VIS Sales, Inc. v. KeyBank, N.A. , 2011 Ohio 1520 ( 2011 )

[Cite as VIS Sales, Inc. v. KeyBank, N.A., 2011-Ohio-1520.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
VIS SALES, INC., et al. C.A. No. 25366
Appellants/Cross-Appellees
v. APPEAL FROM JUDGMENT
ENTERED IN THE
KEYBANK, N. A. COURT OF COMMON PLEAS
COUNTY OF SUMMIT, OHIO
Appellee/Cross-Appellant CASE No. CV 2009-06-4195
DECISION AND JOURNAL ENTRY
Dated: March 30, 2011
BELFANCE, Presiding Judge.
{¶1} Plaintiffs-Appellants/Cross-Appellees VIS Sales, Inc. and Thomas R. Georgeoff,
the president of VIS Sales, Inc., (collectively “VIS Sales”) appeal the decision of the Summit
County Court of Common Pleas concluding both Plaintiffs’ and Defendant’s claims are subject
to arbitration and staying the matter pending arbitration. Defendant-Appellee/Cross-Appellant
KeyBank, N.A. (“KeyBank”) has likewise appealed this decision. For the reasons set forth
below, we affirm in part and reverse in part.
I.
{¶2} In 2004, VIS Sales opened a business checking account at KeyBank which was
subject to a Deposit Account Agreement which contained an arbitration clause. VIS Sales also
established a line of credit with KeyBank in 2004 “enabling VIS Sales to draw on the [line of
credit] and deposit funds directly into its checking account as needed. VIS Sales could likewise
transfer money from the checking account to pay down the [line of credit].” In addition, VIS
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Sales executed a promissory note and a Security Agreement in favor of KeyBank to secure the
promissory note. In 2007, the parties entered into a Business Loan Agreement pertaining to the
line of credit. In addition, Mr. Georgeoff signed a commercial guaranty and promissory note to
secure the line of credit. The line of credit was subsequently extended and the terms of the note
were modified. Thus, several documents are connected to the line of credit: the Business Loan
Agreement, the promissory note, the commercial guaranty, and the security agreement. VIS
Sales also applied for and received a Cash Reserve Credit Account with a limit of $10,000
“which would automatically advance up to $10,000 and place the money in VIS Sales’ checking
account to prevent an overdraft.” The only document containing an arbitration clause was the
Deposit Account Agreement.
{¶3} The promissory note became due and payable in October 2008 and thereafter
KeyBank demanded payment in full of the line of credit. VIS Sales did not make payment.
{¶4} In 2009, VIS Sales filed a complaint for declaratory judgment, injunctive relief,
and damages against KeyBank. In response, KeyBank filed a motion to dismiss. Thereafter,
VIS Sales filed an amended complaint for declaratory judgment and injunctive relief. The claim
for declaratory/injunction relief essentially sought to invalidate the cognovit provisions in the
promissory note and the commercial guaranty related to the line of credit. In addition, VIS
Sales’ complaint contained a claim for tortious interference, alleging that KeyBank’s actions
interfered with VIS Sales’ attempted business relationship with Wachovia Bank, N.A. and a
claim for unjust enrichment, alleging that KeyBank improperly charged VIS Sales fees and
removed money from its checking account. KeyBank answered and filed a counterclaim seeking
a judgment of confession based upon the promissory note and commercial guaranty, which
KeyBank alleged was in default, and a counterclaim/third party claim seeking to take possession
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of the collateral under the security agreement. KeyBank later dismissed the third-party
defendants.
{¶5} KeyBank then filed several motions, including a motion to stay VIS Sales’ claims
pending arbitration. VIS Sales responded in opposition. The trial court held a hearing on the
issue and ultimately concluded that both VIS Sales’ claims and KeyBank’s counterclaims were
subject to arbitration and stayed the matter pending arbitration.
{¶6} VIS Sales has appealed and KeyBank has cross-appealed, each raising a single
assignment of error for our review.
II.
ASSIGNMENT OF ERROR I
“THE TRIAL COURT ERRED BY RULING THAT AN ARBITRATION
CLAUSE IN ONE OF SEVERAL AGREEMENTS REQUIRED THE
SUBMISSION OF ALL DISPUTES TO ARBITRATION.”
CROSS-ASSIGNMENT OF ERROR I
“THE TRIAL COURT COMMITTED REVERSIBLE ERROR BY
SUBMITTING KEYBANK’S CLAIMS – CLAIMS PREMISED ON A
PROMISSORY NOTE AND GUARANTY – TO ARBITRATION.”
