Stardust Ventures, LLC v. Gary Roberts and Teresa Roberts

FILED
Dec 28 2016, 8:49 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEES
Jeffrey S. Zipes Andrew M. McNeil
Coots Henke & Wheeler, P.C. Philip R. Zimmerly
Carmel, Indiana Bose McKinney & Evans LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Stardust Ventures, LLC, December 28, 2016
Appellant-Defendant, Court of Appeals Case No.
33A01-1603-PL-604
v. Appeal from the Henry Circuit
Court
Gary Roberts and Teresa The Honorable Bob A. Witham,
Roberts, Judge
Appellees-Plaintiffs. Trial Court Cause No.
33C03-1404-PL-18
Robb, Judge.
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Case Summary and Issue
[1] Gary and Teresa Roberts (the “Robertses”) entered into an agreement
(“Purchase Agreement”) with Stardust Ventures, LLC (“Stardust”) to purchase
a houseboat. Thereafter, the Robertses cancelled the agreement and brought
suit to recover $75,000 paid to Stardust. Stardust filed a motion to dismiss
stating it elected to arbitrate the dispute, as agreed upon in the Purchase
Agreement. The trial court denied Stardust’s motion to dismiss, and
subsequently entered summary judgment in favor of the Robertses. Stardust
appeals, raising several issues for our review, one of which we find dispositive:
whether the trial court erred in denying its motion to dismiss. Concluding the
trial court erred in denying Stardust’s motion to dismiss, we reverse and remand
to the trial court for entry of an order directing the parties to proceed to
arbitration.
Facts and Procedural History
[2] Stardust is a custom houseboat builder located in Monticello, Kentucky. In late
2013, the Robertses and Stardust began negotiating for the construction of a
customized houseboat. In November 2013, Stardust and the Robertses reached
an oral agreement on the price, time of delivery, floor plan, decorations, and
specifications. Specifically, the parties agreed to a price of $775,000 and a
delivery of the houseboat in the “midsummer [2014] timeframe.” Brief of
Appellees at 8. In recognition of their oral agreement, Stardust provided the
Robertses with a quote (“Quote”), dated November 3, 2013. The Quote
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outlined the general specifications of the houseboat and also stated the price
and payment schedule. The Quote also stated Stardust required a non-
refundable $10,000 deposit to secure a build slot in its facility and payment of
twenty percent of the total purchase price before it would begin construction of
the houseboat.1
[3] On November 20, 2013, the Robertses paid $75,000 to Stardust. Although they
had not paid twenty percent of the purchase price, the Robertses were under the
impression their houseboat would be built directly after that of their friend’s,
who had recently contracted with Stardust, and that their build would
commence within six to eight weeks after Stardust received their $75,000
payment. However, Stardust had an internal policy of not beginning a build
until it received twenty percent of the total purchase price, and because it did
not yet have the full $155,000 from the Robertses, Stardust’s management had
an internal discussion “on what to do to get [the Robertses’ boat] started” in
January 2014. Appellant’s Appendix at 76. Ultimately, Stardust decided to
outsource the build of a different houseboat to create room in its facility for the
construction of the Robertses’ houseboat, and on January 23, 2014, Stardust
contracted with Sunstar Houseboats, Inc., to build the hull of a houseboat it
was then constructing in order to create room for the Robertses’ houseboat.
1
Twenty percent of $775,000 is $155,000.
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[4] In late January 2014, without having commenced construction of the
Robertses’ houseboat, Stardust sent an unsigned Purchase Agreement titled
“Stardust Cruisers Purchase Agreement” to the Robertses. The Robertses
signed the Purchase Agreement and returned it to Stardust on February 4, 2014.
