Opinion ID: 145550
Heading Depth: 3
Heading Rank: 3

Heading: Interpretation of the Guarantees

Text: As an alternative to the statute of limitations argument, the Keehans argue that the confession of judgment provision in the guarantees conflicts with the arbitration provision and, thus, the confession of judgment provision is void. As the district court correctly noted, this argument could constitute a meritorious defense under Ohio law because it goes to the validity of the instrument creating the underlying debt. However, we agree with the district court that the argument does not actually constitute a meritorious defense [3] because the Keehans are simply incorrect in their premise that the two provisions inherently conflict. Ohio law instructs courts to attempt to reconcile inconsistent contract terms and give effect to each term. In re Graham Square, Inc., 126 F.3d 823, 830 (6th Cir.1997). This means that the law recognizes that, in certain circumstances, provisions in a contract will seem to contradict. But courts must seek to find a construction that would give effect to each term, and only if such a construction is impossible will the contract be deemed unenforceable. The arbitration provision in the guarantees provides that either party may demand arbitration until entry of a judgment. The Keehans complain that this right to demand arbitration is functionally worthless because the beneficiary of the guaranty could confess judgment, and thus extinguish the right to compel arbitration, without the guarantor knowing of it. The Keehans are correct that this is a possible scenario, and indeed it appears to be what happened in this case. However, it is easy to imagine several different fact patterns in which the arbitration provision could perform its intended function. For instance, the beneficiary of the guaranty could demand or try to negotiate voluntary payment prior to confessing judgment and proceeding with collection efforts, in which case the guarantor could demand arbitration to dispute the validity or amount of the debt. Or, the beneficiary of the guaranty could elect to compel arbitration rather than confess judgment and then have to litigate the motions to vacate the judgment that seem inevitably to follow confessed judgments, as Ex-Im Bank has had to litigate the Keehans' motion here. Furthermore, the arbitration clause covered all disputes, including those that do not involve non-payment. Accordingly, the arbitration provision does not facially conflict with the confession of judgment provision, so the guarantees are not fatally ambiguous.