Premier Homes, Inc. v. Hanna Commercial, L.L.C. , 2019 Ohio 1336 ( 2019 )

[Cite as Premier Homes, Inc. v. Hanna Commercial, L.L.C., 2019-Ohio-1336.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
PREMIER HOMES, INC., ET AL. JUDGES:
Hon. William B. Hoffman, P.J
Plaintiffs Hon. Patricia A. Delaney, J.
Hon. Earle E. Wise, Jr., J.
-vs-
Case No. 2018CA00108
HANNA COMMERCIAL, LLC, ET AL.
Defendants-Cross-Claim O P I N IO N
Defendants-Appellants
and
LAURI M. WEINFELD LIVING TRUST,
LAURI M. WEINFELD AND
IRWIN J. WEINFELD, M.D, AS
CO-TRUSTEES, ET AL.
Defendants-Cross-Claim
Plaintiffs-Appellees
CHARACTER OF PROCEEDINGS: Appeal from the Stark County Court of
Common Pleas, Case No. 2016CV00019
JUDGMENT: Reversed and Remanded
DATE OF JUDGMENT ENTRY: April 8, 2019
For Cross-Claim Defendants-Appellants For Cross-Claim Plaintiffs-Appellees
MICHAEL S. GRUBER SCOTT M. ZURAKOWSKI
JASON N. BING JOSEPH J. PASQUARELLA
6370 Mt. Pleasant Street, NW 4775 Munson Street, NW
North Canton, Ohio 44720 P.O. Box 36963
Canton, Ohio 44735-6963
KARL H. SCHNEIDER
21 East State Street, Suite 1700
Columbus, Ohio 43215
Stark County, Case No. 2018CA00108 2
Hoffman, P.J.
{¶1} Appellants, Hanna Commercial, LLC, Chartwell Auctions, LLC, Joel D.
Dutton, Jared E. Dutton, and Jack C. Davis (hereinafter “Chartwell parties”), appeal the
judgment entered by the Stark County Common Pleas Court denying their motion to stay
the claims against them pending arbitration. Appellees are Lauri M. Weinfeld Living Trust,
Lauri M. Weinfeld and Irwin J. Weinfeld, M.D., as co-trustees and individually, and Dee
Mar Lake Properties, LLC, (hereinafter “Weinfeld parties”)
STATEMENT OF THE FACTS AND CASE
{¶2} On November 11, 2015, the Chartwell parties and the Weinfeld parties
entered into an auction agreement whereby the Weinfeld parties hired the Chartwell
parteis to auction off their real property consisting of a home and a banquet center. The
auction agreement included an arbitration provision in the event of a dispute arising from
the agreement. The auction bids were accepted using a multi-parcel method. First the
properties were offered separately, then they were offered together. The home was sold
first separately to the plaintiffs, Premier Homes, Inc., Johannes Schlabach, and Rebecca
Gingerich, and the banquet center was subsequently sold separately to another party,
who did not go through with the purchase of the banquet center. As a result, the Chartwell
parties re-auctioned and resold both properties to Leo and Carol Soehnlen, even though
the home had already been purchased by the plaintiffs. A dispute arose over the true
ownership of the properties.
{¶3} On January 5, 2016, the plaintiffs filed a complaint against several of the
Chartwell parties and Weinfeld parties seeking specific performance. Amended
complaints were filed on April 14, and June 6, 2016, to include all of the named Chartwell
parties and Weinfeld parties. Plaintiffs asserted claims for specific performance or in the
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alternative, breach of contract, promissory estoppel, negligent misrepresentation,
violations of R.C. Chapter 4707 governing auctioneers, and intentional interference with
contractual or prospective contractual relationships.
{¶4} The Weinfeld parties filed a cross-claim against the Chartwell parties, with
the exception of Appellant Davis, for indemnification and/or contribution. The Chartwell
parties filed a motion to stay the cross-claim pending arbitration pursuant to the arbitration
provision in the auction agreement and R.C. 2711.02(B) on April 27, 2016.
