Peabody Landscape Constr., Inc. v. Welty Bldg. Co., Ltd. , 2022 Ohio 3565 ( 2022 )

[Cite as Peabody Landscape Constr., Inc. v. Welty Bldg. Co., Ltd., 2022-Ohio-3565.]
COURT OF APPEALS
FAIRFIELD COUNTY, OHIO
FIFTH APPELLATE DISTRICT
JUDGES:
PEABODY LANDSCAPE : Hon. W. Scott Gwin, P.J.
CONSTRUCTION, INC : Hon. William B. Hoffman, J.
: Hon. John W. Wise, J.
Plaintiff-Appellant :
:
-vs- : Case No. 2022 CA 00023
:
WELTY BUILDING :
COMPANY, LTD, ET AL : OPINION
Defendants-Appellees
CHARACTER OF PROCEEDING: Civil appeal from the Fairfield County Court
of Common Pleas, Case No. 2020-CV-
00332
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: October 6, 2022
APPEARANCES:
For Plaintiff-Appellant For Defendants-Appellees
DAVE LACKEY MARC A. SANCHEZ
153 S. Liberty Street 200 Public Square, Suite 3000
Powell, OH 43065 Cleveland, OH 44114
Fairfield County, Case No. 2022 CA 00023 2
Gwin, P.J.
{¶1} Appellant appeals the June 8, 2022 judgment entry of the Fairfield County
Court of Common Pleas denying its motion to compel arbitration.
Facts & Procedural History
{¶2} On September 11, 2020, appellant Peabody Landscape Construction, Inc.
(“Peabody”) filed a complaint against appellees Lancaster Properties II, LLC (“Lancaster”)
and Boldt Capital, LLC (“Boldt”). Peabody named Welty Building Company Ltd. (“Welty”)
as a defendant in the complaint; however, Welty is not a party to this appeal.
{¶3} The construction project at the center of this dispute is located at 2400 North
Columbus Street, in Lancaster, Ohio, and is known as the FMC Health and Wellness
Center. Lancaster is the owner of the FMC Health and Wellness Center construction
project (“Project”). Lancaster initially contracted with Welty to construct the Project. Welty
subcontracted with numerous entities to perform work on the Project, including Peabody,
who it hired to install landscaping and an irrigation system. After the project was delayed,
Lancaster hired Boldt to assist in completing the project
{¶4} Peabody alleges it complied with all of its obligations on the Project;
however, Welty wrongly attempted to deduct a substantial amount from the balance due
to Peabody in order to make up for excess costs that Welty incurred. Peabody states it
is owed $207,634.55 for the unpaid balance due under its subcontract with Welty. That
amount includes change orders performed on the Project. Peabody recorded an affidavit
for mechanics’ lien with the Fairfield County Recorder on October 1, 2019.
{¶5} Peabody asserted the following claims in its September 2020 complaint: (1)
breach of contract against Welty; (2) Welty’s failure to promptly pay was a violation of
Fairfield County, Case No. 2022 CA 00023 3
R.C. 4113.61; (3) foreclosure of deposit against Lancaster/Boldt; and (4) unjust
enrichment / quantum meruit against Lancaster/Boldt.
{¶6} On September 30, 2020, Welty filed a motion to stay pending arbitration
pursuant to R.C. 2711.02, citing the subcontract agreement between Welty and Peabody.
The subcontract provides that, “the subcontractor [Peabody] agrees that [Welty] may, in
its sole discretion, elect arbitration with respect to any dispute or claim arising out of or
relating to this Subcontract or the breach or performance thereof * * *.”
{¶7} On October 20, 2020, Peabody and Welty filed a “stipulation to stay case
pending arbitration,” signed by counsel for both parties. The stipulation provides, “Welty
and Peabody hereby stipulate that this motion should be granted and that this matter
should be stayed pending arbitration.”
