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Harold Butler Enterprises 97 Inc. v. Vanlandingham

February 1, 1973

HAROLD BUTLER ENTERPRISES #97, INC., RESPONDENT,
v.
VANLANDINGHAM, APPELLANT



Appeal from Circuit Court, Multnomah County. Clifford B. Olsen, Judge.

Roger Tilbury and Henry Kane, Portland, argued the cause for appellant. With them on the briefs were Tilbury & Kane, Portland.

R. Alan Wight, Portland, argued the cause for respondent. With him on the brief were Norman J. Wiener, and Miller, Anderson, Nash, Yerke & Wiener, Portland.

In Banc. Howell, J.

Howell

Plaintiff filed this action alleging an unlawful detainer of real property in its first cause of action and alleging unpaid rentals and management fees in its second cause of action. Both actions arise out of a restaurant franchise agreement between the parties. The case was tried before the court without a jury, and a judgment for restitution of the premises and for recovery of management fees was entered in favor of plaintiff. Defendant appeals.

Plaintiff, an Oregon corporation, is a wholly owned subsidiary of Denny's Restaurants, Inc. Denny's Restaurants is engaged in franchising individual restaurants to persons and also operates some restaurants of its own under the trade name of "Denny's." In 1965 defendant secured a Denny's franchise for the operation of a Denny's Restaurant in Portland. The franchise agreement which was executed between plaintiff as the franchisor and defendant as the franchisee required defendant to pay $50,000 for the franchise, plus certain weekly amounts for rental of the equipment and fixtures, for rent of the premises, and for sign rental.

The franchise agreement also recited that Denny's Restaurants had developed, advertised, and promoted

certain styles and techniques of restaurant operation; that defendant, as the franchisee, should sell only such products as are prepared by plaintiff in accordance with Denny's policies; and that all items would be purchased by the franchisee from plaintiff or from any manufacturer authorized by plaintiff. The items were to be purchased by the franchisee at standard prices to be fixed by plaintiff.

The franchise agreement stated:

"* * *.

"5. f) There is attached hereto, marked Schedule 'A' and made a part hereof, a list of the principal goods, products, merchandise, supplies and commodities now being manufactured or sold by the First Party which the Second Party may need for use or sale at or from the place of business described above, and the Second Party agrees to pay therefor at prices to be fixed by the First Party from time to time for all Denny's Restaurant franchise operators in full, upon invoice. Such list may at any time be added to or subtracted from by the First Party. Only such merchandise, products, goods or commodities shall be sold or offered for sale by the Second Party, at or from the premises described above as are set forth in or shall become a part of the list set forth in Schedule 'A':"

Paragraph 7 of the agreement required the defendant franchisee to pay plaintiff 12 per cent on all items purchased:

"7. In consideration of First Party's Authorization to Second Party to use the trade name and the insignia, trade marks and designs and in consideration of First Party's imparting to Second Party all of its selling, promotion and merchandising methods and techniques, and in consideration of First Party's furnishing adequate and competent supervisory personnel to insure that all various

retail outlets are operated in accordance with First Party's uniform standard of quality, cleanliness and service, Second Party agrees to pay to First Party a service charge of Twelve (12%) percent on all items purchased by Second Party from First Party or First Party's designees. All discounts given First Party from its suppliers for quantity purchases shall remain the property of First Party."

The entire dispute in this case is focused on the 12 per cent management fee, or service charge as it was sometimes described by the parties. The defendant paid the management fee on all purchases from plaintiff or plaintiff's designees until July 1970. Apparently at that time he concluded that the obligation to pay the management fee violated the Sherman Anti-Trust Act. Subsequently, the defendant refused to pay the management fee on any purchases.

Plaintiff filed this f.e.d. action for restitution of the premises and for recovery of the management fees on November 9, 1971. Defendant filed a plea in abatement asking that the instant case be abated on the grounds that he had filed an antitrust action in the United States District Court for the District of Oregon against Denny's Restaurants, Inc., and Harold Butler Enterprises #97, Inc., the plaintiff herein. In the plea in abatement defendant alleged that the question of whether defendant was liable to plaintiff for payment of the management fees was one of the issues in the action in the federal court.

The trial court denied the plea in abatement, and the action was tried on the merits in the circuit court. However, after completion of the trial, the court entered an opinion in which it stated that the pivotal issue was the validity of the management fee and,

therefore, the court would withhold the entry of a decision and judgment until that issue had been decided in the antitrust action in the federal court.

In March 1972 the defendant's action in the federal court was dismissed and no injunctive relief granted. Thereafter, the trial court in the ...


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