Attorneys for Appellant Attorneys for Appellees
John C. Hoard Jeffrey R. Gaither
R. Brock Jordan Brian H. Babb
Indianapolis, Indiana T. Joseph Wendt
David J. Theising
Indiana Supreme Court
David J. Theising, Receiver of
IQuest Internet, Inc.,
Appellant (Plaintiff below),
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
March 4, 2004
Facts and Procedural History
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in an unpublished decision, reversed.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
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 IQuests 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.
Hoquims 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 IQuests 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 Hoquims Estate. There is a disagreement between counsel
for Hoquims 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 ISPs 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 ISPs 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
receivers 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 receivers 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 Hoquims 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. Hoquims rights under the note, and therefore the receivers 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 courts refusal to set aside the
original judgment ordering this dispute to be arbitrated. Theisings 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 Estates failure to respond timely to ISPs motion was
the product of excusable neglect.
The judgment of the trial court is affirmed.
SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.