Crouse v. LaGrange Junction Ltd.

[Cite as Crouse v. LaGrange Junction Ltd., 2012-Ohio-2972.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF LORAIN )
KEN CROUSE C.A. No. 11CA010065
Appellee
v. APPEAL FROM JUDGMENT
ENTERED IN THE
LAGRANGE JUNCTION LTD COURT OF COMMON PLEAS
COUNTY OF LORAIN, OHIO
Appellant CASE No. 11CV172042
DECISION AND JOURNAL ENTRY
Dated: June 29, 2012
DICKINSON, Judge.
INTRODUCTION
{¶1} Ken Crouse bought a vacant lot and, nine months later, entered into a contract
with LaGrange Junction Ltd. for construction of a house on that lot. This case arose after Mr.
Crouse suffered a number of problems with the lot and house that prevented him from legally
occupying the house. He sued LaGrange, which answered and moved for a stay pending
arbitration. Mr. Crouse opposed the stay, arguing that the arbitration clause in the construction
contract was both substantively and procedurally unconscionable. The trial court denied the
stay, and LaGrange appealed. This Court reverses because Mr. Crouse did not provide sufficient
evidence of procedural unconscionability.
BACKGROUND
{¶2} Mr. Crouse bought a vacant lot from Mr. Stiner, a member of LaGrange Junction
Ltd., and then entered into a construction contract with LaGrange for the building of a single-
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family dwelling on that lot. According to his complaint, Mr. Crouse’s claims in this case are
based on “severe and continued flooding covering the lot” and “numerous construction and/or
design problems with the interior of the home.”
{¶3} Mr. Crouse sued four defendants: (1) LaGrange Junction Ltd., which had served
as his builder, (2) Erie Coast Engineering LLC, an architectural and engineering firm, (3) an
individual member of Erie Coast, who had worked as the architect and engineer on the project,
and (4) Dennis R. Stiner, the seller of the real property at issue. Mr. Crouse sued Mr. Stiner for
breach of the purchase contract for the vacant lot. He sued LaGrange for breach of the
construction contract and negligent construction and/or repair. He sued Erie Coast for negligent
design. He also brought claims against “Defendants” for breach of implied and express
warranties, negligent supervision and retention, fraud, negligent misrepresentation, and deceptive
trade practices. It is unclear whether those claims were aimed at all the named defendants or just
some of them.
{¶4} LaGrange and Mr. Stiner jointly moved under Section 2711.02(B) of the Ohio
Revised Code to dismiss and/or stay the proceedings, arguing that the construction contract
required arbitration of the dispute. Mr. Crouse opposed the motion to dismiss and/or stay the
proceedings, arguing that the arbitration clause is unenforceable due to substantive and
procedural unconscionability. The trial court denied the motion, and LaGrange and Mr. Stiner
timely appealed.
{¶5} The issue on appeal is limited to the enforceability of the arbitration clause in the
LaGrange construction contract. That clause, if enforceable, applies only to claims arising under
that contract. Mr. Crouse sued Mr. Stiner individually based on a separate transaction, that is,
the sale of the vacant lot. Mr. Stiner has not argued that he is a party to LaGrange’s contract
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with Mr. Crouse nor that the real estate contract between him and Mr. Crouse contains an
arbitration clause. Therefore, although LaGrange and Mr. Stiner are represented by the same
lawyer and both parties’ names appear on the notice of appeal and the briefs, for the sake of
clarity, this Court will address LaGrange’s arguments without reference to Mr. Stiner.
JURISDICTION
{¶6} On September 23, 2011, this Court ordered LaGrange to demonstrate this Court’s
jurisdiction because the order appealed provides only that the “Motion to Dismiss and/or Stay
[P]roceedings is denied.” LaGrange responded to the order, explaining that the entry was a final,
appealable order under Section 2711.02(C) of the Ohio Revised Code because the motion to stay
or dismiss was based on a demand for arbitration. “[Section] 2711.02(C) permits a party to
appeal a trial court order that grants or denies a stay of trial pending arbitration, even when the
order makes no determination pursuant to [Rule 54(B) of the Ohio Rules of Civil Procedure].”
Mynes v. Brooks, 124 Ohio St. 3d 13, 2009-Ohio-5946, at syllabus. Thus, despite the fact that
Mr. Crouse’s claims remain pending against other defendants not involved in this appeal, the
trial court’s entry denying the requested stay is immediately appealable by statute.
ARBITRATION
{¶7} The sole assignment of error is that the trial court incorrectly denied the motion to
dismiss and/or stay the proceedings pending arbitration because it incorrectly determined that the
arbitration clause is unenforceable due to unconscionability. “Arbitration agreements are ‘valid,
irrevocable, and enforceable, except upon grounds that exist at law or in equity for the revocation
of any contract.’” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008–Ohio–938,
¶ 33 (quoting R.C. 2711.01(A)). Unconscionability is a valid basis for revoking a contract. Id.
