Court Opinion

ID: 9774687
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:29:44.647923+00
Date Added: 2024-06-11T07:32:13.310260
License: Public Domain

GRANT, Justice,
dissenting.
I respectfully dissent.
For the first time in the jurisprudence of this state, the question must be determined as to whether a franchise relationship constitutes a fiduciary relationship. Texas has long held that a fiduciary relationship exists as a matter of law between parties acting as partners,1 between parties who are joint venturers,2 between principal and agent,3 between boards of directors and corporations,4 and in informal relationships whenever one party trusts and relies on another.5 When finding a fiduciary relationship in an informal relationship, the courts rely on fair dealing and good faith rather than a legal obligation as its basis. Kinzbach Tool Co. v. Corbett-Wallace Corporation, 138 Tex. 565, 160 S.W.2d 509, 512 (1942).
Harold Brown, in an article entitled “Franchising — A Fiduciary Relationship” in 49 Texas L.Rev. 650 (1971), states the following:
Since the franchising relationship is characterized by such pervasive power of control, this writer proposes the following principles: (1) When one has the power to control another, a fiduciary obli*246gation exists; (2) a fiduciary’s duty is coextensive with his power to control; and (3) when the power to control another is abused by preference of self, equity will intervene.
While no Texas court has examined whether the relationship between a franchisor and a franchisee should be considered fiduciary in nature, there have been a number of significant decisions outside of this jurisdiction in which the courts have concluded that a fiduciary relationship does exist between participants in a franchise agreement. In the case of Arnott v. American Oil Co., 609 F.2d 873 (8th Cir.1979), cert. denied, 446 U.S. 918, 100 S.Ct. 1852, 64 L.Ed.2d 272 (1980), the court stated its policy reasons for considering such a relationship inherently fiduciary in nature:
A franchisee, unlike a tenant pursuing his own interests, builds the goodwill of his own business and the goodwill of the _ franchisor. [Citation omitted.] This facet of the relationship has led to the recognition that the franchise relationship imposes a duty upon franchisors not to act arbitrarily in terminating the franchise.
The court further noted that in a franchise relationship both parties have a common interest in profit from the activities of the other.
In a later case, Bain v. Champlin Petroleum, 692 F.2d 43, 48 (8th Cir.1982), the same court held that Arnott did not stand for the proposition that the grant of franchise of itself imposes on the franchisor in every instance all the duties or responsibilities which traditionally pertain to a true fiduciary. In the case of Cambee’s Furniture v. Doughboy Recreational, Inc., 825 F.2d 167 (8th Cir.1987), the court went on to say that a franchise or other ordinary business relationship does not alone create fiduciary duties. The court, in its analysis which involved the termination of a franchise arrangement allegedly without good cause, found that obligations of good faith and fair dealing prevented the defendant from terminating the franchise agreement without cause.
The Fifth Circuit Court of Appeals considered much the same situation in Carter Equipment Company v. John Deere Industrial Equipment Company, 681 F.2d 386 (5th Cir.1982). The court found that Mississippi law recognized the existence of a fiduciary relationship as a possible outgrowth of a franchise agreement and observed that at least one of the facts that might distinguish a franchise agreement from a typical contractual arrangement is that it involves a functioning and continuing enterprise. In a later case, Phillips v. Chevron U.S.A., Inc., 792 F.2d 521 (5th Cir.1986), the court determined that in applying Mississippi law, the existence of the fiduciary relationship under a franchise agreement was a question of fact for the jury to determine.
A number of courts have held that in appropriate circumstances, a franchise relationship may in fact give rise to fiduciary duties when there is a bad faith attempt to terminate a dealership contract. Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480 (5th Cir.1984) (applying Louisiana law); Murphy v. White Hen Pantry Co., 691 F.2d 350 (7th Cir.1982), and cases cited therein; General Business Machines v. National Semiconductor Datachecker/DTS, 664 F.Supp. 1422 (D.C.Utah 1987). There is no reported case from any jurisdiction that imposes a fiduciary relationship on the parties during the arm’s-length negotiation of the terms of a franchise agreement. Lewis, Franchise Litigation in Texas: Analyzing Claims and Defenses, 19 St. Mary’s L.J. 663 (1988).
When a franchising relationship exists, good faith and fair dealing should be required to terminate a dealership contract. This requirement could be made by considering the franchise relationship to be a fiduciary relationship for purposes of the termination of a dealership contract, or the good faith and fair dealing duty could be required without classifying this relationship as fiduciary in nature.
In the earlier Texas case law, a clear dichotomy is recognized between a “technical fiduciary” relationship and a “confidential” relationship. Fitz-Gerald v. Hull, *247150 Tex. 39, 237 S.W.2d 256 (1951); Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786, 787-88 (1938). These concepts have since been merged into the concept of fiduciary relationships applied today. The initial determination of whether a technical fiduciary relationship may, as a matter of law, exist in a given situation is for the court to determine. Johnson v. Peckham, 120 S.W.2d 786. Thus, if such relationship exists as a matter of law, the inquiry ends. If, however, the relationship may exist in a given situation, its actual existence as an informal fiduciary relationship or a “confidential relationship” is a question of fact for the jury to determine. MacDonald v. Follett, 142 Tex. 616, 180 S.W.2d 334 (1944); Page Airways, Inc. v. Associated Radio Service Co., 545 S.W.2d 184, 192 (Tex.Civ.App.-San Antonio 1976, writ ref’d n.r.e.).
In the present case, the jury found the existence of a fiduciary relationship. The evidence showed that the relationship between Navistar’s predecessor, International Harvester, and the Crim family began in 1943 and continued until the termination which is the subject of this suit. Crim Truck & Tractor had been the sole distributor in Henderson for Navistar products for forty-two years, and the purpose of the franchise agreement was to further the common goals of both the franchisor and franchisee. Crim testified that he and his father had always done the things requested by the franchisor, including building a prototype building and changing locations at the franchisor’s suggestion. Crim further testified that Crim had taken Navis-tar’s recommendation and purchased two computer systems several years earlier. He testified that he trusted the franchisor, partly because of the term of the franchise agreement which provided for “mutual confidence and trust.” There was also evidence that Crim Truck & Tractor has been held out by Navistar to be an excellent dealership with whom they hoped to continue a long and fruitful relationship. By the terms of the franchise agreement, Navistar was in a superior position to Crim, and Crim was compelled to rely upon its dictates and policies.
There was sufficient evidence in this case to show a fiduciary relationship.

. Johnson v. Peckham, 132 Tex. 148, 120 S.W.2d 786 (1938).

. Texas Bank and Trust Co. v. Moore, 595 S.W.2d 502 (Tex.1980).

. Scott v. Weaver, 2 S.W.2d 870 (Tex.Civ.App.Austin 1927, writ dism'd).

. Tenison v. Patton, 95 Tex. 284, 67 S.W. 92 (1902).

. Gaines v. Hamman, 163 Tex. 618, 358 S.W.2d 557, 561 (1962).