Craver v. Tomsic , 2014 Ohio 2603 ( 2014 )

[Cite as Craver v. Tomsic, 2014-Ohio-2603.]
COURT OF APPEALS
DELAWARE COUNTY, OHIO
FIFTH APPELLATE DISTRICT
PAUL L. CRAVER, DBA JUDGES:
PAUL L. CRAVER, HOUSEWRIGHT Hon. William B. Hoffman, P.J.
Hon. Sheila G. Farmer, J.
Plaintiff-Appellee Hon. Patricia A. Delaney, J.
-vs- Case No. 13 CAE 11 0078
RICK R. TOMSIC, ET AL.
OPINION
Defendants-Appellants
CHARACTER OF PROCEEDING: Appeal from the Delaware County Court of
Common Pleas, Case No. 13 CV H 03
0207
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: June 16, 2014
APPEARANCES:
For Plaintiff-Appellee For Defendants-Appellants
BEAU K. RYMERS MARK SKAKUN
140 E. Town Street, Suite 1015 JUSTIN S. GREENFELDER
Columbus, Ohio 43215 Buckingham, Doolittle & Burroughs, LLC
4518 Fulton Drive, N.W., Suite 200
And P.O. Box 35548
Canton, Ohio 44735-5548
THOMAS L. HART
Isaac, Wiles, Burkholder & Teetor, LLC
Two Miranova Place, Suite 700
Columbus, Ohio 43215
Delaware County, Case No. 13 CAE 11 0078 2
Hoffman, P.J.
{¶1} Defendants-appellants Rick R. Tomsic, et al. appeal the October 23, 2013
Judgment Entry entered by the Delaware County Court of Common Pleas, which
granted, in part, the petition for an order directing arbitration and for stay of litigation
filed by plaintiff-appellee Paul Craver, dba Paul L. Craver Housewright (“Craver”).
STATEMENT OF THE FACTS AND CASE
{¶2} In February, 2010, Appellants entered into a contract with Craver for the
construction of a new home (“the Contract”). The Contract price for the home was
$2,491,300. The parties agreed the home would be constructed within 445 working
days from the time construction commenced.
{¶3} The Contract included a dispute resolution provision, which reads:
Any claim or controversy between the parties arising out of or
relating to this agreement or the breach thereof will be resolved as follows:
23.1 The parties will meet and confer in good faith in an attempt to
resolve the dispute or problem.
23.2 In the event that the parties are unable to resolve the claim or
controversy, either party may notify the other that the matter must be
submitted to mediation or binding arbitration in Columbus, Delaware
County, Ohio in accordance with the applicable provisions of Chapter
2711 of the Ohio Revised Code, excepting that the following terms and
conditions will control and supersede and/or supplement the provisions of
Chapter 2711:
Delaware County, Case No. 13 CAE 11 0078 3
23.2.1 The mediation and/or arbitration will be conducted within 60
days of the selection of the mediator and/or arbitrator(s).
23.2.2 In the event a party fails or refuses to select a mediator or
arbitrator, the provisions of Ohio Revised Code Section 2711.03 apply.
***
23.2.6 In the event of any claim or controversy necessitating
dispute resolution, the Work of the Contractor will continue, as time is of
the essence, and with respect to any such claim or controversy, the
parties will be bound by the determination reached as a result of the
dispute resolution procedures.
23.3 Nothing herein contained shall bar the right of either party to
obtain injunctive relief against threatened conduct that will cause loss or
damages, under the usual equity rules, including the applicable rules for
obtaining preliminary injunctions.
{¶4} In addition to the Contract with Craver, Appellants also entered into a
verbal agreement with Phyllis Craver (“Architect”), Paul Craver’s wife, for all
architectural services on the design and construction of the home. Architect provided all
architectural drawings, designs, and plans for Appellants’ new residence.
{¶5} The completion date set forth in the Contract passed with construction still
progressing. Appellants continually pushed Craver for a new completion date with
Craver eventually promising the residence would be completed on October 1, 2012.
The October 1, 2012 deadline arrived, and the home was still not complete. Craver
walked off the job on or about November 5, 2012.