{¶8} On November 12, 2021, Peabody filed a second complaint against
Lancaster and Boldt. The complaint contains similar allegations as to Peabody’s
completion of its obligations under the subcontract with Welty. Peabody additionally cites
an e-mail, allegedly sent from Boldt, that states, “you will not be back charged for Boldt
help and equipment - we are looking for as much labor that Peabody can provide to finish
this project successfully.” Peabody alleges that, in reliance upon the promise contained
in the e-mail, Peabody supplied additional labor to the Project. In turn, Boldt back-
charged Welty. Welty then deducted the back-charge amount from the balance due to
Peabody. Peabody asserted the following claims in the second complaint against
Lancaster and Boldt: (1) indemnification; (2) promissory estoppel; (3) unjust enrichment /
quantum meruit; (4) intentional and/or negligent misrepresentation; and (5) breach of
contract.
Fairfield County, Case No. 2022 CA 00023 4
{¶9} Boldt and Lancaster filed a motion for temporary relief from stay in the first
case to file a motion to consolidate the cases. Welty filed a motion for temporary relief
from stay to file a motion to compel arbitration, arguing that after the parties agreed to an
arbitrator, Peabody refused to arbitrate on February 17, 2022. Peabody filed a combined
memorandum in opposition to Welty’s motion to compel and motion to compel arbitration
as to Lancaster and Boldt, seeking to stay the Welty/Peabody arbitration until Boldt and
Lancaster were made parties to the arbitration. Lancaster and Boldt filed a brief in
opposition, arguing there was no agreement to arbitrate between Peabody and
Lancaster/Boldt. Peabody filed a reply in support of the motion to compel arbitration.
{¶10} On June 8, 2022, the trial court granted Boldt and Lancaster’s motion for
temporary relief from stay to file a motion to consolidate; the court also granted the motion
to consolidate.
{¶11} The trial court issued a separate judgment entry on June 8, 2022, ruling on
Welty’s motion for relief from stay to file a motion to compel arbitration and Peabody’s
motion to compel Lancaster and Boldt to join arbitration. With regards to Welty’s motion,
the trial court granted Welty’s motion for leave and granted Welty’s motion to compel.
The trial court referenced Section 27 of the subcontract agreement between Peabody
and Welty that, “[Peabody] agrees that [Welty] may, in its sole discretion, elect arbitration
with respect to any dispute or claim arising out of or relating to this Subcontract or the
breach of performance thereof * * *.” The trial court noted that Peabody does not dispute
it agreed to enter into subcontract agreement, or that it failed to attend the February 2022
arbitration. The court ordered Peabody and Welty to proceed with arbitration.
Fairfield County, Case No. 2022 CA 00023 5
{¶12} As to Peabody’s motion to compel arbitration of Lancaster and Boldt, the
trial court overruled the motion. The court found that none of the exceptions to the general
rule against compelling arbitration when a party has not agreed to submit to arbitration
apply to the instant matter.
{¶13} Appellant appeals the June 8, 2022 judgment entry of the Fairfield County
Court of Common Pleas and assigns the following as error:
{¶14} “I. THE TRIAL COURT ERRED IN FAILING TO PROCEED TO A TRIAL
ON THE ISSUES SURROUNDING THE FAILURE TO PERFORM UNDER THE
ARBITRATION AGREEMENT AS REQUIRED BY R.C. 2711.03(B).
{¶15} “II. THE TRIAL COURT ERRED IN REFUSING TO COMPEL
NONSIGNATORIES LANCASTER/BOLDT TO PARTICIPATE IN ARBITRATION WHEN
THE CONTROVERSY WAS DIRECTLY RELATED TO ACTIONS THOSE COMPANIES
UNDERTOOK IN ASSUMING WELTY’S ROLE AS GENERAL CONTRACTOR UNDER
THE SUBCONTRACT.”
Appellees’ Motion to Dismiss
{¶16} Appellees filed a motion with this Court to dismiss for a lack of final,
appealable order. Appellees contend a judgment entry ruling on a motion to compel
pursuant to R.C. 2711.03 is not a final, appealable order. Appellant filed a response,
arguing a judgment entry ruling on a motion to compel pursuant to R.C. 2711.03 is a final,
appealable order. Each party cited caselaw from other appellate districts in support of
their arguments.
