Court of Appeals of Texas, Fourth District, San Antonio
WHATABURGER, INC.; CA Development LLC; CA Real Estate LLC; Cinco Aguilas LLC; Tres Aguilas Enterprises LLC; Tres Aguilas Management LLC; Whataburger International LLC; Whataburger Real Estate LLC; Whataburger Restaurants LLC; Whataburger Ventures, LLC; Whataburger Supply and Merchandising LLC; and Whatabrands LLC; Appellants
WHATABURGER OF ALICE, LTD., Appellee
the 131st Judicial District Court, Bexar County, Texas Trial
Court No. 2016-CI-01431 Honorable Gloria Saldana, Judge
Sitting: Karen Angelini, Justice, Marialyn Barnard, Justice
Patricia O. Alvarez, Justice.
underlying dispute arises out of a 1993 settlement agreement
between Appellee Whataburger of Alice, Ltd.
("WOA"), and Appellants Whataburger, Inc.; CA
Development LLC; CA Real Estate LLC; Cinco Aguilas LLC; Tres
Aguilas Enterprises LLC; Tres Aguilas Management LLC;
Whataburger International LLC; Whataburger Real Estate LLC;
Whataburger Restaurants LLC; Whataburger Ventures, LLC;
Whataburger Supply and Merchandising LLC; and Whatabrands LLC
filed the underlying petition for declaratory judgment, and
Whataburger filed a counterclaim for declaratory judgment.
Both parties filed traditional motions for summary judgment,
seeking declarations by the trial court. The trial court
granted WOA's motion for summary judgment, and denied
Whataburger's motion. It then made declarations as
requested by WOA's motion. Whataburger appeals, arguing
that the trial court erred in
(1)declaring that Whataburger owed WOA duties of
"candor, loyalty, and good faith";
(2)declaring that after the franchise agreement for an
existing location expires, WOA has a right to re-designate
that existing location as a "new" location under
the 1993 Settlement Agreement; and
(3)declaring that WOA has the "sole right" to
select site locations in Webb and Jim Wells Counties and thus
requiring Whataburger to tender standard form franchise
agreements for any such selected locations to WOA.
affirm the trial court's judgment in part, and reverse
and render in part.
Whataburger have had a business relationship dating back to
1953 when WOA opened its first Whataburger franchise in
Alice, Jim Wells County, Texas. Over the next forty years,
WOA opened more Whataburger franchises in Bexar County, Jim
Wells County, Bee County, and Webb County. WOA's
development of franchises was based on Whataburger's
promises of exclusivity in each of those counties. In 1990,
WOA arranged to sell to a group of investors its twenty-eight
franchises situated in Bexar County, along with its exclusive
development rights. In response, Whataburger sued WOA to
block the sale of the franchises. During the pendency of the
lawsuit, WOA discovered what it labeled a
"kickback" scheme. Whataburger required its
franchisees to purchase certain food products and supplies
from specified vendors. WOA discovered that Whataburger was
receiving money from these vendors as a result of these
"forced" sales. The case went to trial and while
the jury was deliberating, the parties agreed to settle. The
result was the 1993 Settlement Agreement, the interpretation
of which is in dispute in this case.
1993 Settlement Agreement is titled "Agreement for
Acquisition of Assets Between Whataburger, Inc. (a Texas
corporation) and Whataburger of Alice, Inc. (a Texas
Corporation)." Pursuant to the 1993 Settlement
Agreement, Whataburger agreed to buy WOA's twenty-eight
franchises located in Bexar County for the purchase price of
$4, 600, 000.00. Additionally, Whataburger gave WOA "the
exclusive right to construct, operate or develop Whataburger
restaurants in Bee, Jim Wells, and Webb Counties, except as
otherwise provided for herein." The 1993 Settlement
Agreement stated that WOA and Whataburger "shall enter
in [Whataburger]'s standard form of franchise agreement
for each new location developed by [WOA] in Bee, Jim Wells,
or Webb County." Also pursuant to the 1993 Settlement
Agreement, any franchise agreements between Whataburger and
WOA entered into after 1993 with respect to Whataburger
restaurants located in Bee, Jim Wells, and Webb Counties
"shall provide that the amount of each of the royalty
and advertising fee payable by [WOA] to [Whataburger] shall
be 2% of the gross sales of such restaurants."
