Arbor Grove Properties v. Clear Sky Realty, Inc.

[Cite as Arbor Grove Properties v. Clear Sky Realty, Inc., 2018-Ohio-1467.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
ARBOR GROVE PROPERTIES, et al. JUDGES:
Hon. John W. Wise, P. J.
Plaintiffs-Appellees Hon. Craig R. Baldwin, J.
Hon. Earle E. Wise, Jr., J.
-vs-
Case No. 2017 CA 00124
CLEAR SKY REALTY, INC., et al.
Defendants-Appellants OPINION
CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common
Pleas, Case No. 2015 CV 02504
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: April 16, 2018
APPEARANCES:
For Plaintiffs-Appellees For Appellants Clear Sky Realty & Wohlwends
JOHN P. MAXWELL BRIAN D. SULLIVAN
MATTHEW W. ONEST REMINGER CO., LPA
KRUGLIAK, WILKINS, GRIFFITHS 101 West Prospect Avenue, Suite 11400
& DOUGHERTY CO., LPA Cleveland, Ohio 44115-1093
4775 Munson Street
Canton, Ohio 44718 ROBERT S. YALLECH
REMINGER CO., LPA
11 Federal Plaza Central, Suite 1200
Youngstown, Ohio 44503
For Appellants Clear Sky Properties
JOHN V. BOGGINS
1428 Market Avenue North
Canton, Ohio 44714-2616
Stark County, Case No. 2017 CA 00124 2
Wise, John, P. J.
{¶1} Defendants-Appellants Clear Sky Realty, Inc., et al., appeal the decision of
the Stark County Court of Common Pleas, which denied certain motions to compel
arbitration in a lawsuit filed by Appellees Arbor Grove Properties, LLC, et al. for breach of
contract and other claims. The relevant facts leading to this appeal are as follows.
{¶2} On December 1, 2015, Appellees Arbor Grove Properties, LLC, One
Rowland, LLC, Pioneer Trail Properties, LLC, Pollyanna Properties, LLC, and Julian Real
Estate, LLC (hereinafter “appellees") filed a civil action in the Stark County Court of
Common Pleas against Appellants Clear Sky Realty, Inc., Eric M. Wohlwend, and Lila
Wohlwend.
{¶3} In their complaint, appellees, owners of certain residential properties,
alleged that between October 2012 and August 2015 they had entered into several
agreements with appellants concerning management services for some of appellees’
residential tenant units. Appellees further alleged that appellants overcharged them for
various maintenance and repair work performed at the residential buildings and that
appellants failed to properly manage the properties. The complaint included several
breach of contract claims against Appellant Clear Sky Realty, and breach of fiduciary
duties, fraud, and accounting against Appellants Clear Sky Realty, Eric M. Wohlwend,
and Lila Wohlwend.
{¶4} The management agreements in question include a total of eleven
arbitration provisions. Nine of these eleven provisions are in pertinent part as follows:
"Owner and agent agree to submit any dispute over District Court maximum limits to
Stark County, Case No. 2017 CA 00124 3
arbitration before the American Arbitration Association. Except as prohibited by Ohio law
***.” (Emphasis added).
{¶5} The remaining two of the eleven provisions provide in pertinent part: "Owner
and agent agree to submit any dispute over court maximum limits to arbitration before the
American Arbitration Association. Except as prohibited by Ohio law ***." (Emphasis
added).
{¶6} On January 25, 2016, Appellants Clear Sky Realty, Eric M. Wohlwend, and
Lila Wohlwend (the original three defendants) answered appellees’ aforesaid complaint
and asserted various counterclaims alleging failure of compensation for services
performed under the management agreements. Appellants also therein advanced two
third-party complaints, the details of which need not be recited in the present appeal.
{¶7} Over a year later, on March 1, 2017, appellees moved to amend their
complaint. At that time, appellees further alleged that discovery of new factual issues
required the naming of an additional party, Clear Sky Properties, Inc. (emphasis added)
and the assertion of breach of contract against all defendants. Appellees also asserted
that they had "inadvertently failed to attach several written contracts between the parties,
which would likely cover plaintiffs' claims during the terms of those agreements." Motion
for Leave to Amend Instanter at 4.
{¶8} On March 29, 2017, the trial court granted appellees’ motion for leave to file
their amended complaint.
{¶9} On April 7, 2017, appellants filed their answers to the amended complaint
and, for the first time, separate motions to stay proceedings and to compel arbitration.
Appellants argued that the additional management agreements made subject to the
Stark County, Case No. 2017 CA 00124 4
litigation by virtue of the amended complaint, as well as the management agreements
identified in the original complaint, mandated that the dispute be arbitrated. On April 21,
2017, appellees and the two third-party defendants filed a memorandum in opposition to
arbitrating the dispute. On April 28, 2017, appellants filed a reply in support of their motion
to compel arbitration.