{¶17} This Court has previously addressed judgment entries denying and granting
motions to compel arbitration pursuant to R.C. 2711.03 as final, appealable orders. Rona
Fairfield County, Case No. 2022 CA 00023 6
Enterprises, Inc. v. Vascoy, 5th Dist. Perry Nos. 09CA6, 09CA8, 2010-Ohio-1836(reversing trial court’s judgment entry granting motion to compel pursuant to R.C.
2711.03); Mason v. Mason, 5th Dist. Stark No. 2016CA00208, 2017-Ohio-5787 (finding
the trial court did not err in denying the motion to compel arbitration pursuant to R.C.
2711.03); Church v. Fleishour Homes Inc. (affirming in part and reversing in part trial
court’s denial of motion to compel arbitration pursuant to R.C. 2711.03).
{¶18} Based upon this Court’s precedent, we deny appellees’ motion to dismiss
and address appellant’s assignments of error.
I.
{¶19} Appellant first contends the trial court committed error in not conducting a
trial or an oral hearing on the issue of whether appellees could be compelled to arbitrate.
Appellant cites to the language contained in R.C. 2711.03.
{¶20} R.C. 2711.03 provides as follows:
(A) The party aggrieved by the alleged failure of another to perform under
a written agreement for arbitration may petition any court of common pleas
having jurisdiction of the party so failing to perform for an order directing
that the arbitration proceed in the manner provided for in the written
agreement. * * * The court shall hear the parties, and, upon being satisfied
that the making of the agreement for arbitration or the failure to comply with
the agreement is not in issue, the court shall make an order directing the
parties proceed to arbitration in accordance with the agreement.
(B) If the making of the arbitration agreement or the failure to perform it is
in issue in a petition filed under division (A) of this section, the court shall
Fairfield County, Case No. 2022 CA 00023 7
proceed summarily to the trial of that issue. If no jury trial is demanded as
provided in this division, the court shall hear and determine that issue. * * *
{¶21} This Court has previously addressed the “hearing” and “trial” requirements
contained in R.C. 2711.03 in Church v. Fleishour Homes, Inc., 172 Ohio App.3d 205,
2007-Ohio-1806, 874 N.E.2d 795 (5th Dist. Stark 2007). We held that, “while a party’s
request for an oral hearing will be granted pursuant to R.C. 2711.03, an oral hearing is
not mandatory absent a request.” Id. We reasoned that, “because the doctrine of waiver
is applicable to all personal rights and privileges, whether secured by contract, conferred
by statute, or guaranteed by the Constitution,” a party “may waive rights and privileges
secured by statutes, including the statutory right to a hearing conferred by R.C. 2711.03.”
Id., citing Sanit. Commercial Services, Inc. v. Shank, 57 Ohio St.3d 178, 566 N.E.2d 1215(1991). Because neither party in the Church case requested a trial or oral hearing, we
stated, “[i]t is therefore clear the parties waived their right to a trial and an oral hearing by
not requesting that the trial court conduct one and by not objecting to the manner in which
the trial court proceeded to resolve the matter.” Id.; see also West v. Household Life Ins.
Co., 170 Ohio App.3d 463, 2007-Ohio-845, 867 N.E.2d 868 (10th Dist. Franklin) (trial
court “heard” the motion to compel via motion practice); Nemec v. Morledge, 8th Dist.
Cuyahoga No. 110149, 2021-Ohio-3361 (“while a party’s request for an oral hearing shall
be granted pursuant to R.C. 2711.03, an oral hearing is not mandatory absent a request”);
Chrysler Fin. Servs. v. Henderson, 4th Dist. Athens No. 11CA4, 2011-Ohio-6813 (trial
court need not hold hearing or trial unless specifically requested); AJZ’s Hauling LLC v.
TruNorth Warranty Programs of North America, 8th Dist. Cuyahoga No. 109632, 2021-
Ohio-1190 (trial court “heard” the parties for purposes of R.C. 2711.03 when the parties
Fairfield County, Case No. 2022 CA 00023 8
thoroughly briefed the issues and neither party requested an oral hearing); Liese v. Kent
State University, 11th Dist. Portage No. 2003-P-0033, 2004-Ohio-5322 (oral hearing not
mandatory absent a request).