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{¶8} “Unconscionability includes both ‘an absence of meaningful choice on the part of
one of the parties together with contract terms which are unreasonably favorable to the other
party.’” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008–Ohio–938, ¶ 34
(quoting Lake Ridge Acad. v. Carney, 66 Ohio St. 3d 376, 383 (1993)). “The party asserting
unconscionability of a contract bears the burden of proving that the agreement is both
procedurally and substantively unconscionable.” Id. (citing Collins v. Click Camera & Video
Inc., 86 Ohio App. 3d 826, 834 (1993) (“One must allege and prove a ‘quantum’ of both prongs
in order to establish that a particular contract is unconscionable”)). “The issue of
unconscionability is a question of law.” Eagle v. Fred Martin Motor Co., 157 Ohio App. 3d
150, 2004–Ohio–829, at ¶ 12. Therefore, this Court reviews a trial court’s unconscionability
decision de novo. Taylor, 2008–Ohio–938, at ¶ 2.
{¶9} The LaGrange construction contract contains an arbitration clause: “Any
controversy [or] claim which does arise, or which arises out of construction o[r] sale of the new
house or improvement thereto which is the subject of this contract, and which cannot be settled
by buyer and seller, shall be settled by arbitration in Lorain, Ohio, at the instance of either party
hereto. Such arbitration to be held with the American Arbitration Association and the arbitration
will be in accordance with the industry arbitration rules of said association and judgment upon
the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.”
PROCEDURAL UNCONSCIONABILITY
{¶10} “Procedural unconscionability concerns the formation of the agreement and
occurs when no voluntary meeting of the minds is possible.” Brunke v. Ohio State Home Servs.
Inc., 9th Dist. No. 08CA009320, 2008–Ohio–5394, ¶ 10 (quoting Porpora v. Gatliff Bldg. Co.,
160 Ohio App. 3d 843, 2005–Ohio–2410, ¶ 7). To evaluate procedural unconscionability, this
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Court considers “the relative bargaining positions of the parties . . . and whether the party
claiming that the provision is unconscionable was represented by counsel at the time the contract
was executed.” Porpora, 2005–Ohio–2410, at ¶ 7 (citing Eagle v. Fred Martin Motor Co., 157
Ohio App. 3d 150, 2004–Ohio–829, ¶ 31). Factors bearing on the relative bargaining positions
of the parties include “age, education, intelligence, business acumen, experience in similar
transactions, whether the terms were explained to the weaker party, and who drafted the
contract.” Eagle, 2004–Ohio–829, at ¶ 31. Courts will also consider “whether alterations in the
printed terms were possible, [and] whether there were alternative sources of supply for the goods
in question.” Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009–Ohio–2054, ¶ 23 (quoting
Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008–Ohio–938, ¶ 44). Generally,
no one factor alone determines whether a contract is procedurally unconscionable. Id. at ¶ 29. A
court must consider the totality of the circumstances. Id. at ¶ 30.
{¶11} Mr. Crouse has argued that the arbitration clause is procedurally unconscionable
because LaGrange drafted the agreement and failed to explain the arbitration provision to him.
He has argued that he was not represented by a lawyer at the meeting, he did not understand
what arbitration meant, and the provision is buried on page eight of the nine page agreement. By
affidavit, Mr. Crouse testified that LaGrange drafted the entire agreement and a representative
told him that it was “the[ ] standard construction agreement they always used.” He also wrote
that he was not represented by counsel at that time, no representative of LaGrange explained the
arbitration provision to him, and he did not understand the meaning of the term arbitration.
{¶12} The record does not contain any evidence regarding Mr. Crouse’s “age, education,
intelligence, business acumen, [or] experience in similar transactions.” Eagle v. Fred Martin
Motor Co., 157 Ohio App. 3d 150, 2004–Ohio–829, ¶ 31. It also contains no evidence about
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“whether alterations in the printed terms were possible, [and] whether there were alternative
sources of supply for the goods in question.” Hayes v. Oakridge Home, 122 Ohio St. 3d 63,
2009-Ohio-2054, ¶ 23 (quoting Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352,
2008-Ohio-938, ¶ 44). Although both sides have argued in their briefs to this Court that the
other party enjoyed a superior bargaining position in entering the contract, there is no evidence in
the record about whether either party’s bargaining position was superior to the other.
{¶13} The arbitration provision does appear on the eighth of nine contract pages, but it
appears in an average font size and is separated from the surrounding text by a centered heading
that brings attention to the word “Arbitration” in bold text. There is no evidence that LaGrange
misrepresented the arbitration clause to Mr. Crouse or that the language was out of the ordinary
for the industry. See ABM Farms Inc. v. Woods, 81 Ohio St. 3d 498, 503 (1998) (determining
that arbitration clause need not be explained orally when it is not hidden, misrepresented, or out
of the ordinary for the industry).
