Berns Custom Homes, Inc. v. Johnson ( 2014 )

[Cite as Berns Custom Homes, Inc. v. Johnson, 2014-Ohio-3918.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
Nos. 100837 and 101014
BERNS CUSTOM HOMES, INC.
PLAINTIFF-APPELLEE
vs.
RICHARD G. JOHNSON
DEFENDANT-APPELLANT
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-12-791858
BEFORE: E.A. Gallagher, J., Boyle, A.J., and Jones, J.
RELEASED AND JOURNALIZED: September 11, 2014
ATTORNEY FOR APPELLANT
Robert D. Kehoe
Kehoe & Associates, L.L.C.
900 Baker Building
1940 East Sixth Street
Cleveland, Ohio 44114
ATTORNEYS FOR APPELLEE
Jordan Berns
Paul M. Greenberger
Berns, Ockner & Greenberger, L.L.C.
3733 Park East Drive, Suite 200
Beachwood, Ohio 44122
EILEEN A. GALLAGHER, J.:
{¶1} Appellant Richard G. Johnson appeals the decision of the trial court, which
confirmed an arbitration award rendered in favor of Berns Custom Homes Incorporated
(“Berns”). Johnson argues the trial court erred in confirming the award because the
arbitrator exceeded his authority and powers, his decision directly contradicts the terms
of the agreement between the parties and the arbitrator’s decision could not be rationally
derived from the terms of the agreement. Finding no merit to the instant appeal, we
affirm the decision of the trial court.
{¶2} Richard Johnson contracted with Berns to renovate his home in Bentleyville,
Ohio. The parties entered into a contract and each party was represented by counsel.
The contract itself was detailed and specifically tailored to this home renovation. In
particular, the work was supposed to be done in two phases: phase one to remodel the
main level of the house was to begin on June 14, 2010 and was scheduled to take 80
days; thereafter, phase two on the lower level was to take 57 days. The parties’ contract
stated that “[n]o amendment to this [c]ontract shall be effective unless in an instrument
signed by all parties.” The parties further agreed that with respect to work not
described in the plans and specifications — whether new items requested by Johnson or
extra work necessitated because of unexpected conditions — there must be joint consent
in a written change order, otherwise Berns would not be obligated to do the additional
work.
{¶3} Disagreements arose as the work progressed and, by October 6, 2010,
Johnson barred the workers from his home and emailed Justin Berns, president of Berns,
advising that Berns was “in material breach of our contract since September 20th for
failing to complete” the main level. Then, on October 15, 2010, Johnson notified
Berns, pursuant to paragraph five of the contract, that the agreement was terminated.
{¶4} Paragraph 16 of the contract requires “any dispute” under the contract be
submitted to binding arbitration before a single arbitrator. Berns initiated arbitration
with the American Arbitration Association (“AAA”) claiming that Johnson breached
the contract and Johnson counterclaimed. A nine-day arbitration hearing was held and
the arbitrator awarded Berns $160,162.27 in damages plus $6,388.58 for AAA’s
administrative fees and expenses.
{¶5} The arbitrator found that “Johnson breached his agreement with [Berns] by
failing to pay for certain base contract and extra work.” The arbitrator also concluded
that Johnson prevented Berns’ performance under the contract by “removing [Berns] and
its subcontractors” from the job site and “by terminating [Berns].” At the same time, he
rejected Berns’ claims for liquidated damages and attorney fees so that the combined
total award was less than Berns sought.
{¶6} Berns filed a lawsuit in the common pleas court to reduce the arbitrator’s
award to judgment under R.C. 2711.09, which allows a party who prevailed at an
arbitration to apply to the common pleas court for such an order. Johnson opposed and
moved the trial court to vacate the arbitrator’s award under R.C. 2711.10(D). The trial
court entered a journal entry denying Johnson’s motion to vacate the arbitration award
and granted Berns’ application to reduce the award to judgment. In its entry, the trial
court concluded that the arbitrator’s award was rationally related to the contract and that
because the award “draws its essence from the renovation contract, the defendant’s
motion to vacate the award must be denied.”
{¶7} Johnson initially appealed but then on the same day, filed a motion with this
court to stay the appeal and remand and also filed a motion to reconsider and motion to
vacate the judgment with the trial court. This court granted Johnson’s motion to stay
the appeal and to remand.