{¶22} Similarly, in this case, appellant did not request a trial or oral hearing in
either its motion to compel arbitration or its reply in support of the motion. Appellees did
not request a trial or oral hearing in their response. The parties fully and thoroughly
briefed the issues. Pursuant to our holding in Church, appellant waived its right to a trial
and oral hearing by not requesting one and by not objecting to the manner in which the
trial court resolved the matter. Appellant’s first assignment of error is overruled.
II.
{¶23} In its second assignment of error, appellant argues the trial court committed
error in denying its motion to compel arbitration.
{¶24} In general, an appellate court reviews a trial court’s decision to grant or deny
a motion to compel arbitration under an abuse of discretion standard of review. Simmons
v. Extendicare Health Services, Inc., 5th Dist. Delaware No. 15 CAE 12 0095, 2016-Ohio-
4831. However, the issue of whether a controversy is arbitrable under an arbitration
provision of a contract is a question of law for the court to decide, therefore, the standard
of review on those issues is de novo. Id. Thus, when the validity of an arbitration
agreement is in question, the determination involves a mixed question of law and fact.
Id.; Mason v. Mason, 5th Dist. Stark No. 2016CA00208, 2017-Ohio-5787.
{¶25} The Ohio Supreme Court has recognized Ohio’s public policy favoring
arbitration. Taylor Bldg. Corp. of America v. Benfield, 117 Ohio St.3d 352, 884 N.E.2d 12(2008). However, arbitration is a matter of contract and, despite the strong policy in its
Fairfield County, Case No. 2022 CA 00023 9
favor, a party cannot be compelled to arbitrate any dispute that he has not agreed to
submit to arbitration. Bunta v. Superior Vacupress LLC, 5th Dist. Holmes No. 17CA023,
2018-Ohio-2823. This axiom “recognizes the fact that arbitrators derive their authority to
resolve disputes only because the parties have agreed to submit such grievances to
arbitration.” Grady v. Winchester, 5th Dist. Fairfield No. 08 CA 59, 2009-Ohio-3660.
While arbitration is encouraged as a form of dispute resolution, the policy favoring
arbitration does not trump the constitutional right to seek redress in court. Peters v.
Columbus Steel Castings Co., 115 Ohio St.3d 134, 2007-Ohio-4787, 873 N.E.2d 1258.
“Where a party resisting arbitration is not a signatory to any written agreement to arbitrate,
a presumption against arbitration arises.” Council of Smaller Enterprises v. Gates,
McDonald & Co., 80 Ohio St.3d 661, 687 N.E.2d 1352 (1998).
{¶26} Courts have recognized limited exceptions to the rule that a person cannot
be compelled to arbitrate a dispute it did not agree in writing to submit to arbitration.
These theories arise from common-law principles of contract and agency, and include the
following: (1) incorporation by reference; (2) assumption; (3) agency; (4) veil piercing/alter
ego; and (5) estoppel. I Sports v. IMG Worldwide, Inc., 157 Ohio App.3d 593, 2004-Ohio-
3113, 813 N.E.2d 4 (8th Dist. Cuyahoga).
{¶27} It is undisputed that neither Lancaster nor Boldt signed the subcontract
between Welty and appellant that contains the arbitration clause at issue. Appellant
contends the trial court committed error in denying its motion to compel arbitration
because the facts in this case fall into one of the exceptions listed above, specifically,
agency, estoppel, or third-party beneficiary. We disagree with appellant.
Fairfield County, Case No. 2022 CA 00023 10
{¶28} Appellant first contends appellees were agents of Welty when they took
over as general contractors on the project and thus, the arbitration clause in the
Welty/appellant subcontract is applicable to appellees. “A party will be bound by contract
in agency if such party has, by his words and conduct, reasonably interpreted, caused
the other party to the contract to believe that the one assuming to act * * * had the
necessary authority to make the contract.” Church v. Fleishour Homes, Inc., 172 Ohio
App.3d 205, 2007-Ohio-1806, 874 N.E.2d 795 (5th Dist. 2007).
