Louisiana Case Law

GOD’S GLORY & GRACE v. QUIK INT’L INC., 2005-1414 (La.App. 1 Cir. 6/9/06) GOD’S GLORY & GRACE, INC. v. QUIK INTERNATIONAL, INC., ET AL. No. 2005-CA-1414. Court of Appeal of Louisiana, First Circuit. June 9, 2006. Page 1

ON APPEAL FROM THE NINETEENTH JUDICIAL DISTRICT COURT PARISH OF EAST BATON ROUGE, STATE OF LOUISIANA NO. 480,664, DIVISION “M” HONORABLE KAY BATES, JUDGE PRESIDING

JOHN HOUSAN FENNER, III, Baton Rouge, Louisiana, Attorney
for Appellant.

CLIFTON O. BINGHAM, JR., DAVID A. PETERSON, OATS & HUDSON,
Baton Rouge, Louisiana, Attorneys for Appellee.

Panel composed of Ad Hoc Judges James L. Cannella, Marion
F. Edwards and Susan M. Chehardy.

JAMES CANNELLA, Judge Ad Hoc. Page 2

The Plaintiff, God’s Glory & Grace, Inc. (God’s Glory),
appeals from the trial court judgment rendered in favor of
the Defendant, Quik International, Inc. (Quik
International), finding that it was not liable, as the
franchisor of a local business with which God’s Glory
contracted, for damages allegedly suffered by it when the
contract was breached. For the reasons which follow, we
affirm.

God’s Glory is a closely held subchapter S corporation
owned entirely by Mark Lee and his wife, Glinda Lee. In
mid-summer of 1999, the Lees decided to form an
internet-based company that would market certain products
primarily to the Christian-based buying public. The Lees’
business plan included construction of a web site that
would sell these products through a “web store.” The Lees
were interested in hiring someone to design and create a
web site and web store which would market commerce greeting
cards and link consumers over to their web store. According
to the petition, on November 9, 1999, God’s Glory entered
into a contract with Quik Computer Solutions to design
their web site and handle their Page 3 other computer
needs. It is alleged that Quik Computer Solutions was a
franchisee of Quik International. Quik International is a
foreign corporation, in the business of franchising the
“Quik Internet” concept to local internet service
providers.

God’s Glory contends that it was promised that its web
site would be online and functioning by November 12, 1999.
After numerous problems and delays, on May 12, 2000, it
informed Quik Computer Solutions that it wished to
discontinue its services. On February 1, 2001, God’s Glory
filed this lawsuit for breach of contract, naming as
Defendants, Quik International and “Quik Internet of Baton
Rouge, a/k/a Quik Computer Solutions.”

In its answer, Simpliance Corporation (Simpliance)
explained that it was the corporation with which God’s
Glory contracted, doing business as Quik Internet of Baton
Rouge and Quik Computer Solutions, and otherwise denied the
allegations in the petition and asserted several defenses.
God’s Glory thereafter duly amended its petition to name
Simpliance as a Defendant.

God’s Glory filed a second amending petition, further
alleging that Quik International had entered into a
franchise agreement with Simpliance, as a franchisee of the
Quik Internet concept in the Baton Rouge area. It was
alleged that the Quik International web site represented
that Quik International provided web site design services
for customers of Quik Internet franchisees. It was also
alleged that the Lees read and relied on these
representations in contracting with Simpliance.