{¶8} The basis for Johnson’s reconsideration was the First District’s decision in
H.C. Nutting Co. v. Midland Atlantic Dev. Co., L.L.C., 1st Dist. Hamilton No.
C-1300132, 2013-Ohio-5511. In its decision, the First District affirmed the vacation of
an arbitration award finding that the arbitrator exceeded its authority under the parties’
contract by including consequential damages that were expressly excluded by the parties’
agreement. Johnson argued that the damages awarded by the arbitrator were not
recoverable because there never were written change orders for the work done by Berns
and not paid for by Johnson.
{¶9} The trial court distinguished Nutting from the instant case concluding that
“there is legal precedent for the position that a party, by his conduct, can waive the
contract requirement for written, signed change orders, and evidence was offered at
arbitration that this is exactly what happened.” 1 The trial court denied Johnson’s
1
The parties’ emails attached as exhibits to their trial court briefs reference both running
motion to reconsider and motion to vacate.
{¶10} Johnson appealed the trial court’s order and this court consolidated his two
appeals for record, briefing, hearing and disposition. In his appeal, Johnson raises the
following assigned errors:
I. The trial court erred in affirming the arbitration award because the
arbitrator exceeded his authority and powers where his decision directly
contradicts the express terms of the agreement between the parties, and
could not be rationally derived from the terms of the agreement.
II. The trial court erred in affirming the arbitration award which is defective
because the arbitration award does not draw its essence from the agreement
and is unlawful, arbitrary, or capricious where the agreement expressly
required any changes in work to be approved in writing, and the damages
awarded were for work that was not approved in writing.
III. The trial court erred in affirming the arbitration award which is defective
because the arbitration award does not draw its essence from the agreement
where it disregarded express terms in the agreement that state time is of the
essence and set forth a schedule for work that established Plaintiff’s breach
for not completing work in the time agreed upon for performance.
{¶11} Although Johnson puts forth three assigned errors for our review each
involves an analysis of the same standard of review and legal issues and, as such, we
shall address them together.
{¶12} Judicial review of an arbitrator’s decision is narrow. BIGResearch,
L.L.C., v. PENN L.L.C., 10th Dist. Franklin Nos. 11-AP-855 and 11AP-856,
2012-Ohio-2992.
{¶13} As stated by the Eleventh District Court of Appeals:
change order lists as well as admissions that changes were made orally during the home renovation.
Before embarking on an analysis of the merits, we first point out that a
court has a very limited role in reviewing a binding arbitration award.
The arbitrator is the final judge of both law and facts and we may not
substitute our judgment for that of the arbitrator. An arbitrator’s decision
is presumed valid and thus enjoys great deference. (Internal citation
omitted).
Judicial deference in arbitration cases is fundamentally based on the
recognition that the parties have contracted to have their dispute settled by
an arbitrator they have chosen in lieu of committing the matter to the
courts. It therefore stands to reason that the parties have agreed to accept
the arbitrator’s view of the facts and the meaning of the contract regardless
of the outcome. (Internal citation omitted).
Mike McGarry & Sons, Inc. v. Marous Bros. Constr., Inc., 11th Dist. Lake No.
2009-L-056, 2010-Ohio-823.
{¶14} Further, once it is determined that the arbitrator’s award draws its essence
from the agreement and is not unlawful, arbitrary or capricious, a reviewing court’s
inquiry for purposes of vacating an arbitrator’s award pursuant to R.C. 2711.10(D) is at
an end. Findlay Bd. Edn. v. Findlay Edn. Assn., 49 Ohio St. 3d 129, 551 N.E.2d 186
(1990). An arbitrator’s award draws its essence from an agreement when there is a
rational nexus between the agreement and the award. Mahoning Cty. Bd. Mental
Retardation & Dev. Disabilities v. Mahoning Cty. TMR Edn. Assn., 22 Ohio St. 3d 80,
488 N.E.2d 872 (1986). Conversely, an arbitrator’s decision departs from the essence
of the parties’ agreement where it conflicts with the express terms of the agreement or
cannot be rationally derived from those terms. Ohio Office of Collective Bargaining v.
Ohio Civ. Serv. Emp. Assn. Local 11, AFSCME, AFL-CIO, 59 Ohio St. 3d 177, 571
N.E.2d 71 (1991).
