Greil v. Travelodge International, Inc. , 186 Ill. App. 3d 1061 ( 1989 )

PRESIDING JUSTICE BILANDIC

delivered the opinion of the court:

Plaintiff, David Greil, appeals from the circuit court order dismissing, with prejudice, his action against defendant, LaSalle Ohio Enterprises, Inc. (LaSalle), and a subsequent order granting summary judgment in favor of defendant, Travelodge International, Inc. (International). Each appeal was filed immediately after the respective orders were entered. These appeals, Nos. 87 — 2372 and 87 — 2762, have been consolidated.

On January 22, 1983, plaintiff, David Greil, was a paying guest at a motel located at 545 North La Salle Street in Chicago, Illinois. The motel was advertised, designated and operated under the name “Travelodge in the Heart of Chicago.”

Travelodge International, Inc. (International), is a California corporation duly authorized to do business in the State of Illinois. International owns the trademark “Travelodge” under which it operates a national network of motor hotels principally through the grant of a license to others to use its mark. Such a license was granted for use of the trademark “Travelodge” for the motel at 545 North La Salle Street in Chicago, Illinois.

On January 22, 1983, a robber entered plaintiff’s room at the motel. In an attempt to escape, plaintiff jumped from a window in his second-story room to the sidewalk, thereby sustaining personal injuries. On January 16, 1985, approximately one week before the expiration of the statute of limitations, plaintiff filed a multicount complaint against International, the franchisor, and “Travelodge in the Heart of Chicago.”

Summons and a copy of the complaint were served on “Travelodge in the Heart of Chicago” on February 4, 1985, by leaving a copy with Miss Kathleen O’Brien as agent at the motel office in Chicago. “Travelodge in the Heart of Chicago” filed a special and limited appearance and subsequently filed a motion to dismiss on the ground that it was not a legal entity and, therefore, could not be sued. An affidavit executed by Ludovico Bongiovanni revealed that LaSalle Ohio Enterprises, Inc., an Illinois corporation, was the entity that was granted the license to use the “Travelodge” trade and service marks for the operation of the motel at 545 North La Salle Street in Chicago, Illinois.

This caused plaintiff to file an amended complaint on November 20, 1985, naming LaSalle as an additional party defendant. After receipt of process, LaSalle entered its appearance and a motion to dismiss through the same law firm that appeared for codefendant “Travelodge in the Heart of Chicago.” LaSalle’s section 2 — 619 motion to dismiss (Ill. Rev. Stat. 1985, ch. 110, par. 2 — 619) asserted that the action was barred because it was served on December 4, 1985, which was more than 10 months after the expiration of the two-year statute of limitations.

After a hearing on the “Travelodge in the Heart of Chicago” motion to dismiss and a hearing on LaSalle’s motion to dismiss, the trial court, on January 16, 1987, entered an order granting both motions. “Travelodge in the Heart of Chicago” was dismissed because it was not a legal entity. LaSalle was dismissed because the trial judge decided that the misnomer rule did not apply (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 401); that plaintiff did not come within the requirements of relation back under section 2 — 616 (Ill. Rev. Stat. 1987, ch. 110, par. 2 — 616(d)); and that, therefore, the amended complaint was barred by the statute of limitations (Ill. Rev. Stat. 1987, ch. 110, par. 13-202).

First, we will consider plaintiff’s appeal from the order dismissing LaSalle.

I

Plaintiff presents two questions of law regarding the motion to dismiss LaSalle. The first is whether the circumstances of this action present a case of misnomer. (Ill. Rev. Stat. 1985, ch. 110, par. 2— 401.) The second is whether the relation-back theory of section 2— 616(d) applies. (Ill. Rev. Stat. 1985, ch. 110, par. 2 — 616(d).) Because we find that the circumstances of this action present a case of misnomer, it is not necessary to discuss the merits of relation-back.

Plaintiff contends that he sued the real party in interest, the business operating the “Travelodge in the Heart of Chicago” motel, but did so under the wrong name. Section 2 — 401(b) of the Illinois Code of Civil Procedure provides:

“Misnomer of a party is not a ground for dismissal but the name of any party may be corrected at any time, before or after judgment, on motion, upon any terms and proof that the court requires.” Ill. Rev. Stat. 1987, ch. 110, par. 2 — 401(b).

