Murtha v. Ravines of McNaughton Condominium Assn.Murtha v. Ravines of McNaughton Condominium Assn.
Rendered on March 30, 2010
Michael J. O‘Reilly, for appellant.
Smith, Rolfes & Skavdahl Co., L.P.A., and M. Andrew Sway, for appellees.
APPEAL from the Franklin County Court of Common Pleas.
PER CURIAM.
{¶1} Plaintiff-appellant, Patrick J. Murtha, appeals from a judgment of the Franklin County Court of Common Pleas granting the motion of defendants-appellees, Ravines of McNaughten Condominium Association and several named and unnamed individual members of the Board of Directors of the association, to stay proceedings pending arbitration and to appoint an arbitrator. Because the trial court did not err in (1)
I. Procedural History
{¶2} In 2007, plaintiff purchased a residential condominium unit in a development that the Ravines of McNaughten Condominium Association (individually “defendant“) managed; plaintiff recorded title to the property on March 2, 2007. Shortly before plaintiff‘s purchase, defendant filed with the County Recorder‘s office a Ninth Amendment to the Declaration of Condominium. The amendment prohibits a Ravines of McNaughten condominium owner from leasing his or her unit unless certain exceptions apply. Plaintiff applied for a hardship exception to the no-leasing rule, but defendant denied his application.
{¶3} Plaintiff‘s own review of the Declaration of Condominium led plaintiff to conclude a clause that prohibited changing “the fundamental purposes to which units are restricted,” except upon a vote of 100 percent of unit owners, rendered the Ninth Amendment defective. (Declaration of Condominium, Article XIX, Section 1(a)(iv).) Because only 75 percent of unit owners approved the Ninth Amendment, and because plaintiff determined the ability to lease his unit was a “fundamental purpose” of his property, plaintiff decided the Ninth Amendment was invalid. With that premise, plaintiff advertised his condominium unit for rent. Defendant informed plaintiff the Ninth Amendment prohibited plaintiff from leasing his unit, but plaintiff entered into a lease
{¶4} Plaintiff in response filed a complaint against defendants on October 31, 2008, seeking (1) a declaratory judgment that the Ninth Amendment was invalid, (2) a preliminary injunction preventing defendant from evicting plaintiff‘s tenants, and (3) damages for slander of title and breach of fiduciary duty arising from the actions of defendant‘s individual officers and members of the board of directors. Defendant not only answered and counterclaimed to vindicate the amendment, but ultimately filed a motion seeking to stay proceedings due to an arbitration clause in the Declaration of Condominium. In that same motion, defendant asked the trial court to appoint an arbitrator. On June 22, 2009, the trial court entered a decision granting defendant‘s motions to stay and to appoint an arbitrator.
II. Assignments of Error
{¶5} Plaintiff appeals, assigning the following errors:
- The Trial Court Erred in Interpreting
R.C. 2711.01(B) in Finding that the Subject Dispute Did Not Involve Title To or Possession of Real Estate. - The Trial Court Erred in Finding that Defendants Had Not Waived the Arbitration Provision in Controversy.
- The Trial Court Erred in Failing to Find the Arbitration Provision to be Unconscionable.
- The Trial Court Erred in Appointing an Arbitrator When Defendants’ Pleadings Did Not Seek an Order to Enforce Arbitration.
The Trial Court Erred in Failing to Permit Plaintiff to Conduct a Voir Dire of the Proposed Arbitrator‘s Qualifications.
III. General Arbitration Principles
{¶6} Arbitration is strongly encouraged as a method to settle disputes. Williams v. Aetna Finance Co. (1998), 83 Ohio St.3d 464. “A presumption favoring arbitration arises when the claim in dispute falls within the scope of the arbitration provision.” Id. at 471. “An arbitration clause in a contract is generally viewed as an expression that the parties agree to arbitrate disagreements within the scope of the arbitration clause, and, with limited exceptions, an arbitration clause is to be upheld just as any other provision in a contract should be respected.” Id. Because arbitration is a matter of contract, “a party cannot be required to submit to arbitration any dispute which [the party] has not agreed so to submit.” Peters v. Columbus Steel Castings Co., 10th Dist. No. 05AP-308, 2006-Ohio-382, ¶11, quoting Council of Smaller Ent. v. Gates, McDonald & Co. (1998), 80 Ohio St.3d 661, 665 (citation omitted).
{¶7} “The validity of an arbitration agreement involves a mixed question of law and fact.” Corl v. Thomas & King, 10th Dist. No. 05AP-1128, 2006-Ohio-2956, ¶10, citing Peters at ¶11. “Generally, appellate courts review a trial court‘s decision to grant a stay pending arbitration under an abuse of discretion standard.” Id. Nonetheless, the de novo standard is proper when the issue presents a question of law. Id.