{¶7} The trial court ruled that both VIS Sales’ claims and KeyBank’s counterclaims
were subject to arbitration and stayed the proceedings pending arbitration. VIS Sales appears to
assert that none of its claims were subject to arbitration as only the checking account contained
an arbitration clause and all of VIS Sales’ allegations with respect to the checking account were
“ancillary.” KeyBank asserts that the trial court erred in submitting its counterclaims to
arbitration, as its claims were based upon a promissory note and a commercial guaranty.
{¶8} Generally, this Court reviews a lower court’s decision to grant or deny a stay
pending arbitration for an abuse of discretion. Ault v. Parkview Homes, Inc., 9th Dist. No.
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24375, 2009-Ohio-586, at ¶7. However, the primary question before this Court is whether the
claims are arbitrable. “The question of whether a controversy is arbitrable under a contract is a
question of law for the Court to decide upon an examination of the contract.” (Internal quotations
and citations omitted.) May v. Wachovia Securities, LLC, 9th Dist. No. 24635, 2009-Ohio-4339,
at ¶5. Thus, our review is de novo. Id.{¶9} Pursuant to R.C. 2711.02(B):
“If any action is brought upon any issue referable to arbitration under an
agreement in writing for arbitration, the court in which the action is pending, upon
being satisfied that the issue involved in the action is referable to arbitration under
an agreement in writing for arbitration, shall on application of one of the parties
stay the trial of the action until the arbitration of the issue has been had in
accordance with the agreement, provided the applicant for the stay is not in
default in proceeding with arbitration.”
Thus, a court must stay a matter pending arbitration if: “(1) the action is brought upon any issue
referable to arbitration under a written agreement for arbitration; and (2) the court is satisfied the
issue is referable to arbitration under the written agreement.” (Internal quotations and citations
omitted.) May at ¶6.
{¶10} Ohio public policy favors arbitration. Murray v. David Moore Builders, 177 Ohio
App.3d 62, 2008-Ohio-2960, at ¶8. Nonetheless, “arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”
(Internal quotations and citations omitted.) Academy of Medicine of Cincinnati v. Aetna Health,
Inc., 108 Ohio St.3d 185, 2006-Ohio-657, at ¶11. “An arbitration clause in a contract is
generally viewed as an expression that the parties agree to arbitrate disagreements within the
scope of the arbitration clause[.]” (Internal quotations and citations omitted.) Id. at ¶16. “To
determine whether the claims asserted in the complaint fall within the scope of an arbitration
clause, the Court must classify the particular clause as either broad or narrow. An arbitration
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clause that contains the phrase ‘any claim or controversy arising out of or relating to the
agreement’ is considered the paradigm of a broad clause.” (Internal quotations and citations
omitted.) Id. at ¶18.
{¶11} However, even the presence of a broad arbitration clause does not make all claims
subject to arbitration. See id. at ¶20. The reviewing court still must ask if the parties agreed to
arbitrate the issue at hand. Id. “[A] proper method of analysis is to ask if an action could be
maintained without reference to the contract or relationship at issue.” (Internal quotations and
citation omitted.) Id. at ¶24. This test “allows courts to make determinations of arbitrability
based upon the factual allegations in the complaint instead of on the legal theories presented. It
also establishes that the existence of a contract between the parties does not mean that every
dispute between the parties is arbitrable.” Id. at ¶29.
{¶12} “[I]f a dispute even arguably falls within the arbitration provision, the trial court
must stay the proceedings until arbitration has been completed.” Tomovich v. USA
Waterproofing & Foundation Services, Inc., 9th Dist. No. 07CA009150, 2007-Ohio-6214, at ¶8.
{¶13} We begin by noting that this is not the typical case with one contract containing a
single arbitration clause. This dispute involves several contracts, only one of which contains an
arbitration clause. Thus, our task is to examine the claims and determine which of the claims
arose from, or are related to, the contract containing the arbitration provision, i.e. the Deposit
Account Agreement. Further, despite the parties’ focus on whether different accounts were
subject to arbitration, the real issue before this Court is which, if any, of the parties’ claims are
subject to arbitration based upon the arbitration clause contained within the Deposit Account
Agreement.
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{¶14} The arbitration provision at issue is contained in section twenty-five of the
Deposit Account Agreement. It provides in pertinent part that:
“This Arbitration Provision sets forth the circumstances and procedures under
which a Claim or Claims (as defined below) may be arbitrated instead of litigated
in court. * * * .
