Adams v. FRANCHISE FINANCE CORP.

689 So. 2d 572, 1997 WL 43423
CourtLouisiana Court of Appeal
DecidedFebruary 5, 1997
Docket96-855
StatusPublished
Cited by8 cases

This text of 689 So. 2d 572 (Adams v. FRANCHISE FINANCE CORP.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Adams v. FRANCHISE FINANCE CORP., 689 So. 2d 572, 1997 WL 43423 (La. Ct. App. 1997).

Opinion

689 So.2d 572 (1997)

Paul K. ADAMS, Plaintiff-Appellee,
v.
FRANCHISE FINANCE CORP. OF AMERICA, et al., Defendants-Appellants.

No. 96-855.

Court of Appeal of Louisiana, Third Circuit.

February 5, 1997.
Writ Denied April 18, 1997.

*573 Raymond L. Brown, Jr., Alexandria, for Paul K. Adams.

David McLean Culpepper, New Orleans, for Franchise Finance Corp. of America, et al.

Before WOODARD, SULLIVAN and GREMILLION, JJ.

GREMILLION, Judge.

The defendant, Franchise Finance Corp. of America (FFCA), appeals a judgment of the trial court denying its motion for summary judgment and granting the plaintiff's, Paul K. Adams, motion for summary judgment. We affirm.

FACTS

FFCA is the successor to three Delaware general partnerships, all of which merged into FFCA on June 1, 1994. Prior to that date, it was the general partner of Insured Income Properties 1984 (IIP84), and the managing general partner of both Insured Income Properties 1985 and 1986 (IIP85 and IIP86).

At issue in this case are purchase agreements and leases selling and then leasing back three Taco Bell franchises owned by Will-I, a Louisiana corporation, of which Adams was a shareholder. The first agreement, pertaining to a Natchitoches franchise, was executed on August 16, 1985, between Will-I, Inc. and IIP84. The second agreement, pertaining to an Alexandria franchise, was executed on August 11, 1986, between Will-I and IIP85. The final agreement, pertaining to a Pineville franchise, was executed on November 30, 1987, between Will-I and IIP86.

The terms of each purchase agreement and lease were similar. However, the 1985 and 1986 agreements required Will-I to purchase, as additional security, an unconditional and irrevocable letter of credit equal to six months rent. In the event that Will-I defaulted, IIP84 or IIP85 were entitled to draw upon the entire amounts of the letters of credit and apply the proceeds to "any and all amounts outstanding under the lease, to any damages or costs incurred by IIP84 or IIP85 in connection with the default of Will-I, or to any other costs incurred by IIP84 or IIP85, which they could determine at their sole discretion." The lease agreements further required Will-I to enter into a franchise or license agreement with Taco Bell, to remain in full force and effect for the full term of the lease.

An advance deposit of two months rent was required under the leases. This amount was to be applied as the last two months rent at the termination of the lease periods. Defaults and remedies were set out in the agreements:

(i) If any material representation or warranty of Lessee herein or as Seller in the Purchase Agreement was false when made, or in the event that any such representation or warranty is continuing and becomes false at any time, or if lessee renders any false statement or account;
(ii) If any rent of or other monetary sums due remain unpaid for 5 days after written notice thereof to Lessee;
(iii) If Lessee becomes insolvent, performs any act of bankruptcy or is not generally paying its debts as the same become due;
(iv) If there is a breach or default under the Purchase Agreement, under any license *574 or franchise permitting Lessee or Guarantors to operate the Premises in the manner authorized or if such license or franchise otherwise terminates or expires, under any Guarantee of Lessee's obligations under this Lease or under any other agreement between Lessor and Lessee.
. . . .
(c) In the event of any breach or default... Lessor shall be entitled to exercise, at its option ...:
(i) To terminate this Lease;
(ii) To reenter and take possession of the Premises ...;
. . . .
(iv) To relet the Premises or any part thereof for such term or terms (including a term which extends beyond the original term of this Lease), at such rentals and upon such other terms as Lessor, in is (sic) sole discretion, may determine with all proceeds received from such reletting being applied to the rentals and other sums due from Lessee in such order as Lessor may, it its sole discretion, determine, with Lessee remaining liable for any deficiency;
(v) To recover from Lessee an amount equal to the difference between the rentals and such other sums (including all sums required to be paid by Lessee, such as taxes and insurance) to be received from the date of such breach to the expiration of the original term hereof and the reasonable long term rental value of the Premises for the same period; and/or
(vi) To recover from Lessee all expenses, including attorney's fees, reasonably paid or incurred by Lessor as a result of such breach.

Prior to the closing of each purchase agreement, Will-I obtained the requisite franchising agreement from Taco Bell. On July 29, 1988, the Rapides Bank & Trust Company issued a letter of credit in favor of IIP85 in the maximum amount of $64,500.00. A second letter of credit was issued on November 18, 1988, in favor of IIP84, in the maximum amount of $40,000.00.

In 1988, relations between Taco Bell and Will-I deteriorated as a result of actions by Will-I. On September 7, 1988, Taco Bell threatened to terminate all three franchise agreements. However, Taco Bell extended the termination date to October 28, 1988, after receiving evidence that Will-I was negotiating the sale of the restaurants. Further extensions were granted on November 28, 1988 and December 12, 1988. On March 14, 1989, Taco Bell sent Will-I a notice of default due to its failure to pay its franchise and other fees. Taco Bell terminated Will-I's franchise agreements on April 17, 1989.

Will-I was also in trouble with its lessors. On April 25, 1989, it received a notice of default from FFCA for failure to pay its April rent under all three lease agreements. It was given five days to remit the amounts due. FFCA further informed Will-I that Taco Bell's termination of its franchise agreements constituted a default under the lease agreements. Will-I was given thirty days to reinstate the franchise agreements.

Following negotiations, Will-I executed an act of sale on April 28, 1989, selling all of its interest in the three franchises to Gregory J. Hamer. The sale was conditioned upon approval by Taco Bell and FFCA's release of Will-I from the leases. FFCA never approved this sale, but on that same day, it executed leases for the franchises in favor of Hamer. The effective date of the Hamer leases was May 1, 1989.

On May 2, 1989, due to the alleged default of Will-I, FFCA drew upon the maximum amount of the two letters of credit ($104,500.00). Adams, as personal guarantor, satisfied Will-I's obligations with the bank under the letters of credit. FFCA also retained the advance deposits under all three leases, $51,054.80.

Taco Bell reinstated the franchise agreements for the three restaurants, effective May 5, 1989. On that same day, Will-I executed an assignment in favor of Adams, whereby it assigned its interests in all the claims it possessed against FFCA and the IIP partnerships to Adams:

*575 [F]or the return of deposits or monies wrongfully obtained by execution on Letters of Credit issued by Rapides Bank and Trust Company of Alexandria in connection with those terminated leases between Will-I and FFCA.

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Cite This Page — Counsel Stack

Bluebook (online)
689 So. 2d 572, 1997 WL 43423, Counsel Stack Legal Research, https://law.counselstack.com/opinion/adams-v-franchise-finance-corp-lactapp-1997.