Delaware County, Case No. 13 CAE 11 0078 4
{¶6} On December 31, 2012, Craver filed a mechanic's lien against the
property in the amount of $133,329.27. Craver was served with Appellants’ R.C.
1311.11 Notice to Commence Suit, which provided:
You are hereby given formal notice pursuant to Ohio Revised Code
Section 1311.11(B) to commence suit as required by the statute upon your
captioned Mechanics [sic] Lien.
Failure to commence suit within 60 days after receipt of this Notice
will result in discharge of the captioned Mechanics [sic] Lien.
{¶7} On March 8, 2013, Craver filed a Complaint against Appellants, alleging
breach of contract and unjust enrichment, and seeking foreclosure on the mechanic’s
lien. In the Complaint, Craver acknowledged the arbitration provision in the Contract,
but asserted R.C. Chapter 1311 required him to file the Complaint in order to preserve
his rights under the mechanic’s lien. Craver also indicated he did not intend to waive
his right to seek arbitration under the Contract.
{¶8} Appellants filed an answer and counterclaim against Craver and Architect
on April 24, 2013. As against Craver, Appellants alleged breach of contract,
negligence, fraud, violations of the Ohio Consumer Sales Practices Act, breach of
warranty, civil conspiracy, breach of oral contract, and unjust enrichment. Appellants
also sought declaratory judgment against Craver, asking the trial court to find Craver
had waived his right to seek mediation or arbitration under the Contract by filing the
mechanic’s lien and subsequently filing his Complaint. As against Architect, Appellants
alleged breach of contract, negligence/malpractice, fraud, violations of the Ohio
Consumer Sales Practices Act, and civil conspiracy.
Delaware County, Case No. 13 CAE 11 0078 5
{¶9} On August 27, 2013, Craver and Architect filed a petition for an order
directing arbitration and requesting a stay of litigation pursuant to R.C. 2711.02 and
2711.03. In their petition, Craver and Architect asserted the Contract governed dispute
resolution procedures and they had complied with those procedures. Craver and
Architect claimed the parties had made a good faith attempt to resolve the matter, but
were unable to do so; therefore, pursuant to the Contract, they were allowed to notify
Appellants the dispute must be submitted to mediation or binding arbitration. Although
Craver and Architect notified Appellants of their desire to arbitrate the matter, Appellants
responded with an unwillingness to do so. Craver and Architect requested the trial court
issue an order directing arbitration and stay the action pending arbitration. Craver and
Architect attached to the petition various correspondences between their attorney and
Appellants’ attorney regarding settlement attempts and their desire to arbitrate.
{¶10} In their brief in opposition, Appellants asserted the trial court should deny
Craver and Architect’s petition on several grounds. First, Appellants maintained
arbitration was not the sole method of dispute resolution under the terms of the
Contract. Next, Appellants asserted Craver had waived arbitration for taking action
inconsistent with the right to arbitrate. Appellants also contended their claims against
Architect were not arbitrable as she was not a party to the Contract. Appellants further
argued, even if Craver had not waived arbitration, the majority of the claims against him
were not within the scope of the arbitration provision set forth in the Contract; therefore,
the provision did not apply.
{¶11} In reply, Craver acknowledged arbitration was not the sole method of
dispute resolution under the Contract, but added, under the Contract, either party could
Delaware County, Case No. 13 CAE 11 0078 6
request arbitration. Craver explained, because settlement discussions and mediation
efforts failed, binding arbitration was the next step. Craver further maintained he did not
waive his right to arbitration by filing the Complaint. Craver specified, in the Complaint,
he reserved the right to enforce the arbitration provision and indicated his intent not to
waive that right. Craver noted he filed the mechanic’s lien in order to avoid waiving his
statutory right. Craver further disputed Appellants’ assertion the inclusion of arguably
non-arbitrable claims rendered arbitration inappropriate, and pointed out the trial court
was required to stay the non-arbitrable claims until the arbitrable claims were resolved.
