Centofanti. v. Wayne HomesCentofanti. v. Wayne Homes
For Plaintiff-Appellee: Atty. Matthew C. Giannini, 10404 South Commons Place, Suite 200, Youngstown, Ohio 44514
For Defendant-Appellant: Atty. Michael S. Gruber, Atty. M. Dean Dahl, Zollinger, Gruber, Thomas & Co., P.O. Box 2985, 6370 Mt. Pleasant Street, N.W., North Canton, Ohio 44720-0985
WAITE, P.J.
Summary
{¶1} In 2007, Appellee Ludovico Centofanti hired Appellant, Wayne Homes, to build a house. Less than a year later the building was not complete and Appellee informed Appellant that a variety of defects existed in construction. Appellee also informed Appellant that Appellant‘s failure to comply with applicable building codes was making financing the remainder of the project difficult. When the parties could not resolve their differences, Appellee filed a breach of contract suit in the Mahoning County Common Pleas Court. Within a week of that filing, Appellant initiated a private arbitration proceeding. Appellant received service of the complaint, but did not respond until February of the following year when Appellant filed a hybrid
{¶2} Appellee, who had both opposed arbitration and sought, in the alternative, a court-appointed arbitrator rather than a private firm, filed a motion to stay the arbitration decision, an appeal of the decision and a motion for hearing on all pending motions. A hearing was held on the cross motions, and the magistrate
{¶3} An arbitrator‘s authority to arbitrate, in the absence of a court order, comes from the voluntary participation of the parties. The trial court‘s decision to vacate the award obtained by Appellant without Appellee‘s participation was appropriate and was not an abuse of discretion. The judgment of the trial court is affirmed and the matter remanded for further proceedings in accordance with this Court‘s Opinion.
Factual and Procedural History
{¶4} Appellant, Wayne Homes, L.L.C., was hired by Appellee, Ludovico Centofanti, for the construction of a house. On November 20, 2008, before the completion of construction, Appellee filed a complaint alleging breach of contract, breach of implied warranty to deliver the home free from defect, negligent construction and violations of the Ohio Consumer Sales Practices Act (“CSPA“). Appellee alleged Appellant had failed to perform in a workmanlike manner and provided specific examples, including: improper installation of the footers on the home and garage units, improper installation of post pads, beams and the foundation of the furnace as well as failure to comply with local and state ordinances, regulations, and building codes, resulting in adverse action by Mahoning County which impaired Appellee‘s ability to maintain financing. Appellee sought release from the construction contract or compensatory damages in the amount of $233,840.00
{¶5} On February 13, 2009 Appellant, then several months in default of filing an answer, filed a
{¶6} On March 6, 2009 Appellant filed a copy of the construction contract with an affidavit in support of the February 13, 2009 motion to dismiss or for a stay pending arbitration. Appellant‘s copy of the agreement has a second, illegible, signature, dated November 29, 2007, on the space provided for Wayne Homes as contractor. The Wayne Homes representative is not identified. The document was stamped “received by Court Room No. 1” on March 18, 2009.
{¶7} The record is then conspicuously silent until Appellee‘s May 15, 2009 notice of appeal of arbitration; motion to stay decision; and request for hearing; which was docketed by the court on June 2, 2009. Between the filing of the competing motions in February of 2009 along with the
{¶8} Appellee‘s May 15, 2009 notice and motion described Appellant‘s unilateral decision to pursue commercial arbitration absent a court order on the pending motions and Appellee‘s unambiguous refusal to participate absent a court order. Without Appellee‘s participation, Appellant obtained an arbitration award. As a result, Appellee asked that the court stay execution of the award and instead schedule a hearing and rule on the outstanding motions as well as his appeal of the arbitration award. On May 20, 2009 Appellant filed an application for an order confirming the arbitration award. Appellant‘s motion requested confirmation of “a written Award of Arbitrator in the sum of $29,725.00, plus interest at the statutory rate per annum from April 30, 2009, rendered as a result of an arbitration proceeding between Plaintiff and Defendant. Defendant was further awarded $900.00 for reimbursement of arbitration [fees] and expenses.” (5/29/09 Application for Order Confirming Arbitration Award.)