“As used in this Arbitration Provision, the word ‘Claim’ or ‘Claims’ means any
claim, dispute, or controversy between you and us arising from or relating to this
Agreement or your Account(s), including without limitation, the validity,
enforceability, or scope of this Arbitration Provision or this Deposit Account
Agreement. ‘Claim’ or ‘Claims’ includes claims of every kind and nature,
whether pre-existing, present, or future, including without limitation, initial
claims, counterclaims, cross-claims, and third-party claims, and claims based
upon contract, tort, fraud and other intentional torts, constitutions, statute,
regulation, common law, and equity (including, without limitation, any claim for
injunctive or declaratory relief). The word ‘Claim’ or ‘Claims’ is to be given the
broadest possible meaning and includes, by way of example and without
limitation, any claim, dispute, or controversy that arises from or relates to (a) any
Account subject to the terms of this Agreement[,] (b) any electronic funds transfer
from or to any account, (c) advertisements, promotions, or oral or written
statements related to this Agreement or your Account, (d) your application for any
Account, and (e) the collection of amounts owed by you to us.” (Emphasis
added.)
The language emphasized above supports the conclusion that the arbitration clause is a broad
clause. See Academy of Medicine of Cincinnati at ¶18.
{¶15} The Deposit Account Agreement also defines “Account” as “all Checking,
Savings and Time Deposit Accounts.” It defines “Checking Accounts” as “all Accounts we
designate from time to time as Checking Accounts.” It defines “Savings Accounts” as “all
Accounts we designate from time to time as Savings Accounts.” It defines “Time Accounts” as
“all Accounts that you deposit with us for a specified period of time and we classify from time to
time as time deposits.”
{¶16} The Deposit Account Agreement also defines both “Personal Accounts” and
“Business Accounts[.]” “Personal Accounts means Accounts [KeyBank] classif[ies] from time
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to time as personal and offer primarily to consumers for personal, family or household
purposes.” It defines “Business Accounts” as “all other Accounts and includes Accounts we
offer from time to time primarily to businesses, organizations, public entities, commercial and
non-profit enterprises, corporations, partnerships, limited liability companies, sole proprietors
and associations.”
{¶17} The trial court concluded that VIS Sales’ promissory note, checking account, and
cash reserve credit account all constituted “business accounts[,]” despite the fact that the
promissory note and cash reserve credit account are not checking, savings, or time deposit
accounts. While the promissory note and cash reserve credit account might be commonly
referred to as business accounts, there is no evidence that these agreements fit within the
definition of Account stated in the Deposit Account Agreement. Based upon the definitions
contained in the Deposit Account Agreement, the only contract that appears to meet the
definition of “Account” is the checking account. The trial court further concluded that “[b]ased
upon the broad nature of the Arbitration Provision and the interrelationship between all the
business accounts with the pending claims,” all the claims and counterclaims were subject to
arbitration. Thus, the trial court, in large part, based its decision upon the notion that the
agreements between VIS Sales and KeyBank were all business accounts; a conclusion that is
contrary to how the terms are defined in the Deposit Account Agreement.
{¶18} Nonetheless, this Court “‘is not authorized to reverse a correct judgment merely
because erroneous reasons were assigned as a basis thereof.’” Murray v. David Moore Builders,
Inc., 177 Ohio App.3d 62, 2008-Ohio-2960, at ¶12, quoting State ex rel. Carter v. Schotten
(1994), 70 Ohio St.3d 89, 92. Therefore, we independently examine the claims and
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counterclaims to determine whether they “aris[e] from or relat[e] to this [Deposit Account]
Agreement or [VIS Sales’] Account(s)[.]”
Claim for Declaratory Judgment/Injunctive Relief
{¶19} Each of VIS Sales’ requests for relief related to its claim for declaratory
judgment/injunctive relief essentially seek to bar application of the cognovit provisions. While
VIS Sales’ allegations under this claim are varied and seem to implicate several contracts, the
relief it seeks relates solely to invalidating the cognovit provisions. The only contracts
containing cognovit provisions are the promissory note and commercial guaranty, and the
amendments thereto, all of which are connected to the line of credit. We do not see how
determining whether the cognovit provisions of the promissory note and commercial guaranty
are, or are not, valid implicates the Deposit Account Agreement. This claim arose from, and
relates to, the line of credit, not the checking account governed by the Deposit Account
Agreement containing the arbitration provision. A claim related to the validity of the cognovit
provisions could have been brought without reference to
the existence of the Deposit Account Agreement. See Academy of Medicine of Cincinnati at
¶24. This Court cannot conclude that the parties agreed to arbitrate this claim.