{¶12} Via Judgment Entry filed October 23, 2013, the trial court granted Craver’s
petition. The trial court found Craver neither waived the right to arbitrate nor acted
inconsistently with the right. The trial court also found Craver followed the proper
procedure regarding the enforceability of the arbitration provision and properly notified
Appellants the matter be submitted to arbitration. The trial court concluded Appellants’
claims against Craver for civil conspiracy, and breach of oral contract/unjust enrichment
relative the construction of a second garage were not subject to arbitration. In addition,
the trial court determined all of Appellants’ claims against Architect were not arbitrable
because she was not a party to the Contract.
{¶13} It is from this judgment entry Appellants appeal, assigning the following
errors:
{¶14} "I. THE TRIAL COURT ERRED IN CONCLUDING THAT PLAINTIFF-
APPELLEE DID NOT WAIVE THE ARBITRATION PROVISION IN THE
CONSTRUCTION AGREEMENT WHEN PLAINTIFF-APPELLEE KNEW OF HIS
RIGHT TO ARBITRATE AND ACTED INCONSISTENTLY WITH THAT RIGHT.
Delaware County, Case No. 13 CAE 11 0078 7
{¶15} "II. THE TRIAL COURT ERRED IN CONCLUDING THAT DEFENDANTS-
APPELLANTS' COUNTERCLAIMS AGAINST PLAINTIFF-APPELLEE FOR
NEGLIGENCE, FRAUD, AND CONSUMER SALES PRACTICES ACT VIOLATIONS
ARE SUBJECT TO ARBITRATION."
I
{¶16} In their first assignment of error, Appellants contend the trial court erred in
concluding Craver did not waive the arbitration provision of the Contract as Craver was
aware of the right to arbitrate, but acted inconsistently with that right.
{¶17} “Both the Ohio General Assembly and Ohio courts have expressed a
strong public policy favoring arbitration.” Hayes v. Oakridge Home, 122 Ohio St. 3d 63,
908 N.E.2d 408, 2009–Ohio–2054, ¶ 15, citing R.C. Chapter 2711, Taylor Bldg. Corp. of
Am. v. Benfield, 117 Ohio St. 3d 352, 884 N.E.2d 12, 2008–Ohio–938, ¶ 27, and
Williams v. Aetna Fin. Co., 83 Ohio St. 3d 464, 471, 700 N.E.2d 859 (1998). “‘Arbitration
is favored because it provides the parties thereto with a relatively expeditious and
economical means of resolving a dispute’. “ Kelm v. Kelm, 68 Ohio St. 3d 26, 29, 623
N.E.2d 39 (1993), quoting Schaefer v. Allstate Ins. Co., 63 Ohio St. 3d 708, 712, 590
N.E.2d 1242 (1992). “Arbitration also has the additional benefit of unburdening crowded
court dockets.” Hayes at ¶ 15, citing Mahoning Cty. Bd. of Mental Retardation & Dev.
Disabilities v. Mahoning Cty. TMR Edn. Assn., 22 Ohio St. 3d 80, 83, 488 N.E.2d 872
(1986). “In light of the strong presumption favoring arbitration, all doubts should be
resolved in its favor.” Id., citing Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio
St.3d 276, 865 N.E.2d 18, 2007–Ohio–1947, ¶ 18.
Delaware County, Case No. 13 CAE 11 0078 8
{¶18} “The General Assembly has endorsed the strong policy in favor of
arbitration of disputes in R.C. 2711.01(A), which provides that an arbitration agreement
‘shall be valid, irrevocable, and enforceable, except upon grounds that exist at law or in
equity for the revocation of any contract’. “ Id. at ¶ 16, 865 N.E.2d 18. R.C. 2711.02
provides for enforcement of an arbitration agreement. A party to such an agreement
may obtain a stay of litigation in favor of arbitration under R.C. 2711.02(B), which states:
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.
{¶19} Moreover, an order under R.C. 2711.02(B) that grants or denies a stay of
a trial pending arbitration “is a final order and may be reviewed, affirmed, modified, or
reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent not
in conflict with those rules, Chapter 2505. of the Revised Code.” R.C. 2711.02(C).
