Paradie v. Turning Point Builders, Inc.
| Decision Date | 28 June 2021 |
| Docket Number | NO. 2020-L-046,2020-L-046 |
| Citation | 174 N.E.3d 940 |
| Parties | Terrance PARADIE, Plaintiff-Appellee, v. TURNING POINT BUILDERS, INC., et al., Defendants-Appellants. |
| Court | Ohio Court of Appeals |
Rochelle M. Hellier, Axelrod Law Office, 7976 Tyler Boulevard, Mentor, OH 44060 (For Plaintiff-Appellee).
Patrick D. Quinn and Ronald A. Annotico, Quinn Legal Associates, Inc., 2802 Som Center Road, Suite 102, Willoughby Hills, OH 44094 (Defendants-Appellants).
{¶1} Defendants-appellants, Turning Point Builders, Inc., Turning Point Insurance Restoration, and Ryan Brown, appeal from the judgment of the Lake County Court of Common Pleas, denying their motion to stay proceedings pending arbitration. For the following reasons, we reverse the decision of the lower court and remand for further proceedings consistent with this opinion.
{¶2} On November 15, 2019, plaintiff-appellee, Terrance Paradie, filed a Complaint against appellants. The Complaint raised claims for Breach of Contract, Bad Faith, Conversion, Fraud, and Unjust Enrichment. The claims related to a dispute over a contract for the appellants to build Paradie a home.
{¶3} On January 2, 2020, appellants filed a Joint Motion for Leave to File Answer and Counterclaims, which was granted. Appellants filed their Joint Answer on January 21, 2020. As an affirmative defense, they alleged that the claims were "subject to a contractually agreed upon binding arbitration clause." On the same date, appellants filed a motion to stay the case pending arbitration, which was subsequently stricken from the record as "unsigned and not in compliance with Civ.R. 11." Paradie filed a motion in opposition on January 27, 2020, contending that the provision for arbitration did not apply since appellants’ actions were fraudulent and they were withholding a refund for money owed despite not performing under the contract. The arbitration clause, contained in the parties’ "Contract to Purchase" provides:
{¶4} On February 18, 2020, appellants filed counterclaims against Paradie. In a February 21, 2020 Judgment Entry, the court found that the counterclaims should be stricken from the record as they were filed over a month past the time granted for leave to file the answer and counterclaims.
{¶5} Also on February 18, appellants filed a second motion to stay case. They alleged that the matter should be stayed pending arbitration since there was a mandatory arbitration clause in the parties’ contract.
{¶6} On March 2, 2020, appellants filed a motion requesting leave to file counterclaims instanter, asserting that since Paradie had objected and opposed the motion to stay, they needed to "prepare for the possibility that the arbitration provision may not be enforced or that the case will not be stayed." Attached were counterclaims for Promissory Estoppel, Unjust Enrichment, Breach of Contract, and Fraud.
{¶7} The court issued a Judgment Entry on March 5, 2020, denying the motion to stay. It found, "without reviewing the issue of whether fraud in the inducement precludes arbitration in this case," appellants had waived their right to have the matter submitted to arbitration. This finding was based on the fact that they filed an answer and counterclaims and sought leave to do so, as well as sought extra time for discovery due to the counterclaims, which the court found demonstrated recognition of its authority to determine the outcome.
{¶8} Appellants timely appeal and raise the following assignment of error:
{¶9} "The Trial Court abused its discretion and otherwise committed prejudicial error when it denied Appellants’ Motion to Stay the Case Pending Arbitration."
{¶10} "Generally, the standard of review for a decision granting or denying a motion to stay proceedings pending arbitration is abuse of discretion," including the issue of waiver of arbitration. Naylor Family Partnership v. Home S. & L. Co. of Youngstown , 11th Dist. Lake No. 2013-L-096, 2014-Ohio-2704, 2014 WL 2881917, ¶ 13. "However, a de novo standard of review is used when a trial court's grant or denial of a stay is based solely upon questions of law." Id.
{¶11} Appellants raise several issues, both procedural and substantive, relating to the finding of waiver. We will initially address whether, under the facts of this case, the record supported the determination that appellants waived their right to arbitrate.
{¶12} "Ohio public policy favors arbitration and, therefore, such provisions are ordinarily considered valid and enforceable." Alkenbrack v. Green Tree Servicing, L.L.C. , 11th Dist. Geauga No. 2009-G-2889, 2009-Ohio-6512, 2009 WL 4756349, ¶ 14. "As a result, a court must indulge a strong presumption in favor of arbitration and resolve any doubts in favor of arbitrability." Wascovich v. Personacare of Ohio, Inc. , 190 Ohio App.3d 619, 2010-Ohio-4563, 943 N.E.2d 1030, ¶ 24 (11th Dist.).