It is well settled that whether a case involves misnomer depends upon whom plaintiff intended to sue (Ashley v. Hill (1981), 101 Ill. App. 3d 292, 427 N.E.2d 1319, appeal denied (1982), 91 Ill. 2d 551), and whether the real party in interest is sued (Leonard v. City of Streator (1983), 113 Ill. App. 3d 404, 447 N.E.2d 489). A determinative factor in deciding whether misnomer applies is whether the party sued actually exists. Thielke v. Osman Construction Corp. (1985), 129 Ill. App. 3d 948, 951, 773 N.E.2d 574 (“It seems clear that plaintiff did not have a mistaken belief as to the identity of defendant. This conclusion is enforced by the fact that there is no corporation in existence named Osmond”); Clinton v. Avello (1982), 105 Ill. App. 3d 336, 338, 434 N.E.2d 355, appeal denied (1982), 91 Ill. 2d 568 (“The most probative evidence of who a plaintiff intended to sue is the party named by the plaintiff in the complaint. If such a party in fact exists, but is not the real party in interest, a court can conclude that the plaintiff has mistakenly sued the wrong party”).

In Ingram v. MFA Insurance Co. (1974), 18 Ill. App. 3d 560, 309 N.E.2d 690, appeal denied (1974), 56 Ill. 2d 587, the court rejected defendant’s argument that a judgment against it was void because suit was brought in a name that was merely a trade name for a group of insurance companies. Plaintiff sued “MFA Insurance Company” and served a purported agent of MFA. The true name of the company, however, was Countryside Casualty Company, a Missouri corporation. “MFA Insurance Company” was nothing more than a name, a nonentity. In correcting the misnomer and .allowing plaintiff to amend the name of the defendant, the court stated:

“[I]n view of the admissions of record which indicate a telephone listing and the doing of business under the name of MFA Insurance Company, we find that plaintiff’s reliance on the name in designating the defendant was reasonable. Further, the amendment required is not a substantive matter but a formal one and in conformity with the record. [Citations.] We note also that counsel for defendant has appeared on behalf of ‘MFA Insurance Company’ throughout, has filed an affidavit stating he is the attorney for the defendant, MFA Insurance Company. *** Accordingly, we have decided to correct the misnomer ***.”18 Ill. App. 3d at 566.

The identical situation presents itself in the instant case. Plaintiff sued “Travelodge in the Heart of Chicago” and served its purported agent. However, the true name was LaSalle Ohio Enterprises, Inc., an Illinois corporation (LaSalle). Although under the wrong name, plaintiff actually served an agent of LaSalle; Miss Kathleen O’Brien. O’Brien’s duties at the motel include opening the mail and also working behind the desk. Legal documents were forwarded by O’Brien to Ludovico Bongiovanni, the president of LaSalle.

The franchise/license agreement between International and LaSalle was executed on behalf of LaSalle by Ludovico Bongiovanni, President. The agreement authorized LaSalle to use the trademark “Travelodge” for the operation of a motor hotel at 545 North La Salle Street, Chicago, Illinois. That motel is listed in the Chicago telephone directory as “Travelodge in the Heart of Chicago.” LaSalle and “Travelodge in the Heart of Chicago” share the same legal counsel. Thus, all of the vital signs that made a case for misnomer in Ingram are also present in this case.

“Names are nothing. The gist of the matter is, were the parties in interest actually served.” (Pond v. Ennis (1873), 69 Ill. 341, 344.) We therefore conclude that this defendant was aware that “Travelodge in the Heart of Chicago” and LaSalle were one and the same. As in Ingram, “we have decided to correct the misnomer.”

The authorities relied upon by the trial court and defendant are not persuasive. In Leonard v. City of Streator (1983), 113 Ill. App. 3d 404, 447 N.E.2d 489, dramshop plaintiffs sued an individual under the belief that the individual was the owner and operator of a tavern. In fact, the real owner and operator was a corporation. There were two separate entities: an individual and a corporation. Plaintiffs did not misname the right party, but named the wrong party. Thus, there was no misnomer.

Similar facts exist in Marsden v. Neisius (1955), 5 Ill. App. 2d 396, 126 N.E.2d 44. In that case, plaintiff brought an action naming a corporation as defendant. The real defendant was an individual. Thus, again there are two separate entities: an individual and a corporation. As in Leonard, the plaintiff did not misname the right party, but named the wrong party. It was a mistake and not a misnomer.

In the case at bar there was only one entity; not two separate entities. Plaintiff intended to sue the company operating as “Travelodge in the Heart of Chicago.” Plaintiff served the registered agent of LaSalle when the true name of the corporation was discovered. This was done despite the fact that O’Brien could have been served as an agent of the corporation. (See A-Z Equipment Co. v. Moody (1980), 88 Ill. App. 3d 187, 410 N.E.2d 438.) Plaintiff served the proper physical party because the agent served for “Travelodge in the Heart of Chicago” is also an agent of LaSalle. The only defect is that the correct name is LaSalle. Same entity, wrong name.