{¶9} On June 3, 2009 Appellant filed a response opposing Appellee‘s notice of appeal and motion for stay. Appellant acknowledged that the court never ruled on the pending motions, and that Appellant obtained the arbitration‘s award without Appellee‘s participation in the process. Appellant nevertheless asserted the validity of the arbitration decision and maintained that it was Appellee‘s responsibility to obtain an injunction halting arbitration or asserting that Appellee must abide by the decision even where there was no court order to participate. Appellant refers to a change in the case status in the electronic docket summary as a “February 24, 2009
{¶10} A post-hearing magistrate‘s decision was filed on July 1, 2009. The magistrate found that six days after Appellee filed suit, Appellant had filed a demand for arbitration with the American Arbitration Association (“AAA“) and that subsequent motions to dismiss and for stays were filed in the common pleas court but that no motion for stay was decided prior to Appellant‘s May 20, 2009 motion seeking confirmation of the arbitration award. The magistrate noted that Appellee‘s May 15, 2009 filing included objections to the arbitration process, but that Appellee had not expressly requested to vacate the award. The magistrate ordered both parties to provide “legal authority pertaining to the jurisdiction of the AAA to proceed with arbitration of a contractual dispute * * * before a ruling by this Court upon Defendant‘s motion to dismiss or stay and before a ruling on Plaintiff‘s motion
{¶11} In its court ordered response, filed one day late, Appellant acknowledged that the arbitration provisions governing the proceedings allow motions for stay and motions to compel a party to participate in arbitration. Appellant also recognized that these provisions do not provide for or require that the party opposing arbitration has the burden to file some protective motion to stop arbitration. The magistrate‘s March 16, 2010 decision denied Appellant‘s motion to confirm the arbitration award, granted Appellee‘s motion to vacate the award, and set an April 14, 2010 hearing to determine whether an executed contract between the parties included a binding and enforceable arbitration clause. Appellant filed timely objections to the decision but made no request for findings of fact or conclusions of law. Appellee filed a motion in support of the decision and Appellant, without seeking leave, filed a sur reply.
{¶12} The trial court adopted the magistrate‘s decision in its entirety. The court denied Appellant‘s application for an order confirming the arbitration award, and instead vacated the award and taxed costs to Appellant in a judgment entry dated November 2, 2010. Appellant filed a timely notice of appeal of this judgment entry. Interestingly, on November 10, 2010 the magistrate granted Appellant‘s motion for stay pending arbitration. This November 10, 2010 determination has no bearing on the issues before us, which involves the trial court‘s decision to vacate the unilateral award.
Argument and Law
THE TRIAL COURT‘S RULING DENYING DEFENDANT‘S APPLICATION FOR ORDER CONFIRMING ARBITRATION AWARD AND VACATING THE ARBITRATION AWARD IS ERRONEOUS AS A MATTER OF LAW.
{¶13} The issue before us is the propriety of a trial court‘s decision to vacate an arbitration award gained without the participation of a party and in the absence of a court order, while the matter was pending in court. The alleged right to arbitrate in lieu of litigation at issue here is based in contract. Because “arbitration is a matter of contract * * * a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. * * * This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed to submit such grievances to arbitration.” Council of Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 665, 687 N.E.2d 1352 (1998) quoting AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Although the arbitrator‘s authority to decide an issue is created by contract, without a party‘s voluntary participation the arbitrator has no authority to compel participation. Where a party seeks to enforce a contractual right to arbitrate, the mechanism for enforcement is a court order.
{¶15} In Council of Smaller Ents., supra, the Ohio Supreme Court set forth parameters to determine the arbitrability of a given dispute. We have once before condensed these parameters into a set of guidelines that courts must follow: “(1) arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit; (2) the question whether a particular claim is arbitrable is one of law for the court to decide; (3) when deciding whether the parties have agreed to submit a particular claim to arbitration, a court may not rule on the potential merits of the underlying claim; and, importantly, (4) when a contract contains an arbitration provision, there is a presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not
{¶16} When a party, generally plaintiff, has waived the contractual right to arbitrate by filing suit and the other party seeks to enforce it, the “party seeking to enforce an arbitration provision may choose to move for a stay under
(B) If any action is brought upon any issue referable to arbitration under an agreement in writing for arbitration, the court in which the action is pending, upon being satisfied that the issue involved in the action is referable to arbitration under an agreement in writing for arbitration, shall on application of one of the parties stay the trial of the action until the arbitration of the issue has been had in accordance with the
agreement, provided the applicant for stay is not in default in proceeding with arbitration. (C) * * * an order under division (B) of this section that grants or denies a stay of a trial of any action pending arbitration, including, but not limited to, an order that is based upon a determination of the court that a party has waived arbitration under the arbitration agreement, is a final order and may be reviewed, affirmed, modified or reversed on appeal.
{¶17}
The party aggrieved by the alleged failure of another to perform under a written agreement for arbitration may petition any court of common pleas having jurisdiction of the party so failing to perform for an order directing that the arbitration proceed in the manner provided for in the written agreement. * * * The court shall hear the parties, and, upon being satisfied that the making of the agreement for arbitration or the failure to comply with the agreement is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the agreement.
