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Destination Yachts, Inc. v. Pierce

Court of Appeals of Indiana

October 19, 2018

Destination Yachts, Inc., and Sheldon Graber, Appellants-Defendants,
v.
Shirley Pierce and Al Burnham, Appellees-Plaintiffs.

          Appeal from the Daviess Circuit Court The Honorable Mark R. McConnell, Special Judge Trial Court Cause No. 14C01-1706-CT-272

          ATTORNEYS FOR APPELLANTS Clay W. Havill Francis X. Mattingly L. Katherine Boren Ziemer, Stayman, Weitzel & Shoulders, LLP Evansville, Indiana

          ATTORNEYS FOR APPELLEES James D. Johnson Blair M. Gardner Jackson Kelly, PLLC Evansville, Indiana

          MATHIAS, JUDGE.

         [¶1] Shirley Pierce ("Pierce") and Al Burnham ("Burnham") (collectively "the Purchasers") bought a houseboat manufactured and sold by Destination Yachts, Inc. ("DYI"). Thereafter, the Purchasers filed a complaint in Daviess Circuit Court against DYI and its president, Sheldon Graber ("Graber") (collectively "the Defendants"), alleging various contract and tort claims arising out of their purchase of the houseboat. The Defendants subsequently filed a motion to dismiss the Purchasers' claims, arguing inter alia that the purchase agreement was subject to a mandatory, binding arbitration clause. The trial court granted the motion to dismiss with prejudice. The parties then proceeded to arbitration, but before the arbitration could occur, the Defendants filed a motion with the arbitrator claiming that the trial court's order dismissing the Purchasers' claims with prejudice was a judgment on the merits that acted to bar any subsequent claim, including arbitration. The Purchasers then returned to the trial court and filed a motion to correct error or, in the alternative, for relief from judgment arguing that the earlier dismissal with prejudice did not bar arbitration. The trial court agreed and granted the motion. The Defendants appeal and present two issues, which we restate as: (1) whether the trial court erred by granting the Purchasers' motion to correct error/motion for relief from judgment, and (2) whether Graber is a party to the contract and therefore properly subject to any arbitrable claims.

         [¶2] We affirm.

         Facts and Procedural History

         [¶3] The Purchasers met with Graber at DYI's Washington, Indiana location on April 24, 2014, to discuss the purchase of a houseboat. After some discussion, the Purchasers and DYI entered into a Contract and Purchase Agreement ("the Agreement") which provided that the Purchasers agreed to buy a custom-built houseboat for a price of $314, 909.19. Included in this Agreement, which was drafted by DYI, was an arbitration clause that provides:

SECTION THREE
RESOLUTION OF PROBLEMS
It is understood and agreed that any problems arising during the construction of the boat can best be resolved by maintenance of a close liaison between Builder and Purchaser, and that the parties will make every good-faith effort to avoid and resolve any problems and disputes by maintaining such close liaison between Builder and Purchaser. All disputes, complaints, problems and objections relating to the terms, conditions and obligations of the within Purchase Agreement, unless resolved directly between Builder and Purchaser, shall be submitted to binding arbitration in the matter set forth in Sections Seven and Twelve below.
* * *
SECTION SEVEN
INSPECTION
All work-in-process at Builder's plant shall be subject to inspection by Purchaser, and Builder shall grant Purchaser access to Builder's premises for such inspection at all reasonable times and upon prior notice by Purchaser.
Prior to the completion of the boat, Purchaser and/or a representative of Purchaser and Builder and/or a representative of Builder shall carry out a final inspection of the boat, at the conclusion of which Purchaser shall be entitled to submit in writing, to Builder, such changes, complaints and/or objections, if any, as Purchaser may have with respect to the construction of the boat within seven (7) days of inspection. Any valid complaints or objections so stated shall be corrected or remedied by Builder as soon as practical thereafter.
In the event purchaser does not inspect boat prior to shipping any changes will be at the expense of the purchaser. Builder will make every effort to take pictures and keep purchaser informed but can not be responsible in the event purchaser wants changes after shipment, purchaser waives any remedy as to cosmetic and/or mechanical changes in the event no inspection is made.
Any dispute as to the validity of such complaints or objections, or as to the parties' respective responsibilities concerning same or the within Purchase Agreement, shall be settled by arbitration. Should arbitration become necessary either party may serve upon the other notice requiring the matter to be arbitrated and such notice shall set out the name of the arbitrator appointed by the party giving such notice. Within seven (7) days of the receipt of such notice the other party shall either agree to the arbitrator appointed by the party giving the notice or appoint its own arbitrator and notify the first party of the name of same. In the event the two arbitrators so appointed cannot agree as of the resolution of the complaint or objection, then the two arbitrators shall select a third arbitrator and shall thereupon proceed with all due diligence to settle the matter. The decision of the majority of the arbitrators shall be final and binding upon the parties. Each party shall be responsible for the cost and fees of the arbitrator selected by that party. The costs and fees of the third arbitrator, if necessary, shall be borne equally by the parties. In the event the two arbitrators selected as hereinabove provided cannot agree upon a third arbitrator, then the third arbitrator, if necessary, shall be appointed by the Daviess Circuit Court, Daviess County, Indiana, upon petition by either party.
* * *
SECTION TWELVE
GOVERNING LAW AND VENUE
It is agreed that this agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Indiana. Purchaser and Builder agree that in the event any type of litigation should result from the within Purchase Agreement, then the exclusive venue of such litigation shall be with the Daviess Circuit Court, Daviess County, Indiana.

