America's Directories v. Stellhorn One Hour

• Decision Date: 08 September 2005
• Docket Number: No. 02A03-0409-CV-411.,02A03-0409-CV-411.
• Citation: 833 N.E.2d 1059
• Parties: AMERICA'S DIRECTORIES INCORPORATED, INC., Appellant-Plaintiff, v. STELLHORN ONE HOUR PHOTO, INC., Appellee-Defendant.
• Court: Indiana Supreme Court

833 N.E.2d 1059

AMERICA'S DIRECTORIES INCORPORATED, INC., Appellant-Plaintiff, v. STELLHORN ONE HOUR PHOTO, INC., Appellee-Defendant.

No. 02A03-0409-CV-411.

Court of Appeals of Indiana.

September 8, 2005.

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Robert J. Palmer, May Oberfell Lorber, South Bend, IN, Randall K. Arndt, Arndt & Ehrhard, Mishawaka, IN, Attorneys for Appellant.

Robert G. Devetski, Barnes & Thornburg, LLP, Elkhart, IN, Attorney for Appellee.

OPINION

KIRSCH, Chief Judge.

America's Directories Incorporated, Inc. ("ADI") appeals from a judgment in the amount of $230,374.04, awarded to Stellhorn One Hour Photo, Inc. ("One Hour") on One Hour's counterclaim to ADI's breach of contract suit. On appeal, we address the following consolidated and restated issues:

I. Whether the trial court erred in denying ADI's motion for partial summary judgment on its claim that the contract integration clause precluded parol evidence to prove that ADI fraudulently induced One Hour to sign the contracts.

II. Whether the trial court erred in failing to instruct the jury regarding the effect of an integration clause.

III. Whether One Hour's fraud claim was independent from its breach of contract claim.

IV. Whether a compensatory damage claim in the amount of $52,911.42 was an appropriate remedy.

V. Whether the trial court erred in granting damages to One Hour when its president incurred the loss.

VI. Whether the trial court erred in granting punitive damages.

VII. Whether the trial court erred in finding that ADI had litigated frivolous claims under IC 34-52-1-1.

We affirm.

FACTS AND PROCEDURAL HISTORY

For twenty-three years, Paul Saalfield ("Saalfield") and his wife, Dee, owned and operated One Hour, a small, family-run, photo developing business in Fort Wayne. Saalfield owns three One Hour stores, employs fifteen employees, and runs the day-to-day operations. Saalfield is the president of One Hour, and Dee is the bookkeeper.

ADI publishes and sells advertising for Best Book yellow pages telephone directories, which is one of several advertising and publishing companies owned by Rick Singleton. In 1997, ADI was expanding its business into the Fort Wayne market.

In March 1997, a salesperson from ADI approached Saalfield at one of his stores to inquire whether he would purchase advertising in the new Fort Wayne Best Book ("Best Book"). Saalfield said he was not interested. Five days later, the salesperson returned and again asked Saalfield to purchase an ad. Saalfield again declined. Within the week, the salesperson again called on Saalfield and said that ADI's president, Singleton, wanted to meet with him. Saalfield was flattered by the invitation and agreed to the meeting.

Saalfield, Singleton, and the ADI salesperson attended the meeting, during which Singleton commented on Saalfield's positive reputation in the community. Noting that it would be helpful to tell other potential advertisers that One Hour advertised in the Best Book, Singleton requested, as a favor, that Saalfield purchase an ad. Saalfield again declined, stating that he could not justify the expense. Singleton persisted and stated that because he badly wanted Saalfield's business, the ad would only cost the $600 production fee and $250 in future services, which was designated as "trade." Saalfield finally agreed to place a 1997 ad.

At Singleton's request, the salesperson produced three, double-sided, form contracts, with terms already completed. The first contract reflected Saalfield and Singleton's agreement for the 1997 ad. However, the second and third contracts referenced ad space for Best Book's 1998 and 1999 directories. Saalfield did not read the fine print on the contracts, yet noted that the fee for the 1998 contract was $6,600.00 in cash with $2,400.00 in trade and the fee for the 1999 contract was $9,600.00 in cash with $3,000.00 in trade.

Saalfield questioned why there were three contracts when he had agreed to purchase ad space only in the 1997 book. Singleton gestured for his salesperson to leave and said, "listen[,] I can't do this in front of our sales people. We know that there was no way we could expect you to pay that kind of money," but I need to give my "financing people" a three-year commitment. Transcript, Vol. 2 at 64-65.¹ Singleton said that he hoped Saalfield would stay with the Best Book for 1998 and 1999, but stated that Saalfield could cancel the second and third contracts at any time. Saalfield signed the three contracts.