{¶20} Our standard of review for a R.C. 2711.02(B) order depends on the nature
of the issues involved. See Dispatch Printing Co. v. Recovery Ltd. Partnership, 10th
Dist. No. 10AP–353, 2011–Ohio–80, ¶ 17. Here, the issue is whether Craver waived the
right to arbitrate. “The right to arbitration may be waived just like any other contractual
right.” Id. at ¶ 19, citing Murtha v. Ravines of McNaughton Condominium Assn., 10th
Delaware County, Case No. 13 CAE 11 0078 9
Dist. No. 09AP–709, 2010–Ohio–1325, ¶ 20. “ ‘ “[T]he question of waiver is usually a
fact-driven issue and an appellate court will not reverse” the trial court's decision
“absent a showing of an abuse of discretion.” ‘ “ Morris v. Morris, 189 Ohio App. 3d 608,
939 N.E.2d 928, 2010–Ohio–4750, ¶ 17, quoting Murtha at ¶ 20, quoting ACRS, Inc. v.
Blue Cross & Blue Shield of Minnesota, 131 Ohio App. 3d 450, 456, 722 N.E.2d 1040
(1998). The phrase “abuse of discretion” implies the trial court's attitude is arbitrary,
unreasonable or unconscionable. Blakemore v. Blakemore, 5 Ohio St. 3d 217, 219, 450
N.E.2d 1140 (1983).
{¶21} “A party asserting waiver must prove that the waiving party knew of the
existing right to arbitrate and, based on the totality of the circumstances, acted
inconsistently with that known right.” Dispatch Printing Co. at ¶ 21, citing Murtha at ¶ 21.
(Emphasis in original) “In determining whether the totality of the circumstances
supports a finding of waiver, a court may consider such factors as: (1) whether the party
seeking arbitration invoked the court's jurisdiction by filing a complaint or claim without
first requesting a stay; (2) the delay, if any, by the party seeking arbitration to request a
stay; (3) the extent to which the party seeking arbitration has participated in the
litigation; and (4) whether prior inconsistent acts by the party seeking arbitration would
prejudice the non-moving party.” Id., citing Tinker v. Oldaker, 10th Dist. No. 03AP–671,
2004–Ohio–3316, ¶ 20. “Waiver attaches where there is active participation in a lawsuit
evincing an acquiescence to proceeding in a judicial forum.” Tinker at ¶ 21.
{¶22} As set forth in our Statement of the Facts and Case, supra, Craver filed a
mechanic’s lien against Appellants’ property on December 21, 2012. On March 8,
2013, after being served with Appellants’ R.C. 1311.11 “Notice to Commence Suit”,
Delaware County, Case No. 13 CAE 11 0078 10
Craver filed the Complaint against Appellants. Therein, Craver recognized the
existence of the arbitration provision in the Contract, and expressly stated he did not
intend to waive his rights thereunder. On April 8, 2013, Appellants propounded written
discovery on Craver. Appellants then filed their answer and counterclaim on April 24,
2013. Craver filed an answer to the counterclaim on May 28, 2013. During this time, the
parties attempted to resolve the matter. Craver did not respond to Appellants’ discovery
requests or serve discovery on Appellants. The trial court issued a scheduling order on
July 11, 2013. After a failed attempt at mediation, Craver’s counsel sent an email to
Appellants’ counsel asking if they would consent to arbitration. Appellants refused to
consent and Craver filed his petition for arbitration on August 27, 2013.
{¶23} Upon review of the entire record, we cannot find the trial court abused its
discretion in finding, based on the totality of the circumstances, Craver did not waive his
right to arbitrate. Less than six months passed between the filing of the Complaint and
the filing of the petition for arbitration. In addition, little, in the way of court proceedings,
had occurred. Furthermore, Appellants failed to show they were prejudiced by the time
passage.1
{¶24} Appellants’ first assignment of error is overruled.
II
{¶25} In their second assignment of error, Appellants maintain the trial court
erred in concluding their counterclaims for negligence, fraud, and violations of the
Consumer Sales Practices Act were subject to arbitration. We disagree.