Code pleading was adopted in this State because procedural pitfalls of common law pleading often denied litigants an opportunity to have their differences determined on the merits. (Miller v. Enslen (1978), 60 Ill. App. 3d 865, 868, 377 N.E.2d 282.) The Code of Civil Procedure provides that “[t]his Act shall be liberally construed, to the end that controversies may be speedily and finally determined according to the substantive rights of the parties.” (Emphasis added.) Ill. Rev. Stat. 1985, ch. 110, par. 1 — 106.

One purpose of the misnomer provision of the Code is to avoid dismissal of cases on a purely technical basis and to allow the action to reach its substantive merits. The spirit and letter of the Code make this a case of misnomer which the plaintiff has a right to correct. The trial court erred in depriving the plaintiff the opportunity to correct the misnomer.

II

Plaintiff next argues that the trial court erred in granting summary judgment in favor of International, contending that there is a question of material fact as to the relationship between International and LaSalle.

International is a corporation organized and existing under the laws of the State of California. It is duly qualified to do business in the State of Illinois. On June 1, 1978, it entered into a franchise/license agreement with LaSalle, an Illinois corporation. This agreement gave LaSalle the right to use International’s “Travelodge” trademarks and service marks in the operation of a motel located at 545 North La Salle Street in Chicago, Illinois. LaSalle agreed to pay International a fee and to maintain the high standards of International’s “Travelodge” trade and service marks, by agreeing to operate and maintain the motel “in a clean, safe and orderly manner.” (Emphasis added.) LaSalle agreed to follow the standards and procedures set forth in the operations manual provided by International. Deviation was not permitted without the written consent of International.

International was also granted the right to supervise the motel operations. LaSalle was required to send its personnel responsible for management of the motel to International’s training program. These and other provisions were designed to insure that LaSalle’s operation under the “Travelodge” mark would “maintain the highest standards of hospitality.” Substantial violation of these covenants by LaSalle could result in a cancellation of the license granted by International. LaSalle was also required to indemnify and hold International harmless for personal injuries arising in connection with its operations of the motel and to place public liability insurance “for the benefit” of International as well as LaSalle.

The trial court granted International’s motion for summary judgment because it could find nothing in the pleadings or the franchise/ license agreement that indicated International may have been responsible for the safety provisions alleged to have been breached. The trial court also held that plaintiff’s argument that the agreement at least created an apparent agency was immaterial.

The business franchise system provides an effective means by which to increase sales of trademark goods or services. It begins with a sale by the franchisor to the franchisee of a license to use that particular trademark. Under the Lanham Act, the owner of a trademark may license the mark provided that he adequately controls the licensee. (15 U.S.C. §1127 (1982).) The criterion regarding the control necessary to satisfy the Lanham Act is whether such control guarantees that third parties dealing with the franchisee will receive goods or services of the quality which they have learned to associate with the trademark. (S. Rep. No. 1333, 79th Cong., 2d Sess. (1946).) Depending upon the control expressed in the franchise agreement, either an actual agency or ostensible agency may be found.

In its motion for summary judgment, International referred to provisions of the license agreement and principally cited Illinois authorities. Whether by inadvertence or deliberate design, International did not call the trial court’s attention to significant provisions in the agreement which state that the agreement was “entered into at El Cajon, California” and “shall be governed by and construed in accordance with the laws of the State of California.” While International did not deny that California law applied, it chose not to emphasize that point. The application of California law, as required by the agreement, leads us to the conclusion that the trial court erred in granting summary judgment for International.

California law is clear that a franchisee may be deemed to be the agent of the franchisor and that the question of whether the franchisee is an agent is ordinarily one of fact. (Kuchta v. Allied Builders Corp. (1971), 21 Cal. App. 3d 541, 98 Cal. Rptr. 588.) California courts have found both types of agency to exist in the franchise context. Beck v. Arthur Murray, Inc. (1966), 245 Cal. App. 2d 976, 54 Cal. Rptr. 328 (ostensible agency); Nichols v. Arthur Murray, Inc. (1967), 248 Cal. App. 2d 610, 56 Cal. Rptr. 728 (actual agency).

An actual agency exists if the franchisor has imposed controls beyond that necessary to protect its trademark. (62 Am. Jur. 2d Private Franchise Contracts §16 (1972).) Courts generally look to the extent of the franchisor’s involvement in day-to-day operations, noting that what is important is the extent of control which the franchisor is permitted to exercise, rather than that which it actually exercised. (Nichols v. Arthur Murray, Inc. (1967), 248 Cal. App. 2d 610, 56 Cal. Rptr. 728.) Courts will look at the franchise agreement as well as operating and training manuals for evidence of control.