On November 6, 2003, God’s Glory filed a motion to dismiss
Simpliance and the case went to trial solely against Quik
International, the franchisor. On October 7, 2004,
following trial and after taking the matter under
advisement, the trial court rendered judgment, in accord
with written reasons, in favor of Quik International
dismissing all claims by God’s Glory against it. In her
reasons for Page 4 judgment, the trial court found that
Quik International’s primary role was to serve as an
Internet Service Provider and to provide a location to host
the God’s Glory web site. Quik International had no contact
with God’s Glory or the Lees and it did not manage or
control its franchisee, Simpliance. God’s Glory dealt only
with the representatives of Simpliance and never contacted
Quik International regarding the actions or inactions of
Simpliance. The trial court also found that Quik
International was not the alter ego of Simpliance, both
companies having different directors, officers, employees,
clients and contracts. The trial court found that Quik
International did not make any representations to God’s
Glory upon which the latter could have reasonably relied.
The trial court noted that Quik International was not a
party to the contract that God’s Glory entered into with
Simpliance and that much of the information that the Lees
found out about Quik International was discovered after
they terminated Simpliance and not in contemplation of
entering into the contract with Simpliance. Finally, the
trial court noted that in the franchise agreement it was
clearly stated that Simpliance was an independent
contractor and that there was no principle-agency
relationship between the parties. Quik International did
not give Simpliance the authority to bind it to any
contract with a third party. It is from this judgment
dismissing its claims that God’s Glory appeals. Quik
International filed an answer requesting damages for
frivolous appeal.

On appeal, God’s Glory assigns three errors, the first two
addressing trial court errors in the judgment and reasons
and the third addressing damages in the event of a
reversal. On the merits, in the first two assignments of
error God’s Glory argues that the trial court erred in
dismissing its claims against Quik International based on
language in the franchise agreement and a perceived duty on
the part of third parties (God’s Glory) to investigate the
franchisor’s contractual Page 5 liability as provided in
the agreement. God’s Glory also argues that under agency
law Quik International should have been held liable for the
authorized acts of its agents.

Quik International argues to the contrary that the trial
court judgment was correct. It argues that God’s Glory took
one sentence from the trial court’s reasons for judgment
out of context, referencing the trial court’s reliance on
the terms of the franchise agreement which provided that
Quik International was not responsible for the acts of
franchisees or their employees. Moreover, absolute
liability of a franchisor is not recognized under Louisiana
law. Rather, under principal-agency principles, the trial
court was correct in ruling that Quik International was not
liable to God’s Glory for any breach of the contract which
God’s Glory entered into with its franchisee, Simpliance,
based on the findings that Quik International never
communicated with God’s Glory, or the Lees, it had no
control over Simpliance, no common directors, officers or
employees, Simpliance had no actual authority to bind Quik
International and apparent authority requires manifestation
by the principal and reasonable reliance thereon, which
were not proven in this case.

It is well settled that an appellate court’s review of
factual findings in a civil appeal is governed by the
manifest error — clearly wrong standard. In order to
reverse a factual determination by the trier of fact, the
appellate court must apply a two-part test: (1) the
appellate court must find that a reasonable factual basis
does not exist in the record for the finding; and (2) the
appellate court must further determine that the record
establishes that the finding is clearly wrong (manifestly
erroneous). Stobart v. State through Department of
Transportation and Development, 617 So.2d 880, 882 (La.
1993); Rogers v. City of Baton Rouge, 04-1001 (La.App. 1st
Cir. 6/29/05), 916 So.2d 1099. If the findings are
reasonable in Page 6 light of the record reviewed in its
entirety, this court may not reverse even though convinced
that had it been sitting as the trier of fact, it would
have weighed the evidence differently. Rosell v. ESCO, 549
So.2d 840, 844 (La. 1989); Rogers, supra. Thus, where there
are two permissible views of the evidence, the factfinder’s
choice between them cannot be manifestly erroneous or
clearly wrong. Stobart, 617 So.2d at 883; Rogers, 916 So.2d
at 1101.