{¶5} The arbitration provision in the agreement provides:
In the event a dispute arises concerning this contract and/or the
performance of Owner(s) or Auctioneer/Broker arising out of or in any way
related to this contract or any of their acts or performances in connection
therewith, the dispute shall be submitted to binding arbitration pursuant to
the rules of the American Arbitration Association or similar arbitration
organization. By agreeing to arbitration, all parties waive their right to court
or jury trial. The party first filing shall have the right to select the arbitration
or are waived. The arbitration will be administered by the arbitration
association and will include the use of its arbitrators. The arbitrators shall
have actual experience with the auction of the type of property being sold
pursuant to this contract. All issues of the arbitration shall be determined
by the arbitrator. All costs and/or fees of the arbitration shall be equally
divided among all parties and all parties shall be responsible for the paying
[of] their own attorney’s fees. All incidental, consequential, or punitive
damages of any type or nature are hereby waived by all parties to this
Stark County, Case No. 2018CA00108 4
contract. Any and all disputes, whether by arbitration or otherwise, shall be
venued, heard and decided in Cuyahoga County, Ohio.
{¶6} On May 16, 2016, the Weinfeld parties filed an amended cross-claim
against the Chartwell parties, adding claims for breach of contract, breach of good faith,
fraudulent inducement/misrepresentation, violations of R.C. Chapters 4707 and 4735,
breach of common law fiduciary duty, professional negligence, negligent
misrepresentation, and promissory estoppel. In addition, the Weinfeld parties filed a third-
party complaint against Appellant Davis for the identical claims, and a third-party
complaint against the Soehnlens for declaratory judgment.
{¶7} On May 23, 2016, the plaintiffs filed a motion to bifurcate the trial, separating
their specific performance claim from their other legal causes of action. Plaintiffs also
filed a memorandum in opposition to the Chartwell parties’ motion to stay the Weinfeld
parties’ cross-claim pending arbitration.
{¶8} The Soehnlens filed a counterclaim against the Weinfeld parties alleging
specific performance, breach of contract, abuse of process, frivolous complaint, and
respondent superior. Also, the Soehnlens filed a cross-claim against Plaintiffs alleging
statute of frauds, abuse of process, and frivolous complaint, and included a negligence
claim against the Chartwell parties.
{¶9} On October 7, 2016, Appellant Davis filed a motion to stay the Weinfeld
parties’ third-party claims against him pending arbitration pursuant to the arbitration
provision in the auction agreement and R.C. 2711.02(B). The Weinfeld parties filed a
Stark County, Case No. 2018CA00108 5
memorandum in opposition to the Chartwell parties’ motion to stay their cross-claim
pending arbitration.
{¶10} On October 27, and 28, 2016, the trial court held a bench trial concerning
the specific performance claims of Plaintiffs and the Soehnlens. All parties were present.
By findings of fact and conclusions of law filed January 9, 2017, the trial court denied both
claims for specific performance, finding the auction "was conducted with mistake and
patent unfairness" and therefore requiring the Weinfeld parties to perform any sales
contract "would be unconscionable."
{¶11} On June 26, 2017, the trial court denied the Chartwell parties’ motions to
stay the proceedings pending arbitration. The Chartwell parties filed a notice of appeal
of this decision on July 20, 2017. Thereafter, Plaintiffs dismissed all of their claims against
the Chartwell parties and the Weinfeld parties with prejudice, and the Soehnlens
dismissed their cross-claims against Plaintiffs without prejudice. The Soehlens'
counterclaim against the Weinfeld parties was disposed of via a partial dismissal filed
August 30, 2017, and a decision on summary judgment filed November 16, 2017. As a
result, Plaintiffs and the Soehnlens are not parties to the instant appeal.
{¶12} By decision filed March 20, 2018, this Court found we could not determine
the reason the trial court denied the stay pending arbitration, and remanded the instant
action to the trial court to enter a new judgment with specific reasoning. Premier Homes,
Inc. v. Hanna Commercial, LLC, 5th Dist. Stark No. 2017CA00135, 2018-Ohio-1126.
{¶13} On remand, the trial court found the arbitration clause in the auction
agreement violates public policy. The court found the arbitration clause circumvents the
Weinfeld parties’ statutory causes of action and related remedies as set forth in R.C.