The Purchase Agreement also contains the signature of Jerry Harden, the
president of Stardust, dated February 12, 2014. The Purchase Agreement
signed by the parties includes the agreed upon price, $775,000, and a provision
stating the Purchase Agreement incorporates the plans and specifications for the
houseboat as provided by the Quote. In addition, the Purchase Agreement
includes an arbitration clause. According to the Purchase Agreement, the
option of arbitration belonged solely to Stardust, and if Stardust chose to
proceed to arbitration, any dispute arising out of the Purchase Agreement
would be decided in accordance with the American Arbitration Association,
subject to several procedural limitations. The Purchase Agreement also
includes an integration clause, which states, “The entire understanding between
the parties is set forth in this Agreement. This agreement supersedes and voids
all prior proposals, letters and agreements, oral and written, . . .” Id. at 31.
[5] On March 4, 2014, the Robertses informed Harden they desired to cancel their
agreement. The Robertses were frustrated Stardust had not yet commenced
construction of their houseboat and concerned Stardust would be unable to
complete construction by midsummer of 2014, as the parties had agreed.
Harden requested the Robertses confirm their cancelation in writing, and on
March 5, 2014, the Robertses emailed Harden to confirm their cancellation of
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the agreement. The following day, Harden replied to the Robertses’ email and
stated, “I have advised our bookkeeping department. I will let you know when
your check will be ready.” Id. at 19.
[6] A few weeks later, when Stardust failed to send a check, the Robertses hired
counsel to secure the return of their money. On March 24, 2014, Harden sent a
letter to the Robertses stating Stardust was “in the process of collecting the costs
related to your construction. The cost of that work will be deducted prior [to]
considering a refund.” Id. at 21. Stardust never returned any of the $75,000
and later stated its offer to return any of the $75,000 was a mistake and against
policy because deposits are non-refundable.
[7] On April 14, 2014, the Robertses filed a complaint seeking to recover the
$75,000 paid to Stardust. The complaint alleged Stardust never returned a
signed copy of the Purchase Agreement; therefore, the Robertses alleged they
had validly revoked their offer to purchase a houseboat from Stardust, and
Stardust was obligated to return the $75,000. On June 11, 2014, Stardust filed a
motion to dismiss stating it elected to invoke its right to arbitrate the dispute in
accordance with the Purchase Agreement. The trial court denied Stardust’s
motion to dismiss on August 7, 2014.
[8] On October 19, 2015, the Robertses filed their motion for summary judgment
and supporting designated materials. Stardust responded on December 7, 2015,
and the trial court held a hearing on the matter on January 15, 2016. The trial
court granted the Robertses’ motion for summary judgment and entered a
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$75,000 judgment in favor of the Robertses. The Robertses filed a motion to
correct error on February 24, 2016, alleging the trial court erred in failing to
award prejudgment interest. Stardust filed a motion in opposition to the
Robertses’ motion to correct error and a cross-motion to correct error. The trial
court did not hold a hearing nor did it issue a ruling on any of the motions.
Stardust now appeals; the Robertses cross-appeal arguing the trial court was
obligated to award prejudgment interest as a matter of law.
Discussion and Decision
[9] Stardust contends the trial court erred in denying its motion to dismiss.
Stardust based its motion to dismiss on the existence of an arbitration clause in
the Purchase Agreement and stated it elected to proceed to arbitration. Where
a motion to dismiss is based upon a contention that arbitration is required
before litigation, it is, in essence, a motion to compel arbitration and is treated
as such. See Roddie v. N. Am. Manufactured Homes, Inc., 851 N.E.2d 1281, 1284
(Ind. Ct. App. 2006); Capitol Const. Services, Inc. v. Farah, LLC, 946 N.E.2d 624,
628 (Ind. Ct. App. 2011). We apply a de novo standard of review to a trial
court’s ruling on a motion to compel arbitration. Roddie, 851 N.E.2d at 1284.
[10] Although the Robertses admit they signed and returned the Purchase
Agreement, they dispute its validity and allege they revoked their offer to
purchase a houseboat. Thus, as a threshold issue, we address whether the
Purchase Agreement is a valid and enforceable agreement between the parties.
See Safety Nat’l Cas. Co. v. Cinergy Corp., 829 N.E.2d 986, 1000 (Ind. Ct. App.
