Shahan v. Brinegar

• Decision Date: 14 June 1979
• Docket Number: No. 1-378A56,1-378A56
• Citation: 390 N.E.2d 1036,181 Ind.App. 39
• Parties: James L. SHAHAN, Defendant-Appellant, v. James Frederick BRINEGAR, and Dulcie Lou Brinegar, Plaintiffs-Appellees.
• Court: Indiana Appellate Court

Page 1036

390 N.E.2d 1036

181 Ind.App. 39

James L. SHAHAN, Defendant-Appellant, v. James Frederick BRINEGAR, and Dulcie Lou Brinegar,

Plaintiffs-Appellees.

No. 1-378A56.

Court of Appeals of Indiana, First District.

June 14, 1979.

Paul J. Watts, Spencer, for defendant-appellant.

Thomas A. Berry, Bloomington, for plaintiffs-appellees.

LYBROOK, Judge.

Defendant-appellant James L. Shahan (Shahan) brings this appeal from an action initiated by plaintiffs-appellees, James Frederick and Dulcie Lou Brinegar (Brinegar) for breach of the lease and contract entered into by the parties on December 7, 1973.

The lease involved the five-year rental of a building at 710 North College Avenue, Bloomington, known as the Still, for payment of $500 per month. The contract concerned the sale by Brinegar of certain tavern equipment located in the building to Shahan. Also executed was an agreement which called for the transfer of a three-way liquor and alcoholic beverage license from Brinegar to Shahan and served as an employment contract between the parties, naming Shahan as business manager of the Still until the license was transferred. There is some dispute as to when the lease was to commence, with Brinegar claiming that it was to start "December 10, 1973 and on the transfer of the license." Shahan took physical possession of the Still and began to operate as "manager" of the business December 16 or 17 of 1973. Shahan did not pay rent for the remainder of December, 1973, and for the month of January, 1974. Shahan made his first rent payment in April, 1974. A summary of rent payments plus interest prepared by Brinegar showed Shahan in arrears in the amount of $2,867.02, at the time of trial.

The lease also contained a three-month grace period on any overdue rent. Brinegar claimed that Shahan was behind in his rent payments for the first three months of the lease.

Shahan began paying $500 per month in April, 1974, and paid that amount each month throughout the remainder of 1974. In July, 1974, he paid an additional $250 as partial payment of the amount he was behind. In 1975, Shahan paid $500 each month through August, including an additional $250 payment in March. A fire occurred at the Still in August, 1975, which was followed by an eight to ten week period during which the premises were repaired. Although he did not pay rent for October, 1975, Shahan resumed rental payments in November, 1975, and continued paying through October, 1977.

On October 4, 1976, Brinegar served written notice on Shahan's attorney demanding that Shahan's rental payments be made current. Shahan failed to do so. Brinegar subsequently filed suit.

Following an inventory check of the contents of the building, Brinegar complained that certain equipment was missing from the premises, contrary to the security provisions in the contract which provided that all equipment was to remain on the premises until the contract was paid in full. Brinegar valued the missing equipment at $2,515.18.

Brinegar repaired the premises following the fire in August, 1975, and Shahan replaced some of the missing equipment in some instances with equipment of greater value. Shahan also added such items as a pool table.

Neither party made a demand for arbitration under the lease prior to trial.

On December 9, 1976, Brinegar brought suit against Shahan alleging: (1) overdue rent under the lease and (2) removal of certain items from the premises, both in breach of contract. Brinegar sought money demands for the count brought under the lease, and specific performance and reconveyance of the liquor license under the contract. Shahan counterclaimed against Brinegar, asserting that by failing to submit the dispute to arbitration as required by the lease, and by accusing Shahan of removing items from the premises which Brinegar knew had been destroyed by fire, Brinegar breached his contract with Shahan and exhibited a "willful and wanton disregard for the consequences" of his actions. Shahan sought both exemplary and punitive damages from Brinegar as a result.

The trial court found substantially in favor of Brinegar and against Shahan, entered his judgment as follows:

"The Court being duly advised now finds:

"1. That Judgment should be entered for the Plaintiff and against the Defendant on Plaintiff's Complaint for Specific Performance; and that Judgment should be entered for Plaintiff and against Defendant on Defendant's Counter-Claim.

