Kyran Murphy was injured when she slipped on water allegedly allowed to accumulate on a motel walkway in Danville, Virginia. She sued Holiday Inns, Inc., alleging that it owned and operated the motel and negligently maintained the premises.
Holiday Inns moved for summary judgment. It produced a license agreement showing that Betsy-Len Motor Corporation, not Holiday Inns, owned and operated the motel under a Holiday Inn franchise. The trial court found that Holiday Inns did not own the premises and that no principal-agent or master-servant relationship existed between Holiday Inns and Betsy-Len. It therefore entered summary judgment for Holiday Inns.
On appeal, Murphy argued both that the franchise agreement created an actual agency relationship and that Holiday Inns had created the appearance of such a relationship by holding the motel out as a Holiday Inn.
Issue #1
Whether Murphy could assert liability based on ostensible agency when that theory had not been raised or preserved in the trial court.
Holding
No. The ostensible-agency theory was not properly before the Supreme Court of Virginia.
Reasoning
Murphy had not alleged that Holiday Inns held Betsy-Len out as its agent, nor had she alleged that she relied on any such representation. She also did not object to the final order on that ground, seek to set aside the order on that theory, or assign error addressing it on appeal.
Because the trial court was not given a fair opportunity to rule on ostensible agency, Virginia's preservation rule barred the Supreme Court from considering that alternative theory of liability.
Issue #2
Whether the trial court improperly resolved the agency question on summary judgment rather than submitting it to a jury.
Holding
No. Where agency depends on an undisputed written agreement and the inferences drawn from it, the question is one of law for the court.
Reasoning
The construction of written documents is exclusively a judicial function. Here, the facts material to actual agency were contained in the franchise agreement, and neither party disputed the agreement's contents.
Virginia's summary-judgment rule permits judgment when no genuine dispute of material fact exists and the moving party is entitled to judgment. Since the controlling facts were undisputed, the trial court could determine as a matter of law whether the agreement created an agency relationship.
Issue #3
Whether Holiday Inns' franchise agreement with Betsy-Len created an actual principal-agent or master-servant relationship that could make Holiday Inns liable for negligent maintenance at the motel.
Holding
No. The agreement protected and standardized the Holiday Inn system but did not give Holiday Inns control, or a right to control, Betsy-Len's day-to-day operations.
Reasoning
Agency is a consensual fiduciary relationship in which one person agrees to act on another's behalf and subject to that person's control. The decisive inquiry is not the contract's label or its disclaimer of agency, but the nature and extent of control the agreement actually gives the alleged principal.
Murphy identified extensive franchise controls: Holiday Inns approved plans and locations, required use of its names and symbols, collected continuing and advertising fees, restricted certain business activities and ownership changes, provided training, required reports, and inspected facilities and procedures. The Court recognized that a franchise contract can create agency if its controls are sufficiently extensive.
But a trademark owner must regulate its licensees to preserve the mark and prevent the public from being deceived. Franchise provisions designed to secure uniform business identity, consistent service, and goodwill do not alone establish agency; their legal effect depends on whether they control the methods and details of the franchisee's work.
Holiday Inns had no authority over the motel's daily maintenance, including the condition that allegedly caused Murphy's fall. It also lacked power to direct current expenditures, set room rates, take profits, hire or fire employees, set wages or working conditions, establish employee productivity standards, supervise work routines, or discipline employees.
Betsy-Len retained the ordinary managerial powers and financial risks of operating the motel, including the right to profit and the risk of loss. Because Holiday Inns regulated the brand system rather than the daily methods and details of Betsy-Len's business, no actual agency or master-servant relationship existed.