# FILED December 18, 2001 Cecil Crowson, Jr . Appellate Court Clerk SHOLO DGE FRANCHISE SYSTEMS, ) INC., ) ) Plaintiff /Appella nt, )

) Davidson Chancery ) No. 93- 97- II VS. ) ) ) Appeal No. McKIBB ON BROTHERS, INC., ) 01-A-01-9506-CH-00240 ) Defendant/Appellee. )

IN THE COURT OF APPEALS OF TENNESSEE MIDD LE S EC TION AT N AS HVILLE
APPEAL FROM THE CHANCERY COURT OF DAVI DSON COUNTY AT NASHVIL

LE, TENNESSEE
HONORABLE C. AL

LEN HIGH, CHANCELLOR Eugene N. Bulso, Jr. Larry G. Haye s, Jr. BOUL T, CUMMI

NGS, CONN

ERS & BER

RY 414 Union Street, Suite 1600 P.O. Box 198062 Nashville, Tennessee 37219 ATTORNEY FOR PLAI

NTIFF/APPEL

LANT John E. Quinn MANIER, HEROD, HOL LABAUGH &

SMITH 2200 First Union Tower 150 Four th Avenue , North Nashville, Tennessee 37219 ATTORNEY FOR DEFENDANT/APPEL LEE
AFFIRMED AND

REMANDED HENRY F. TODD

PRESIDING

JUDGE, MIDDL

E SECTION CONCUR: SAMUEL L . LEWIS, JUDGE WILL IAM C. KOCH, JR., JUDGE-2-

SHOLO DGE FRANCHISE SYSTEMS, ) INC., ) ) Plaintiff /Appella nt, )

) Davidson Chancery ) No. 93- 97- II VS. ) ) ) Appeal No. McKIBB ON BROTHERS, INC., ) 01-A-01-9506-CH-00240 ) Defendant/Appellee. ) O P I N I O N The plaintiff counter-defendant, ShoL odge Franchise Sy stems, Inc. (herea fter "Sholodge") has appea

led from a jury ve

rdict of $327,272 in favor of the defendant counterplaintiff McKibbon Brothers, I nc. (hereafter McKibbon) for damages for breach of

a franch ise contr act.
Issues presented on appe al by Sholodge a re: 1. Whether

ShoLo dge br

eached the licen se agr

eement, and if so, whether the br

each wa s materia

l. 2. Whether the Trial Court properly discharged its role as the thirteenth juror. 3. Whether the jury' s award of damages is supported by the record. On July 10, 1989, Sholodge

and McKi

bbon exec uted a " Shoney 's I nn Lic ense Agreement" authorizing McKibbon to construct and operate a "Shoney 's Inn" on H ighway 341 at Perry, Ge orgia for a period of twenty years. The

initial license fee was agree d to be $150 per room with a

minimum tota

l of $15,00 0. A conti nuing fee of 3% of gross sa les in each month was pay able on the tenth of the following month.
Sholodge agreed: 8. Warranties of Licensor. . . . (a) T o make av ailable t o Lice nsee the privileg e of cons ulting wi th Lic ensor' s officia

ls and staff upon problems relating to design, construction, operati on, marke

ting and adverti sing, so t

hat L icensee will-3- have available to it any

experience of Licensor

and other license es rela

ting to su ch proble

ms.

. . . . (e) To ma

intain sup ervision

over all license es in orde

r to assure compliance with Lice nsor's standards and policies as from time to time established, and with Licensor' s rules of operation. (f) To encourage the e

ver-increasing use of Shoney 's Inns on a national basis. The agreement contained the f ollowing pertinent provisions for termination: 12. Termination. Licensor may , at its option, upon the occurr ence of any one or mor

e of the f ollowing events, terminat e this Ag reemen t: (a) If L icensee fails to pay

any amount due to L

icensor he re un de r a nd fa il s t o c ur e s uc h f ai lu re wi th in te n ( 10 ) d ays after Licensor g

ives written notice to cure. (b) I f Lic ensee f

ails to per form or breache s any

covena nt, obligation, term, condition, warranty or certification herein and fails to cure such breach or fails to perf orm within thirty (30) days afte r Licensor g ives written notice to cure.

. . . . (n) If L icensee serves any

food, or allows any f

ood service on the premises, without the express written consent of Lice nsor. 13. Obligations Upon Termination. Upon the termination or expiration of this Agreement, Lice nsee shall cease to be a Licensee of L

icensor, and: (a) Licensee

shall immediately cease

to operate the former Licensed Unit under the Sy stem, and shall not thereafter, directly or indirectly, represe nt to the public that the former Licensed Unit is operated unde r the System, or hold itself out as a present or former licensee of Licensor.

