Anderson v. Indianapolis Indiana AAMCO Dealers Advertising Pool

• Decision Date: 14 April 1997
• Docket Number: No. 48A02-9602-CV-105,48A02-9602-CV-105
• Citation: 678 N.E.2d 832
• Parties: Joseph ANDERSON and Mark Haines, Appellants-Defendants, v. INDIANAPOLIS INDIANA AAMCO DEALERS ADVERTISING POOL, Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 832

678 N.E.2d 832

Joseph ANDERSON and Mark Haines, Appellants-Defendants, v. INDIANAPOLIS INDIANA AAMCO DEALERS ADVERTISING POOL Appellee-Plaintiff.

No. 48A02-9602-CV-105.

Court of Appeals of Indiana.

April 14, 1997.

Transfer Denied Sept.12, 1997.

Chris M. Teagle, Muncie, for Appellant Joseph Anderson.

Donald Dunnuck, Muncie, for Appellant Mark Haines.

James F. Beatty, Landman & Beatty, Indianapolis, for Appellee.

OPINION

BAKER, Judge.

Appellants-defendants Joseph Anderson and Mark Haines appeal a judgment in favor of appellee-plaintiff the Indianapolis, Indiana, AAMCO Dealer's Advertising Pool (Ad Pool) on its claim for breach of contract. Anderson and Haines contend that the trial court erred in entering judgment for the Ad Pool because the contract on which it sued violated the Indiana Deceptive Franchise Practices Act (Franchise Act). Further, Anderson and Haines argue that the contract was unenforceable because it was not signed by all of the parties, was induced by fraud and was not fully performed. Finally, Anderson and Haines contend that the trial court erred in finding against them on their counterclaim for conversion.

FACTS

In 1986, Anderson and Haines, who owned a building which had previously housed an AAMCO Transmission franchise, expressed their interest in executing a formal franchise agreement with AAMCO, Inc. AAMCO responded that Anderson and Haines would have to sign a franchise agreement and an advertising agreement in order to procure a franchise. The advertising agreement provided that Anderson and Haines would participate in and cooperate with the Ad Pool, which consisted of four AAMCO, Inc. franchise owners in the Indianapolis area. The Ad Pool's responsibilities included providing Yellow-Page and media advertising in central Indiana. Although Anderson and Haines expressed dissatisfaction with the advertising agreement, they executed the franchise and advertising documents on April 18, 1986, and became owners of the Muncie AAMCO Transmission franchise.

Pursuant to the advertising agreement, Anderson and Haines began making payments to the Ad Pool. The advertising agreement provided in part as follows:

F. It is further agreed and understood by and between me and the Indianapolis IN AAMCO Dealer's Advertising Pool that I contract for a period equal to the duration of my Franchise Agreement with AAMCO ... to participate in and to be responsible for the payment of advertising on this local level as determined by my advertising pool.... The amount of payment for such advertising shall be as follows:

1. Existing percent or flat rate formula, if applicable $200.00/week

2. Existing minimum weekly contribution

3. Existing maximum weekly contribution

G. I acknowledge that the above amount(s) may be changed by the local AAMCO Dealer's Advertising Pool according to its standard procedure and I agree to be bound by any such change(s).

Record at 577-58. Initially, Anderson and Haines were assessed a monthly advertising fee of $200. Two months later, however, the Ad Pool increased each member's weekly contribution in order to provide for television advertising. As a result, Anderson and Haines' monthly obligation increased to $487.62. When Anderson and Haines failed to pay their contributions to the Ad Pool from June 1986 to February 1987, the Ad Pool filed suit against them for breach of contract. In response, Anderson and Haines filed a counterclaim alleging fraudulent misrepresentation and conversion. Anderson and Haines then made a few, small payments to the Ad Pool in 1987. Nevertheless, despite Anderson and Haines failure to pay, the Ad Pool continued to include the Muncie AAMCO franchise in its advertisements.

Thereafter, on January 29, 1990, the trial court notified the Ad Pool that its claim was subject to Ind.Trial Rule 41(E) dismissal for failure to prosecute. When the Ad Pool failed to appear at a subsequent hearing, the trial court dismissed the case. However, after the Ad Pool sought relief from the dismissal, its claim for breach of contract was reinstated.