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2005) (stating a party seeking to arbitrate a dispute must first demonstrate the
existence of an enforceable agreement to arbitrate), trans. denied.
I. Validity of the Purchase Agreement
[11] Initially, we note the sale of a goods is governed by Indiana’s version of the
Uniform Commercial Code (“UCC”). See Ind. Code § 26-1-2 et seq.2 “Goods”
are defined as “all things (including specially manufactured goods) which are
movable at the time of identification to the contract for sale.” Ind. Code § 26-1-
2-105(1). A sale of goods also includes contracts for the sale of “future goods”
that are “not both existing and identified.” Ind. Code § 26-1-2-105(2).
Therefore, a contract to build a customized houseboat is the sale of a “good.”
See Jones v. Abriani, 169 Ind. App. 556, 566, 350 N.E.2d 635, 642 (1976) (noting
the sale of a mobile home is a sale of a good). We further note “[u]nless
displaced by the particular provisions of [the UCC], the principles of law and
equity . . . shall supplement the provisions of [the UCC].” Ind. Code § 26-1-1-
103.
[12] Moreover, whether a contract exists is a question of law. Kelly v. Levandoski,
825 N.E.2d 850, 857 (Ind. Ct. App. 2005), trans. denied. The essential elements
of a contract are an offer, an acceptance, and consideration. Indiana Dep’t of
State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174, 179 (Ind. 2010),
2
The parties cited to the UCC in their briefs before the trial court and to this court on appeal, and do not
dispute that the UCC governs this transaction.
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modified on reh’g, 942 N.E.2d 796 (Ind. 2011). Under the UCC, a “contract for
sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a
contract.” Ind. Code § 26-1-2-204(1). Further, unless otherwise indicated by
the contract, “an offer to make a contract shall be construed as inviting
acceptance in any manner and by any medium reasonable in the
circumstances.” Ind. Code § 26-1-2-206(1)(a).
[13] Here, Stardust drafted the Purchase Agreement and sent it to the Robertses.3
The Robertses manifested their assent to the terms of Purchase Agreement by
signing it and returning it to Stardust. Stardust’s actions constituted an offer to
create a contract, which was subsequently accepted by the Robertses. See Ind.
Bureau of Motor Vehicles v. Ash, Inc., 895 N.E.2d 359, 366 (Ind. Ct. App. 2008)
(noting the defendant drafted the proposed contract and sent it to plaintiff,
indicating the defendant assented to the terms of the proposed contract).
[14] Moreover, Stardust produced a copy of the Purchase Agreement, signed by the
president of Stardust, and attached it to its motion to dismiss. The signature of
Stardust’s president is sufficient to manifest Stardust’s intent to be bound by the
agreement. Although the Robertses contend the Purchase Agreement was only
3
We note the Purchase Agreement is essentially a modification of the parties’ oral agreement. The
modification of a contract generally requires the same elements as a contract: offer, acceptance, and
consideration. Henthorne v. Legacy Healthcare, Inc., 764 N.E.2d 751, 759 (Ind. Ct. App. 2002). However,
under the UCC, an “agreement modifying a contract . . . needs no consideration to be binding.” Ind. Code §
26-1-2-209(1).
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signed and backdated when litigation commenced, they offer no evidence to
support this suspicion. Regardless, we note Indiana courts have made clear that
“the validity of a contract is not dependent upon the signature of the parties.”
Ash, Inc., 895 N.E.2d at 366. Signatures of both parties would be required if
“such [was] made a condition of the agreement,” Int’l Creative Mgmt., Inc. v. D &
R Entm’t Co., Inc., 670 N.E.2d 1305, 1312 (Ind. Ct. App. 1996), trans. denied, but
there is nothing in the plain language of the Purchase Agreement to suggest
such a condition existed here.
