2016 Ohio 2766
Ohio Ct. App.2016Background
- U.S. Bank filed foreclosure in Dec 2011 on a manufactured-home promissory note/mortgage originally financed by Conseco (later Green Tree); Appellant Lorinda Allen answered and asserted six counterclaims (fraud, unconscionability, breach of covenant, breach of contract, wrongful foreclosure, declaratory relief).
- Appellant alleged a separate Manufactured Home Service Contract (with Green Tree/Conseco) and referenced a Retail Sales Installment Contract; parties dispute which agreements bind which parties.
- Appellees (U.S. Bank and Green Tree) moved in Feb 2013 to stay litigation and compel arbitration based on arbitration clauses in the promissory note and the service contract; Green Tree asserted arbitration as an affirmative defense in its answer.
- The trial court held conferences and an evidentiary hearing in 2015, then granted the motion in Nov 2015: counterclaims were bifurcated and compelled to binding arbitration, ordered one arbitrator, AAA rules, and a cost allocation (plaintiff pays first $1,500; remainder split)—but the entry lacked clarity about which plaintiff and which arbitration clause applied to which counterclaims.
- This appeal challenges (1) waiver of arbitration, (2) arbitrability/bifurcation of counterclaims, (3) trial court’s modification of arbitration terms (single arbitrator and cost-splitting), and (4) failure to stay the entire foreclosure action pending arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of arbitration | Appellees did not waive arbitration despite litigation activity; right preserved by statute and contract language | Allen: appellees acted inconsistently (delay, discovery, failed to plead arbitration) and thus waived right | No abuse of discretion in finding no waiver; failure to plead arbitration in answer not dispositive and motion to compel was filed early │ |
| Arbitrability / scope of counterclaims | Counterclaims arise from the note/service contract and are subject to arbitration | Allen: counterclaims are defensive recoupment claims to foreclosure and non-arbitrable; foreclosure (title) must stay with court | Court correctly found counterclaims fall within arbitration clauses; foreclosure itself (title) remains non-arbitrable │ |
| Arbitration procedure terms (number of arbitrators; cost allocation) | Plaintiffs sought arbitration consistent with agreement(s); parties allegedly agreed orally to one arbitrator and cost-splitting | Allen: trial court had no authority to rewrite written arbitration agreements (one arbitrator vs. three; cost terms); indigence and written contract control | Trial court abused discretion by imposing written arbitration terms that modified the parties’ written agreements; remanded to identify applicable agreement(s) and parties for each claim │ |
| Stay of entire action pending arbitration | Appellees: effective stay occurred because trial did not proceed after arbitration order; no prejudice to plaintiffs | Allen: R.C. 2711.02(B) requires the court to stay the entire proceeding when arbitrable and non-arbitrable claims coexist | Trial court erred by not entering an express stay of the entire foreclosure action when compelling arbitration of counterclaims; remand required │ |
Key Cases Cited
- Blakemore v. Blakemore, 5 Ohio St.3d 217 (1983) (defines abuse of discretion standard)
- Hayes v. Oakridge Home, 122 Ohio St.3d 63 (2009) (strong public policy favoring arbitration; doubts resolved in favor of arbitration)
- Alexander v. Wells Fargo Fin. Ohio 1, Inc., 122 Ohio St.3d 341 (2009) (test for whether a dispute falls within an arbitration clause)
- Pons v. Ohio State Med. Bd., 66 Ohio St.3d 619 (1993) (appellate review cannot substitute its judgment for trial court absent abuse of discretion)
- Kelm v. Kelm, 68 Ohio St.3d 26 (1993) (arbitration offers relatively expeditious resolution and is favored)
- Williams v. Aetna Fin. Co., 83 Ohio St.3d 464 (1998) (arbitration clauses are contractual provisions to be respected)