In the franchise agreement, terms dictating that the facility be built and maintained according to specifications and requiring certain operational procedures are indicia of control as well as the requirement that the franchisee permit regular inspections by franchisor’s inspectors to ensure compliance with procedures. (Wood v. Holiday Inns, Inc. (5th Cir. 1975), 508 F.2d 167.) Also, terms providing that substantial violations of any of the covenants of the franchise agreement give the franchisor the right to cancel the license have been held to be indicative of control. (508 F.2d at 175.) Other examples of control include minimum price fixing (508 F.2d at 174); approval by franchisor of all advertising (508 F.2d at 177); profit sharing (Arthur Murray, Inc. v. Smith (1971), 124 Ga. App. 51, 183 S.E.2d 66); and book auditing (Kuchta v. Allied Builders Corp. (1971), 21 Cal. App. 3d 541, 98 Cal. Rptr. 588).

The plaintiff had a right to expect a “clean, safe and orderly” accommodation at premises bearing the “Travelodge” mark. It is obvious that the agreement between International and LaSalle was designed to provide a guest and invitee with such accommodations by maintaining the “highest standards of hospitality.”

The intrusion of a criminal committing a robbery in plaintiff’s room at the motel and causing the plaintiff to jump from his second-story room to the sidewalk below, at least, creates a disputed question of fact as to whether International, LaSalle, or both failed to provide plaintiff with “clean, safe and orderly” accommodations and failed to maintain the “highest standards of hospitality.”

The license agreement gave International the right to inspect LaSalle’s operation under the “Travelodge” mark. It exercised this right on a frequent and regular basis. Among the many items checked, found deficient, and called to LaSalle’s attention for correction were matters involving the safety of guests. We note from the record that lighting of the parking area, locks on the premises and latches and locks on windows were called to the attention of LaSalle for correction. Whether the intrusion of the criminal into the room of the plaintiff, or other guests, might or could have been prevented creates a question of material fact.

We, therefore, conclude that the pleadings, license agreement and its incorporated operations manual sufficiently involve International in day-to-day operations of the motel to raise a question of fact as to whether an actual agency relationship existed between International and LaSalle.

In addition to actual agency, a franchisor may be held liable as principal for the acts and omissions of a franchisee where the franchisee has ostensible authority to act for the principal. If a third party reasonably believes that the franchisee is authorized to bind the principal, or is acting for the principal, an agency relationship may be held to have been created. See Beck v. Arthur Murray, Inc. (1966), 245 Cal. App. 2d 976, 54 Cal. Rptr. 328.

Courts are influenced by such factors as common advertising, common telephone listings, and common trademark usage in signs, posters, or cards. All these factors are present in the instant case. Further, there is no evidence in the record to indicate that third parties were informed that the motel in question operating in Chicago under the “Travelodge” mark was distinct and independent from International. See Beck, 245 Cal. App. 2d 976, 54 Cal. Rptr. 328 (obvious disclaimer sign may shield franchisor from liability).

We therefore also conclude that the issue of ostensible agency between International and LaSalle, based on the record before us, presents a disputed question of fact.

The franchise system depends on an effective monopoly, in which a franchisee will pay to participate. (Comment, Liability of a Franchisor for Acts of the Franchisee, 41 S. Cal. L. Rev. 143 (1968).) The franchisor is the primary benefactor; thus, the franchisor is in the better position to distribute losses. (Comment, A Franchisor’s Liability for the Torts of his Franchisee, 5 U.S.F. L. Rev. 118 (1970).) Imposing liability on the franchisor is a strong incentive for franchisors to exercise great care in selecting their franchisees and, in turn, protect the public interest. See Comment, A Franchisor’s Liability for the Torts of his Franchisee, 5 U.S.F. L. Rev. 118, 122 (1970).

Summary judgment should not be granted unless the pleadings, depositions, admissions and affidavits “show that there is no genuine issues as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Ill. Rev. Stat. 1985, ch. 110, par. 2 — 1005(c).) The summary judgment tool is not used to try an issue of fact, “but rather to determine whether one exists.” (Weber v. Northern Illinois Gas Co. (1973), 10 Ill. App. 3d 625, 635, 295 N.E.2d 41.) Hence, if all the evidence is viewed most favorably for the nonmovant and facts are present upon which reasonable persons could disagree or if they lead to inferences that can be fairly drawn and present different conclusions, then summary judgment should not be granted. Nolan v. Johns-Manville Asbestos & Magnesia Materials Co. (1979), 74 Ill. App. 3d 778, 794, 392 N.E.2d 1352, aff’d (1981), 85 Ill. 2d 161, 421 N.E.2d 864.

Based on the record in this case, there is a genuine issue of material fact as to the existence of an actual or ostensible agency relationship between International and LaSalle. Therefore, we find that the trial court erred in granting summary judgment in favor of International.

Accordingly, the judgment of the circuit court of Cook County is reversed and this cause is remanded for further proceedings consistent with the view expressed herein.

Reversed and remanded.

PINCHAM, J., concurs.