Saydell v. Geppetto's Pizza Ribs

I agree with the majority that genuine issues were raised that would defeat summary judgment; however, I concur in judgment only because I disagree with the majority's analysis on most of the issues, particularly analysis on the refund of the franchise fees and the conversion arguments.

Appellant argues that the trial court erred by holding that there was a mutual agreement on location and, therefore, the provision of the franchise agreement concerning the forfeiture of the franchise fee was complied with.

The franchise agreement provides in a pertinent part as follows:

Section 1.4 of the contract states:

"In consideration of the franchise and license granted hereby, Franchisee shall pay, in one (1) lump sum, to Franchisor an initial franchise fee of Fifteen Thousand ($15,000.00) Dollars (herein called `Initial Franchise Fee') upon the execution of this Franchise Agreement. It is expressly understood and agreed that the Initial Franchise Fee is and shall be fully earned by Franchisor upon the execution of this Franchise Agreement and that no part of the Initial Franchise Fee shall berefunded or forgiven to Franchisee for any reason whatsoever." (Emphasis added.)

Addendum No. One of the agreement states:

"It is further understood and agreed that performance of the terms and conditions of this Franchise Agreement shall be contingent upon Franchisor's and Franchisee's mutual agreement on the location of the franchised business contemplated under this Franchise Agreement. Should a mutually agreeable site not be obtained on or before September 21, 1989, Franchisor agreed to return to Franchisee the full initial Franchise Fee.

"All other terms, conditions and covenants of the aforementioned Franchise Agreement shall remain unchanged and in force as written."

The main issue before the court is whether the agreement allows appellant the right to a refund after September 21, 1989, and if so, was there a mutual agreement on the Broadview Heights location to have negated the need for the refund? Both questions should be answered in the affirmative.

According to the agreement, appellant is to be refunded his franchise fees if no location is agreed upon on or before September 21, 1989. The issue, therefore, is whether a mutually agreeable site was obtained before September 21, 1989.

The franchise agreement places the responsibility for finding a location on appellant, the franchisee, subject to approval by appellee, the franchisor. There is no definition as to what constitutes a mutually agreeable site, so it is necessary to look to the totality of the conduct of the parties.

The record shows that appellant found the Broadview Heights location. He testified that he was interested in the location. He made inquiries and had several meetings with the landlord and they discussed costs. He informed appellee and also had several discussions with appellee on the location. Appellee never rejected the location but rather attempted to help appellant get financing. Appellant met with the building architect and the equipment person and discussed layout and cost of equipment. He was given the store operating manual. He made arrangements for the leasing of equipment and attempted to secure financing for the equipment.

The record also shows that appellant continued in his attempt to secure financing for the Broadview Heights location way past the September 21, 1989 deadline for refund and never at any time did he demand a refund of the franchise fees. Therefore, from the totality of the parties' conduct and there being no evidence of disagreement on the location by appellee, a site of Broadview Heights was agreed upon by the parties. The agreement did not indicate that mutual agreement on a site requires a sublease agreement because the sublease contract is between the property owner and appellant, of which appellee had no control.

Appellant further argues that the trial court erred in holding that appellant waived his right to the refund.

Appellant testified that he liked the Broadview Heights location and attempted to acquire it. As stated above, he made all efforts to acquire it and made all the negotiations for the acquisition several months after the September 21, 1989 deadline. Appellant by his conduct waived his right to the refund because not only did he not seek a refund, but he continued after September 21, 1989 to attempt to acquire the location. Another inquiry is, why was appellant unable to acquire the Broadview location?

The following testimony was adduced during trial:

"Q. Why did you meet with Mike O'Malley?

"A. Because I wanted to tell him that I couldn't come up with the extra money that I need had [sic] in order to take him up on his offer to go into the Broadview Heights location.

"Q. Extra money, Greg on [sic]. Hang on. By early on in your examination, you knew that the [range] was anywhere from $100,000 and $144,000, correct?

"A. That was the range.

"Q. That was shown to you on a fact sheet by FDC, right?

"A. That's correct.

"Q. A fact sheet that was in the disclosure document?

"A. No.

"Q. It didn't matter if it was 185, $205,000 or three million dollars you couldn't even meet the bare minimum of $100,000, could you?

"A. I was told —

"Q. Could you —

"A. I was getting —

"Q. Could you, yes or no.

"THE COURT: He can answer the question.

"Q. Yes or no?

"A. No I could not get those kinds [of] funds.

"Q. So you meet with Mike O'Malley on 2-12 by your notation, right?

"A. That's correct.

"Q. And you tell Mike, I can't come up with the money. Right?

"A. I told Mike I couldn't come up with the extra money.

"Q. And yesterday, made a notation on your direct examination that you said, I told Mike I have to decline from the Broadview Heights location, do you remember saying that?

"A. Yes.

"Q. Those were your words?

"A. Yes, sir.

"Q. Am I right to assume that if you mean you decline, that you have already testified in your mind when you told him that statement?

"A. No, sir, I declined an offer to go into the location.

"Q. [sic] Because I had not accepted it yet.

"Q. Then what are you declining from?

"A. His offer.

"Q. Needless to say you at the time [told] him you don't have enough money and you are walk[ing] away from Broadview Heights, correct in essence?

"A. I am not walking away. Well —

"Q. You don't want it?

"A. I didn't want the location, that's correct.

"Q. And construction had started on it, hadn't it?

"A. Yes. That's correct.

"Q. And construction had started as to the types of plans that you and O'Malley had talked to with Lewandowski correct?

"A. That Mike had and I was there, that's right." (Languagesic.)

Thus, from appellant's testimony, the reason he declined to acquire the Broadview Heights location was not because there was no mutual agreement on the site but because he could not finance the project. As the Ohio Supreme Court held in Fletcher v.Fletcher (1994), 68 Ohio St.3d 464, 468, 628 N.E.2d 1343, 1347:

"This court will not reweigh the evidence introduced in a trial court; rather, we will uphold the findings of the trial court when the record contains some competent evidence to sustain the trial court's conclusions. Ross v. Ross (1980),64 Ohio St.2d 203, 18 O.O.3d 414, 414 N.E.2d 426. In addition, we will indulge all reasonable presumptions consistent with the record in favor of lower court decisions on questions of law.In re Sublett (1959), 169 Ohio St. 19, 7 O.O.2d 487,157 N.E.2d 324. When a trial court, sitting without a jury, determines an issue but does not make separate findings of fact and conclusions of law, a reviewing court will presume the validity of that judgment as long as there is evidence in the record to support it. Scovanner v. Toelke (1928), 119 Ohio St. 256, 163 N.E. 493, paragraph four of the syllabus."

While it is my opinion that there was a mutual agreement on location, it is also an issue of fact whether appellant waived his right to seek a refund of the franchise fee when he continued to seek a franchise location with the approval of appellee after the September 21 deadline.

For these reasons, I concur in judgment only.