. . . . (d) Licensee sha

ll immediately make such modifications or alternations as may be

necessary

to distinguish the former Licensed Unit and the Premises ef fectively f

rom its former appearance and from any

other Shoney' s Inn Sy stem Unit, and to prevent the operation of any business on the Premises by Licensee or other s in derogation of this Agreement, . . . .-4- The agre ement also c ontai ned th e foll owing: 20. Restaura

nt. . . . (b) So long

as the re stauran

t is being operate d adjace

nt or in relative proximity to the Shoney 's Inn, L icensee shall not offer or provide any

food or food service at the L icensed Unit for either o n or off- premisesconsumpti on without t he expres s written consent of Licensor. Provided, how ever, that Licensee shall be allowed to operate vending machines se lling soft drinks, c offee a

nd snack s on the Pre

mises.
On Ja nuary 12, 1993, Shol odge fi led it s comp laint , alle ging: . . . 5. Purs uant t o Sect ion 1 2(a) of the Agr eement , Sho ney's may terminate the Agreement if L icensee fails to pay

any amount due within ten (10) day s of Shoney' s giving written no ti ce to pa y. 6. By letter

dated December 22, 1992, and attached he reto as Exhibit "2" (the "Letter "), Shoney' s gave Lice nsee notice that Lice nsee wa s in violati on of the Agreem ent and de

manded a ll payments due under

the Agreement, which demand was r efused by L icensee in furthe r violatio n of the A greem ent. 8. On January 3, 1993, Shoney 's terminated the Agreeme nt pursuant to Section 12(a). 9. Pursua nt to Sectio ns 13(a) and 18 of the Agr eement, Licensee is require d to pay upon termination all sums owing Shoney 's inclu ding ac tual dama ges, c osts, expen ses, cour t costs and rea sonable a

ttorney s' fee s incurr

ed by Shoney 's as a r

esult of the default. 10. Pursuant to Section 13(e) of the Agreement, L icensee owes Shoney 's a roy

alty fee in the amount o f $347,49 6.76; and also currently ow es Shoney' s past due royalties, mar keting and reservation fees in the amount of $5,610.00. On April 30, 1993, McKibbon filed its answer admitting the execution and violation of the contr act, b ut ass ertin g that v ariou s of it s prov isio ns wer e inva lid an d that Shol odge resci nded t he con tract by violat ions inclu ding t he fol lowi ng:

. . . 3. Beginning in 1991 the parent compa ny, Shoney 's Inc., obviously bega

n losing interest in the Shoney' s Inns concept and as a r esult dev elopment

slowed a s did the effort to p romote Shoney 's I

nns on a na

tional ba sis. 4. Eventu ally

in 1992, Sho ney 's, I

nc. sold it s interes t in Shon ey's Lodging, Inc. , it b ecame S holo dge and Shol odge continued to ignore development of a national chain a nd failed to develop a national reputation.-5- 5. By 1992, the plaintiff w as receiving an avera ge of only one to two reservations per day from the central reservation sy stem and Shone

y' s Inn s had no na

tional na me reco gnition a

nd in particular, no name recognition in the Midwest from which plaintiff's primary

potential market came. 6. In addition, Sholodge permitted some of the Shoney 's Inns in the system to serve food in violation of the provisions of the contract which cr

eated a n expecta tion in the c onsuming

public which wa s contra

ry to the ter ms of coun

ter-pla intiff' s contra

ct. 7. In addition, Sholodge failed to supervise a nd inspect other Shoney's I

nns within the system so that the reputation of the entire chain was damaged. 8. By the summer of

1992, counter-plaintiff was losing money and when plaintiff attempted to consult with and obtain the assistance of the franchisor, Sholodge, pursua nt to the provisions of paragraph 8(a), in an effort to resolve counterplaintiff 's prob lems, cou

nter-de fendant failed o r refus ed to assist, in v

iolation of

the agr eement. 9. Throug

hout the f all of 199 2, the pla

intiff co ntinued to

lose money and continued to a ttempt to consult with and obtain the advice a nd assista nce of Sh olodge

without av ail. Even

tually plaintiff requested that the parties release e ach other from the terms of t he franchise ag

reemen t so that the

plaintiff could attempt to salvage its business, and Sholodge demanded the sum of $350 ,000.00 a

nd continu ed to ref

use to add

ress plaintiff 's prob lems. Sholodge responded, deny

ing any breach of contr act.
McKibbon was permitted to amend its counter-claim to allege f raudulent and negligent misrepresentation and to sue for $1,000,000.
Sholodge denied th e materi al alleg ations of

the amen ded coun

ter-cla im.
On December 7, 1994, following a jury verdict, plaintiff's suit was dismissed and judgment was entered in favor of McK ibbon for $327,272.00.