IV. First Assignment of Error – Interpretation of R.C. 2711.01(B)
{¶8} Plaintiff‘s first assignment of error presents a question of law and asserts the trial court wrongly interpreted
{¶9}
{¶10}
{¶11} Neither party disputes that plaintiff holds the title to his condominium unit, and plaintiff did not file an action to quiet title. Plaintiff nonetheless argues
{¶12} Plaintiff‘s argument relies heavily on Keybank v. MRN Ltd. Partnership, 8th Dist. No. 88868, 2007-Ohio-5709, and its interpretation of
{¶13} Despite plaintiff‘s best efforts to characterize this as a dispute involving both title to and possession of real estate, it is essentially a dispute involving contract interpretation, as “[c]ondominium declarations and bylaws are contracts between the association and the purchaser.” Acacia on the Green Condominium Assn., Inc. v. Gottlieb, 8th Dist. No. 92145, 2009-Ohio-4878, ¶20, citing Nottingdale Homeowners’
{¶14} In certain circumstances, resolving a contractual dispute ultimately may implicate issues of title to and possession of real estate. See, e.g., Kedzior v. CDC Dev. Corp. (1997), 123 Ohio App.3d 301. Kedzior determined
{¶15} Plaintiff‘s complaint presents a significantly different scenario. Count one of plaintiff‘s complaint seeks a declaratory judgment that the Ninth Amendment is invalid, with a corresponding finding that defendant be ordered to rescind it of record. Because
{¶16} Plaintiff‘s breach of fiduciary duty claim likewise does not “involve” title to or possession of real estate, a conclusion plaintiff does not dispute. Even plaintiff‘s slander of title claim does not transform this controversy into one “involving the title to or possession of real estate” for purposes of
{¶17} Here, even if plaintiff‘s complaint sufficiently stated a claim for slander of title, it properly is submitted to arbitration. See, e.g., Garcia v. Wayne Homes, LLC, 2d Dist. No. 2001 CA 53, 2002-Ohio-1884 (sending a claim of slander of title to arbitration where an arbitration clause was incorporated by reference into a purchase agreement for construction of a new home); Rossi v. Lanmark Homes, Inc. (Dec. 30, 1994), 11th Dist. No. 94-L-046 (sending all claims to arbitration, including a counterclaim for slander of title, where the contract for the construction and sale of a new house included an arbitration provision).
{¶18} Because plaintiff‘s complaint seeks a declaration concerning the validity of the Ninth Amendment to the Declaration of Condominium, this is not a dispute “involving the title to or the possession of real estate” within the purview of
V. Second Assignment of Error – Waiver
{¶19} In his second assignment of error, plaintiff asserts the trial court erred in finding defendants did not waive the arbitration provision in controversy. Plaintiff argues
{¶20} Like any other contractual right, the right to arbitrate may be waived. Rock v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1992), 79 Ohio App.3d 126, 128. Due to Ohio‘s strong policy favoring arbitration, the party asserting a waiver has the burden of proving it. Tinker v. Oldaker, 10th Dist. No. 03AP-671, 2004-Ohio-3316, ¶18, citing Atkinson v. Dick Masheter Leasing II, Inc., 10th Dist. No. 01AP-1016, 2002-Ohio-4299, ¶18. “[T]he question of waiver is usually a fact-driven issue and an appellate court will not reverse” the trial court‘s decision “absent a showing of an abuse of discretion.” ACRS, Inc. v. Blue Cross & Blue Shield of Minnesota (1998), 131 Ohio App.3d 450.
{¶21} A party asserting waiver must prove (1) the waiving party knew of the existing right to arbitrate; and (2) the totality of the circumstances demonstrates the waiving party acted inconsistently with that known right. Id., citing Atkinson; see also Griffith v. Linton (1998), 130 Ohio App.3d 746, 751. Here, the parties do not dispute defendants knew of their existing right to arbitrate incorporated into the Declaration of Condominium. Instead, the disputed issue is whether, under the totality of the circumstances, defendants acted inconsistently with their right to arbitrate when defendants filed a counterclaim and participated in discovery prior to filing their motion seeking arbitration.
{¶22} To determine whether the totality of the circumstances supports waiver, courts consider (1) whether the party seeking arbitration invoked the jurisdiction of the
{¶23} Here, defendants filed a counterclaim, a factor indicating it invoked the trial court‘s jurisdiction. About two months later defendants file a motion seeking arbitration. While the motion was pending, defendants participated in ongoing discovery. The trial court concluded defendants did not waive their right to enforce the arbitration provision because they timely filed the motion to stay proceedings. Further noting defendants did not participate in discovery until after they filed their motion to stay, the trial court refused to “penalize [defendants] for being cooperative while [their] motion was pending.”
