*1 Conover, v. Bar ex State Assn. State rel. Nebraska 132, 2d 135. 88 N. W. 166 Neb. integrity duty maintain
A rests the courts suspending disbarring legal profession by or of the attorneys constituting practices indulge who corrupt and de- courts, on the tend fraud which justice. ex rel. Ne- State feat the administration Jensen, 105 N. 171 Neb. braska State Bar Assn. v. W. 2d 459. consistently failure ac- held that
This court has lawyer for or of trust funds count conversion possession requires It therefore is disbarment. adjudged respondent be disbarred. Judgment disbarment. participating. J., not
Brodkey, appellees Schupack al., and cross- Eli I. et Inc., appellants, System, Illinois v. McDonald’s appellants cross-appellees, corporation, al., et A. appellee impleaded Edwards, with Robert cross-appellee. 2d 827 264 N. W. April
Filed 1978. No. 41114. *2 Campbell Kutak Rock Cohen & Garfinkle Wood- appellants. ward, for Abrahams, appellees Cassman, Kaslow & for Schu-
pack et al. O’Malley,
McGrath, Dwyer, O’Leary North, Kratz, appellee Martin, & for Edwards. Heard J., before White, Spencer, Boslaugh, C. and JJ.
McCown, Clinton, Brodkey, White,
White, C. J. by plaintiffs against
This is an action the the de- Corporation fendants, McDonald’s and McDonald’s System, wholly (herein- Inc., subsidiary its owned McDonald’s), after referred to declaratory for a judgment ligations respective rights to determine and ob- parties
of the to and under a certain (or Right) of First originally granted by Refusal alleg- McDonald’s Bernard L. and now edly possessed by plaintiffs, specific per- and for injunctive formance requiring Right and relief McDon- plaintiffs ald’s to accord the of First Re- acquire fusal to Bellevue, McDonald’s unit Ne- braska, might additional units which be in developed by Omaha, future McDonald’s Nebraska, Bluffs, Iowa, or After com- Council area. granted the mencement of this action McDonald’s Edwards franchise the Bellevue unit Robert A. subsequently joined defendant. who was as a Septem- which, on The case was tried to the court given Cope- ber The found that: land not a contract McDonald’s was freely assignable without transferable consent; was transferred conveyed plaintiffs by Copeland Skoog in vari- John when sold all their interest Council ous McDonald’s franchises Omaha and (al- plaintiffs; consented Bluffs though necessary) to this their consent Right by knowledge transfer of the fer their of the trans- subsequent transfer; and their conduct only encompassed by the area includes corporate that area which limits is within the *3 cities of as those bound- Omaha and Council Bluffs may by appropriate aries ordinance, to time be fixed from time specifically Right not the does encompass Bellevue.
Accordingly, the held that under the District Court Right obligated of the McDonald’s is accord any plaintiffs acquire addi- First Refusal to the developed may in the tional units which be hereafter geographical corporate area the limits within existing of cities Omaha and Council Bluffs as now may enjoined extended; or hereafter be granting operating from or franchises ac- the Omaha and Council Bluffs area without cording plaintiffs Refusal First acquire such units. appeal portion the decree from per- finds
which and holds that assignable L. and was sonal Bernard plaintiffs assigned to the and was and transferred acknowledged and consented and that McDonald’s 488 por- cross-appeal from that Plaintiffs
this transfer. tion of the decree Right finds and holds that which scope corporate limited in limits of
is and Council Bluffs and that does en- Omaha compass below, For the Bellevue. reasons stated judgment reverse the of the District Court and we proceedings in accord- remand ance with this cause further opinion. gov- equity following
This is an action. The rules ern our review the trial court’s action. “In an appeal equity duty action, is the of this court try upon issues fact de novo the record and independent reach an conclusion thereon without findings reference of the District Court.” Spagnola, Marfisi v. 2d 24 Neb. 248 N. W. (1976). independent “Such conclusions of fact must by be determined this court accordance ordinary governing proof rules burden and the competency materiality evidence.” Schmunk, v. Shirk 192 Neb. 218 N. W. 2d (1974). See, also, 25-1925, § R. R. S. 1943. question granted The to Bernard Copeland July 1, McDonald’s in a letter dated 1959, which reads: Copeland, letter,
“This Mr. will confirm our un- derstanding regarding any additional McDonald’s may developed units that braska, Omaha, in the Ne- Bluffs, or Council Iowa area.