Stark County, Case No. 2018CA00108 6
4707.23(B) and R.C. 4707.261. The court further found arbitration would equate to a
waiver of Chartwell parties’ liability for breach of fiduciary duties. Judgment Entry, July 6,
2018.
{¶14} It is from the July 6, 2018 judgment of the trial court the Chartwell parties
prosecute their appeal, assigning as error:
THE TRIAL COURT ERRED IN DENYING THE HANNA PARTIES’
MOTION(S) TO STAY THE WEINFELD PARTIES’ CROSS-CLAIM AND
THIRD PARTY COMPLAINT AGAINST THE HANNA PARTIES PENDING
ARBITRATION PURSUANT TO THE VALID AND ENFORCEABLE
ARBITRATION PROVISION IN THE AGREEMENT.
{¶15} The Chartwell parties argue the trial court erred in finding the arbitration
clause void as against public policy.
{¶16} “When addressing whether a trial court has properly granted motions to
stay proceedings and compel arbitration, the standard of review is abuse of discretion.”
Eagle v. Fred Martin Motor Co., 157 Ohio App.3d 150, 2004–Ohio–829, ¶ 10 (9th Dist.
Summit), citing Carter Steel & Fabricating Co. v. Danis Bldg. Constr. Co., 126 Ohio
App.3d 251, 254–255 (3d Dist. Logan 1998). However, at issue in the case sub judice is
the enforceability of the arbitration clause as a matter of public policy, which is a question
of law. See Murray v. David Moore Builders, Inc., 9th Dist. Summit No. 23257, 2006–
Ohio–6751, ¶ 8; Eagle at ¶ 11. “[W]hen an appellate court is presented with purely legal
questions, the standard of review to be applied is de novo.” Eagle at ¶ 11.
Stark County, Case No. 2018CA00108 7
{¶17} Ohio’s public policy encourages the use of arbitration to settle disputes.
Eagle at ¶ 14, citing Schaefer v. Allstate Ins. Co., 63 Ohio St.3d 708, 711–712 (1992).
Accordingly, there exists a presumption in favor of arbitration when the disputed issue
falls within the scope of the arbitration agreement. Eagle at ¶ 14, citing Williams v. Aetna
Fin. Co., 83 Ohio St.3d 464, 471 (1998). Arbitration agreements are “valid, irrevocable,
and enforceable, except upon grounds that exist at law or in equity for the revocation of
any contract.” R.C. 2711.01(A); Eagle at ¶ 16.
{¶18} Although on remand the trial court specifically found the agreement violated
public policy, the Weinfeld parties argue because Chartwell Auctions, LLC and Hanna
Commercial Real Estate did not sign the agreement and the agreement was not validly
executed pursuant to instructions set forth in a letter from the Ohio Department of
Agriculture, the Chartwell parties cannot compel arbitration in this matter. The Weinfeld
parties did not raise this argument in their brief in opposition to the motion to stay in the
trial court. A litigant who has the opportunity to raise an issue in the trial court, but
declines to do so, waives the right to raise that issue on appeal. The Strip Delaware, LLC
v. Landry's Restaurants, Inc., 5th Dist. Stark No. 2010CA00316, 2011–Ohio–4075, ¶41;
State Farm Mut. Auto. Ins. Co. v. Cheeks, 5th Dist. Stark No. 2013CA00135, 2014-Ohio-
410, ¶12.
{¶19} Further, in its January 9, 2017 judgment entry following trial on the equitable
relief sought in the case, the trial court identified Appellants herein collectively as
“Chartwell,” and Appellees herein as “the Weinfelds.” The court specifically found:
Stark County, Case No. 2018CA00108 8
The Weinfelds and Chartwell entered into an “Exclusive Auction
Agreement” effective November 11, 2015, which provided Chartwell the
“exclusive right and authority” to sell the Tudor Home and Banquet Center
on behalf of the Weinfelds at auction (the “Auction Agreement”). [Exh. A,
¶1]. The Weinfelds and Chartwell agreed this auction would be held on
December 14, 2015 (the “Auction”). [Id. at ¶2]. The Auction Agreement
was signed by Ms. Lauri Weinfeld and Jared Dutton as “auctioneer” on
behalf of Chartwell.