{¶29} Appellant cites the Seventh District case of Villas Di Tuscany Condo. Assn.
v. Villas Di Tuscany, 7th Dist. Mahoning No. 12 MA 165, 2014-Ohio-776, in support of its
argument. In that case, the Seventh District found the plaintiff condominium association
(non-signatory) could bring claims and compel arbitration against the developer
(signatory) as an agent of the condominium unit owners. Id. However, in this case, the
non-signatory appellees are not bringing any claims against appellant, either their own
claims or anyone else’s. Appellees are not Welty’s agents; rather, they are separate
entities hired after the Project was delayed by Welty. The agency exception applies in
cases where “the non-signatory [must be allowed] to invoke arbitration to avoid
evisceration of the arbitration agreement between the signatories.” I Sports v. IMG
Worldwide, Inc., 157 Ohio App.3d 593, 2004-Ohio-3113, 813 N.E.2d 4 (8th Dist.
Cuyahoga). In this case, the non-signatory appellees are not attempting to invoke the
arbitration clause. Accordingly, the agency exception does not apply.
{¶30} Appellant next argues the estoppel exception applies in this case because
appellees knowingly took over as general contractors for the Project under the contract
between appellant and Welty. Under the estoppel theory, a party who knowingly accepts
Fairfield County, Case No. 2022 CA 00023 11
the benefits of an agreement is estopped from denying a corresponding obligation to
arbitrate. Mason v. Mason, 5th Dist. Stark No. 2016CA00208, 2017-Ohio-5787. An
indirect benefit is not enough; instead, the party must directly benefit. Id. However, “when
a non-signatory is bringing their own claims, not the claims of the signatory through which
they are allegedly bound, the non-signatory is not bound by the terms of the agreement.”
Id., citing Peters v. Columbus Steel Castings Co., 115 Ohio St.3d 134, 2007-Ohio-4787,
873 N.E.2d 1258. It is not enough that the claims “touch matters” concerning the
agreement or that the claims are “dependent upon” the agreement. Church v. Fleishour
Homes, Inc., 172 Ohio App.3d 205, 2007-Ohio-1806, 874 N.E.2d 795 (5th Dist. 2007).
{¶31} First, as noted above, the non-signatories in this case are not bringing any
claims. Courts have limited the estoppel exception to situations in which a non-signatory
is attempting to enforce some aspect of the contract containing the arbitration clause.
Trinity Health System v. MDX Corp., 180 Ohio App.3d 815, 2009-Ohio-417, 907 N.E.2d
746 (7th Dist. Jefferson). The rationale is that, by relying on one portion of the contract,
a non-signatory may be estopped from denying other parts of the contract such as an
arbitration clause. Id. Here, a signatory is trying to bind non-signatories, which is “not a
permissible use of the estoppel defense.” Id.{¶32} Further, appellant did not rely on the terms of the subcontract agreement
with Welty to establish their claims against appellees. The claims appellant asserted
against appellees in their November 2021 complaint (indemnification, promissory
estoppel, unjust enrichment, breach of contract, negligent misrepresentation) are all
based upon an e-mail allegedly sent from Boldt, not based upon the subcontract between
appellant and Welty. Similarly, the claims asserted against appellees in the first complaint
Fairfield County, Case No. 2022 CA 00023 12
(unjust enrichment/quantum meruit and foreclosure of deposit/mechanic’s lien) do not rely
on the terms of the subcontract agreement; rather, the complaint states that appellant
provided benefits to appellees “by paying overtime to Peabody’s employees at Boldt’s
direction,” and it would be “unjust” for appellees to retain the benefits without
compensating appellant.
{¶33} Appellant additionally cites the “alternate estoppel theory” in support of its
argument. The alternate estoppel theory provides that arbitration may be compelled due
to the “close relationship between the entities involved, as well as the relationship of the
alleged wrongs to the non-signatory’s obligations and duties in the contract * * * and the
fact that claims were intimately founded in and intertwined with the underlying
obligations.” Mason v. Mason, 5th Dist. Stark No. 2016CA00208, 2017-Ohio-5787,
quoting Thompson-CSF, S.A. v. Am. Arbitration Assn., 64 F.3d 773 (2nd Cir. 1995).