2. That the lease entered into between the parties on December 7, 1973 is in full force and effect; and that the original term of said lease commenced on December 18, 1973.

3. That Defendant is in arrears to Plaintiff on rent pursuant to the lease in the amount of $1,300.00, with interest due Plaintiff at the rate of 8% Per annum from the date of demand of January 14, 1976, without compounding of said interest.

4. That Plaintiff is entitled to Attorney fees in the amount of $250.00.

5. That Defendant is not in violation of the collateral or security provisions of the Contract entered into by the parties on December 7, 1973.

6. That Court costs should be taxed to Defendant.

Judgment entered on the findings for Plaintiff in the principal sum of $1,300.00 with interest at 8% Per annum from January 14, 1976, with Attorney fees in the amount of $250.00 and with Court costs, all to be assessed against Defendant.

/s/ William A. Fawcett"

Shahan thereafter filed his Motion to Correct Errors on December 6, 1977. The motion was overruled by the trial court the same day, and Shahan brings this appeal. He raises the following issues for our review:

(1) Whether the trial court's decision is contrary to law where the lease provides for arbitration of any disputes arising under the terms of the lease and the trial court failed to either dismiss the case or require arbitration.

(2) Whether the decision of the trial court was supported by sufficient evidence in:

(a) finding Shahan in arrears on rent in the amount of $1,300 (b) finding that the term of the original lease began on December 18, 1977; and

(c) finding that Brinegar made a demand for rent on January 14, 1976.

(3) Whether the decision of the trial court in the amount of $1,300 is contrary to law where the lease provides for a 90-day grace period for the lessee on any rent arrearage.

(4) Whether Shahan was denied a fair trial due to irregularities in the proceedings of the trial court where Nos. 1 and 5 of the findings of fact were inconsistent and appear to be contradictory.

I.

Whether the trial court's decision is contrary to law where the lease provides for arbitration of any disputes arising under the terms of the lease and the trial court failed to either dismiss the case or require arbitration.

Shahan asserts that the language of the lease provides for arbitration of any disputes arising under the lease and that this provision makes arbitration a condition precedent to initiation of a suit. ¹ Shahan cites 6 C.J.S. Arbitration § 7 (1975), at page 172, for the proposition that arbitration is not merely an optional remedy to be pursued or ignored by the parties, as choice may dictate, but "(w)here arbitration has been contracted for, it constitutes a substantive and mandatory right."

We note, however, that 6 C.J.S. Arbitration § 28 provides at pages 205-206:

"Arbitration of factual differences may or may not be a condition to recovery in an action on a contract, generally depending on the contract of the parties. In order to prevent resort to the courts the contract must not only provide for an arbitration but Either expressly or by clear implication make such arbitration a condition precedent to the right of action, and if this is not done the arbitration provision will be construed as merely a collateral and independent matter which cannot be pleaded in bar to an action on the principal contract.

The intention to make the arbitration a condition precedent to the right of action may be either express or implied, But the implication, if an implied condition is relied on, must be so plain that a contrary intention cannot be supposed. In other words, the implication is tantamount to a direct expression only because nothing else is inferable." (Footnotes omitted. Emphasis added.)

Ind.Code 34-4-2-2 places the burden of initiating arbitration on Either party desiring to arbitrate, by requiring a written notice by either party to be mailed by registered or certified mail, or delivered to the other party, in which the party desiring arbitration briefly states a claim, the grounds for the claim and the amount or amounts sought. In the case at bar, neither party initiated arbitration. Shahan insists that Brinegar had the duty to make application for arbitration as it was Brinegar who claimed a dispute over the lease. Shahan also maintains that it was not his burden to request arbitration.

By statute, the trial court is only required to order the parties to proceed with arbitration on the application of a party who has demonstrated (1) the existence of a valid arbitration agreement, and (2) the opposing party's refusal to arbitrate. See, Ind.Code 34-4-2-3(a).

There is no showing here that either party formally requested the trial court to intervene and order arbitration pursuant to Ind.Code 34-4-2-3(a), either prior to or during the trial, ² although Ind.Code 34-4- 2-3 provides the trial court with jurisdiction to hear application for arbitration and to order a stay in the proceedings on the underlying agreement.

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...