“Providing you any corporation you or are in- with, volved not in is default on a McDonald’s fran- Realty Corporation chise, or a lease; franchise might develop Omaha, locations that we Ne- Bluffs, braska Council Iowa area will be offered to Bernard L. first.” This letter was *4 signed by Conley, president Donald R. then vice McDonald’s. question
The initial for tous decide is whether the assignable as transferable without “Subject excep- consent of McDonald’s. to certain
489 per- involving relations tions case contracts being personal serv- or or confidence trust sonal assignable.” S., As- C. J. 6A all contracts are ices by signments, p. contract, shows 29, “A which § 626. character, personal or it is nature terms that its placed performance is, is that reliance for its party, responsibility integrity, or credit, of a or personally reposed in him or confidence trust is that for its assignable, performance, even is being delegated performance to another of its sense party to the of the other the consent without * * p. Assignments, 33, contract, S., § 6A C. J. 635. (1894), 264, Gibbs, In Rice v. 40 Neb. 58 N. W. “ ‘Rights arising can- of a contract stated: out we not they coupled with liabilities
be transferred
are
personal
confidence
or if
involve a relation
agreement
party
conferred
whose
such
rights
them to be exer-
those
must have intended
”
only
actually
by him in
confided.’
cised
whom
per-
Right granted to
Whether
assignable
him,
without
sonal
and thus
question
McDonald’s,
to be resolved
consent of
is a
ascertaining
parties
by
the intent of the
to the trans-
rights
under a contract
action.
“Whether
and duties
permit assignment
personal
is
too
a character
are
a
question
to be
from the
of construction
resolved
express
presumed
nature
the contract and
* *
Assign-
parties,
S.,
of the
6A C. J.
intention
City
p.
ments,
In
v.
§
636.
Rossetti
New Brit-
(1972),
ain,
stated:
163 Conn.
a restaurant in San Califor- plan nia. In 1955 Kroc embarked on to create a system nationwide standardized food restaurants. of franchised fast- During period 1959, the to operated five individuals McDonald’s. These were controlling Kroc, who was the founder and stock- president holder, its and “the head man” “boss”; secretary; Martino, June Kroc’s former Harry Sonneborn; Turner; Fred L. and Donald R. Conley. image trial,
At the Kroc testified about the he sought to create with McDonald’s. He stated that he joint hamburgers.” wanted “to take the out of He image people to wanted create “An would have con- image image fidence in. An of cleanliness. An glad parents the children would be have where come have them work there.” and/or
Kroc testified that careful selection of franchisees key to be for success McDonald’s and the image. way stated, establishment of this He “The get image people across, was that the kind * * People selected, we had there were “who great pride, aptitude had a deal of and had an serving public, and had dedication.” Kroc testi- people fied, going “we knew that if we had that were grow going grow us, that we were to- — gether” fully and, “I wanted him to be committed get time, full there with both feet and have the pride, philosophy trying and that we were be a * * * part community. days In those we were catering family image. So we wanted have persons category, in emulate the that would philosophy be McDonald’s and would Mr. community.” McDonald president Turner, Fred L. McDon- current process by ald’s testified that franchises which gradually, were selected pany the com- evolved and that By early made some mistakes. fairly
standards for selection established. were well ap- by Turner stated that 1957 and became parent only goal could achieve its persons careful selection of adhere who would company’s high in- standards. He stated managerial dividual’s skills abilities prime importance proc- matter of in the selection ess.
