Attorneys for Appellant Attorneys for Appellees
John C. Hoard Jeffrey R. Gaither
R. Brock Jordan Brian H. Babb
Indianapolis, Indiana T. Joseph Wendt
Indianapolis, Indiana
David J. Theising
Indianapolis, Indiana
________________________________________________________________________
In the
Indiana Supreme Court
_________________________________
No. 49S05-0311-CV-00577
David J. Theising, Receiver of
IQuest Internet, Inc.,
Appellant (Plaintiff below),
v.
ISP.com, LLC; and ISP.net; LLC and
IQuest Internet, LLC,
Appellees (Defendants below).
_________________________________
Appeal from the Marion Superior Court, No. 49D11-0101-CP-0075
The Honorable John Hanley, Judge
_________________________________
On Petition To Transfer from the Indiana Court of Appeals, No. 49A05-0301-
CV-0035
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March 4, 2004
Boehm, Justice.
This is an appeal from an order of the Marion Superior Court
described in our opinion dated today in ISP.com, LLC v. Theising, __ N.E.2d
__ (Ind. 2004) (“the Hamilton County case”). In this case the Marion
Superior Court ordered the parties to arbitrate their dispute, but the
Court of Appeals, in an unpublished decision, reversed. We now grant
transfer and affirm the trial court
Facts and Procedural History
The background of this dispute is set forth in our opinion in the
Hamilton County case. The essential facts relevant to this appeal are
simply stated. The plaintiff, David Theising, is the receiver of IQuest
Internet, Inc., an Indiana corporation. Incident to the sale of IQuest’s
assets to some of the defendants in this case (“ISP”), ISP issued a
promissory note in the principal amount of $10 million to Robert Hoquim,
the majority shareholder of IQuest. Hoquim and ISP also entered into a
Loan and Security Agreement. After these transactions, Hoquim died
intestate and IQuest was placed in receivership. Hoquim’s Estate initiated
this lawsuit by suing ISP and its guarantors on the note. Theising then
succeeded in obtaining an order of the probate court directing that the
note be transferred to him, as IQuest’s receiver, and was substituted as
plaintiff in this case. Theising now appeals the order of the Marion
Superior Court directing that his claim under the note and Loan and
Security Agreement be referred to arbitration pursuant to the arbitration
provisions in the agreement for the sale of IQuest to ISP.
This case has a long and tortured history that is, for our purposes,
irrelevant. In brief, ISP first moved to order this case to arbitration
when the plaintiff was Hoquim’s Estate. There is a disagreement between
counsel for Hoquim’s Estate and counsel for ISP as to understandings that
were or were not reached as to extensions of time to respond to the motion
while the Estate and the receiver debated entitlement to the note in
Hamilton Superior Court. Ultimately, the Hamilton Superior Court ordered
the note transferred to the receiver. In the meantime, however, and
allegedly without notice to counsel for the Estate, the Marion Superior
Court granted ISP’s motion to compel arbitration. After the receiver was
substituted as plaintiff, he unsuccessfully filed a motion to correct
errors. In the ensuing appeal, the Court of Appeals, in an unpublished
decision, remanded for specific findings and conclusions, but apparently
did not rule on the merits of the appeal. After the Marion Superior Court
entered specific findings and conclusions, it again ordered the dispute to
arbitration. This appeal then followed, and the Court of Appeals reversed.
By the time the second appeal in this case reached the Court of Appeals,
another panel of the Court of Appeals had already affirmed an order in the
Hamilton County case denying ISP’s motion to compel arbitration of claims
asserted against it by the receiver. Although the Hamilton County case was
filed after the Estate initiated this case, the Hamilton County case had
lapped this case in the course of the described skirmishing, and was
precedent by the time the Court of Appeals reached the merits of this
appeal.
Our opinion in the Hamilton County case handed down today explains
why the receiver’s claims against ISP in that case are required to be
arbitrated. We concluded that the provisions in the note and Loan and
Security agreement do not override the undertaking to arbitrate disputes
“relating to” the Asset Purchase Agreement that contains the arbitration
clause. The circumstances of the issuance of the note and any right to set
off based on breach of the Asset Purchase Agreement certainly “relate to”
the Asset Purchase Agreement. Hoquim in his individual capacity is a party
to that agreement as well as to the note and Loan and Security Agreement.
In the Hamilton County case, we also held that the receiver, as such, has
the rights and obligations of IQuest, but is not authorized to assert
claims of creditors or third parties. Similar, but somewhat different
considerations apply here. The result, however, is the same: the
receiver’s claims are required to be submitted to arbitration.
The receiver here claims as the holder of a note that was issued to
Hoquim and then assigned to the receiver by order of the Hamilton probate
court. The Court of Appeals in the Hamilton County case concluded that the
receiver was not bound by the arbitration clause because the receiver
represented the interests of creditors of IQuest in addition to succeeding
to the rights of IQuest itself. For the reasons given in our opinion in
the Hamilton County case, we do not agree. Here however, the rationale is
somewhat different. The rights Theising asserts are as holder of the note
issued by ISP to Hoquim, not as a claim for participating in a fraud on
creditors. As receiver, Theising is bound by the undertakings of IQuest.
But as assignee of a note, he is bound by undertakings of Hoquim as his
assignor, and his status as a receiver is irrelevant, except to the extent
that IQuest itself could avoid the arbitration provision if it sued as
Hoquim’s assignee.
The arbitration clause in question is the culmination of a dispute
resolution mechanism prescribed by the Asset Purchase Agreement. The
amounts due under the note are ultimately resolved by the degree to which
ISP is entitled to set off “Indemnity Obligations” of IQuest and Hoquim
against the amounts due under the note. Hoquim’s rights under the note,
and therefore the receiver’s rights under the note, are dependent on
resolution of those disputes. Hoquim and IQuest agreed to arbitrate those
disputes, and that undertaking is binding on Theising as their successor in
interest.
This is an appeal of the trial court’s refusal to set aside the
original judgment ordering this dispute to be arbitrated. Theising’s
motion under Trial Rule 60(B) requires a showing that he has a “meritorious
defense” and that the failure to respond to the motion to compel
arbitration was due to excusable neglect. Chelovich v. Ruff & Silvian
Agency, 551 N.E.2d 890, 892 (Ind. Ct. App. 1990). Because Theising is
bound by the arbitration clause, we find no meritorious defense to the
judgment of the trial court ordering this matter to be arbitrated. We
therefore need not address the extensively debated issue whether the
Estate’s failure to respond timely to ISP’s motion was the product of
excusable neglect.
Conclusion
The judgment of the trial court is affirmed.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.