Although a trial court’s determination of credibility is
entitled to deference on appellate review, where documents
or objective evidence so contradict the witness’s story, or
the story itself is so internally inconsistent or
implausible on its face, that a reasonable factfinder would
not credit the witness’s story, a court of appeal may find
manifest error even in a finding purportedly based upon a
credibility determination. Toston v. Pardon, 03-1747, p. 12
(La. 4/23/04), 874 So.2d 791, 800. In summary, an appellate
court cannot shirk its duty of appellate review of fact by
simply deferring to a trial court’s factual determinations
because its reasons for judgment are couched in terms of a
credibility call. At some point, even a bare transcript is
so deficient in terms of quality of evidence that the trial
court’s error is manifest, even if some credibility
determinations must necessarily be made. Rogers v. City of
Baton Rouge, 04-1001, p. 9 (La.App. 1st Cir. 6/29/05), 916
So.2d 1099, 1104.

The standard of appellate review for questions of law is
simply to determine whether the trial court was legally
correct or incorrect. Cangelosi v. Allstate Ins. Co.,
96-0159 (La.App. 1st Cir. 9/27/96), 680 So.2d 1358, 1360,
writ denied, 96-2586 (La. 12/13/96), 692 So.2d 375. If the
trial court’s decision was based on an erroneous
interpretation or application of law, rather than a valid
exercise of discretion, such incorrect decision is not
entitled to deference by the reviewing Page 7 court.
Conagra Poultry Co. v. Collingsworth, 30,155 (La.App. 2nd
Cir. 1/21/98), 705 So.2d 1280.

In considering the liability of the franchisor, Quik
International, to a third party, God’s Glory, for the
alleged breach of the contract the latter entered into with
the franchisee, Simpliance, we must look to the law on
agency and mandate. A principal is bound by the authorized
acts of his agent. La. C.C. art. 3021. A principal may also
be bound by acts of a professed agent acting with “apparent
authority.” Tedesco v. Gentry Development, Inc., 540 So.2d
960 (La. 1989); Dart Distributors, Inc. v. Foti
Enterprises, Inc., 271 So.2d 705 (La.App. 1st Cir. 1972).
As explained by the Supreme Court in Tedesco:

Apparent authority is a doctrine by which an agent is
empowered to bind his principal in a transaction with a
third person when the principal has made a manifestation
to the third person, or to the community of which the
third person is a member, that the agent is authorized
to engage in the particular transaction, although the
principal has not actually delegated this authority to the
agent. Restatement (Second) of Agency § 8 (1958);
W. Seavey, Law of Agency § 8(D) (1968); F. Mechem,
Law of Agency § 84 (4th ed. 1952); Comment, Agency
Power in Louisiana, 40 Tul.L.Rev. 110 (1965) [hereinafter
cited as Comment, Agency Power]. In an actual authority
situation the principal makes the manifestation first to
the agent; in an apparent authority situation the
principal makes this manifestation to a third person.
However, the third person has the same rights in relation
to the principal under either actual or apparent
authority. Further, apparent authority operates only when
it is reasonable for the third person to believe the
agent is authorized and the third person actually believes
this. Restatement, supra § 8, comments a and c.

There is no express codal or statutory authority for the
doctrine of apparent authority in Louisiana. This doctrine
of unprivileged agency power, however, is an important
part of the modern law of agency. A. Yiannopoulos, Civil
Law in the Modern World 88 (1965).

Louisiana courts have utilized the doctrine of apparent
authority to protect third persons by treating a Page 8
principal who has manifested an agent’s authority to third
persons as if the principal had actually granted the
authority to the agent. See Restatement, supra § 8,
comment d; Comment, Agency Power, supra; Conant, The
Objective Theory of Agency: Apparent Authority and the
Estoppel of Apparent Ownership, 47 Neb.L.Rev. 678 (1968).
(Footnotes omitted.)

