JKL Components Corp. v. Insul-Reps, Inc.

• Decision Date: 27 July 1992
• Docket Number: No. 29A02-9111-CV-495,INSUL-REP,INC,29A02-9111-CV-495
• Citation: JKL Components Corp. v. Insul-Reps, Inc., 596 N.E.2d 945 (Ind. App. 1992)
• Parties: JKL COMPONENTS CORPORATION, Appellant-Defendant, v., Appellee-Plaintiff.
• Court: Indiana Appellate Court

Page 945

596 N.E.2d 945

JKL COMPONENTS CORPORATION, Appellant-Defendant, v. INSUL-REPS, INC., Appellee-Plaintiff.

No. 29A02-9111-CV-495.

Court of Appeals of Indiana Second District.

July 27, 1992.

Frederic C. Sipe, Scott D. Pankow, Sipe, Pankow, Han & Rumely, Gregory L. Noland, Emswiller Williams Noland & Clarke, Indianapolis, Bruce A. Boje, Richard Adams, Boje & Pickering, Noblesville, for appellant-defendant.

Deborah L. Farmer, Christine C. Altman, Campbell Kyle Proffitt, Carmel, for appellee-plaintiff.

BUCHANAN, Judge.

CASE SUMMARY

Defendant-appellant JKL Components Corporation (JKL) appeals from a judgment in favor of plaintiff-appellee Insul-Reps, Inc. (Insul-Reps), claiming that the trial court should have enforced the parties' agreement to arbitrate, that the trial court erred when it found an implied contract between the parties, and when it calculated Insul-Reps' damage award.

We affirm.

FACTS

The facts most favorable to the trial court's judgment reveal that JKL, a California corporation, is a distributor of lamps and lighted products to original equipment manufacturers (such as automobile manufacturers) and Insul-Reps, an Indiana corporation, is a manufacturer's representative that employs a sales staff to sell a variety of products to original equipment manufacturers. Insul-Reps became JKL's representative for Indiana, Kentucky, Tennessee, Mississippi and Alabama.

On January 18, 1982, Insul-Reps executed a representation agreement drafted by JKL. The contract's term was for one year from the date of execution, which would be automatically renewed for four additional periods of one year each, unless either party terminated the agreement. The agreement set forth the commission rate to be paid to Insul-Reps, and provided that JKL could reduce the size of Insul-Reps' territory if it believed Insul-Reps was not effectively servicing the territory.

The contract provided that commissions would be paid for six months after the expiration of the term of the agreement and also allowed JKL to terminate the agreement for cause without having to pay any commissions. The agreement was to be governed by the laws of California and provided: "In the event that any controversy or clain [sic] arising out of the Agreement cannot be settled by the parties hereto, such controversy or claim shall be settled by arbitration at Los Angeles, California, in accordance with the then current rules of the American Arbitration Association in [sic] judgment upon the award may be entered in any court having jurisdiction thereof." Record at 15-16.

In December, 1985, Michael Spratt (Spratt), one of Insul-Reps' key salesmen for JKL's products, agreed to accept a reduced commission rate from JKL on a particular lamp sold to a Chrysler production facility in Alabama.

The term of the parties' original agreement ended without either party noticing. The parties continued to operate as if the agreement remained in effect. In July, 1987, JKL considered reducing Insul-Reps' territory, but ultimately no changes were made.

On November 13, 1987, Insul-Reps fired Spratt and shortly thereafter David Stone (Stone), another main salesman of JKL's products, also left the company. Insul-Reps notified JKL of the personnel change. On December 21, 1987, JKL terminated its relationship with Insul-Reps. Within the next three months, JKL hired both Spratt and Stone to sell JKL's products in Insul-Reps' former territory for a lower commission rate than JKL had paid Insul-Reps.

Insul-Reps brought suit, alleging breach of contract, and sought damages for JKL's failure to pay commissions. JKL filed a motion to dismiss Insul-Reps' claim under Ind.Rules of Procedure, Trial Rule 12(B)(1) (lack of subject-matter jurisdiction), claiming Insul-Reps had failed to arbitrate its claim as required by the contract. ¹ After a hearing, JKL's motion was denied.

During the course of the litigation, Insul-Reps filed several motions to compel discovery and for sanctions for JKL's failure to provide documents relating to the commissions Insul-Reps' claimed it was owed. At trial, the trial court ruled that any evidence that JKL had been ordered to produce, but had not, would be excluded.

After a bench trial, the trial court ruled in Insul-Reps' favor, determining that although the contract term had ended, an implied contract existed between the parties containing all of the terms of the former written agreement. The trial court awarded as damages the commissions due for orders shipped to Insul-Reps' territory through August 21, 1988.