If the making of the arbitration agreement or the failure to perform it is in issue in a petition filed under division (A) of this section, the court shall proceed summarily to the trial of that issue. * * * [E]ither party * * * may demand a jury trial of that issue.
{¶19} As we explained in Hoppel: “As a general rule, either party to a contract of arbitration may waive the contractual right to arbitrate. For instance, a plaintiff waives the right to arbitrate by filing a complaint. For the defendant, the right to arbitrate can be preserved by seeking enforcement of the arbitration clause. Failure to move for a stay pursuant to
In any of the following cases, the court of common pleas shall make an order vacating the award upon the application of any party to the arbitration if:
The award was procured by corruption, fraud, or undue means.
The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.
The arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
If an award is vacated and the time within which the agreement required the award to be made has not expired, the court may direct a rehearing by the arbitrators.
{¶21} Appellant argues that, despite statutory provisions and caselaw that explicitly identify the mechanisms necessary to enforce a contractual arbitration clause, the burden to enjoin arbitration is on the party who does not wish to arbitrate and is challenging the validity of the arbitration clause. However, both the Ohio legislature and the Supreme Court have clearly placed the burden on Appellant, as the party seeking arbitration, to first obtain enforcement of the clause in a court with jurisdiction over the matter by securing a court order. No requirement or mechanism exists for Appellee to enjoin an arbitration that Appellant commenced after suit was
{¶22} Arbitration is not a substitute for judicial process, nor does the process followed by an arbitrator vindicate a litigant‘s due process rights. These are functions of government. Arbitration is an extra judicial process: a way, in theory, to avoid the cost and time of litigation. Arbitration clauses cannot be enforced in the absence of some voluntary act by the parties, who presumably made a genuine choice to arbitrate, rather than use the courts, when negotiating their contracts. Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 Ohio St.3d 185, 842 N.E.2d 488 (2006). In the absence of voluntary participation by both parties, such a clause cannot be enforced without court action. Just as an arbitrator‘s power to subpoena witnesses is not equal to a court‘s power to compel the appearance of parties and the parties must ask the court to enforce the subpoena, where a party seeks to enforce an arbitration clause over the objections of the other party to the agreement, the party seeking to arbitrate must first prove the validity of the clause and seek enforcement in court according to the procedures outlined by the legislature.
{¶23} Appellant attempts to explain its decision to ignore the judicial proceeding and to coerce Appellee into arbitration by citing to the February 24, 2009 change in the case disposition listed in the docket as the basis for its actions.
{¶25} “Dockets and journals are distinct records kept by clerks;” a court, however, speaks only through its journal. (Internal citation omitted.) State ex rel. White v. Junkin, 80 Ohio St.3d 335, 337 (1997). The common pleas clerk of courts is charged by
{¶27} The “docket” as it pertains to a common pleas court is prepared and maintained by the clerk and is required to include the “[n]ames and addresses of all parties in full“; “[n]ames, addresses, and Supreme Court attorney registration numbers of all counsel“; “issuance of documents for service upon a party and the return of service or lack of return” as well as a “brief description of all records and orders filed in the proceeding, the time and date filed, and a cross reference to other records as appropriate“; “[a] schedule of court proceedings for the division and its officers to use for case management“; “[a]ll actions taken by the division to enforce orders or judgments; and * * * [a]ny information necessary to document the activity of the clerk of the division regarding the case.” Sup.R. 26.03(C).
{¶28} As this Court recently explained in State v. Roepke, 7th Dist. No. 10 MA 138, 2011-Ohio-6369, the general index and docket created by the clerk is “not the same as a journal.” Id. at ¶18. While the docket is prepared and maintained by the clerk, the “court speaks through its journals and an entry is effective only when it has been journalized.
{¶30} In essence, because the trial court did not order arbitration, Appellee did not voluntarily participate and no valid arbitration occurred. Without Appellee‘s voluntary or court-ordered participation the arbitrator exceeded his power and so imperfectly executed his duties that the resulting decision was in no way mutual, and severely prejudiced Appellee. Appellant failed to obtain a court order enforcing the alleged arbitration clause prior to proceeding with arbitration and Appellee refused to participate voluntarily. Hence, the trial court was correct to refuse to enforce the resulting invalid award. Appellant‘s assignment of error is without merit and is overruled.
{¶31} The record below supports the trial court‘s decision to vacate the arbitration award. Appellant‘s assignment of error is without merit and is overruled. The decision of the trial court is affirmed and the matter remanded to the trial court for further proceedings in compliance with
Donofrio, J., concurs.
DeGenaro, J., concurs.