{¶10} After conducting a hearing, the trial court denied appellants’ motions to
compel arbitration and stay the proceedings. See Judgment Entry, June 30, 2017.
{¶11} On July 11, 2017, Appellants Clear Sky Realty, Inc., Eric M. Wohlwend, Lila
Wohlwend, and Clear Sky Properties, Inc. jointly filed a notice of appeal. They herein
raise the following sole Assignment of Error:
{¶12} “I. THE TRIAL COURT INCORRECTLY DENIED DEFENDANTS’ MOTION
TO COMPEL ARBITRATION AND STAY PROCEEDINGS.”
I.
{¶13} In their sole Assignment of Error, appellants contend the trial court erred in
denying their motions to compel arbitration and stay proceedings. We disagree.
Jurisdiction
{¶14} As an initial matter, we find we have appellate jurisdiction to proceed in this
matter, even though a final judgment is not before us. As a general rule, a judgment that
leaves issues unresolved and contemplates that further action must be taken is not a final
appealable order. See Moscarello v. Moscarello, 5th Dist. Stark No. 2014CA00181,
2015–Ohio–654, ¶ 11, quoting Rice v. Lewis, 4th Dist. Scioto No. 11CA3451, 2012–Ohio–
2588, ¶ 14 (additional citations omitted). However, an order under R.C. 2711.02(B) that
grants or denies a stay of a trial of an action pending arbitration is a final appealable order.
Stark County, Case No. 2017 CA 00124 5
See R.C. 2711.02(C). Such a decision under R.C. 2711.02 remains a final appealable
order even without the language of Civ.R. 54(B). See, e.g., Welsh v. Indiana Insurance
Co., 5th Dist. Stark No. 2005-CA-00327, 2006-Ohio-6803, ¶ 15 (citations omitted). We
will therefore proceed to the merits of the present appeal.
Standard of Review
{¶15} R.C. 2711.02(B) states as follows: “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.”
{¶16} Ohio public policy favors enforcement of arbitration provisions. See
Harrison v. Toyota Motor Sales, U.S.A., Inc., 9th Dist. Summit No. 20815, 2002–Ohio–
1642, ¶ 9. “Arbitration is favored because it provides the parties thereto a relatively
expeditious and economical means of resolving a dispute.” Sunrush Construction Co. v.
Landmark Properties, L.L.C., 4th Dist. Ross No. 17CA3596, 2017-Ohio-8598, ¶ 17,
quoting Schaefer v. Allstate Ins. Co., 63 Ohio St. 3d 708, 712, 590 N.E.2d 1242 (1992).
{¶17} Generally, an appellate court reviews a trial court's stay of proceedings
pending arbitration under R.C. 2711.02 under an abuse of discretion standard.
Featherstone v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 159 Ohio App. 3d 27, 30, 822
N.E.2d 841, 2004–Ohio–5953, citing Pinette v. Wynn's Extended Care, Inc., Summit App.
No. 21478, 2003–Ohio–4636, ¶ 5. However, the issue of whether a controversy is
Stark County, Case No. 2017 CA 00124 6
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. Simmons v.
Extendicare Health Servs., Inc., 5th Dist. Delaware No. 15 CAE 12 0095, 2016-Ohio-
4831, ¶ 13, citing Church v. Fleishour Homes, Inc., 172 Ohio App. 3d 205, 874 N.E.2d
795, 172 Ohio App. 3d 205, ¶ 19 (5th Dist.2007).
Severability Issue
{¶18} Appellants first propose that the trial court erroneously failed to sever the
“maximum limits” language in the arbitration provision in order to facilitate arbitration in
this matter.
{¶19} There is no duty to arbitrate particular disputes where there has been no
agreement between parties requiring such disputes to be submitted to arbitration. See
Kegg v. Mansfield, 5th Dist. Stark No. 1999CA00167, 2000 WL 222118. In the case sub
judice, the eleven agreements at issue evince a meeting of the minds to submit
disagreements to arbitration only where the amounts involved are “over court maximum
limits” or “over District Court maximum limits.” However, appellants do not dispute the trial
court’s observation that the Stark County Court of Common Pleas has no such upper
limit, nor do federal district courts, the only “District Courts” extant in Ohio.1 Therefore,
strictly speaking, no dispute in an Ohio common pleas court under the agreements in
question could ever go to arbitration, no matter how large.
1 Although the underlying action was not brought in a municipal court, we nonetheless
recognize that under R.C. 1901.17, “[a] municipal court shall have original jurisdiction only
in those cases in which the amount claimed by any party, or the appraised value of the
personal property sought to be recovered, does not exceed fifteen thousand dollars,
except that this limit does not apply to the housing division or environmental division of a
municipal court. ***.” We also take note inter alia of Ohio’s statutory damage caps under
R.C. 2315.18.