Prospective franchisees interviewed *6 during early period by Kroc, this at McDonald’s Conley. Turner, approximately At time this and/or acquire $25,000 was needed a franchise. Turner money testified that individuals who had the were they process filtered out in the interview if were not qualified. otherwise occasionally grant
At first McDonald’s ex- would give franchisee, clusive territories to a would which right the franchisee an absolute new stores opened territory. practice, in however, This proved growth to be detrimental be- McDonald’s territory if cause the holder of the exclusive was sat- units, isfied with a certain number of McDonald’s growth in that area come to A would a standstill. change was made from exclusive territories to a of First The Refusal. was better suited expand they desire to since could still party, a build unit offer it to another if of holder store. refused the new Kroc testified about circumstances under grant Right: pre- “Well, he which this would a — dominantly my my solely And, in in hands. hands — got funny got if I that inflection if I bone feel- ing; got feeling I if and faith and confi- trust — every- give give dence, then I would it. I would thing days, you, in those mind was an individual thing. dealing I an indi- as an individual with — gave vidual,” and, before, “As I if he said he — reaction, me kind of I felt that that kind of per- ability kind of in in his total confidence his — spirit dedication, in in son enthusiasm and 492 give
yes, would, him I the assurance we part.” grow him if his he did wanted During period 1955 155 McDonald’s Rights, During period, opened. in- units were this cluding granted. question, Thirteen the one were Rights were the franchise these embodied agreement, separate form, 2 in in- letter ternal memos. Conley, witness, R. at the
Plaintiffs’ main Donald question president time the vice franchising, selling and director testified that selling franchises, car.” He stated that "was like a routinely promised Rights prospective fran- part pitch. chisees his sales He testified only attorney pres- when a would franchisee they put Right them, form. sure written applicant’s personal qualifications, according to The Conley, Rights, granting unimportant these to ob-
and that McDonald’s real concern was applicant’s money tain because were finan- cially pressed period. in this He testified: personal ability
“Q. in his You weren’t interested operate successfully to be able to this restaurant at *7 right? all; is that interest, I that had some but wasn’t real
“A. factor.
“Q. real What was the factor? money “A. The real factor was did have willing put it line that on the at time.” and was he days, early Kroc McDonald’s testified that press conditions would never allow financial into day Right. granting He that the stated after they began receiving opened the first unit always people waiting for calls and that there were placed into evidence McDonald’s its licenses. federal returns which showed that tax income $400,000 in cash flow. On re- had over Schupack, accountant, plaintiff buttal, con- Eli tended that the returns evidenced a decrease working capital for 1959. agreements
Franchise contained a clause which expressly prohibited transfer without the consent explained purpose McDonald’s. Kroc provision: of this “Well, that was so that we would know dealing ques- who we were with. We didn’t want a money buy tionable character who had that business out. to be able to per- wanted to We know who that go through was, type son and we wanted to the same thing with the new owner that we had with the old authority.” one. We wanted that Kroc testified that McDonald’s never sold territor- purchaser ies because this would have allowed a subfranchise, sublease or and McDonald’s wanted to being retain direct control over what was done. Rights granted by All the McDonald’s between placed 1955 and 1960 were evidence. None into Rights any express language these transferability. contain of non- Right The first to contain such lan- guage Kroc testified that de- in 1962. is one issued express terms, spite the intention of this lack of Rights McDonald’s that these could not be trans- ferred without their consent: Now,
“Q. would those same considerations have your you gave been First intentions when out the you
Refusal; something Did intend transferability? that would be different toas Well, dealing “A. different, we with individual. That individual that we had given Refusal, First was the individual going that we were still to deal with when a new up store came and was offered to him.” Conley that he knew that testified agreement contained in the it would be franchise agreement, pur- with the and that transferred pose placing separate in a document was to enable withhold consent a trans- *8 agreeing time to while at the same a
fer transfer of franchise. Copeland approached In the fall of Bernard L. McDonald’s about a franchise Omaha. McDon- yet ald’s had entered Omaha and thus Omaha preference was selected as the area of for his fran- chise.