2013, WOA had twelve franchise restaurants. It had found a
location in Laredo, Texas, and wanted to open a new
Whataburger restaurant at that location. It informed
Whataburger of its intention to open a new franchise
restaurant on that site. Whataburger and WOA then argued
about whether WOA needed Whataburger's consent to the
selected site. Whataburger agreed that WOA had the right of
exclusivity in Webb County, but Whataburger argued that it
had the right to approve new site locations. According to
Whataburger, it could approve or not approve such site
locations in its sole discretion for any reason. Whataburger
stated that it would not approve this new site location
unless WOA renegotiated the franchise agreements regarding
its existing locations. Whataburger demanded that (1) WOA
relinquish its rights set out in the 1993 Settlement
Agreement to a fixed 2% royalty and advertising fee on future
restaurants; (2) all existing WOA franchise locations be
transitioned to a new 5% royalty and advertising fee; and (3)
WOA formally agree that Whataburger had the right to approve
all site locations. Because of the uncertainty surrounding
these negotiations, WOA did not move forward on the new
location in Laredo.
Whataburger made it clear that no more franchise agreements
would be issued with respect to any site locations designated
by WOA until WOA agreed to the new terms, WOA filed the
underlying petition for declaratory judgment. Whataburger
responded by filing a counterclaim for declaratory judgment.
Both WOA and Whataburger then filed traditional motions for
motion for summary judgment, WOA requested that the trial
court make the following declarations:
(1)The 1993 Settlement Agreement allows WOA the sole right to
select site locations on which restaurants are to be located
in the counties of exclusivity.
(2)The right to site selection and the right to receive
standard form franchise agreements on sites that WOA selects
in areas of exclusivity also exists with respect to sites
that WOA has previously selected, has previously received a
site specific franchise agreement for and operated a
restaurant on, even when that specific franchise agreement
may have expired by its terms.
(3)Whataburger must deliver to WOA standard form franchise
agreements with royalty and advertising fees of 2% on sites
selected by WOA in areas of exclusivity.
(4)Whataburger owes fiduciary duties and special duties of
good faith and fair dealing to WOA in the performance of its
obligations under the 1993 Settlement Agreement (including
duties of candor, loyalty, and good faith) pursuant to
sections 5.01 and 6.01 of the 1993 Settlement Agreement.
These duties prevent Whataburger from (1) including terms and
conditions in a proposed "standard form" franchise
agreement that have the purpose and/or effect of limiting the
rights of WOA to select locations; (2) limit or curtail
WOA's other rights under the 1993 Settlement Agreement;
and (3) demanding or conditioning any acts or approvals upon
a waiver by WOA of its existing rights.
motion for summary judgment, Whataburger argued that the
trial court should refuse to grant WOA's request for
declaration and should instead make the following
(1)Neither the 1993 Settlement Agreement nor the franchise
agreements signed by WOA compel Whataburger to grant a new
Whataburger franchise to WOA. On the contrary, the agreements
unambiguously recognize Whataburger's sole discretion to
grant or deny future franchise locations.
(2)Neither the 1993 Settlement Agreement nor the franchise
agreements signed by WOA compel Whataburger to grant a new
franchise agreement to WOA upon the expiration of the
franchise agreements governing each of WOA's existing
restaurants. On the contrary, the agreements unambiguously
recognize Whataburger's sole discretion to grant or deny
new franchise agreements for existing locations upon the
expiration of these agreements.
(3)Whataburger may issue to WOA a standard form of franchise
agreement that includes any obligation, requirement, term, or
language Whataburger deems appropriate so long as the
standard form of franchise agreement includes the following
terms: (i) a 2% cap on the royalty rate; (ii) a 2% cap on the
advertising rate; (iii) a reference to exclusivity within Jim
Wells County and Webb County, subject to the terms and
conditions of the 1993 Settlement Agreement; and (iv) a
reference to the transferability provisions within Section
6.03(e) of the 1993 Settlement Agreement. The 1993 Settlement
Agreement does not otherwise restrict Whataburger's
inclusion of terms within its standard form of franchise
agreement offered to WOA.
(4)The 1993 Settlement Agreement includes no covenant of
honest and forthright performance and Whataburger has not
violated any such covenant.
