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Procedural Posture

Procedural Posture

By: SMITH THOMPSON

Plaintiff franchisee brought suit, claiming that defendants, the franchisor and the franchisee’s small business lender, used inaccurate market data and appraisal methods to induce the franchisee to enter into an unprofitable franchise agreement. The franchisor had previously brought suit to terminate the agreement and the lender had commenced a foreclosure action against the franchisee. Appellant was represented by a business attorney.

Overview

A settlement from a prior action brought by the franchisor against the franchisee enjoined the franchisee’s use of the trade dress. The franchisor brought a subsequent action for money damages, and the court entered an order finding that the money damages claims should have been raised and resolved in the first lawsuit, and were therefore barred by the doctrine of res judicata. In the instant, third lawsuit, the franchisee alleged that misrepresentations as to the funds available for loan and erroneous appraisal data were used to induce it to accept the agreement. It generally failed to identify any specific misrepresentations with specificity. The franchisee’s claims were not barred by either res judicata or as compulsory counterclaims that should have been filed in the prior suits, where it never had filed a responsive pleading in either case. The current litigation was unlikely to involve substantially the same evidence as the prior suits.

Outcome

The claims for intentional misrepresentation and negligent misrepresentation of the viability of the franchise, and the claim for breach of fiduciary duty were dismissed with leave to amend; the claim for unfair competition was not dismissed; res judicata and the failure to plead a compulsory counterclaim did not bar the claims.

Overview

HOLDINGS: [1]-A mortgagor failed to allege sufficient facts to show that a mortgage lender was not the true lender, that the loan was financed by unidentified investors, that the lender concealed or obscured the negotiations with the investors, or that the lender engaged in fraud; [2]-The nominee of the lender and its assigns had the authority to assign the deed of trust securing the loan and to institute nonjudicial foreclosure proceedings, since the deed of trust expressly identified the nominee as the beneficiary of the deed of trust; [3]-Cancellation was not warranted of the deed of trust, notices of default, a substitution of trustee, an assignment of the deed of trust, and a notice of foreclosure sale, since the mortgagor failed to allege facts showing that the written instruments were void or voidable and caused the mortgagor serious injury.

Outcome

Motion to dismiss granted.

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