However, courts, including this Court, have limited this alternative estoppel theory to
situations where a non-signatory tries to bind a signatory to arbitration, not the reverse,
i.e., where a signatory tries to bind a non-signatory. Id.; see also I Sports v. IMG
Worldwide, Inc., 157 Ohio App.3d 593, 2004-Ohio-3113, 813 N.E.2d 4 (8th Dist.
Cuyahoga). In this case, appellant is a signatory attempting to bind non-signatory
appellees and thus the “intertwined” estoppel theory does not apply.
{¶34} Appellant next argues appellees are third-party beneficiaries of the
subcontract between appellant and Welty, and thus can be compelled to arbitrate. A third
party seeking to benefit from a contractual relationship need not be expressly named in
the contract, but must be contemplated by the parties and be sufficiently identified.
QualChoice, Inc. v. Bhd. Ins. Co., 5th Dist. Stark No. 06CA00020, 2007-Ohio-226. “It
Fairfield County, Case No. 2022 CA 00023 13
must be shown that the contract was made and entered into with the [named parties]
intent to benefit the third person.” West v. Household Life Ins. Co., 170 Ohio App.3d 463,
2007-Ohio-845, 867 N.E.2d 868. In the case cited by appellant in support of its argument,
the third party was specifically identified throughout the contract as the sponsor of the
project, and there was a “clear understanding at the time the contract was executed that
defendant-appellee would become owner of the project in the near future.” Snavely Co.,
Inc. v. Laurel Lake Retirement Community, 8th Dist. Cuyahoga No. 76331, 1999 WL
980646 (Oct. 28, 1999). Once the defendant became the owner of the project, it became
the successor to the underlying contract, and could then avail itself of the contractual
terms, including the arbitration clause. Id.{¶35} However, this case is factually distinguishable. Neither Lancaster nor Boldt
is specifically identified in the Welty/appellant subcontract. The non-signatories
(appellees) are not attempting to enforce the arbitration agreement, and have made no
claims against appellant. There is no evidence that either Welty or appellant intended to
confer any benefit to appellees in the Welty/appellant subcontract. Further, the arbitration
agreement specifically provides that only Welty, “in its sole discretion,” may elect
arbitration. Even assuming appellees somehow benefited from the contract or were
successors to the Welty portion of the contract, the plain language clearly provides Welty,
not Peabody, had the sole discretion to elect arbitration.
{¶36} Appellant contends the trial court committed error in denying its motion
because its claims against appellees “cannot be maintained without reference to the
contract or relationship at issue.” However, in the case cited by appellant that utilizes this
language, it was undisputed the agreement contained an arbitration provision and the
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issue was whether the parties’ dispute fell within the scope of the agreement. Fries v.
Greg G. Wright & Sons LLC, 1st Dist. Hamilton No. C-160818, 2018-Ohio-3785.
However, in this case, there is no written agreement to arbitrate between appellant and
appellees, and the issue is whether any exceptions to the general presumption against
arbitration apply, not whether the particular claims are within the scope of the parties’
written agreement. Zayiceck v. JG3 Holdings, LLC, 8th Dist. Cuyahoga No. 109910,
2021-Ohio-1816. As detailed above, the claims made by appellant in both their first and
second complaints are not dependent upon the subcontract between Welty and appellant,
and exist independently of the relationship between Welty and appellant.
{¶37} We find the trial court did not commit error in concluding that none of the
exceptions apply to the general rule that a court cannot compel parties to arbitrate
disputes that they have not agreed in writing to arbitrate. Appellant’s second assignment
of error is overruled.
Fairfield County, Case No. 2022 CA 00023 15
{¶38} Based on the foregoing, appellant’s assignments of error are overruled.
{¶39} The June 8, 2022 judgment entry of the Fairfield County Court of Common
Pleas is affirmed.
By Gwin, P.J.,
Hoffman, J., and
Wise, John, J., concur