(5)As a matter of law and based upon the parties'
contracts, Whataburger and WOA do not have a formal or
informal fiduciary relationship.
considering the cross-motions for summary judgment, the trial
court granted WOA's motion for summary judgment and
denied Whataburger's motion. The trial court's order
made the following declarations, which it numbered (a)
a. WOA has the sole right of selecting site locations upon
which Whataburger restaurants will be developed in Webb and
Jim Wells Counties about which locations Whataburger has no
preapproval or veto rights. Whataburger's argument that
it has the "sole discretion" to approve or
disapprove sites is denied.
b. Upon WOA's designation of those site locations for
development of restaurants in Webb and Jim Wells Counties,
Whataburger is obligated to tender its standard form
franchise agreement for such site locations and Whataburger
may not refuse to enter a standard franchise agreement
regarding a site location selected by WOA.
c. Pursuant to Section 6.03(d) of the 1993 Settlement
Agreement, such franchise agreements must provide that the
amount of royalty and advertising fees shall each be 2% of
the gross sales of such restaurants.
d. Given WOA's rights of exclusivity as well as its right
of site selection and the right to receive a franchise
agreement on locations it selects, when the franchise
agreements on any of WOA's existing locations expires by
their terms, at that time, should WOA choose, it has the
right to re-designate that site as one on which it chooses to
conduct a Whataburger operation. At that time, having
designated that location as a new location, WOA is entitled
to receive a standard franchise agreement for that location
such that it could continue to operate;
e. As a result of sections 5.01 and 6.01 of the 1993
Settlement Agreement, Whataburger owes WOA duties of candor,
loyalty and good faith. As a result of these duties, among
other things, Whataburger is precluded from
i. including terms and conditions in a proposed
"standard form" franchise agreement that have the
purpose and/or effect of limiting the rights of WOA to select
ii. limiting or curtailing WOA's other rights arising
from the 1993 Settlement Agreement; and
iii. conditioning the performance of its obligations, whether
approving any new site locations or franchise agreements or
otherwise, on WOA waiving or releasing rights stated in the
1993 Settlement Agreements.
f. The provisions set forth in paragraph 82 hereof,
 if included in any franchise agreement
presented by Whataburger, violate the 1993 Settlement
Agreement and thus may not be included in any future standard
form franchise agreement.
appeals, arguing that the trial court erred in granting
WOA's motion for summary judgment. Specifically,
Whataburger contends the trial court erred in declaring the
following: (1) WOA has the "sole right" to select
site locations in Webb and Jim Wells Counties, and
Whataburger must tender to WOA standard form franchise
agreements for such selected locations; (2) WOA has a right
to renew the terms of the 1993 Settlement Agreement after the
franchise agreement for an existing restaurant expires; and
(3) Whataburger owes WOA duties of "candor, loyalty, and
good faith." Whataburger also contends the trial court
should have made the declarations it requested in its motion
for summary judgment.
obtain a traditional summary judgment, a party moving for
summary judgment must show that no genuine issue of material
fact exists and that the party is entitled to judgment as a
matter of law. Tex.R.Civ.P. 166a(c); Randall's Food
Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995);
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548
(Tex. 1985). In reviewing the grant of a summary judgment, we
must indulge every reasonable inference and resolve any
doubts in favor of the respondent. Johnson, 891
S.W.2d at 644; Nixon, 690 S.W.2d at 549. In
addition, we must assume all evidence favorable to the
respondent is true. Johnson, 891 S.W.2d at 644;
Nixon, 690 S.W.2d at 548-49. Once the movant has
established a right to summary judgment, the burden shifts to
the respondent to present evidence that would raise a genuine
issue of material fact. City of Houston v. Clear Creek
Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).
as here, both parties move for summary judgment on the same
issues and the trial court grants one motion and denies the
other, we consider the summary judgment evidence presented by
both sides, determine all questions presented, and if we
determine that the trial court erred, render the judgment the
trial court should have rendered. Valence Operating Co.
v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).
interpretation of an unambiguous contract is a question of
law for the court. Moayedi v. Interstate 35/Chisam Road,
L.P., 438 S.W.3d 1, 7 (Tex. 2014). In interpreting a
contract, a court's "primary concern is to determine
the true intent of the parties as expressed by the plain
language of the agreement." N. Shore Energy, LLC v.
Harkins, 501 S.W.3d 598, 602 (Tex. 2016). "To
achieve this objective, " we "examine and consider
the entire writing in an effort to harmonize and give effect
to all the provisions of the contract so that none will be
rendered meaningless." J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 223, 229 (Tex. 2003). We
"construe contracts from a utilitarian standpoint
bearing in mind the particular business activity sought to be
served and avoiding unreasonable constructions when possible
and proper." Harkins, 501 S.W.3d at 602
contract is not ambiguous if the contract's language can
be given a certain or definite meaning." Id.
(citation omitted). "On the other hand, a contract is
ambiguous if it is susceptible to more than one reasonable
interpretation." Id. (citation omitted).
"An ambiguity, however, does not arise merely because
parties to an agreement proffer different interpretations of
a term." Id. (citation omitted). "For
ambiguity to exist, both interpretations must be
reasonable." Id. (citation omitted)
(emphasis in ...