The trial court ordered the parties to submit their calculations of the commissions due. The parties submitted their computations of damages, but JKL's calculations were based on evidence not presented at trial, and JKL requested that the evidence be reopened. JKL also moved to amend the trial court's findings and judgment and filed a motion to correct errors. These motions were denied after a hearing and the trial court entered judgment for Insul-Reps in the amount of $225,973.52.

ISSUES

JKL raises several issues for our consideration, which we consolidate and restate as:

1. Whether the trial court erred when it failed to order the parties to submit to arbitration?

2. Whether the trial court erred when it determined an implied contract existed between the parties?

3. Whether the trial court erred when it determined the damages owed to Insul-Reps?

DECISION

ISSUE ONE--Should the trial court have ordered the parties to arbitrate their dispute?

PARTIES' CONTENTIONS--JKL asserts that because the parties' agreement contained an arbitration clause, the trial court should have ordered them to arbitrate their dispute. Insul-Reps responds that JKL never asked the trial court to order arbitration.

CONCLUSION--The trial court did not err by failing to order the parties to submit to arbitration.

After Insul-Reps filed its complaint, JKL filed a motion to dismiss Insul-Reps' complaint under T.R. 12(B)(1), contending the trial court lacked subject-matter jurisdiction of Insul-Reps' claim because Insul-Reps had not sought arbitration in accordance with the arbitration clause of the parties' contract. On appeal, for the first time, JKL argues that the trial court should have stayed Insul-Reps' action and ordered the parties to arbitrate their controversy.

The trial court properly denied JKL's motion to dismiss, as it did not lack subject-matter jurisdiction over Insul-Reps' claim. "Subject-matter jurisdiction" refers to the power of a court to hear and determine a general class or kind of case and such an issue requires the determination of whether a claim falls within the general scope of authority conferred to the court by the Constitution or by statute. Williams v. Williams (1990), Ind., 555 N.E.2d 142; State ex rel. Hight v. Marion Superior Court (1989), Ind., 547 N.E.2d 267.

The Hamilton Superior Court is a court of general jurisdiction and has concurrent jurisdiction with the Hamilton Circuit Court in all civil actions. Ind.Code 33-5-22-2; IC 33-5-22-5. The trial court therefore had subject-matter jurisdiction over Insul-Reps' breach of contract claim. See Suyemasa v. Myers (1981), Ind.App., 420 N.E.2d 1334.

JKL cites no authority, and we can find none, to support its claim that a party's failure to arbitrate divests a trial court of jurisdiction over a breach of contract claim. The statutes of both Indiana and California set forth the proper steps to be taken to enforce an agreement to arbitrate if a party resorts to the courts prematurely.

The relevant laws of both Indiana and California are essentially identical. A party seeking to compel arbitration pursuant to an arbitration agreement can petition the court to order arbitration and stay the court proceeding until after the arbitration is completed. Cal.Civ.Proc.Code Sec. 1281.2 and 1281.4; Ind.Code 34-4-2-3.

JKL, however, never attempted to avail itself of the statutory remedy available to enforce the arbitration clause, but instead mistakenly sought to dismiss Insul-Reps' action. JKL now argues that the trial court should have ordered arbitration in spite of the fact that it never requested such relief.

This court considered a substantially similar factual situation in Shahan v. Brinegar (1979), 181 Ind.App. 39, 390 N.E.2d 1036. There, "Appellant Shahan made reference to the existence of the arbitration clause in the lease in his Motion to Dismiss, but did not formally request arbitration until page 14 of the Appellant's Brief." Id. at 44 n. 2, 390 N.E.2d at 1040 n. 2. We concluded:

"While a written agreement to submit either an existing controversy or a controversy thereafter arising to arbitration is valid and enforceable under Ind.Code 34-4-2-1, we think the right to require such arbitration, as in the case of other contractual matters, may be waived by the parties where they fail to request arbitration and the issues sought to be determined by arbitration have been fully litigated before a court of competent jurisdiction.

It is the purpose of arbitration to entertain consideration of disputed matters and to reach an acceptable decision and award, without having to undertake often ponderous and costly judicial proceedings. Where, as here, the parties litigant have failed to exercise their option of seeking arbitration until after the trial court has construed the underlying agreement, and made its award thereon, this court on appeal will not set aside the trial court's decision and order arbitration."

Shahan, supra at 44-45, 390 N.E.2d at 1041 (emphasis supplied).

And so it is here. A careful reading of JKL's motion to dismiss clearly establishes that it made no effort to request arbitration at any time before this appeal. 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...