Claim for Tortious Interference
{¶20} VIS Sales’ claim for tortious interference alleges that “by participating in a
financial scheme of reckless profiteering, and intending to earn as many fees as possible from
VIS Sales, [KeyBank] interfered with [VIS Sales’] business relationship and caused Wachovia
not to enter into a lending relationship with VIS Sales.” This claim does not arise from or relate
to any of the contracts. The claim essentially alleges that KeyBank wrongfully kept Wachovia
from entering into a relationship with VIS Sales. Resolution of this issue does not on its face
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implicate the Deposit Account Agreement. We cannot say the parties agreed to arbitrate this
claim.
Claim for Unjust Enrichment
{¶21} VIS Sales’ claim for unjust enrichment alleges that KeyBank “inappropriately
charged VIS Sales for fees and removed money directly from VIS Sales’ checking account.”
While it is difficult to discern from the language of the amended complaint, it appears the
problematic fees represent overdraft fees that VIS Sales alleges it would not have been charged if
KeyBank had not altered the manner it which it processed checks or held funds unavailable and
if the cash reserve credit account was being appropriately operated. We conclude this claim
clearly arose from and relates to the Deposit Account Agreement that governs the checking
account and contains the arbitration provision.
{¶22} We begin by noting that the allegations quoted above implicate the checking
account and therefore the Deposit Account Agreement. Further, to the extent that this claim
encompasses the allegations that KeyBank improperly processed checks or held funds
unavailable, it is also related to the Deposit Account Agreement as both issues are discussed in it.
To the extent that VIS Sales alleges that the overdraft protection of the Cash Reserve Credit
Account did not function appropriately, the claim also relates to the checking account and
Deposit Account Agreement. Mr. Georgeoff testified at the hearing held on this matter that the
Cash Reserve Credit Account was an “automatic line of credit[,]” and that the sole purpose of the
Cash Reserve Credit Account was to fund potential overdrafts on the checking account. As is
evident from Mr. Georgeoff’s testimony, and given the fact that the Deposit Account Agreement
governs the checking account, the broad language of the Deposit Account Agreement containing
the arbitration clause is susceptible to an interpretation that covers this dispute. See Academy of
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Medicine at ¶14. We conclude that VIS Sales’ unjust enrichment claim arose from and relates to
the Deposit Account Agreement containing the arbitration provision. This claim could not be
maintained without reference to the Deposit Account Agreement. See id. Accordingly, this
claim is subject to arbitration.
{¶23} Based on the foregoing, we sustain in part and overrule in part VIS Sales’
assignment of error.
Counterclaims
{¶24} We note that neither side argued to the trial court that KeyBank’s counterclaims
were subject to arbitration. Nonetheless, the trial court concluded they were. Assuming that the
trial court had the authority to make that determination sua sponte, we conclude it erred in so
doing.
{¶25} KeyBank’s first counterclaim seeks payment of the amount due under the line of
credit based upon the promissory note and commercial guaranty. KeyBank’s second
counterclaim seeks to recover the collateral discussed under the security agreement due to the
alleged default under the promissory note and commercial guaranty. These claims do not arise
from or relate to the Deposit Account Agreement. The line of credit is governed by several
documents: the Business Loan Agreement, a promissory note, a commercial guaranty, and a
security agreement. None of these documents contain an arbitration provision. KeyBank could
proceed on both counterclaims without reference to the Deposit Account Agreement. See id.The parties did not agree to arbitrate KeyBank’s counterclaims.
{¶26} Based on the foregoing, we sustain KeyBank’s cross-assignment of error.
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III.
{¶27} In light of the foregoing, we affirm in part, and reverse in part the judgment of the
Summit County Court of Common Pleas. VIS Sales’ claim for unjust enrichment is subject to
arbitration, while the remaining claims and counterclaims are not subject to arbitration. The
proceedings are stayed pending arbitration. See R.C. 2711.02(B); Tomovich at ¶8.
Judgment affirmed in part,
reversed in part,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to all parties equally.
EVE V. BELFANCE
FOR THE COURT
CARR, J.
MOORE, J.
CONCUR
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APPEARANCES:
ERICA L. EVERSMAN, Attorney at Law, for Appellants/Cross-Appellees.
JOEL K. DAYTON, RANDOLPH L. SNOW, and GORDON D. WOOLBERT, II, Attorneys at
Law, for Appellee/Cross-Appellant.