{¶14} The evidence does not support Mr. Crouse’s argument that the contract was one
of adhesion. Although the evidence tends to show that LaGrange drafted the contract and used it
as a form for their construction jobs, there is no evidence that Mr. Crouse could not have
negotiated more advantageous terms, including the elimination of the arbitration clause. There is
no evidence in the record tending to show that LaGrange offered the contract on a take-it-or-
leave-it basis. See Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008–Ohio–938,
at ¶ 49 (defining an adhesion contract as “a standardized form contract prepared by one party,
and offered to the weaker party, usually a consumer, who has no realistic choice as to the
contract terms”) (citing Black’s Law Dictionary 342 (8th Ed. 2004)).
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{¶15} The evidence indicates that, although this was the type of purchase agreement that
might have involved lawyers, Mr. Crouse was not represented by a lawyer when he entered into
this contract. There is no evidence, however, indicating that LaGrange rushed Mr. Crouse
through the process of forming the agreement. Mr. Crouse testified by affidavit that he sunk his
“life savings” into this project, but he did not say that there was any reason why he was unable to
secure the assistance of legal counsel to review this contract for him before doing so.
{¶16} The facts of this case distinguish it from cases such as Porpora v. Gatliff Building
Company, 160 Ohio App. 3d 843, 2005-Ohio-2410 (9th Dist.), wherein this Court held a
residential construction contract to be procedurally unconscionable. In Porpora, this Court
determined that the business owner’s “own testimony characterizes the construction contract in
general and the arbitration clause in particular as adhesive.” Id. at ¶ 12. In that case, the
business owner testified at deposition that he would never agree to do business with a consumer
who would not accept the terms of the arbitration clause in his form contract. In Porpora, this
Court also relied on the fact that the consumer testified that he had no prior experience with
construction contracts. Id. In this case, the record contains no evidence regarding Mr. Crouse’s
prior experience with similar contracts and no evidence suggesting that he could not have
negotiated for the removal of the arbitration clause.
{¶17} Based on the totality of the circumstances, the trial court incorrectly determined
that the arbitration provision in the LaGrange contract was procedurally unconscionable. As Mr.
Crouse failed to carry his burden to show procedural unconscionability, this Court need not
consider whether the clause is substantively unconscionable. See Taylor Bldg. Corp. of Am. v.
Benfield, 117 Ohio St. 3d 352, 2008–Ohio–938, at ¶ 34. LaGrange’s assignment of error is
sustained.
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CONCLUSION
{¶18} LaGrange’s assignment of error is sustained because Mr. Crouse did not present
sufficient evidence of procedural unconscionability to render the arbitration clause
unenforceable. The judgment of the Lorain County Common Pleas Court is reversed, and this
cause is remanded for proceedings consistent with this opinion.
Judgment reversed,
and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Lorain, State of Ohio, to carry this judgment into execution. A certified copy of
this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellee.
CLAIR E. DICKINSON
FOR THE COURT
MOORE, P. J.
CONCURS.
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BELFANCE, J.
DISSENTING.
{¶19} I respectfully dissent from the judgment of the majority based upon the analysis
and reasoning outlined in Porpora v. Gatliff Bldg. Co., 160 Ohio App. 3d 843, 2005-Ohio-2410
(9th Dist.). I disagree that Porpora is not applicable to this case. In Porpora, this Court
expressly relied upon the fact that the arbitration provision was not explained to the consumers
by anyone in the company, the construction company did not bring the arbitration provision to
the consumers’ attention, the consumers were unrepresented by counsel, this was the first
construction contract that the consumers had experience with, and the consumers did not know
what arbitration meant. Id. at ¶ 11. These facts are present in this case. Although there was
additional testimony in Porpora that the company president would not have removed the
arbitration clause if he had been asked to, that fact was not dispositive given that the parties were
not confronted with the consumers’ attempt to remove the clause. Id. at ¶12. In fact, the
company president and the consumers did not have any discussion concerning the clause. See
id. Thus, the president’s state of mind concerning what he might have done had he been asked
had no actual impact on the formation of the agreement.
{¶20} Furthermore, and also relying in part upon the similarity between the facts in this
case and the facts in Porpora, I would conclude that the agreement was substantively
unconscionable as well. See Porpora at ¶ 14-18. Accordingly, I would affirm the judgment of
the trial court.
APPEARANCES:
STEPHEN J. PROE, Attorney at Law, for Appellant.
ANTHONY J. COYNE and TRACEY S. MCGURK, Attorneys at Law, for Appellee.