{¶24} Appellate review acknowledges the discretion vested in trial courts in determining whether a party has waived the right to arbitration. As a result, the appellate court in Milling Away, LLC v. Infinity Retail Environments, Inc., 9th Dist. No. 24168, 2008-Ohio-4691 concluded the trial court did not abuse its discretion in staying litigation pending arbitration where the defendant in that action filed a counterclaim and waited six months before invoking his right to arbitration. By contrast, the appellate court in Hauser & Taylor, LLP v. Accelerated Systems Integration, Inc., 8th Dist. No. 84748, 2005-Ohio-1017 concluded the trial court did not abuse its discretion in denying a motion to stay
{¶25} Here, defendants’ answer and counterclaim are inconsistent with a request for arbitration. Defendants, however, filed their request for a stay pending arbitration within about two months after their pleadings, a time period considerably shorter than the time lapse involved in Milling Away. Similarly, although defendants participated in discovery following the request for a stay, we cannot say the trial court was wrong in refusing to punish defendants for cooperating in discovery that likely produced pertinent information wherever the controversy ultimately is resolved. Lastly, plaintiff does not demonstrate prejudice in defendants’ delay in requesting arbitration, primarily because the delay was not as long as in, for example, Hauser & Taylor.
{¶26} In the final analysis, although the factors present a somewhat close question, we cannot say the trial court abused its discretion in concluding that the totality of the circumstances supports a determination that defendants did not waive their right to arbitration. Accordingly, we overrule plaintiff‘s second assignment of error.
{¶27} In his third assignment of error, plaintiff asserts the trial court erred in failing to find the arbitration provision to be both substantively and procedurally unconscionable because (1) plaintiff was in a weak bargaining position; (2) plaintiff was not an original party to the Declaration of Condominium; and (3) plaintiff is not permitted to select the arbitrator.
{¶28} An appellate court applies de novo review to a trial court‘s legal determination of whether an arbitration provision is unconscionable, but an appellate court should accord deference to the trial court‘s factual findings. Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, ¶2, 34. The party raising the issue of unconscionability must demonstrate both procedural and substantive unconscionability. Id. at ¶33; Williams Creek Homeowners Assn. v. Zweifel, 10th Dist. No. 07AP-689, 2008-Ohio-2434, ¶42, 49.
{¶29} “Procedural unconscionability pertains to circumstances surrounding the parties’ bargaining on an agreement, such as the parties’ age, education, intelligence, business acumen, and experience.” Reno at ¶7, citing Taylor Bldg. at ¶43. Additional concerns for procedural unconscionability include who drafted the agreement, ” ‘whether alterations to printed terms were possible,’ ” and whether there were ” ‘alternative sources of supply’ ” for the items subject to the agreement. Taylor Bldg. at ¶43, quoting Collins v. Click Camera & Video, Inc. (1993), 86 Ohio App.3d 826, 834. Procedural unconscionability also involves consideration of (1) whether the stronger party believes no reasonable probability exists that the weaker party will fully perform the contract; (2)
{¶30} “In determining substantive unconscionability, we consider the terms of the agreement and ‘whether they are commercially reasonable.’ ” Reno at ¶8, quoting Khoury v. Denney Motors Assoc., Inc., 10th Dist. No. 06AP-1024, 2007-Ohio-5791, ¶12. “We consider ‘the fairness of the terms, the charge for the service rendered, the standard in the industry, and the ability to accurately predict the extent of future liability.’ ” Id., citing Khoury at ¶12, citing Cronin v. California Fitness, 10th Dist. No. 04AP-1121, 2005-Ohio-3273.
{¶31} The arbitration provision in Article XX of the Ravines of McNaughten Declaration of Condominium is identical to the language of the arbitration provision subject to dispute in Reno. See Reno at ¶16 (Tyack, J., dissenting). In Reno, this court determined the arbitration provision was not substantively unconscionable because the arbitration provision provides the arbitrator must be independent, and
{¶32} Plaintiff‘s fourth assignment of error asserts the trial court erred in appointing an arbitrator when defendants’ motion only moved for a stay of arbitration.
{¶33} Defendants titled their January 26, 2009 motion as “Defendants’ Motion to Stay Proceedings Pending Arbitration and Motion to Appoint Arbitrator.” In the first paragraph of the motion, defendants expressly requested the trial court (1) to stay the proceedings pending arbitration, and (2) to allow defendants to appoint an arbitrator pursuant to
{¶34} Defendants also expressly moved the court to appoint David Kaman to be the arbitrator, directing the trial court to Article XX, Section 2 of the Declaration of Condominium, which provides that the Board select an independent arbitrator. In its entirety, defendants’ motion “state[d] with particularity the grounds therefore, and * * * set forth the relief or order sought.”
VIII. Fifth Assignment of Error – Voir Dire
{¶35} Plaintiff‘s fifth and final assignment of error asserts the trial court erred in denying plaintiff‘s request to conduct a voir dire of the proposed arbitrator‘s qualifications.
{¶36} Plaintiff does not cite any authority for his contention that the trial court was required to allow him to conduct a voir dire of the proposed arbitrator‘s qualifications prior to the arbitrator‘s actual appointment. Cf. e.g.,
IX. Disposition
{¶37} In sum, the trial court did not abuse its discretion in granting defendants’ motion to stay proceedings pending arbitration and motion to appoint an arbitrator. The trial court properly interpreted
Judgment affirmed.
BRYANT, SADLER and McGRATH, JJ., concur.
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