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COA: Purchase agreement valid, case against company must go to arbitration

December 28, 2016

A Kentucky-based houseboat company cannot be forced to refund a deposit to a Henry County couple after the Indiana Court of Appeals found Wednesday that an existing purchase agreement was a valid and binding contract that allowed the company to request arbitration.

In November 2013, Stardust Ventures LLC, a custom houseboat builder in Monticello, Kentucky, reached an oral agreement with Gary and Teresa Roberts on the construction of a customized houseboat. The parties agreed to a price of $775,000 and a delivery of the houseboat in midsummer 2014.

Stardust provided the Robertses with a quote that called for a nonrefundable $10,000 security deposit for a build slot in its facility and payment of 20 percent of the total purchase price before Stardust would begin construction of the houseboat.

The Robertses paid $75,000 to Stardust in November 2013, less than 20 percent of the total price. Stardust, having not yet received the necessary $155,000, decided in January 2014 to contract with Sunstar Houseboats Inc. to build the hull of another houseboat it was constructing in order to create room for the Robertses’ houseboat.

Then in late January, Stardust sent an unsigned purchase agreement to the Robertses without having begun construction of their boat. The couple signed the agreement, along with Jerry Harden, Stardust president.  The agreement included an arbitration clause stating that arbitration belonged solely to Stardust.

In March 2014, the Robertses asked to cancel their agreement with Stardust because construction on their houseboat had not yet begun. The couple then retained counsel to secure the return of their money from Stardust, so Harden sent a letter stating his company was “in the process of collecting the costs related to your construction. The costs of that work will be deducted prior (to) considering a refund.”

Stardust never returned any of the $75,000 and said its offer to return any portion of that cost was a mistake and was against policy because deposits were nonrefundable.  The couple filed a complaint seeking recovery of the full amount their paid, alleging that Stardust never returned a signed copy of the purchase agreement, so their offer to purchase a houseboat from Stardust was validly revoked.

Stardust moved to dismiss to proceed to arbitration, but the Henry Circuit Court dismissed that motion and instead granted the Robertses’ motion for summary judgment and entered a $75,000 judgment in their favor. The couple filed a motion to correct error for prejudgment interest. Stardust filed an opposition motion, but the trial court never held a hearing or issued a ruling.

Stardust appealed the denial of its motion to dismiss and the Robertses cross-appealed, arguing that there were entitle to prejudgment interest as a matter of law.

In the Wednesday opinion, the Indiana Court of Appeals first found that the purchase agreement was valid because Stardust produced a signed copy of the agreement and attached it to its motion to dismiss. Even if Stardust had not signed the agreement, Judge Margret Robb wrote that the company had drafted the agreement and outsourced with Sunstar to make room for the Roberts’ boat, both indications that it intended to abide by the terms of the agreement.

Further, Robb rejected the Robertses’ argument that Stardust had waived its right to arbitrate the dispute. First, Robb wrote, Stardust explicitly stated its decision to invoke its right to arbitration, and second, the company filed a motion to dismiss to arbitration as its first substantive pleading.

“Clearly, Stardust decided early on in litigation that it would rather have the dispute decided by arbitration and did not wait until an adverse final judgment to request arbitration,” Robb wrote.

Thus, the trial court’s grant of summary judgment in favor of the couple was reversed and the case was remanded with instructions to enter an order compelling arbitration.

The case is Stardust Ventures, LLC v. Gary Robert and Teresa Roberts, 33A01-1603-PL-604.
 

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