         Appellants' App. Vol. 2, pp. 48-51 (emphases added). Graber signed the Agreement as President of DYI. Id. at 53.

         [¶4] After the houseboat was built and delivered to the Purchasers, they found a number of alleged defects. The parties attempted to resolve these concerns, and even attempted mediation in 2016, but were unable to come to an agreement.

         [¶5] Despite the clear language of the Agreement requiring arbitration of any claims, the Purchasers filed suit against the Defendants on June 7, 2017 in Daviess Circuit Court. The complaint set forth eight counts against the Defendants. The counts against DYI were: breach of contract, breach of a written warranty, breach of the implied warranty of merchantability, and breach of the implied warranty of fitness for a particular purpose. The counts against both DYI and Graber were: fraud in the inducement to enter into the Agreement, negligent misrepresentation, rescission, and unjust enrichment. Appellants' App. Vol. 2, pp. 13-20.

         [¶6] On August 22, 2017, the Defendants filed a motion to dismiss the Purchasers' complaint. The Defendants argued first and foremost that the entire controversy was subject to mandatory, binding arbitration and that the trial court should dismiss the case with an order to compel arbitration. Appellants' App. Vol. 2, p. 36. The Defendants also argued that the integration clause in the Agreement prevented any claim based on Graber's oral statements regarding the houseboat; that the claim alleging a breach of the written warranty failed to state a claim upon which relief could be granted; that the Purchasers' claims against Graber were improper and should be dismissed because they were based on oral statements and sought to hold Graber personally liable for the alleged faults of DYI; that the Purchasers' claims for fraud in the inducement, negligent misrepresentation, rescission, and unjust enrichment failed to state valid claims for relief; that the demand for attorney fees should be dismissed; and that the Defendants should instead be awarded attorney fees. Id. at 37-46. Attached to their motion, the Defendants submitted a proposed order dismissing the Purchasers' claims with prejudice. After the Purchasers filed a response to this motion, the Defendants filed a surreply.

         [¶7] The trial court held a hearing on the motion to dismiss on November 13, 2017. At this hearing, counsel for the Defendants repeated the claims made in their motion: that the entire suit was subject to arbitration and, in the alternative, that the Purchasers' claims failed as a matter of law. With regard to the claims against Graber personally, defense counsel argued:

Now further, we also believe this arbitration agreement applies to Sheldon Graber as an individual as President of DYI at all times. As the arbitration provision, sorry, as the arbitration provisions of the agreement should require that all claims in this matter against DYI be heard in arbitration, so should all Claims against Sheldon Graber, because Sheldon has been acting as President of DYI, and interacting with the plaintiffs. He was acting as President of DYI, during any discussions about the construction of this houseboat. Because the plaintiffs and DYI have intended to arbitrate disputes between them, for the a, sorry, between them the arbitration agreement should also extend to plaintiffs['] claims against Graber's actions as they allege he took those actions and did not allege that he took those actions in any capacity other than as President of DYI. If such agents, such as a President of a company that has entered into an arbitration agreement are not extended the benefit of the arbitration provisions, then it would be all too easy for crafty litigants to feed and [sic] arbitration agreement by naming non signatories as parties. By naming non signatories in their individual capacity only, plus all defendants in both their official and individual capacities must have the benefit of the arbitration clause that they entered into. Per the integration provisions of this agreement also of our plaintiffs['] claims, we believe that the arbitration agreement alone in the arbitration provisions should cause this matter to be dismissed, but if the Court finds otherwise I believe the integration provisions of this agreement bar any claims based on an alleged promise of a ride high boat. . .

         Appellants' App. Vol. 3, pp. 43-44 (emphases added). At the conclusion of the hearing, the trial court took the matter under advisement.

         [¶8] On November 15, 2017, the trial court granted the motion to dismiss, using the order submitted by the Defendants, [1] which provided:

This matter, having come before the Court upon Defendants' Motion to Dismiss Complaint and the Court GRANTS the same.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED, that this cause of action is ...

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