{¶15} As stated by the trial court, “[t]he gist of Johnson’s argument is that the
arbitrator made the wrong conclusion on the evidence because it is not possible that he
breached the contract and that Berns did not.” In support of this argument, Johnson
argues that the court “need not look beyond the four corners of the [c]ontract and the
exhibits” to see that it is true. Nonetheless, Johnson spends the entirety of his
appellate brief making distinctly factual arguments. In particular, Johnson argues that
he never approved running change orders; that Berns never relied on his assent to the
running change orders; that the arbitrator incorrectly calculated the time for performance
of the two stages of work; that Berns was in breach of the time-is-of-the-essence clause
of the agreement; and that the evidence at arbitration that Johnson waived by estoppel
the contract requirement that all change orders be in writing was improper and contrary
to the terms of the agreement. By making these arguments, Johnson urges this court to
perform the exact kind of de novo review of the weight of the arbitration evidence that
an appellate court is prohibited from undertaking.
{¶16} The trial court stated that “[t]he essence of the parties’ contract is the
plaintiff’s promise to do work and the defendant’s promise to pay for it.” In finding in
favor of Berns, the arbitrator stated that
Johnson breached his agreement with BCH by failing to pay for certain
base contract and extra work performed by BCH. Johnson did not adhere
to the terms of that agreement, first by preventing BCH’s performance by
removing BCH and its subcontractors from the site and, second, by
terminating BCH.
Thus, the trial court concluded, and we agree, that the arbitrator’s award is rationally
related to the contract in that the arbitrator found that Berns did work that was requested,
accepted and then not paid for by Johnson. The crux of Johnson’s argument is that the
arbitrator made the wrong conclusion on the evidence and this is simply an argument that
this court, pursuant to its limited power of review, is precluded from taking.
{¶17} In his motion to reconsider and subsequent appeal from its denial, Johnson
claims the trial court exceeded its authority by looking at evidence, which it was
prohibited from doing pursuant to R.C. 2711.10. We disagree.
{¶18} In denying Johnson’s motion for reconsideration, the trial court stated as
follows:
The defendant continues to argue that the damages awarded by the
arbitrator are not recoverable because there never were written change
orders for the work done by Berns and not paid for by Johnson. But there
is legal precedent for the position that a party, by his conduct, can waive
the contract requirement for written, signed change orders, and evidence
was offered at arbitration that this is exactly what happened.
Given the arbitrator’s full discretion to decide issues of fact, he could have
found that the requirement of a detailed, countersigned change order was
waived.
{¶19} In issuing its ruling, the trial court did not weigh the evidence and, given
the extensive and well-written opinion outlining its limited standard of review, the court
was well informed of its limited role. The trial court simply noted the existence of
evidence in the record that the parties made non-written changes to the contract. The
court then noted the arbitrator’s role as the trier of fact and the arbitrator’s conclusion
that the parties had waived the requirement of a detailed, countersigned change order.
The court then denied Johnson’s motion.
{¶20} We find no error with the trial court’s confirmation of the arbitration award
or its decision to overrule Johnson’s motion for reconsideration. Neither act was
unreasonable, arbitrary or unconscionable. Citibank N.A. v. White, 8th Dist. Cuyahoga
No. 99868, 2014-Ohio-304. As such, we affirm the decision of the trial court and
overrule Johnson’s three assigned errors.
{¶21} Finally, we take issue with the initiation of this case whereby counsel, on
the case designation sheet, indicated that it was a commercial docket case. This matter
is not a case appropriate for a commercial docket pursuant to the parameters set forth by
the Ohio Supreme Court. It is a simple contract dispute between a homeowner and a
home remodeling contractor.
{¶22} The commercial dockets were established to focus on litigation between
business entities and an owner, sole proprietor, shareholder, partner or member of a
business entity. In order to maintain the integrity of commercial dockets as envisioned,
we once again suggest that parties be mindful of the rules in their identification of
commercial docket cases, that the trial judges scrutinize cases prior to transferring to
the commercial docket, and the commercial docket judges accept only cases that are
appropriate on a commercial docket.
{¶23} Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment
into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
EILEEN A. GALLAGHER, JUDGE
MARY J. BOYLE, A.J., and
LARRY A. JONES SR., J., CONCUR