trial. We sustain Murat's first cross-point of error and remand the tortious interference claim to the trial court. We overrule Murat's second, third, and fourth cross-points of error.

Background

Murat Holdings, L.L.C. is a Louisiana limited liability company owned by Emanuel Organek and his wife. Organek formed Murat to acquire, own, and operate a hotel located in Baton Rouge, Louisiana. Instead of selling the hotel "as is" for a quick profit, Organek decided to purchase a Red Roof franchise and turn the hotel into a Red Roof Inn & Suites.

On December 15, 1998, Organek and Red Roof executed a franchise agreement. Subsequently, Murat commenced renovations at the hotel to convert it to a Red Roof. The hotel remained open during the renovations. Joe Oliveri, a Red Roof employee, made decisions as to what renovations needed to be done and when the hotel would be ready to open under the Red Roof name. The hotel consisted of 5 buildings numbered 100 through 500. The work scope, attached to the franchise agreement, required that the renovations in buildings 100, 200, and 300 be completed prior to opening. Oliveri later stated that only buildings 200 and 300 needed to be completed prior to opening and sent Organek a memo to that effect.¹

On August 12, 1999, Oliveri came to inspect the hotel. Organek and Eugene Thill, the manager of the hotel during the renovations, were present at this inspection. Following the inspection, Oliveri said the hotel was "good to go," set an opening date of August 27, 1999, and scheduled Red Roof trainers to come and prepare for the opening of the hotel as a Red Roof.

On August 13, 1999, following acquisition of Red Roof by Accor, management of Red Roof's operations was transferred to AEL, Accor's wholly owned subsidiary. AEL operated the Motel 6 chain, including three located in Baton Rouge. On August 23, 1999, Oliveri sent a letter to Murat stating that AEL now required that buildings 100, 200, and 300 be completed prior to opening as a Red Roof. In that letter, Oliveri stated that "with the change of control, came the directive" that Accor would require 100% completion of the renovations before opening. When Thill contacted Oliveri about the letter, Oliveri stated that AEL was "a lot tougher."

When Organek discussed the delay in opening, David O'Shaughnessy, AEL's executive vice president of franchise operations, told him that the hotel was "atypical" and did not fit AEL's idea of the Red Roof prototype. After the acquisition, AEL abandoned the Red Roof Inn & Suites concept and decided that it no longer wanted full-service hotels.

On September 17, 1999, Randy Evanchyck, a Red Roof director of franchise sales, called Murat and told him that AEL did not want the hotel in the Red Roof system. Red Roof offered to return the franchise fee if Organek would terminate the franchise agreement. Organek would not agree to termination.

Following an inspection of the hotel on October 11 and 12, O'Shaughnessy sent Murat a letter dated October 22, 1999. He stated that Murat was in breach of the franchise agreement because the renovations of buildings 100, 200, and 300 had not been completed. He offered Organek a thirty-day extension to complete the renovations noted by the inspectors on a punch-list if he would execute a written addendum stating that the renovations in buildings 400 and 500 would be completed within 180 days of opening. Organek sent O'Shaughnessy a letter on October 25, 1999 informing him that he did not receive the punch-list of needed renovations. Organek also stated that he had not received a copy of the proposed addendum.

Alan Rabinowitz, general counsel for AEL, sent Organek a letter on October 29, 1999. The letter was notice of termination due to Murat's alleged default. AEL gave Murat thirty days to cure the alleged default. On November 29, 1999, Organek, by letter, informed Rabinowitz that Murat had completed the additional renovation requirements from the punch-list. Organek asked that Rabinowitz issue the final license agreement. Rabinowitz responded by letter on the same date stating that Dean Savas, vice president of franchising for AEL, would be there on December 1, 1999 to inspect the hotel.

Murat filed this lawsuit on December 1, 1999. Murat alleged contract, statutory, and tort claims. Red Roof moved for summary judgment on all claims. The trial court granted summary judgment against Murat on the statutory and tort claims. The claims on the contract were tried to a jury. The trial court rendered judgment on the jury verdict in the amount of $5,806,000 plus prejudgment interest, court costs, and attorney's fees in favor of Murat. This appeal timely followed.

The Contract Claims

In its third point of error, Red Roof asserts the trial court committed charge error because it submitted an instruction on contract modification but it did not submit a question as to whether the parties modified the franchise agreement.² Red Roof contends it is impossible to determine whether the jury found that the parties modified their agreement when it found that (1) Murat performed its obligations under the franchise agreement and (2) Red Roof breached the franchise agreement. We review claims of charge error for an abuse of discretion. Tex. Dep't of Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex.1990).

The Franchise Agreement, the Workscope, and the First Addendum to the Franchise Agreement were executed simultaneously on December 15, 1998. The Franchise Conversion Work Scope was part of the franchise agreement. The Work Scope provided: "All work in public areas and buildings 100, 200 & 300 referenced in this Workscope must be completed prior to opening as a Red Roof Inn. All work in buildings 400 & 500 should be completed within 180 days of opening as a Red Roof Inn." The franchise agreement provided that: "No amendment may be made nor shall any amendment be valid except in a written agreement signed by both you and us."

Murat pleaded modification and the jury charge included an instruction on contract modification as follows:

A contract may be modified upon the mutual agreement of the parties and may occur through words or conduct, expressly or by implication. The plaintiff claims that the parties modified their Franchise Agreement by oral and written modifications. The plaintiff must prove by the greater weight of the evidence that the parties agreed to modify their contract.

Although the issue of whether the parties modified the franchise agreement was a question for the jury, the charge did not include a question asking whether the parties modified their agreement.

The supreme court has recently held that a court cannot assume that a jury used an instruction to answer an unasked question. Diamond Offshore Mgm't Co. v. Guidry, 171 S.W.3d 840, 844 (Tex.2005). In Guidry, the trial court instructed the jury on course of employment, but did not ask the jury for a finding on that element of the plaintiff's wrongful death action. Moreover, the liability question made no reference to the course of employment instruction. The supreme court held the trial court erred in not obtaining a finding on course of employment. Id. The supreme court reversed and remanded for a new trial. We consider Guidry to be on point.

As Murat points out, in Guidry, the course of employment was an element of the plaintiff's claim. Although not a specific element of Murat's breach of contract claim, under the circumstances of this case, Murat had to establish first a modification of the agreement in order to establish that it met its obligations and to support a breach by Red Roof. Assuming that the franchise agreement required completion of buildings 100, 200, and 300 prior to opening as a Red Roof, without a finding that the parties modified the franchise agreement to require completion of only buildings 200 and 300, Murat cannot prove that it met its obligations under the agreement by August 27. Moreover, Murat could not prove that Red Roof breached the agreement by not allowing it...