Business LAW 3 Holiday Inn Franchising, Inc. v. Hotel associates inc

Follow SIRACY format for this business case

1. Statements of the fact- 1 paragraph 4-5 sentences

2.Issue: Single legal question concerning the case.

3. Rule of law: 1 sentence explaining the rule of law regarding the case

4. analysis: 1/2 a page (talk about both side and then do a legal analysis about the case)

5. court's decision

6. personal opinion

MUST USE LEGAL TERMS

Background and Facts: Buddy House was in the construction business in Arkansas and Texas. For - decades, he collaborated on projects with Holiday Inn Franchising, Inc. Their relationship was char acterized by good faithmany projects were undertaken without written contracts. At Holiday Inns request, House inspected a hotel in Wichita Falls, Texas, to estimate the cost of getting it into shape. Holiday Inn wanted House to renovate the hotel and operate it as a Holiday Inn. House estimated that recovering the cost of renovation would take him more than ten years, so he asked for a franchise term longer than Holiday Inns usual ten years. Holiday Inn refused, but said that if the hotel was run appropriately, the term would be extended at the end of ten years. House bought the hotel, renovated it, and operated it as Hotel Associates, Inc. (HAI), generating substantial profits. He refused offers to sell it for as much as $15 million. Before the ten years had passed, Greg Aden, a Holiday Inn executive, developed a plan to license a different local hotel as a Holiday Inn instead of renewing Houses franchise license. Aden stood to earn a commission from licensing the other hotel. No one informed House of Adens plan. When the time came, HAI applied for an extension of its franchise, and Holiday Inn asked for major renovations. HAI spent $3 million to comply with this request. Holiday Inn did not renew HAIs license, however, but instead granted a franchise to the other hotel. HAI sold its hotel for $5 million and filed a suit in an Arkansas state court against Holiday Inn, asserting fraud. The court awarded HAI compensatory and punitive damages. Holiday Inn appealed.

In the Language of the Court Raymond R. ABRAMSON, Judge. *** * Generally, a mere failure to volunteer information does not constitute fraud. But silence can amount to actionable fraud in some circumstances where the parties have a relation of trust or confidence, where there is inequality of condition and knowledge, or where there are other attendant circumstances. [Emphasis added.] In this case, substantial evidence supports the existence of a duty on Holiday Inns part to disclose the Aden [plan] to HAI. Buddy House had a long-term relationship with Holiday Inn characterized by honesty, trust, and the free flow of pertinent information. He testified that [Holiday Inns] assurances at the onset of licensure [the granting of the license] led him to believe that he would be relicensed after ten years if the hotel was operated appropriately. Yet, despite Holiday Inns having provided such an assurance to House, it failed to apprise House of an internal business plan * * * that advocated licensure of another facility instead of the renewal of his license. A duty of disclosure may exist where informa - tion is peculiarly within the knowledge of one party and is of such a nature that the other party is justified in assuming its nonexistence. Given Houses history with Holiday Inn and the assurance he received, we are convinced he was justified in assuming that no obstacles had arisen that jeopardized his relicensure. [Emphasis added.] Holiday Inn asserts that it would have provided Buddy House with the Aden [plan] if he had asked for it. But, Holiday Inn cannot satisfactorily explain why House should have been charged with the responsibility of inquiring about a plan that he did not know existed. Moreover, several Holiday Inn per sonnel testified that Buddy House in fact should have been provided with the Aden plan. Aden himself stated that * * * House should have been given the plan. * * * In light of these circumstances, we see no ground for reversal on this aspect of HAIs cause of action for fraud.

Decision and Remedy The state intermediate appellate court affirmed the lower courts judgment and - its award of compensatory damages. The appellate court increased the amount of punitive damages, how ever, citing Holiday Inns degree of reprehensibility..