{¶20} Judgment Entry, January 9, 2017, Finding of Fact 8
{¶21} This finding by the trial court was not appealed. Further, to enforce an
arbitration clause it is only necessary the provision be in writing; a party's agreement to
the provision need not be evidenced by the signature of the party to be charged. Garcia
v. Wayne Homes, LLC, 2nd Dist. Clark No. 2001 CA 53, 2002-Ohio-1884, *8. For these
reasons, we reject Appellees’ argument.
{¶22} The trial court first found the arbitration provision violated public policy
because it circumvents R.C. 4707.32(B) and R.C. 4707.261, which provide professional
standards for auctioneers and a statutory right of action in favor of any person harmed by
violation of the professional standards. The court found enforcement of the arbitration
provision would deprive Appellees of their statutory cause of action. We disagree.
{¶23} A refusal to enforce a contract on the grounds of public policy is
distinguished from a finding of unconscionability. Eagle v. Fred Martin Motor Co., 9th Dist.
No. 21522, 157 Ohio App.3d 150, 2004-Ohio-829, 809 N.E.2d 1161, ¶ 63. Rather than
Stark County, Case No. 2018CA00108 9
focusing on the relationship between the parties and the effect of the agreement upon
them, public policy analysis requires the court to consider the impact of such
arrangements upon society as a whole. Id.{¶24} R.C. 4707.32(B) states in pertinent part:
A person who asserts that the person has been aggrieved by the
actions of both an auction firm and a licensed auctioneer related to an
auction that resulted in actual and direct losses to the aggrieved person
may file a cause of action with a court of competent jurisdiction
claiming that a violation of this chapter or rules adopted under it resulted in
the actual and direct losses.
{¶25} Chapter 1345 of the Ohio Revised Code, the Consumer Sales Practices
Act, is a remedial statute designed to provide remedies to protect consumers. Similarly,
R.C. 4707.23(B) is a remedial statute designed to protect anyone aggrieved by the
actions of an auctioneer or auction firm. In finding statutory claims under the Consumer
Sales Practices Act may be arbitrated, the Court of Appeals for the Second District held
as follows:
It is well settled that statutory claims may be the subject of an
arbitration agreement. The Supreme Court has stated that “[h]aving made
the bargain to arbitrate, the party should be held to it unless [the legislature]
itself has evidenced an intention to preclude a waiver of judicial remedies
Stark County, Case No. 2018CA00108 10
for the statutory rights at issue.” Moreover, “so long as the prospective
litigant effectively may vindicate his or her statutory cause of action in the
arbitral forum, the statute will continue to serve both its remedial and
deterrent function.”
Nothing in R.C. Chapter 1345 reflects a policy that claims falling
under it be enforced in court and not in arbitration or suggests that parties
to a consumer transaction covered by the CSPA cannot agree to arbitrate
such matters. Ohio courts have uniformly held that parties to a consumer
transaction covered by the CSPA can agree to arbitrate such matters and
that arbitration does not deprive the complainant of any remedies available
under CSPA claims. Because Appellants are able to vindicate their statutory
cause of action in the arbitral forum, the statute retains its deterrent effect.
In the instant case, the parties bound themselves to settle any dispute
arising from the contract through arbitration and did not except CSPA
claims. Therefore, Appellants' CSPA claims are subject to arbitration per
the parties' agreement.
{¶26} Garcia, supra, *14, citing Parsley v. Terminix International Company, L.P.
(S.D. Ohio Sept. 15, 1998), Western Division App. No. C–3–97–394, unreported; Gilmer
v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S.Ct. 1647, 114 L.Ed.2d 26;
Vincent v. Neyer, 139 Ohio App.3d 848, 851, 745 N.E.2d 1127 (2000); Smith v. Whitlatch
& Co., 137 Ohio App.3d 682, 685, 739 N.E.2d 857 (2000); Karamol v. Continental Estates,
Stark County, Case No. 2018CA00108 11
Inc., Wood App. No. WD–00–012, unreported (September 22, 2000); Stehli v. Action
Custom Homes, Inc., Geauga App. No. 98–G–2198, unreported (Sept. 24, 1999).