Copeland initially dealt Kroc at McDonald’s. concerning Copeland: “Well, Kroc testified probably he was — prestigious one of the one of the most very compli- And, men that had I come in. felt quality mented have a man of that come in. He Sears, was the head of the furniture division of Roe- Company, long great buck and whom I had a admir- * * * up quite And, [he] ation for. had built an equity profit sharing fund, their a was man por- substance, stature and and he showed trayed guy, you it. He was our kind of know.” up
Turner testified that this time li- typically self-employed, censees small busi- untypical nessmen, and that was to have an execu- large prominent corporation. Copeland, tive from a special. time, Conley at was considered ad- Copeland wealthy, experienced mitted that an “very good prospect” businessman, and a li- a cense. Copeland Kroc testified that asked for the exclu- - territory
sive of Omaha Council Bluffs. He told they longer gave him that out exclusive territor- grant ies, but that him which was “exactly thing long going the same as he open new stores.” Kroc stated that he made the de- arranged cision and would have a Right. On November and McDon- preliminary pre- franchise, ald’s into entered liminary agreement, required which procure acceptable use its best efforts to site grant Omaha and him a lease and franchise for that site. *9 waiting obtained, for an site to be
While Omaha Skoog, Copeland applied met had John A. who also granted yet franchise, for a but been one. had not go partnership The two men into decided and and jointly, operate the Omaha-Council Bluffs units agreed Copeland Corporation, on form the owned granted a 50-50basis. On June McDonald’s Copeland Corpora- a franchise and sublease to the Dodge tion for a site located at Road 8022 West granted Omaha, Nebraska. This franchise of First Refusal. Conley
The was discussed between Copeland during negotiations which culminated granting Copeland in the of the franchise Cor- poration. Copeland attorney, Both his Sherman requested Right put Carmell, ing. to have the into writ- On June a week after franchise granted, Copeland Conley stating was tempts wrote that at- being
were made to restrict which granted had been McDonald’s fered him to the that Kroc effect of-
units the Omaha area would be someone else if that McDonald’s did feel satisfactory. operations Copeland felt this contrary understanding to his Kroc with up. part, letter, wanted this cleared That stated: implication day “1. You left the with theme other ‘right covering agreement of first refusal’ twin-city the tain Omaha-Council Bluffs area would con- * * * subjective qualifications. Any qualifications proposed simply
“2. such are post agreement ‘ex facto’ I which had with agree Ray to I came Kroc. At the time he and on ment this entire move mine he assured me signed agreement at the time the franchise coincidentally unit, the first a verify I this would secure right on additional He will units. of first refusal’ qualifying stipulations there were no * * * made. * * * Certainly poor “3. feels that any point management at becomes evident franchising additional units could withhold * * Corporation until the situation is cured. * my original however, would, un- It be counter derstanding were offered if additional units feeling part resulting party from the on the other receiving first unit was optimum management. strongly I must now
“4. believe that McDonald’s my ability to insure kind faith have same aggressive management good, Cor- making in McDonald’s poration, faith I have major point like out that decision. I such *10 responsibility 200 million dollar I had segment for a direct annually period of over a of Sears’ business complete years performed to their satisfaction. certainly to the McDon- It stands reason four ultimately planning I am will ald’s units which given
good management. my pur- fact, In this was Skoog picture pose bringing into Mr. John the background very he has a successful business management.” (Emphasis supplied.) restaurant writing Skoog participated in testified that he the nothing ques- letter it to do this and that had with [separately Right created] tion of whether or transferable not. copy Copeland’s
A Kroc letter was forwarded Conley by Conley a memo attached which with from - keeping read: ‘‘In let’s with our verbal discussion right Copeland. it make a to Bernard 1st refusal L. right purchaser, pass heir, This will not to an etc. (Emphasis supplied.) Don 6/30.” This memo Kroc. On the was initialed ‘‘OK” following containing day, July 1, 1959, the letter Right, quoted Copeland earlier, sent ad- Ridge, Illinois, to him ad- dressed dress. at his Park Conley suggested result, a that he As testified Right personal Copeland Kroc that be made having subjective qualifications it, instead of to Kroc that effect. wrote the June 30th memo Skoog, witness, testified as now a disinterested Cope- the formation of and the land’s lationship nature Right explained the re- of First He Refusal. and his business associ-
between Copeland. Skoog also ation with that he had stated applied franchise, but talked Kroc when he for a Copeland, promised not been that unlike he had Right. they Copeland met, him At the time told orally promised he had been Omaha Council Bluffs.
Skoog Right always testified stood Copeland’s during part- name of their the existence nership, understanding and that was his promise Copeland. was a from Kroc to Prior Right being written, made he and had discussions or not it should be about whether placed joint Skoog in their stated that he names. given jointly, have liked to to them have had agreement but that Kroc. He had they testified that decided leave Copeland’s they name these dis- because when had negotiations Dodge cussions the for the Road West taking place they site were felt that change, might to ask McDonald’s for a something might say want “No.” return Skoog explained understanding *11 it was his ownership Right it had no in the and al- interests ways Copeland’s something stood in he held name as individually personally, Right the was and and that something separate apart from the franchise and agreements, undisputed. Skoog testified, is which Right Copeland “I the of First Re- believe that had thing.” personal fusal, it and was a Skoog only shared in the benefits stated that he Copeland. Right through partnership the Copeland his “ partners’ you him, ‘John, and I are told get location, said, I and he which ‘When we another Right part- on, have a First Refusal we will be ” (Emphasis supplied.) Skoog explained ners.’ in substance each to new was restaurant offered accepted by and, him, a franchise corporation jointly by to issued It owned the two. undisputed Right is to the never transferred
any corporations by Copeland formed Skoog Copeland’s through in but remained name all these transactions.