On Januar

y 6, 1995, Sholo dge fil ed its "Motion to Set a side Ver dicts and Judgments and to Gr ant Plainti ff a New

Trial" on the following g rounds:-6- 1. As thirteenth juror, this Court cannot reasonably accept the jury's ve rdicts because said verdicts are ag ainst the weight of the evidence. 2. There was no material evidence in the re cord upon which the jury could find that plaintiff mate rially brea

ched the contract and ther

efore: (a) Def

endant w as not ent

itled to damage s on its cou

ntercla im, and (b ) Defendant's o nly defense to plaintif f's cla im must fail
. 3. From the start, defendant ignored this Court' s pretrial Order and trial rulings about defendant's putting on pr oof that plaintiff failed to grow to a national chain, thereby depriving plaintiff of a fair tr ial. On April 10, 1995, the Trial Court entered the following order: This matte

r came o n for a he aring b efore t he Honor able C. Allen High, Chancellor, on the 31st day of March 1995 on the Motion for

New Tria

l filed by Plaintiff /Counter- Defend ant, Sholodge Franchise Sy stems, Inc. Upon a review of the Motion and

Brief f iled by Plaintiff /Counter- Defend ant, Sholodge Franchise Sy stems, Inc., the Response filed by Defendant/Counter-Plaintiff, McKibbon Brothers, I nc., the statements of counsel at the hearing on this matter, weighing of all of the evidenc e at the tr

ial of thiscase to d

etermine if it prepond erates agains t the jury 's verd icts and the e

ntire re cord in this cause, from all which it appears to the Court, after due consideration, that the Motion for New Trial filed by Plaintiff/Counter-Defendant, Sholodge Franchise Systems, I

nc., should be d

enied and overruled in all r espects . It is therefore ORDERED, ADJUDGED, and DECREED that the Motion

for New Trial fil ed by

Plaintiff /Counter- Defend ant, Sholodge Franc hise Sy stems, I

nc., is DE NIED . (Emphas is supplied.) -First Issue: Breach by SholodgeOn appeal, a finding of fact by a jury may

not be reversed if there is any material evidenc e to suppor

t it. T.R.A. P. Rule 13( d). I f, howev er, ther

e is a que stion of la

w as to whether the fac ts found by

the jury are leg al suppor

t for the v erdict a

nd judgme

nt, revie w is de novo. Union Carbide Corp. v. Huddleston, Tenn. 1993, 854 S.W.2d 87.
One of defendant's complaints was competition from other Sholodge franchisees which se rved con tinental b reakfa sts.-7- Section 12(N) of the agreement provide s that the contract may be terminated: If L icensee serves any

food service on the premises without the express consent of Licensor. Section 8( e) of the

subject a greem ent quote d above, require d Sholodg e to "ma intain supervision over all licensees in order to assure compliance with Licensor's standar

ds and policies . . . and with Licensor' s rules of operation."

It is c lear tha

t serving food witho

ut specia l permissi on was co ntrary to the con

tract, policy and rule s of Sholodg e. Ther e is ample

evidenc e that other Sholodg es in the vicinity did serve food and that this interfered with the patronag e of defendant. This was a violation of the rules, policies, and contracts of Sholodge, unless spec ial permission had been granted. The answer of Sholodge to the counter-c laim denied that it had ever granted such per mission. Under Section 8(a), above, Sholodge was oblig ated to prevent serving of food on the premises of its other licensees. The failure to do so was a br each of Section 8(a).
Defendant's other complaint was the fa ilure of Sholodge to comply with Section 8(a) of the agreement, quoted above, w hich required Sholodge to: [M]ake ava

ilable to L

icensee the privil ege of

consultin g with Licensor's off

icials and staff upon problems relating to . . . marketing and a

dvertising, so tha

t Lice nsee will have av ailable to it any experience of L

icensor and other Lice nsees re lating to such prob lems.
There isevidenc e of the f ollowing facts: In June, 1992, defendant's mana ger telephoned Sholodge seeking help in increasing patronage. He was told that he nee ded to talk to Chic Johnson. He obtained an appointment with Chic J ohnso n for J une 25 , 1992 , and m ake a tr ip fro m Gain esvil le, Ge orgia t o Sho lodge headqua rters in G allatin, Tennesse e for thispurpose. On arriv al he wa s told that C hic Johnson was on vacation and referred to several other s in the Sholodge office, none of whom offered any

assistance. Neither Chic Johnson or any other official of Sholodge contacted defendant further, except by letter demanding franchise fee s. It later developed that the-8-

Director of Operations was the proper pe rson to assist defendant, but said defendant was never directed to him. There was testimony that defendant did not get "field support" f rom Sholodge.