Prior to trial, Anderson and Haines and the Ad Pool requested the trial court to rule on whether the Franchise Act was applicable as an affirmative defense to the breach of contract claim. On December 13, 1994, the trial court entered an order finding that the Franchise Act was inapplicable. R. at 612-13. Specifically, the trial court found the following:

I.C. 23-2-2.7-2 purports to govern the relationship between franchisors and franchisees. First, the statute is not applicable to these parties since the plaintiff advertising pool is neither a franchisor or franchisee as defined by I.C. 23-2-2.5-1. [The foregoing observation does not address the question of whether or not the defendants might have had a cause of action against their franchisor if, as counsel suggests, the franchisor required the franchisee to participate in an advertising campaign prohibited by I.C. 23-2-2.7-1(11).]

Further, even if I.C. 23-2-2.7-1 was applicable to the plaintiff in this action, the statute of limitations has long expired for any action for damages or reformation.

R. at 612-13. Thereafter, Anderson and Haines filed a motion for leave to amend their counterclaim to allege the Ad Pool's violation of the Franchise Act. The trial court allowed the amendment, but subsequently dismissed the counterclaim. R. at 630.

Trial commenced on June 28, 1995. During trial, Anderson and Haines presented an offer of proof regarding the applicability and violations of the Franchise Act. Thereafter, the trial court entered judgment in favor of the Ad Pool on all counts.

DISCUSSION AND DECISION

I. Standard of Review

Initially, we note that the trial court entered findings of fact and conclusions of law in support of its judgment at the Ad Pool's request. When the trial court enters special findings at the request of a party, we employ a deferential, two-tiered standard of review. Landmark Motors, Inc. v. Chrysler Credit Corp., 662 N.E.2d 971, 975 (Ind.Ct.App.1996). We first determine whether the evidence supports the findings and then determine whether the findings support the judgment. Id. Special findings and the judgment flowing from those findings will be set aside only if they are clearly erroneous. Id. In determining whether the findings and judgment are clearly erroneous, this court will neither reweigh the evidence nor judge the credibility of the witnesses; rather, we consider only the evidence in the record which supports the judgment along with the reasonable inferences to be drawn therefrom. Id. This court will not disturb the trial court's findings unless the record is devoid of facts or inferences to support them. Id.

II. Franchise Act

Anderson and Haines contend that the trial court erred in finding that the Franchise Act was inapplicable as a defense to the Ad Pool's breach of contract claim. The portion of the Franchise Act relevant to this appeal prohibits agreements between a franchisor and franchisee which require the franchisee to participate in advertising or promotional campaigns at an expense which is indeterminate, determined by a third party or determined by a formula, unless the agreement specifies the maximum sum the franchisee may be required to pay. IND.CODE § 23-2-2.7-1(11). According to Anderson and Haines, the advertising agreement violates this provision because it permits the Ad Pool to change the amount each member pays for advertising costs without setting a maximum amount. However, the trial court determined that because the Ad Pool was not a franchisor, the Franchise Act was inapplicable to the agreement.

IND.CODE § 23-2-2.5-1(b) and (c) defines a franchisee as a person to whom a franchise is granted and a franchisor as a person who grants a franchise. Here, Anderson and Haines are clearly franchisees. However, the Ad Pool is an association whose members are also franchisees. It is not a franchisor. Therefore, the advertising agreement is technically not subject to the Franchise Act.

Nevertheless, Anderson and Haines argue that because they were informed that they could not procure a franchise without signing the advertising agreement, the advertising agreement was in effect a part of the franchise agreement and, therefore, subject to the Franchise Act. In support of their argument Anderson and Haines note the trial court's finding that:

as part of the Franchise Agreement, and as a condition precedent to obtaining the franchise, Anderson and Haines entered into an agreement with the Ad Pool whereby Anderson and Haines agreed to participate in and cooperate with the Ad Pool for the duration of the Franchise Agreement.

R. at 686. We agree that this finding is contradictory to the trial court's conclusion that the Ad Pool and AAMCO were not agents or otherwise connected. Further, we agree that AAMCO's requirement that franchisees participate in the advertising agreement allows it to circumvent the prohibitions of the Franchise Act. Nevertheless, we are unable to reach the issue of whether, in light of these circumstances, the Ad Pool should be subject to the Franchise Act.

Even assuming that the advertising agreement is subject to the provisions of the Franchise Act, Anderson and Haines are not entitled to relief. A franchisee who has signed a contract which violates the Franchise Act may bring an action to either recover damages or reform the franchise agreement. I.C. § 23-2-2.7-4. However, "no action may be brought for a violation of this chapter more than two (2) years after the violation." I.C. § 23-2-2.7-7. Here, Anderson and Haines signed the advertising agreement in April 1986 but did not raise the alleged violations until 1994, eight years later. Thus, Anderson and Haines' allegations are barred by the statute of limitations. ¹

Further, we note that Anderson and Haines received the benefit of eight years of television and print advertising under the advertising agreement. This court...