Williams v. Aetna Finance Co.
Decision Date | 02 December 1992 |
Docket Number | No. 91-2000,91-2000 |
Citation | 602 N.E.2d 246,65 Ohio St.3d 1203 |
Parties | WILLIAMS, Appellee, v. AETNA FINANCE COMPANY, d.b.a. ITT Financial Services, Appellant, et al. |
Court | Ohio Supreme Court |
APPEALPCITE, APPEAL from the Court of Appeals for Hamilton County, No. C-900663.
Richard A. Bernat and William H. Blessing, Cincinnati, for appellee.
Dinsmore & Shohl, Mark A. Vander Laan and M. Gabrielle Hils, Cincinnati, for appellant.
Patricia A. Walker, Medina, urging affirmance for amicus curiae, Ohio Academy of Trial Lawyers.
Jones, Day, Reavis & Pogue, Michael H. Carpenter, Darrell L. Dreher and Jeffrey J. Jones, Columbus, urging reversal for amicus curiae, Ohio Consumer Finance Ass'n.
The appeal is dismissed as having been improvidently allowed.
JAMES E. WALSH, J., of the Twelfth Appellate District, sitting for RESNICK, J.
I am writing because I believe that the trial court will be confused and dismayed by the unfortunate disposition of this appeal. I am also writing to articulate my belief that while the issue presented is straightforward, it is too important to be ignored as it has been today.
Appellee, Mildred Williams, and appellant, Aetna Finance Company, d.b.a. ITT Financial Services ("ITT"), entered into two contracts in which ITT agreed to lend Williams money to pay for home improvements. ITT financed the improvements through promissory notes signed by Williams. The notes contained broad arbitration clauses that provided in part:
The home improvements were not completed to Williams' satisfaction and she stopped paying on the notes. She then filed suit against ITT alleging civil conspiracy, breach of contract, and violations of the Ohio Consumer Sales Practices Act. Her complaint did not refer to the arbitration clause in the promissory notes.
ITT promptly filed an application to compel arbitration and to stay the court proceedings pursuant to the requirements of the Federal Arbitration Act. In her response to the application, Williams expressly contested the validity of the arbitration provision. She argued that ITT's application should be denied because
The trial court denied ITT's application to compel arbitration and set the case for further proceedings. The court did not explain its ruling. ITT appealed to the Hamilton County Court of Appeals. The court affirmed in a brief per curiam opinion. It wrote that "because appellee's complaint challenges the existence of a contract between the parties * * *, the arbitration clause in the loan agreement may not be enforced until the question of the existence of the contract is resolved." (Emphasis added.)
The issue on appeal to this court is whether it was proper for the trial court to deny ITT's motion to compel arbitration when the validity of the arbitration provision itself was challenged by Mildred Williams. I read today's disposition of this matter to require that the trial court first consider the narrow issue of whether the agreement to arbitrate is valid. That is the result required by the Federal Arbitration Act.
The Federal Arbitration Act provides that in a transaction involving interstate commerce an agreement to settle a controversy by arbitration "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Section 2, Title 9, U.S.Code. When such an agreement exists and a motion to compel arbitration is filed, the court must order arbitration as long as it is sure that "the making of the agreement for arbitration or the failure to comply therewith is not in issue." Section 4, Title 9, U.S.Code. In Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967), 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270, the United States Supreme Court considered these provisions. The court held that when a contract contains a broadly worded arbitration clause the question of whether the entire contract is invalid due to fraud in the inducement must be decided by an arbitrator. However, "if the claim is fraud in the inducement of the arbitration clause itself--an issue which goes to the 'making' of the agreement to arbitrate--the federal court may proceed to adjudicate it." 388 U.S. at 403-404, 87 S.Ct. at 1806, 18 L.Ed.2d at 1277. In short, a court "may consider only issues relating to the making and performance of the agreement to arbitrate." Id. at 404, 87 S.Ct. at 1806, 18 L.Ed.2d at 1277. Conformance with the Federal Arbitration Act was expressly required of the state courts in Southland Corp. v. Keating (1984), 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1.
In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth (1985), 473 U.S. 614, 105 S.Ct. 3346, 87 L.Ed.2d 444, the Supreme Court commented on the procedure that lower courts must follow in ruling on motions to compel arbitration:
473 U.S. at 626, 105 S.Ct. at 3353, 87 L.Ed.2d at 454-455. The court explained that even when the rights asserted by the party opposing arbitration are based on state statutory rights, the broad provisions of the Federal Arbitration Act apply. Id. at 626, 105 S.Ct. at 3354, 87 L.Ed.2d at 455. The justices cautioned, however, that the courts must "remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds 'for the revocation of any contract.' " Id. at 627, 105 S.Ct. at 3354, 87 L.Ed.2d at 455.
The court of appeals below erred in resting its judgment on an incorrect statement of the law. Contrary to the court's opinion, when there is an enforceable arbitration provision, questions regarding the validity of the contract are to be decided by an arbitrator. Prima Paint, 388 U.S. at 404, 87 S.Ct. at 1806, 18 L.Ed.2d at 1277.
In response to ITT's application to compel arbitration, however, Williams explicitly challenged the validity of the arbitration clause. Williams argued that the arbitration clause was "unconscionable, deceptive, and unfair." Under the United States Supreme Court cases construing the Federal Arbitration Act, Williams' challenge must be dealt with by the trial court prior to deciding whether to compel arbitration. If the court finds that the arbitration...
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Williams v. Aetna Fin. Co.
...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 a......
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...save upon grounds as exist at law or in equity for the revocation of any contract." In the recent case of Williams v. Aetna Finance Co., 65 Ohio St.3d 1203, 602 N.E.2d 246 (1992), Justice Wright dissented because he felt the court should have made a clearer statement of the law regarding th......
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Cross v. Carnes
...for the revocation of any contract." Section 2, Title 9, U.S.Code; see, also, Williams v. Aetna Fin. Co. (1992), 65 Ohio St.3d 1203, 1204, 602 N.E.2d 246, 246-247 (Wright, J., and Holmes, J., dissenting). When a suit is brought upon any issue that is referable to arbitration under an agreem......