[15] Even if we assume the Robertses are correct that Stardust did not sign the
Purchase Agreement, we still conclude a valid contract existed between the
parties. As stated above, a “contract for sale of goods may be made in any
manner sufficient to show agreement, including conduct by both parties which
recognizes the existence of such a contract.” Ind. Code § 26-1-2-204(1) (emphasis
added). First, the fact Stardust drafted the Purchase Agreement indicates it
assented to the terms therein. See Ash, Inc., 895 N.E.2d at 366. Second,
Stardust outsourced a current build in order to create space to build the
Robertses’ houseboat. Specifically, Stardust contracted with Sunstar
Houseboats, Inc., pursuant to which it would pay Sunstar $18,000 to build the
hull of a current project to create room for the Robertses’ houseboat in its
facility. Although the subcontracting occurred nearly two weeks before the
Robertses signed the Purchase Agreement, it seems unlikely Stardust would
make preparations to build the Robertses’ houseboat and incur substantial
additional expenses to do so, and draft and tender a Purchase Agreement to the
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Robertses for their signature, if it did not intend to be bound by the Purchase
Agreement.
[16] We conclude the Purchase Agreement is a valid and enforceable agreement
between the parties.4 Both parties manifested their assent to the Purchase
Agreement by signing the document. Moreover, even if it was not signed as the
Robertses suggest, Stardust manifested its assent to the agreement by its actions.
II. Waiver of Arbitration
[17] The Robertses also contend Stardust waived its right to arbitrate the dispute.
Although Indiana recognizes a strong policy favoring enforcement of
arbitration agreements, the right to require arbitration may nonetheless be
waived. MPACT Const. Group, LLC v. Superior Concrete Constructors, Inc., 802
N.E.2d 901, 905, 910 (Ind. 2004). Whether a party has waived its right to
arbitration is a question of fact that depends primarily upon whether that party
has acted inconsistently with its right to arbitrate. Id. at 910. In determining if
waiver has occurred, courts look at a variety of factors, including the timing of
the arbitration request, if dispositive motions have been filed, and/or if a
4
The Robertses also argue their complaint assumes there is no written agreement between the parties, and
since the trial court must take the allegations in their complaint as true, Kapoor v. Dybwad, 49 N.E.3d 108, 120
(Ind. Ct. App. 2015), trans. denied, it did not err in denying Stardust’s motion to dismiss. However, a court
should “not accept as true allegations that are contradicted by other allegations or exhibits attached to or
incorporated in the pleading,” Brenner v. Powers, 584 N.E.2d 569, 573 (Ind. Ct. App. 1992), trans. denied, nor
is a court bound to accept as true any legal conclusion asserted in the complaint, Ankeny v. Governor of Ind.,
916 N.E.2d 678, 681 (Ind. Ct. App. 2009), trans. denied.
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litigant is unfairly manipulating the judicial system. Capitol Const. Servs., Inc.,
946 N.E.2d at 628.
[18] In support of their argument Stardust waived its right to arbitrate the dispute,
the Robertses cite to JKL Components Corp. v. Insul-Reps, Inc., 596 N.E.2d 945
(Ind. Ct. App. 1992), trans. denied. There, Insul-Reps sued JKL for breach of
contract alleging JKL failed to pay commissions. JKL subsequently filed a
motion to dismiss pursuant to Indiana Rule of Trial Procedure 12(B)(1), 5
claiming Insul-Reps failed to arbitrate the agreement as required by their
contract. The trial court denied the motion because it did, in fact, have subject
matter jurisdiction over the claim. On appeal, this court faulted JKL for failing
to formally request arbitration at any time before appeal, and for mistakenly
filing a motion to dismiss for lack of subject matter jurisdiction. We
summarized JKL’s motion to dismiss, stating, the “only arguments made in
JKL’s motion were that 1) the parties had an arbitration agreement; 2)
arbitration agreements are enforceable and favored under both Indiana and
California law; and 3) because Insul-Reps failed to exhaust the arbitration
procedures provided in the parties’ agreement, the trial court should dismiss
Insul-Reps’ action.” Id. at 949. This court further stated that “[n]othing in the
motion even hints that JKL desired a stay. Its only expressed intention was for
the trial court to dismiss Insul-Reps’ action.” Id. at 950.