There is material evidence of facts which legally support a verdict of breach of contract by Sholodg e.

-Second Issue: Th e Thirtee nth JurorThe orde r of the T rial Cour t, quoted a

bove, sta tes: . . . weighing all of the evidence a t the trial of this case to determine if it pre

pondera tes aga inst the jur

y' s verdic ts . . . it appears to the Court . . . that the Motion for New Trial . . . should be denied. . . . (Emphasis supplied.) Plaintiff insists that the emphasized verbiage, above, indicates that the Trial Court erroneously a

pplied the standard of "does the evidence pr eponderate agains tthe verd ict" instead of the standard of "does the evidenc e preponderate in favor of the ver dict."
Plaintiff argues that "the trial court must independently weigh the evidence . . . and reach t he sam e verdi ct as t he jur y," citin g Miller v. Doe, Tenn. App. 1993, 873 S.W.2d 346, wherein this Court held that the judge must independently weigh the evidence. The requirement that the judge "rea ch the same verdict" is not found in the cited opinion which does include "he must be satisfied, as well as the jury ," and "unless the verdict has rec eived the appr oval of the trial ju dge." The opinio n also sta tes: The obligation of a trial judge to act as a thirteenth juror in a civil trial in this sate is well established. Cumberland Telephone & Telegraph Co. v. Smithwick, 112 Tenn. 463, 79 S.W. 803 (19 04), rea

ds in part as follow s: The rule in civil ca ses is that , if the c ircuit ju dg e i s d is sa ti sf

ie d w it h t he ve rd ic t o f t he ju ry, it is his duty

to set it as ide and g

rant a ne w trial, and that u pon its bei ng made

to appea r to this court , from state ments made b y the circu it ju dge in passing upon the motion for a new trial, that he was r eally not satisf ied with th

e verdict, it-9- becomes the duty of

this court, when it has acquired jurisdiction of the cause, to do what the circuit j udge sh ould have done; tha t is, to gr ant a new trial on the ground of the dissatisfaction of that judicial officer with the verdict. (Citations omitted) . . . .

. . . . If called upon to act a s a thirteenth juror following the filing of a motion

for a new trial, th

e trial ju dge simp ly a

pproves a verdict without an

y c omment, it i s presume d by an appellate court that he has performed his function adequately
. Holden v. Rannick, 682 S.W.2d 90 3, 905 (Te nn. 1984) ; Central Truckaway System v. Waltner, 36 Tenn. App. 202, 253 S.W.2d 985, 991 (1952). In the event that the trial court doe s state his reasons, an appellate court is to examine them only for the purpose of determining whether the trial court proper ly reviewe d the evidence, and was satisfied or dissatisfied with the verdict. Smithwick, supra 79 S.W. at 805. However, if in discharging his duty as thirte enth juro

r, the tri al judge

makes co mments which indicate that he has misconceived his duty or clearly

has not followed it, this court must reverse and remand the case for a new trial. See Nashville, C. & St. L.R. Co. v. Nee ly, 102 Tenn. 700 , 52 S.W. 167 ( 1899); Holden, supra at 905.

. . . . In McLaughli

n v. Broyles, 36 Tenn. App. 391, 255 S.W.2d 1020 (195 2), the pl aintiffsbrough t suit for i njuries su stained in an automobile accident. The jury returned a verdict in favor of the defe ndant. In overruling plaintiffs'

motion for a new trial, the court stated as follow s: In these cases whe

re the evidence is in sharp conflic t the Court

does not f

eel that h e has a right to interfere with the verdict of the jury , and overrul es the moti ons. Id. 255 S.W.2d at 1022. From the beginning, it appears that the tr ial judge was being deferential to the jury

and pointing out to counsel that earlier the jury had hea

rd the same arguments. The court obser ved that the jury wanted to be sympathetic to the plaintiffs and that counsel for plaintiffs "did a good job" in try ing the case. The best the c ourt coul d say

was "I 'm not inc lined to int erfer e with the verdict of the jury , and I approve the ve rdict of the jury."
. .

. .