ADI distributed the Best Book in September 1997. Thereafter, Saalfield attempted to reach Singleton to cancel One Hour's 1998 and 1999 ads. In January 1998, after Singleton had failed to return any of his phone calls, Saalfield wrote a letter to ADI's vice-president, David Scholtz, notifying him that One Hour had received no benefit from the 1997 ad, and that he did not want to advertise in the upcoming Best Books. Saalfield assumed that he had taken care of the matter.

ADI did not publish a 1998 Best Book. Nevertheless, in July 1998, ADI began sending One Hour monthly bills for that directory. Thinking the bill was a mistake, Saalfield again attempted, unsuccessfully, to cancel the contracts. Late in 1998, Jack Nelson, an ADI sales manager who knew nothing of the conflict, met with Saalfield and discussed the nonpayment of the 1998 bill. After Saalfield explained the situation, Nelson said he would "get this thing cleared up." Appellant's Appendix at 406.

In January 1999, ADI faxed to One Hour a three-page "Listing Proof" for the upcoming Best Book. Appellee's Brief at 6. Saalfield immediately faxed back the Listing Proof with the following hand-written notation: "NO NO NO DO NOT RUN! Someone Call Me! . . . Any questions, please see Stephanie or Rick [Singleton]." Defendant's Exhibit J. Saalfield also faxed an urgent letter to Singleton on January 14, 1999, requesting a return call and stating that pursuant to their agreement he would not pay for the ad.

In June and July 1999, the second Best Book was distributed containing One Hour's 1997 ad. In January 2000, after another ADI request for payment, Saalfield wrote a letter to an ADI representative, with a copy to Singleton, and asked for a response to his communications.

In May or June 2000, ADI representative Gregg Miller met with Saalfield and inquired about the nonpayment of the bills. Saalfield told Miller that he did not owe any money because he had only committed to run a 1997 ad, and that Singleton could confirm the existence of a verbal agreement to cancel the other two. Miller assured Saalfield that Singleton would call to clear things up. Nevertheless, although Miller repeatedly talked to Singleton about the situation, Singleton never responded to Saalfield's calls.

The third Best Book was published in August 2000 and, again, contained an ad for One Hour. Singleton told Miller that he would personally handle the One Hour account. On September 11, 2000, ADI, through Singleton, initiated a breach of contract action against One Hour. The complaint alleged that One Hour owed $250 in trade under the 1997 contract, and a balance of $9,000 for advertising in the 1998 directory, and $12,600 for advertising in the 1999 directory, together with interest, paperwork charges, and attorney's fees — a total of $52,911.42.

After learning of the suit, Saalfield again attempted, unsuccessfully, to contact Singleton. On February 16, 2001, One Hour filed an answer and a counterclaim to ADI's suit, alleging beach of contract and fraud.

On January 16, 2002, One Hour filed a motion for partial summary judgment, not only on ADI's claims, but also on its counterclaim against ADI. After a hearing, the trial court denied the motion. Almost two years later, on December 19, 2003, ADI filed a motion for partial summary judgment arguing that the contract integration clause entitled ADI to judgment as a matter of law. The trial court also denied ADI's motion finding that genuine issues of material fact existed as to what Singleton said or did to induce Saalfield to sign the contracts.

Prior to trial, ADI tendered proposed final instructions, one of which addressed the impact of the integration clause. The trial court, after reviewing party-submitted memoranda addressing the need for the integration clause instruction, refused the instruction. The jury entered a general verdict and awarded One Hour $52,911.42 in compensatory damages and $147,088.58 in punitive damages for a total of $200,000.00. Thereafter, arguing that ADI violated IC 34-52-1-1 by filing a frivolous and groundless action, One Hour filed a Verified Petition for Award of Court Costs and Attorney fees in the amount of $60,259.01. The trial court agreed that ADI's action was groundless and granted One Hour $30,147.50, which represented fees incurred to file the answer but not the counterclaim to ADI's suit. After adding $227.54 in court costs, the trial court ordered ADI to pay $230,374.04. Appellant's Appendix at 263. ADI now appeals.

DISCUSSION AND DECISION

I. The Integration Clause and Summary Judgment

ADI first contends that the trial court erred in denying its motion for partial summary judgment. More specifically, ADI contends that the integration clause found in the three contracts precluded the introduction of parol evidence on the issue of fraud and entitled ADI to judgment as a matter of law in connection with both ADI's complaint and One Hour's counterclaim.

Our standard of review for the denial of a motion for summary judgment is the same as that of the trial court. Diversified Fin. Sys., Inc. v. Miner, 713 N.E.2d 293, 297 (Ind.Ct.App.1999). Summary judgment is appropriate only if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Id. (citing Ind. Trial Rule 56(C)). In determining whether the trial court erred in denying summary judgment, we...