Summarizing, overwhelming the evidence is undisputed following almost establish factual conclusions:
(1) undeviating policy it That basic and rigid retain the and absolute control rapidly over who received new franchises expanding demand new franchises. (2) That the First Refusal was intended personal separately grant be in nature in- and was dependent of the terms of the franchise contract itself.
(3) grant depended upon That placed confidence and trust grantee, permit assignability that to or transfer by grantee permission without of McDon- ald’s, destroy policy would serve the basic of con- quality performance trol of the confidence granted the event the new franchises locality.
(4) granting terms, That its the letter granted only though Copeland, to Bernard L. even expressly recognized Copeland’s and extended corporate operation involvement management of the franchise.
(5) Conley authority That the written Kroc only Right. extended a nontransferable (6) purpose That the intent and the of the letter granting was to look personal performance Copeland. of Mr. credibility Conley’s
We now discuss the testi- *12 mony. Conley witness for was the chief and crucial plaintiffs. important, First, and, note most we judge adopt rely upon or the contra- trial did dictory testimony Conley finding of in personal of was in An examination his nature. clearly. interpret decree reveals decree, this As we particularly paragraph theory 7, the court’s upon of was based the actions and McDon- conduct subsequent ald’s Copeland the issuance of the franchise grant
and the of First Refusal. appears Conley It that the more than witness just partial part plaintiffs. witness on the It appears Conley discharged in year plaintiffs Cope- same transaction place. Conley’s against land took bias Conley president was admitted him. is the (MOA), Operators Association an asso- ciation of dissident McDonald’s franchisees. The plaintiffs are members of In this association. its newsletters, MOA has advised McDonald’s fran- chisees that exist under “the constant threat of harassment, intimidation, encroachment, non-re- termination”; newal and even that “McDonald’s trustworthy longer executives, [are] ones company”; “plays with the and that McDonald’s determining favorites” who was entitled a new open franchisees, restaurant. In an letter to Con- all ley has advised them treats that McDonald’s its simpletons, “enemies, hats, franchisees black Conley by admission, dissidents.” cross-examination, forced on his own pros- told
testified that what he pects importance about the of their skills acquiring Refusal, was, fact, First many false. There this ity, are illustrations the record only example, effect, one the interest brev- given will here: you prospective franchisee,
“Q. At the time told a going area, who was into a new that he would have stores, First Refusal additional particular past experience or abilities of great importance? *13 that; but, it ‘‘A. I tried to make him believe was * * *
not so. you try “Q. Did to make him believe then that his obtaining important skills and abilities were Right of this of First Refusal and license? yes. cases,
“A. In most
“Q. Was the truth?
“A. No.” Again, Conley testified that the conversation Copeland he tried to make believe personal performance exper- that his and business important ience were factors that as criteria were granting Right However, for on of First Refusal. Conley spite that, direct examination claimed Copeland, Right what he had told fusal First Re- granted Cope- out of for consideration management qualifications, land’s that the abilities but granting Right simply
reason Copeland’s money. Copeland’s obtain He stated that ability, experience, background business particular although, not of to him interest as out set above, he tried make believe he was being qualities. considered because of these part Conley’s testimony,
The critical admitted objection competency, that, without as is as a occurring result of an uncorroborated conversation July between sometime on June Right 1959, when he forwarded the of First Refusal Copeland, including he issued the without any language transferability. that would restrict its Right, He testified that at the time he drafted the part there intention on his Copeland. Beyond Conley’s admission that say thing would fraudulent one and mean another and make
representations prospective fran- testimony confusingly contradictory. chisees, his is Conley cross-examination, On admitted that the in- purpose per- tent was to look performance Copeland. Summarizing sonal cross-examination,
Conley explain why, could not negotiating insisting upon after the transferable Right, Conley Copeland, exper- claims, represented by ienced businessman who was coun- (exhibit 5) accept Right totally sel, would that was language transferability. devoid of Nor could Conley explain why Cope- McDonald’s would issue freely land a transferable which entitled the franchise, holder to the first offer of a new when at grant Cope- the same time McDonald’s would not land a franchise that was freely transferable. His testimony very significant: exact is Why, then, ‘‘Q. would McDonald’s issue a freely of First Refusal transferable, which would be give when at same time wouldn’t a fran- *14 freely not chise would transferable? — trying go give
“A. I am to to back our I can’t you answer, counselor.