This Court has also explained that “apparent authority is
a doctrine by which an agent is empowered to bind his
principal in a transaction with a third person when the
principal has made a manifestation to the third person that
the agent is authorized to engage in the particular
transaction, although the principal has not actually
delegated his authority to the agent.” Tresch v. Kilgore,
03-0035 (La.App. 1st Cir. 11/7/03), 868 So.2d 91; Waffle
House, Inc. v. Corporate Properties, Ltd., 99-2906 (La.App.
1st Cir. 2/16/01), 780 So.2d 593. The burden of proving
apparent authority is on the party relying on the mandate.
The third party may not blindly rely upon the assertions of
an agent, but has a duty to inquire into the nature and
extent of the agent’s power. Tresch, supra.

Applying these precepts to the case before us and
considering the record in its entirety, we find no error by
the trial court in its interpretation or application of the
law or in its factual findings and credibility
determinations, which we find were reasonably supported by
the record.

God’s Glory takes issue with the trial court’s reference
to the franchise agreement between Quik International and
Simpliance. The trial court noted that Article 17 of the
franchise agreement specifically states that the franchisee
was an independent contractor and the franchisor was not
responsible for the employees of the franchisee. It also
clearly states that there was not an agency or fiduciary
relationship between the franchisor and franchisee. The
trial court found that Quik International never gave
Simpliance the authority to bind it to any contract with a
third party for web design work. Page 9

Upon review, we find that the trial court’s consideration
of the franchise agreement and factual finding that Quik
International did not give Simpliance authority to bind it
to a contract were both relevant and necessary to a
determination in the case. As stated above, an agent can
bind a principal through either actual authority or
apparent authority. The trial court had to first determine
whether Simpliance had actual authority to bind Quik
International to an agreement with a third party. To make
that determination, the terms of the agreement between the
franchisor and franchisee had to be considered and a
factual finding had to be made. Thus, we find no merit in
God’s Glory’s argument that the trial court improperly
dismissed its claims based on the language of the franchise
agreement. To the contrary, consideration of the terms of
the agreement was necessary for consideration of any claims
against Quik International based on the actual authority of
Simpliance. Furthermore, we find that the trial court’s
determination that Quik International did not give
Simpliance the actual authority to bind it to any contracts
with third parties for web design was amply supported by
the record and was not manifestly erroneous.

Ruling out any actual authority of Simpliance to support
God’s Glory’s claims against Quik International, the trial
court next assessed liability under the apparent authority
doctrine. In doing so, the trial court made several
pertinent factual findings. The trial court found that Quik
International’s primary role as franchisor was to serve as
an Internet Service Provider, that is, to provide a
location to host the God’s Glory web site. Quik
International was not a party to the contract with God’s
Glory and, in fact, had no contact with it. God’s Glory
only dealt with agents and employees of Simpliance. At no
time was Quik International contacted directly by God’s
Glory. Page 10

The trial court also found that Quik International was not
the alter ego of Simpliance. Quik International did not
participate in the day-to-day operations of Simpliance, or
control it. The two companies had different directors,
officers, employees, clients and contracts. All of these
findings are well supported by the record and are not
contested on appeal.

Rather, the basis for God’s Glory’s claims against Quik
International rest on alleged comments and assurances made
by Simpliance employees, Mark Perryman (Perryman) and Ken
Thurston (Thurston), the logo on their business cards, and
information that God’s Glory claims to have gathered from
Quik International’s web site, all of which, it contends,
that it relied on in contracting with Simpliance because it
believed they were contracting with Quik International.

The record indicates that Simpliance was doing business
under the name of Quik Internet of Baton Rouge and Quik
Computer Solutions. Quik International is a Nevada
Corporation that franchised an internet service provider
(ISP) concept under the trade name Quik Internet. The Quik
Internet franchise concept was developed to provide web
hosting services on a local level while taking advantage of
the economies of scale to provide the franchisees with a
centralized set of servers upon which the ISP and web
hosting services could be provided. In other words, it
enabled the franchisees to reduce their costs by not having
to acquire servers of their own, allowing them to access
the central servers in California that were operated by
Quik International.

