Williams v. Aetna Fin. Co.

• Decision Date: 04 November 1998
• Docket Number: No. 97-1670,97-1670
• Parties: , 67 USLW 3504 WILLIAMS, Appellee, v. AETNA FINANCE COMPANY, d.b.a. ITT Financial Services, Appellant.
• Court: Ohio Supreme Court

Page 464

83 Ohio St.3d 464

700 N.E.2d 859, 67 USLW 3504

WILLIAMS, Appellee, v. AETNA FINANCE COMPANY, d.b.a. ITT Financial Services, Appellant.

No. 97-1670.

Supreme Court of Ohio.

Submitted May 26, 1998.

Decided Nov. 4, 1998.

In late November 1989, Christopher Blair came to the home of plaintiff-appellee Mildred Williams and had a short conversation with her. Blair told Williams that he had noticed that her house was in need of some repairs. Williams responded that she was aware repairs were needed, but that she was unable to get a loan to get the work done. Williams, a sixty-six-year-old widow was alone in her home at the time, and did not allow Blair to enter. He told her he would return later to speak to her again.

Blair was a pitchman who attempted to convince homeowners to have work done on their houses. He did not do the work himself, but contracted it out to others. At the time he solicited Williams to have her house worked on, Blair was doing business as Homestead Construction Company.

Blair returned to Williams's house again in either late November or in early December. Her grandsons were present at the time, so Williams allowed Blair to enter her home. Blair showed her pictures of what her house could look like with repairs done to the exterior. Williams, who was interested in what Blair had to say, told him she also needed repairs done on the interior of the house.

Blair was seeking business in Williams's neighborhood because he knew that there were a lot of elderly people in the area who had owned their homes for a long time, so that many were free of mortgages. He did not know that Williams owned her home free of a mortgage until he talked to her. Once he found out from her that she had built up equity in her house, he was interested in doing business with her. Blair told Williams he could get her a loan to finance the improvements to her house, even though she again told him she had been unable to get a loan in the past to get the needed repairs done.

Williams signed a contract dated December 1, 1989 with Blair, to have work done on both the interior and exterior of her house, for $11,500. On either December 5 or December 6, an employee of Blair transported Williams to the Loveland, Ohio branch office of defendant-appellant Aetna Finance Company, d.b.a. ITT Financial Services ("ITT"), to obtain a loan to finance the home repairs. Even though another branch office was closer to Williams's home, she was taken to the Loveland branch because Blair frequently referred prospective loan applicants to that branch. The branch manager at Loveland, Tom Scholl, had contacted Blair in early 1988 seeking referrals of loan customers. Blair had been designated an approved "referral source" by ITT, a special status that allowed loan customers referred by Blair to receive preferential handling of their loans based on the fact that they dealt with Blair.

At her first visit to the ITT Loveland office, Williams agreed to the first of two loan contracts she would make with ITT. She borrowed $3,769.95 at an annual interest rate of 27.4 percent. The loan was secured by Williams's television set and stereo, with the total value of those two items listed as $650. Williams also turned over the title to her 1980 Buick automobile as security on the loan. ITT charged her a total of $155 for a loan origination fee and a recording fee. She was also sold insurance on her television set and stereo, as well as life insurance, for a total of $164.80. Williams was to pay $125 per month for a four-year period on the loan.

The loan proceeds from this first loan were paid to Williams in two checks, both made payable to her. One check, for $450.15, was for Williams's personal use. The other check, for $3,000, was to be a down payment on the remodeling work. At the ITT office, Williams signed that check over to Blair and gave it to Blair's employee who had transported her there.

On December 13, 1989, another of Blair's employees brought Williams to the Loveland branch office to do the paperwork to get a larger loan to finance the work on her house. This loan was designed as a debt consolidation loan, and was secured by a mortgage on Williams's real estate. Williams signed a $12,936.64 promissory note at an annual interest rate of 17.81 percent, to be repaid at $190 per month over fifteen years. ITT charged her $1,034.93 for a loan origination fee and points, and also charged Williams $25 for a commitment letter. Williams was charged a total of $417 for the recording fee, title insurance, title search, and appraisal.

Some of the loan proceeds were to be used to pay off Williams's first loan. The proceeds were also to be used to pay off Williams's outstanding credit card debts of $3,326.04 to Visa, L.S. Ayres, and Sears. The remainder of the proceeds was meant to finance the improvements to her home. Williams did not receive any of the proceeds at this time.