{¶27} R.C. 4707.32(B) uses the permissive “may” file an action in court, not the
mandatory “shall.” Nothing in the statute mandates a claim brought pursuant to this
section be brought exclusively before the court. Rather, as in the Consumer Sales
Practices arena, the parties may agree to arbitrate matters governed by Revised Code
Chapter 4707.
{¶28} We further find the arbitration clause does not preclude the Weinfeld parties
from recovering damages allowed by R.C. 4707.32(B). R.C. 4707.32(B), as set forth
above, allows for the recovery of actual and direct losses. While the arbitration clause
herein precludes recovery of incidental, consequential or punitive damages, nothing in
the arbitration agreement precludes recovery of damages for actual and direct losses, as
allowed by statute.
{¶29} The court also found the arbitration provision violated public policy because
it circumvented Appellees’ rights pursuant to R.C. 4707.261, which provides:
A person who obtains a final judgment in a court of competent
jurisdiction against a person licensed under this chapter, on the grounds of
conduct by the licensee that is described in section 4707.15 of the Revised
Code or that otherwise violates this chapter or rules adopted under it and
that is associated with an act or transaction that only a licensee lawfully may
perform, may file a verified application in a court of common pleas for an
order directing payment from the auction recovery fund. The application
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shall be accompanied by the judgment entry and may seek payment in an
amount that is equal to the portion of the judgment that remains unpaid.
The application shall specify the nature of the act or transaction on
which the underlying judgment was based, the activities of the applicant in
pursuit of remedies available under the law for the collection of judgments,
and the actual and direct losses sustained by the applicant. The applicant
shall attach to the application a copy of each pleading and order in the
underlying court action. In addition, the application shall include proof of the
applicant's actual and direct loss.
Whenever possible, the court shall require all applicants and
prospective applicants whose claims to the fund arose from an underlying
judgment against the same licensee to be joined in one action under this
section so that the rights of all applicants may be equitably adjudicated and
settled.
{¶30} R.C. 2711.09 allows a party to confirm an arbitration award in a court of
common pleas, thus reducing the award to judgment. We find such procedure is not in
conflict with R.C. 4707.261 nor otherwise inconsistent with its availability to either party
following confirmation of the arbitration award. The judgment has the same effect as a
judgment in an action, and may be enforced as if rendered in an action in the court in
which it is entered. R.C. 2711.14. Therefore, a party who has an arbitration award
confirmed and reduced to judgment may participate in the auction recovery fund pursuant
to R.C. 4707.261 in the same manner as a party who obtained a judgment in court. We
Stark County, Case No. 2018CA00108 13
find the arbitration provision in this case does not violate public policy by circumventing
Appellees’ rights pursuant to R.C. 4707.261.
{¶31} The trial court also found the arbitration provision violates public policy
because “enforcing the arbitration provision would equate to a waiver of Defendants’
liability for any breach of fiduciary duties.” Again, we disagree.
{¶32} The arbitration clause provides in pertinent part, “In the event a dispute
arises concerning this contract and/or the performance of Owner(s) or
Auctioneer/Broker arising out of or in any way related to this contract or any of
their acts or performances in connection therewith, the dispute shall be submitted to
binding arbitration” (emphasis added). Nothing in this clause suggests the Weinfeld
parties’ claim of breach of fiduciary duty could not be submitted to the arbitrator, as the
arbitration applies to all disputes concerning the performance of the Chartwell parties in
any way related to the contract. (See, generally, Internatl. Culture & Trade Complex, Inc.
v. Drenik, 10th Dist. Franklin No. 13AP-596, 2014-Ohio-713, in which claims of breach of
fiduciary duty were submitted to arbitration.)
{¶33} We find the court erred in denying a stay of the proceedings pending
arbitration on the basis the arbitration provision violated public policy. The assignment of
error is sustained.
Stark County, Case No. 2018CA00108 14
The judgment of the Stark County Common Pleas Court is reversed and this cause is
remanded for further proceedings according to law, consistent with this opinion.
By: Hoffman, P.J.
Delaney, J. and
Wise, Earle, J. concur