Stark County, Case No. 2017 CA 00124 7
{¶20} The doctrine of severability generally provides that where a contract
consists of several agreements, one of which is illegal, the illegal portion can be severed
if it does not destroy the symmetry of the contract. Black v. Pheils, 6th Dist. Wood No.
WD-03-045, 2004-Ohio-4270, ¶ 55, citing Vincent v. Santa Cruz (1982), 98 Nev. 338,
341, 647 P.2d 379, 381. Under the doctrine of severability, an arbitration agreement is
treated as an independent contract that does not necessarily fail if the remainder of the
contract is found invalid. See Champaign Landmark, Inc. v. Prince, 2nd Champaign Nos.
97 CA 28, 97 CA 29, 97 CA 30, 1998 WL 735914. Whether a part of a contract may be
severed from the remainder “depends generally upon the intention of the parties, and this
must be ascertained by the ordinary rules of construction.” Ignazio v. Clear Channel
Broadcasting, Inc., 113 Ohio St. 3d 276, 2007-Ohio-1947, 865 N.E.2d 18, ¶ 11, citing
Huntington & Finke Co. v. Lake Erie Lumber & Supply Co. (1924), 109 Ohio St. 488, 2
Ohio Law. Abs. 197, 143 N.E. 132, syllabus. A court must determine whether the part of
the contract sought to be excised is fundamental to the overall meaning of the agreement,
or whether it may be severed so that the remainder of the agreement may be given effect.
Hehman v. Maxim Crane Works, 12th Dist. Butler No. CA2010-01-009, 2010-Ohio-3562,
¶ 32, citing Ignazio, supra (internal quotations omitted).
{¶21} Our research indicates that in a number of cases, the issue on appeal
focused on the severability of the entire arbitration provision, rather than removal of
portions of a single sentence within the provision, as presently urged by appellants.
However, in Rude v. NUCO Edn. Corp., 9th Dist. Summit No. 25549, 2011-Ohio-6789,
the Ninth District Court of Appeals cogently noted several examples of cases where a
Stark County, Case No. 2017 CA 00124 8
court had “severed a discrete term of the arbitration provision and enforced the remainder
of it.” Id. at ¶ 29.
{¶22} Nonetheless, upon review, we find no basis to invoke the doctrine of
severability under the unusual circumstances presented. Arbitration is a matter of contract
and, in spite of the strong policy in its favor, a party cannot be compelled to arbitrate any
dispute which he or she has not agreed to submit. Teramar Corp. v. Rodier Corp., 40
Ohio App. 3d 39, 40, 531 N.E.2d 721, (8th Dist. 1987) (additional citations omitted). In this
instance, the agreements set forth that only disputes of a sufficient magnitude to exceed
nebulous “court maximum limits” would go to arbitration. While such an arrangement may
have reflected a misunderstanding of the law or court rules, it is nonetheless fundamental
to the overall functioning of the agreement (Hehman, supra), and it is by no means illegal
or unconscionable. We therefore hold that severing the limiting language of the arbitration
clause would improperly compel the parties into a means of remedy upon which they did
not clearly agree.
Waiver Issue
{¶23} The briefs before us also present arguments on the issue of whether
appellants waived their claim to arbitration in the trial court. We have recognized that
active participation in a lawsuit, and failure to request arbitration in a timely manner, may
evince an acquiescence to proceeding in a judicial forum. Smith Design & Constr., Inc. v.
N.L. Constr. Corp., 5th Dist. Stark No. 2014 CA 00002, 2014-Ohio-4904, ¶ 55, citing
Griffith v. Linton, 130 Ohio App. 3d 746, 752, 721 N.E.2d 146 (10th Dist. 1998). Appellants
herein contend that although they did not immediately raise the issue of arbitration during
the first stages of litigation, appellees’ amendment of the complaint in 2017 meant that
Stark County, Case No. 2017 CA 00124 9
“the legal landscape of the loss dramatically changed,” causing appellants to invoke
arbitration at that time. Appellants’ Brief at 9.
{¶24} However, we have generally recognized that an appellate court is not
required to render an advisory opinion or to rule on a question of law that cannot affect
matters at issue in a case. See Ambrose v. Galena, 5th Dist. Delaware No. 15 CAH 01
0011, 2015-Ohio-3157, ¶ 29, citing State v. Bistricky (1990), 66 Ohio App. 3d 395, 584
N.E.2d 75. In light of our previous determinations, we will not further analyze the issue of
waiver of arbitration in the within appeal.
Conclusion
{¶25} The trial court did not err in denying appellants’ motions to compel
arbitration and stay proceedings. Appellants’ sole Assignment of Error is therefore
overruled.
{¶26} For the reasons stated in the foregoing opinion, the judgment of the Court
of Common Pleas, Stark County, Ohio, is hereby affirmed.
By: Wise, John, P. J.
Baldwin, J., and
Wise, Earle, J., concur.
.
JWW/d 0327