. . . .-10- Becau se of the se seemingly harmlessbut unfor

tunate r emarks, this case must be retried. To avoid the recurrenc e of a retrial under such circumstances, we strongly suggest that when a trial judge overrules a motion for new trial, that he simply state that he has reviewed the evidence re levant to the issues and approves the verdict. Any thing more unnecessarily

runs the risk of a n unwante d new tria

l. Miller, 873 S.W.2d at 346-47,349. The pre sent rec ord indic ates tha t the Tria l Judge did

review t he evide nce and did approve the verd ict of the jury without an

y e xpression w

hich woul d invalida

te his app roval.

In James E. Strates Shows, Inc. v. Jacobik, Tenn. 197 7, 554 S.W.2d 613, the Su

preme Court quot ed wit h appr oval t he fol lowi ng:

Where the motion for a new trial asserts that the verdict was contrary to the weight of the evidence it is the duty of the trial judge to weigh t he evide nce and determine whethe

r it preponderates against the verdict, and if so, to grant a new trial. Vaulx v. Tennessee Central Railroad Company, 120 Tenn. 316, 108 S.W. 1142 (1907). It appears that the Supreme Court has approved the standard mentioned in the order of the Trial Cour

t.

It is tr ue that there is a

minuscule

technic al separ

ation bet ween " prepond

erates in favor of" and "does not prepond erate against." Th e line of dis tinction is "equipoi se." Howeve r, in the li ght of th

e quoted holding of

the Supre

me Court, t

his Court is unwilling

to hold that the choice of words by the Trial Court was sufficient to indicate that he disagreed with the verdict but "went along with the decision of the jury ."
No error is found in the function of the Trial Court as "thirteenth juror ."

-Third Iss ue: Supp ort for Amo unt of VerdictThe dama ges cla imed and s hown by

plaintiff totaled $ 352,272. D efenda nt's witness explained that, because of the cancellation of the Sholodge franchise, it was necessary for-11-

defenda nt to affi liate with

another franch ise group or cha

in of motel s; and tha

t, in orde r to enter another group, it was nece ssary to completely refurbish the motel to the satisfaction of the group. The cost of refurbishing was shown to be $327,272, the affiliation fee $25,000, and the advertising of the new name of the motel - $5,000.00, a total of $357,272. The jury awarded $327,272.
Plaintiff asserts that these damages are not author ized by parag

raph 13(d) of the Sholodge agree ment quote d above. Said para graph states ma ndatory require ments enforceable by

Sholodge, but does not include changes nece ssary to aff iliate with another franchise group. The failure to include in a contract every type of damag e for which recovery can be had does not exclude such omitted damages, if shown to be r easonably within the contemplation of the contracting parties. Hawkins v. Reynolds, 62 Tenn. App. 686, 467 S.W.2d 791 (1971).
Plaintiff next insists that it is entitled to some mitigation of the costs of refurbishing because the next ne cessar

y r efurbis hing wa s thereb y po stponed. T his is a re asonable argument, but is not supported by any evidenc e.
Plaintiff complains that the expenses shown by defe ndant were not shown by competent evidence to be reasonable. The qualifications of defendant's witness were not questioned in the Trial Court, either during the trial or upon motion for new trial. Such objection cannot be presented for the first time on appea l. T.R.A.P. Rule 3(e).
Plaintiff argues that the damages shown by defendant are not attributable to the breach or cancellation of the fra nchise agreement by

plaintiff. It is clear from the e vidence that an active affiliation with a franchise g roup is a virtual necessity f or the successful operation of a motel. The loss of the privileges and adva ntages of a Sholodge franc hise made it necessary

for defendant to seek another like aff iliation.-12- The amount of damages rests in the sound discretion of the jury
. Railroad v . Deakin s, 107 Tenn. 522, 64 S.W. 477 (1901).
The amount of damages fixed by the jury and appr

oved by the Tria

l Judge will not be disturbed on appeal unless a violation of discretion by the jury is shown. Ellis v. W hite Freightliner Corp., Tenn. 198 0, 603 S.W.2d 125; D.M. Rose & Co. v. Snyder, 185 Tenn. 499, 206 S.W.2d 89 7 (1947); Strother v. Lane, Tenn. App. 1976, 554 S.W.2d 631.
Exact justice is not always attained, and the law does not require exactness of computation of damages. Cummins v. Brodin, Tenn. App. 1983, 667 S.W.2d 759.
No reversible error is found. The judgme nt of the Trial Court is affirmed. Costs of this appeal are taxed against the plaintiff-appellant. The cause is remanded to the Trial Court for any necessa ry procee dings.

Affirmed and Remanded.

_______________________________________ HENRY F. TODD PRESIDING

JUDGE, MIDDL

E SECTION

CONCUR:

_____________________________________ SAMUEL L . LEWIS, JUDGE

_____________________________________ WILL IAM C. KOCH, JR., JUDGE