“Q. consistent, not It’s Everything is it?
“A. we did was catch as catch can at time.” Conley explained cross-examination, On the al- leged overnight position switch in toas personal Right, by claiming the of nature the that it possible company was the not was in financial 30, 1959, on trouble June when he wrote the memo to stating Right Kroc then one the be transferable and
day July 1,1959, on later when he issued the Right, company the in contends such a financial Copeland’s bind that it had to to accede demand for Right. a transferable
Irrespective of the conclusion that the written lan- guage granting Right of the the letter needs in- terpretation the was not and that under law trans- assignable personal nature, ferable or of its because rely testimony on of the other the witnesses we grounds reject, on the 1959 the transaction and of testimony
credibility, of the rea- the uncorroborated drawing letter between in of the for a sons switch he executed the time of the memorandum forwarding of the on and the Kroc June Right July 1, 1959. written granted of Refusal First hold that We Copeland, Copeland by McDonald’s was assigned or without not be transferred and could also find that of We consent McDonald’s. by Cope- assigned transferred, shared, or during Skoog, their times busi- that at all
land but Copeland, remained with ness association Skoog merely benefits, shared and operation Right. franchises, question is determine whether The next us assigned Copeland’s Right was transferred plaintiffs, ever con- has and whether McDonald’s assignment Copeland’s sented transfer plaintiffs. Skoog acquired From 1959until units, five one in Council Bluffs and a total six separate placed in a Each Omaha. franchise equal corporation In shares. owned them Skoog to sell their franchises decided requested plaintiffs, time were who at the and accountants accounting Chicago and handled including franchises numerous McDonald’s work agents represent theirs, them act as their seeking purchaser. plaintiffs months,
After a small about 6 assembled group Chicago investors, them- investment percentage included for the invest- selves a small *15 by willing pay price ment who were to asked Copeland Skoog. plaintiffs’ to and intent It was purchase group form an investment which would operate franchises and owners. them as absentee by to to McDonald’s refused consent a sale Skoog group to did this because McDonald’s by operated their owners. want franchises absentee plaintiffs About this time the then became interested acquiring majority purchase a interest franchises. Wineberg September 14,
Julian testified that on Harry 1964, he met with Sonneborn. McDonald’s rejected group had the initial investor and there was impasse an Skoog’s attempt to sell the franchises. He wanted resolve this. At this meeting Wineberg testified that he disclosed the Sonneborn, existence admitted who explained exist, did to Sonneborn what an opportunity grow- was, excellent the Omaha area ing only market with six units. He stated that he Schupaek tried convince Sonneborn that he and acquire were the ones who should be able to these franchises, quired and he asked Sonneborn re- what was get
of them to the franchises. Wineberg days testified that a after this few meet- ing, they received a call from Turner and Richard Boyland, suggested plaintiffs who the at acceptable they transfer would least 51 be own percent of the stock and if one of them would accounting practice, Omaha, leave move operator. an active After discussions between plaintiffs agreed accept themselves, pro- this posal.
Wineberg Schupaek testified that he and had a meeting Wineberg in October of Turner 1964. they stated that mentioned Turner that the give opportunity of First them Refusal would an expand join in the market and invited Turner employee them as as an investor. Turner Wineberg them turned down. testified that he Schupaek were aware needed McDon- Right. Wineberg acquire ald’s consent testi- fied: right.