On December 19, 1989, Williams was again transported to ITT's Loveland office by employees of Blair. At that time, the second loan was finalized. As a result, the earlier loan was paid off and Williams received the proceeds of the second loan, as set up on December 13, in five checks. Four checks, made jointly payable to Williams and the credit card companies, were used to pay off those debts. Another check, for $4,492.12, was made payable to Williams. Williams endorsed that check at the ITT Loveland office, and gave it to one of Blair's employees.

At the time these loans were made, Williams's income was either $420 or $430 per month. She was making monthly payments of more than $190 per month on credit card bills and other debts prior to signing the loan agreements with ITT.

After Blair received payments from Williams via the ITT checks she signed over to him, workers came to her house in late December 1989 and early January 1990 and did some work on the house. However, the workers did only a small part of the work that Williams had agreed with Blair would be done. The work done was not what Williams wanted, and most of the work was never done at all. After starting the work, the workers did not return to finish it. Williams attempted to call Blair numerous times to inquire about the failure of the workers to do the job to her satisfaction, but he never answered her inquiries.

Williams made two payments on her loan with ITT, and then stopped making payments when it became evident to her that the work would not be finished. In April 1990, she filed suit in the Court of Common Pleas of Hamilton County against, inter alios, Christopher Blair, d.b.a. Homestead Construction Company, and ITT. Williams claimed violations of the Ohio Consumer Sales Practices Act ("CSPA") and Ohio Home Solicitation Sales Act ("HSSA"), breach of contract, and civil conspiracy. She sought compensatory damages, attorney fees, costs, and punitive damages. Blair, who eventually went bankrupt, was never served with the complaint. ITT was the only defendant served and became the only defendant against whom recovery was sought.

ITT filed a motion with the trial court to compel arbitration pursuant to the arbitration clause contained in the loan agreement Williams signed with ITT, and to stay the trial court proceedings pending arbitration. The loan agreement contained a broad arbitration clause providing that any dispute between Williams and ITT, "other than judicial foreclosures and cancellations regarding real estate security, * * * shall be resolved by binding arbitration."

Williams opposed ITT's motion primarily on equity grounds, claiming that the arbitration provision was unconscionable, deceptive, and unfair, and therefore unenforceable. The trial court, in a judgment entered on August 13, 1990, denied the motion to compel arbitration without giving a reason for the denial. ITT appealed to the Court of Appeals for Hamilton County, which affirmed the trial court's ruling, finding that Williams's "complaint challenges the existence of a contract between the parties and, therefore, the arbitration clause in the loan agreement may not be enforced until the question of the existence of the contract is resolved." Williams v. Aetna Fin. Co. (Aug. 9, 1991), Hamilton App. No. C-900663, unreported, 1991 WL 433751.

ITT appealed the judgment of the court of appeals to this court, which allowed the discretionary appeal. Williams v. Aetna Fin. Co. (1991), 62 Ohio St.3d 1484, 581 N.E.2d 1390. After full briefing and oral argument, this court dismissed the appeal as having been improvidently allowed. (1992), 65 Ohio St.3d 1203, 602 N.E.2d 246.

On February 26, 1993, ITT moved the trial court for an evidentiary hearing regarding the validity and enforceability of the arbitration provision. The trial court denied the motion, finding that its earlier decision denying arbitration had been affirmed on appeal, and that the motion was repetitious of ITT's earlier motion to compel arbitration.

A week after the court of appeals' decision upholding the trial court's denial of the motion to compel arbitration, Williams amended her complaint to allege that she was a victim of a scheme of fraudulent misrepresentation. ITT interposed a counterclaim against Williams for her failure to pay on the promissory note. After the trial court denied several pretrial motions by ITT, including a motion for summary judgment, the case proceeded to a jury trial.

Williams's principal claim at trial was that Blair and ITT collaborated in a scheme to defraud unsuspecting, unsophisticated homeowners, particularly preying on elderly African-Americans, such as Williams, in certain specific low-income neighborhoods. Williams alleged that Blair did not really intend that the work contracted for by these homeowners would be done, and contended that ITT was an integral part of Blair's schemes by supplying the loan money to the homeowners who entered into contracts with Blair, so that Blair would receive the proceeds of the loans....