Perryman acknowledged that part of his sales pitch was to
tell customers that he could provide them better web hosting
and ISP services because of the availability to him of the
centralized servers provided by Quik Internet. Perryman
also confirmed that he and Thurston had business cards that
they used with the Quik Internet logo on them and that the
logo was also displayed on the Quik Page 11 International
web site. The card had the Quik Internet logo on it right
above the heading “Computer Solutions.” The card in the
record had Thurston’s name at the top left corner with a
Baton Rouge Quik email address. In each lower corner was
listed the company name, Quik Internet of Baton Rouge, with
a local address and phone number, in the left corner, and
the company name, Quik Computer Solutions, with a local
address and phone number in the right corner. Nowhere did
the card reference Quik International. One could reach the
Quik Internet web site from the Quik Internet of Baton
Rouge web site. The record also indicates that Quik
Internet was listed in the Baton Rouge telephone directory
under the heading of Web Site Design.

The Lees testified that they checked and relied on the
Quik International web site before entering into the
contract with Simpliance. However, Mrs. Lee conceded that
she did not know anything about the internet or how to
navigate it at the time she contracted with Simpliance, and
had to look over her husband’s shoulder as he moved about
the web sites. While Mr. Lee testified that he relied on
representations in the Quik International site before
signing the contract with Simpliance, there were
discrepancies in the testimony about exactly which pages he
viewed before signing the contract. The web site pages filed
into the record were from the Quik Internet site. The
record also indicates that God’s Glory did not make
telephone inquiry or any other of Quik International to
determine firsthand what support it provided for the
customers of its franchisees. The Lees indicated that they
knew Quik Internet of Baton Rouge or Quik Computer
Solutions was a franchisee of Quik International. Further,
despite the Lees’ testimony that they were led to believe
that they were hiring Quik International when they
contracted with Simpliance, when they were having trouble
over several Page 12 months getting their web site
running, they did not attempt to contact Quik International
about the problems.

The record also contains a page from the Quik Internet
site referring to their expertise in web site design.
However, Jack Reynolds (Reynolds), an employee, shareholder
and founder of Quik International, testified explaining
that the web site was intended in part to explain the
services Quik International offers to its franchisees and
not to customers of the franchisees. This was particularly
the case as to the section on “Web Design Solutions.” He
also explained that the Quik Internet site was available to
all franchisees as part of their package. Reynolds noted
that it was a matter of the franchisees’ discretion as to
whether to offer any services beyond the ISP, web hosting
and email accounts that are part of the Quik Internet
franchise concept.

Following trial, in addition to other factual findings
referred to infra, the trial court found that Quik
International did not make any promises or representations
to God’s Glory. The trial court found that Mrs. Lee was
inexperienced with computers and the internet at the time
Simpliance was hired. Most importantly, the trial court
made credibility determinations, finding that much of the
information that was learned by God’s Glory about Quik
International was acquired after it had terminated
Simpliance or when it was contemplating the filing of the
instant suit. Further, the trial court found that, even if
the Lees did believe that promises were made by Quik
International, such a belief without inquiry was not
reasonable under all the facts and circumstances.

Based on the foregoing, we find no error in the trial
court ruling, manifest or otherwise. The burden was on
God’s Glory to prove the apparent authority of Simpliance
to act for Quik International, evidenced by manifestations
of Quik International to the Lees, and that their reliance
on this apparent authority was Page 13 reasonable. A
review of the entire record indicates, as found by the
trial court, that God’s Glory did not meet its burden.
Considering the record in its entirety, we find a
reasonable factual basis for the credibility determinations
and factual findings of the trial court and that they were
not clearly wrong. We also find that the interpretation and
application of the law to these facts was correct.

Accordingly, the judgment of the trial court in favor of
Quik International, dismissing God’s Glory’s case against
it, is affirmed. Costs are to be paid by God’s Glory. The
answer to the appeal filed by Quik International requesting
penalties for a frivolous appeal is found to lack merit and
is denied.

AFFIRMED