{¶13} However, "[i]t is well-established that the right to arbitration can be waived." Naylor, 2014-Ohio-2704, at ¶ 18, citing Hogan v. Cincinnati Fin. Corp., 11th Dist. Trumbull No. 2003-T-0034, 2004-Ohio-3331, 2004 WL 1433605, ¶ 22. To prove waiver, the opposing party is required to demonstrate "(1) that the party waiving the right knew of the existing right of arbitration and (2) that the party acted inconsistently with that right." Id. , citing Hogan at ¶ 23. It has been held waiver should not be "lightly inferred." Harsco Corp. v. Crane Carrier Co. , 122 Ohio App.3d 406, 415, 701 N.E.2d 1040 (3d Dist.1997).
{¶14} In determining whether a party acted inconsistently with the right to arbitrate, this court has applied the totality of the circumstances test set forth in Harsco . Alkenbrack at ¶ 26 ; Glenmoore Builders, Inc. v. Kennedy , 11th Dist. Portage No. 2001-P-0007, 2001 WL 1561742, *4 (Dec. 7, 2001). "Such circumstances that may be considered by the trial court to determine whether a party acted inconsistently with his right to arbitrate include: (1) any delay in the requesting party's demand to arbitrate by filing a motion to stay the proceedings pending arbitration; (2) the extent of the requesting party's participation in the litigation prior to its filing a motion to stay the proceeding, including a determination of the status of discovery, dispositive motions, and the trial date; (3) whether the requesting party invoked the jurisdiction of the court by filing a counterclaim or third-party complaint without asking for a stay of the proceedings pending arbitration; and (4) whether the non-requesting party has been prejudiced by the requesting party's inconsistent acts." Glenmoore at *4, citing Harsco at 414, 701 N.E.2d 1040 ; Dispatch Printing Co. v. Recovery Ltd. Partnership , 10th Dist. Franklin No. 10AP-353,et al., 2011-Ohio-80, 2011 WL 199120, ¶ 21.
{¶15} In considering the totality of the circumstances, we note that this court held the trial court abused its discretion in finding waiver under a strikingly similar set of facts in Glenmoore . In Glenmoore , the appellant filed an answer to the complaint, in which he asserted the complaint should be dismissed pursuant to the binding arbitration clause. On the same day, appellant also filed a motion to stay the proceedings pending arbitration. Appellant filed a counterclaim and cross-claims, making a demand for a jury trial. Id. at *4. This court found that appellant did not act inconsistently with his right to arbitrate. Id. In reaching this holding, we emphasized that there was no delay between filing the answer and the motion to stay, filed on the same date. Appellant did not take part in any pre-litigation discovery or motion practice prior to filing the motion to stay. Although a counterclaim was filed, it was filed on the same day as the motion to stay and this court noted that counterclaims must be timely asserted, providing a justifiable basis for the filing of the counterclaim although appellant intended to pursue arbitration. Thus, there was no prejudice to the plaintiff. Under the totality of the circumstances, waiver did not apply. Id. {¶16} In the present matter, appellants also filed their initial motion to stay pending arbitration on the same day as the answer, which set forth the affirmative defense of the arbitration clause. While the court found this motion procedurally deficient, it was refiled less than a month later. Appellants did not file other motions or otherwise appear to participate in any discovery either before the filing of the initial motion or the refiled motion. The status conference held on February 18, which resulted in an order setting deadlines for discovery and dispositive motions, was held on the same date the motion to stay was refiled. While appellants did file counterclaims, which were stricken by the trial court as untimely, they were initially filed the same date as the refiled motion to stay pending arbitration. A subsequent attempt to refile the counterclaims included a statement by appellants that the counterclaims were being pursued in the instance that arbitration was denied. We fail to see any prejudice to Paradie as he was essentially immediately on notice that appellants intended to pursue arbitration and he filed no dispositive motions such as a motion for summary judgment and no depositions or other significant discovery appear to have been completed. See Fries v. Greg G. Wright & Sons, LLC , 2018-Ohio-3785, 120 N.E.3d 426, ¶ 33 (1st Dist.). Consistent with Glenmoore , we hold that appellants did not act inconsistently with their right to arbitrate. See Milling...
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