“Q. All the fact You were aware you you needed before McDonald’s consent could ac- quire any corporations the interest held *16 any Copeland’s Skoog of and you
interests, were not? knowledgeable Yes, we needed that “A. we were (Emphasis supplied.) consent.” Right up came at that the never Turner testified emphasized, meeting. “The stated that he this He existing operations opportunities improve the stores,” in those lot more volume that there was a potential growth any of the of the that discussion the exist- in terms the volume Omaha area was ing prob- admitted, however, there He that stores. plaintiffs ably the their abil- about was discussion ity to stores. obtain additional
Following Sonneborn, Turner, with the discussions agreed purchase plaintiffs Cope- Boyland, and land and the Skoog’s in the interests Omaha-Council purchase price franchises, net for a Bluffs subject Schupack $473,500, to McDonald’s consent. Right had the testified ing negotiations discussed dur- he he and that had stated: “That selling corpo- interests, the all of his the stock in was Right everything ration, First Refusal and else that had involved Omaha-Council Skoog the Bluffs area.” also testified that during negotiations plain- the discussed any tiffs, not to retain the sellers did intend They in did not interest know if after the sale. they transferable, was, in- but They sell, tended it. intended to “the transfer right, anything title, in had in the and interest we - anything had Omaha-Council Bluffs area we Skoog according Skoog. McDonald’s,” stated attorney their them to allocate advised part purchase price of the because event transferable part purchase price have to buyers. refund of the price Schupack asked testified by Copeland existing Skoog for stores was expan- excess their and that actual value represented rights sion the market área premium. plaintiffs
On sent McDon- November advising letter indi- ald’s a them of their intention vidually, agents, corporations agents as and/or purchase to be formed: “to all issued *17 operating outstanding corporations stock all now McDonald’s at loca- franchises sub-leases and/or together right, described, tions all above with title operating and interest of and all now individuals said franchises on sub-leases locations above and/or described.” very upset
Turner testified that he was con- plaintiff’s attempt purchase cerned with to the fran- stopped chises and he that consideration McDon- original purchase ald’s of their to offer the fran- plaintiffs chises. He did think the that good operators thought make going that “were pull up company
to a one on the set fast absentee investor deal and we would have some operation problems Axelrad, in Omaha.” McDon- general put pressure counsel, ald’s then some advising Turner him he should make certain that unreasonably did withhold its con- sent to a transfer of the franchises. Axelrad testi- recognized right fied that he to a franchisee has a sell his franchise and that could not its withhold consent without reason. subse- Out quent proposal plaintiffs discussions, the that own 51 percent franchises, of the stock in the and that one of actively operate units, them move to to Omaha emerged.
Despite plaintiffs’ acceptance terms, of these negative very Turner remained to the idea of the plaintiffs. sale of the franchises On advice longer from Axelrad that consent could reason- ably reluctantly agreed withheld, be to Turner to consent the transfer of six franchises under these then the matter conditions. Turner turned necessary con- written to draft Axelrad
over very dot careful told Axelrad Turner sent. the “t’s”. the “i’s” and cross during examina- his routine Axelrad testified that of the existence aware tion of the files he became the sent he had a vast amount drafting Right. prior the con- He that stated conversation eligibility acquire stores, Schupack over his Axelrad and that the was discussed. testified Schupack considered he advised that expire the time at and would transfer, to be reissued that it would have eligibility plaintiffs’ names, that the matter of go, very acquire touch and the stores was agreed only reluctantly to this consent Turner had Right might press tilt the sale, Axelrad testified this entire transaction backwards. Schupack major was not a issue and conceded go practical route since he was let was the most acquire He stated most anxious Schupack’s primary stores. just getting the
concern was *18 not, over and that he did make an issue franchises the only Right. response, Schupack testified that In having any with not conversations did recall in Axelrad 1964. 19, 1964, its con- On issued November “* part, consent, in read: sent the transfer. The
* * purported we have examined a Purchase Agreement you propose to sell all Sale under which right, individually, your title, and as of and interest * * * corpora- following stockholders named * * tions: *. undersigned, and reliance “The as an inducement representation compliance with the aforesaid the terms and of the aforesaid Purchase conditions Agreement, hereby and Sale does consent corporations by transfer of all stock in the aforesaid you Wineberg, Schupack to said Eli L. and Julian J. individually, agents, agents corpo- as for and/or rations be formed.” plaintiffs
On November the sellers purchase agreement. executed a Follow- and sale ing purchase corpora- plaintiffs established corporations. tions to take over each of the sellers’ purchase price The total to the assets was allocated Right corporate on shown The books. up any