1
Contrary to Appellants' argument, we do not interpret the Contract's provision relating
to Craver's obligation to pay mechanic's liens prohibited him from filing a mechanic's
lien to protect his own interests, as opposed to those of his subcontractors.
Delaware County, Case No. 13 CAE 11 0078 11
{¶26} In Council of Smaller Enterprises v. Gates, McDonald & Co., 80 Ohio
St.3d 661, 1998 -Ohio- 172, the Ohio Supreme Court enunciated the four principles
which guide determinations of arbitrability:
The first principle is that “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.” * * * 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. AT & T
Technologies, 475 U.S. at 648–649, 106 S.Ct. at 1418, 89 L. Ed. 2d at 655,
quoting [ United Steelworkers of Am. v.] Warrior & Gulf [ Navigation Co.
(1960) ], 363 U.S. [574] at 582, 80 S.Ct. [1347] at 1353, 4 L.Ed.2d [1409]
at 1417.
The second principle is that “the question of arbitrability—whether
a[n] * * * agreement creates a duty for the parties to arbitrate the particular
grievance—is undeniably an issue for judicial determination. Unless the
parties clearly and unmistakably provide otherwise, the question of
whether the parties agreed to arbitrate is to be decided by the court, not
the arbitrator.” Id., 475 U.S. at 649, 106 S. Ct. at 1418, 89 L.Ed.2d at 656.
The third rule is, “in deciding whether the parties have agreed to
submit a particular grievance to arbitration, a court is not to rule on the
potential merits of the underlying claims.” Id., 475 U.S. at 649, 106 S. Ct. at
1419, 89 L.Ed.2d at 656.
Delaware County, Case No. 13 CAE 11 0078 12
The fourth principle is that “where the contract contains an
arbitration clause, there is a presumption of arbitrability in the sense that
‘[a]n order to arbitrate the particular grievance should not be denied unless
it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute. Doubts
should be resolved in favor of coverage’.” Id., 475 U.S. at 650, 106 S.Ct.
at 1419, 89 L. Ed. 2d at 656, quoting Warrior & Gulf, supra, 363 U.S. at
582–588, 80 S. Ct. at 1353, 4 L.Ed.2d at 1417.” Council of Smaller
Enterprises, 80 Ohio St. 3d at 665–666, 687 N.E.2d 1352.
{¶27} The arbitration provision at issue herein specifically provides “[a]ny claim
or controversy between the parties arising out of or relating to this agreement” will be
resolved as provided in the Contract. Although the language is broad, such does not
make all claims subject to arbitration. In determining whether a claim is within the scope
of an arbitration clause, a trial court must consider whether the “action could be
maintained without reference to the contract or relationship at issue.” Alexander v.
Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St. 3d 241, 2009-Ohio-2962. Even real torts
can be subject to arbitration if “the allegations underlying the claims touch matters
covered by the agreement.” Id., quoting Genesco Inc. v. T. Kakiuchi & Co., 815 F.2d
840, 846 (2d Cir. 1987).
{¶28} Upon examination of the pleadings, we like the trial court, find Appellants’
claims for negligence, fraud, and violations of the Consumer Sales Practices Act are
subject to the arbitration provision. These claims “touch matters” covered by the
arbitration agreement.
Delaware County, Case No. 13 CAE 11 0078 13
{¶29} Appellants’ second assignment of error is overruled.
By: Hoffman, P.J.
Delaney, J. concurs,
Farmer, J. dissents
Delaware County, Case No. 13 CAE 11 0078 14
Farmer, J., dissents
{¶30} I respectfully dissent from the majority's view that the trial court was
correct in finding no waiver of the arbitration provision.
{¶31} I would find appellee's actions are clearly indicative of waiver.
{¶32} The contract readily acknowledged that there were alternative avenues to
resolve a dispute. Therefore, I would find waiver of arbitration because of the filing of
the mechanics lien and a jury demand, plus the continued recourse to the court's
mediation service and the lapse of some five months within the litigation process.
{¶33} I would find appellee's actions by asserting the jurisdiction of the trial court
and demanding a jury trial to be inconsistent with a 13th hour plea for arbitration.
{¶34} I would remand to the trial court.