5
A party may file a motion pursuant to Indiana Rule of Trial Procedure 12(B)(1) when it alleges a trial court
lacks subject matter jurisdiction.
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[19] We find JKL Components Corp. to be inapplicable to the present case for several
reasons. First, we faulted JKL for failing to formally request arbitration at any
point before appeal. Here, Stardust has clearly requested the dispute be
arbitrated. Stardust’s motion to dismiss states, “Pursuant to the applicable
contract, [Stardust] has notified [the Robertses] of its election to have this
matter decided by arbitration,” Appellant’s App. at 29, and requested the
matter be dismissed so the parties could proceed to arbitration. Unlike in JKL
Components Corp., Stardust has done more than simply ask the court to dismiss
the complaint for lack of subject matter jurisdiction. Stardust stated it has
elected to invoke its right to arbitration, and has properly notified the Robertses
of that election.
[20] Second, to the extent the Robertses allege a motion to dismiss is improper and
Stardust should have formally requested a stay of litigation, we note that a
dismissal is preferred in some situations. See Koors v. Steffen, 916 N.E.2d 212,
218 (Ind. Ct. App. 2009) (noting a stay, rather than a dismissal, is perhaps
favorable where certain claims remain that are not subject to arbitration, but
dismissal is proper where all issues raised must be submitted to arbitration).
Here, the Robertses brought a one-count complaint seeking to recover their
monies paid to Stardust. In response, Stardust elected to arbitrate the dispute.
Therefore, the only issue raised by the Robertses would have to be submitted to
arbitration.
[21] Finally, there is no indication Stardust is unfairly manipulating the judicial
system. See Aetna Cas. & Sur. Co. v. Dalson, 421 N.E.2d 691, 692-93 (Ind. Ct.
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Ohio App. 1981) (holding plaintiffs had waived their right to arbitrate where they had
consistently resisted arbitration and only when an unfavorable judgment was
entered against them at trial did they seek to compel arbitration); Shahan v.
Brinegar, 181 Ind. App. 39, 45, 390 N.E.2d 1036, 1041 (1979) (finding waiver
where neither party formally requested the trial court to order arbitration until
after the trial court had already construed the underlying agreement and made
its award). After the Robertses filed their complaint with the trial court,
Stardust filed a motion to dismiss to proceed to arbitration as its first
substantive pleading. Clearly, Stardust decided early on in litigation that it
would rather have the dispute decided by arbitration and did not wait until an
adverse final judgment to request arbitration.
[22] The Robertses also offer a litany of procedural steps they assert Stardust should
have taken to preserve the issue for appeal. They assert Stardust should have
filed a motion to reconsider or a motion to clarify, it should have filed an
immediate appeal of the trial court’s denial of its motion to dismiss,6 or it
should have renewed its motion to dismiss at the summary judgment stage.
However, the Robertses do not point to any Indiana authority requiring a party
to file any of the above-mentioned motions to preserve this issue for appeal.
6
A party may appeal a trial court’s order denying a motion to compel arbitration as a matter of right. Ind.
Code § 34-57-2-19(a)(1). However, a “claimed error in an interlocutory order is not waived for failure to take
an interlocutory appeal but may be raised on appeal from the final judgment.” Bojrab v. Bojrab, 810 N.E.2d
1008, 1014 (Ind. 2004).
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[23] Based on the foregoing, we conclude Stardust did not waive its right to arbitrate
the dispute, nor did it fail to preserve the issue for appeal.
Conclusion
[24] We conclude the Purchase Agreement is a valid and binding contract between
the parties, and that Stardust did not waive its right to request arbitration.
Accordingly, we reverse the trial court’s order denying Stardust’s motion to
dismiss and remand to the trial court to enter an order compelling arbitration.
[25] Reversed and remanded.
Mathias, J., and Brown, J., concur.
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