set porations, as an of those cor- asset on the books part price purchase was al- testimony located it. in There was policy was McDonald’s reissue a First Refusal the name of the transferee such trans- by Copeland’s fer was consented to McDonald’s. Schupack was never reissued the names of Wineberg. and/or purchase
After their the franchises plaintiffs August were desirous of more units. In regional Schmitt, Edward H. man- ager for the time, area at that Schupack met with licensing discuss the a new store 40th South Street Omaha. Schmitt testified that there was during no mention of the his discussions with Schupack. Schmitt made a verbal commitment Schupack. license this unit Schmitt testified that Schupack, the South 40th Street unit was offered plaintiffs because of claim Right, Schupack existing had but because operating franchisee in the area who in a suc- cessful manner and had formal met McDonald’s expansion, general standards company policy. with accordance
Schupack testified that Chicago was mentioned in discussions he had in prior successor, Hall, Bernard Schmitt’s the fran- being granted. chise on the South site 40th Street part licensing procedure, As of the routine Schmitt *19 licensing request made a written to de- McDonald’s partment In a territorial clearance. accordance general procedure, upon receipt a re- such department to
quest, files the franchise searches any or exclusive is whether there determine outstanding proposed territory on the unit. site Right, the files it in be evidenced there is a will If request. response to on the clearance noted request pursuant dis- made Schmitt’s The review Rights outstanding in no Omaha there closed In time. location at on the South 40th Street request E 1963, 42nd and for the unit at a clearance subject this site Omaha disclosed that Streets Copeland. Right in Bernard L. to a First Refusal September offered, 15, 1971, On Schupack. writing, 40th location South Street Schupack September 1971, 24, made a written ac- On ceptance on of the offer of this unit. The franchise granted this unit was October 1971. Schupack September 24, 1971, wrote Turner On complaining under which letter about terms accept He had the South 40th Street unit. wrote: right company presumably to offer “Your has franchisees; franchises however, terms to new under strongly your instance, I feel that this company denying rights purchased by me Certainly is certain dating to 1959. and others first back right meaningless of refusal becomes under your terms.” current this letter
Turner testified he skimmed over pointed Props and turned out of over J. Kenneth who him that the letter made a claim to On First Refusal which should be answered. No- Schupack: responded vember Turner would, your I “There one letter that is inference right correct, like to of re- and that refers ‘first right present at the . There is such time in fusal’ Omaha, granted since Bernard individually passed on when he sold the (Emphasis supplied.) units.” developed Fremont, In a unit in Nebraska, other which was offered someone than *20 plaintiffs. Schupack On wrote March Flynn, manager, Pat district contend- McDonald’s ing that Fremont was in the Omaha-Council Bluffs offering him area and that it to a “violation agreements your companies of the between Schupack July letter, 1,1959, mine.” In his cited Conley Copeland. April 12, 1974, from letter to On Flynn advising no wrote back “There is Omaha, exist- that: ing right of first for the Nebraska refusal Bluffs, and Council area.” Iowa developed Bellevue,
In McDonald’s a unit originally to the Nebraska. plaintiffs, This unit offered relating but to contribu- with conditions Schupack advertising tions a national fund which unacceptable. plaintiffs’ Subsequent found to the unit, refusal of the offered it the de- McDonald’s litigation accepted This it. fendant Edwards who followed.
We hold that did not consent a transfer of the of First Refusal from plaintiffs, they only to the but consented existing of the stock in sale the then franchises. We consistently find maintained also McDonald’s has position per- that the of First Refusal was only Copeland pass plain- sonal and did position, tiffs, and has acted accordance with that pur- subsequent has not at time to the 1964 chase of franchises Omaha-Council Bluffs plaintiffs, recognized the existence of the plaintiffs. in the First Refusal
Accordingly, plaintiffs possess of First Refusal additional franchises Holding do, it Bluffs area. as we be- Omaha-Council unnecessary plaintiffs’ for comes us discuss the relating scope Right. cross-appeal of the judgment of Court is reversed and The the District proceedings ac- the cause remanded further opinion. cordance with this remanded.
Reversed dissenting. Thomas, J., White, C. majority re-
The in its of de novo omits discussion significant part cred- view a ible evidence flict, of that standard. When questions in con- material of fact is observed we will consider the trial court testifying their and ac- witnesses and manner cepted the other. one version of the facts rather than Schmunk, 2d 433. See Shirk v. 192 Neb. 218 N. W. majority de- The concludes that is better able reading record, termine on than judge saw, heard, trial the wit- who and observed *21 nesses, I who was and who was not. confess truthful speak plainly that the to me as record does great majority. placed does to re- I have findings judge. liance on the of the trial appellant, Construction, Inc., Cather v. & Sons City Nebraska, appellee, Lincoln, The Goodyear Company, Tire & Rubber
intervener-appellee.
264 N. W. 2d April Filed 1978. No. 41263.