Court Opinion

ID: 9369692
Source: CourtListenerOpinion
Date Created: 2023-02-09 16:09:47.90319+00
Date Added: 2024-06-11T17:16:16.537206
License: Public Domain

[Cite as Menter Family Trust v. Menter, 2023-Ohio-367.]

                              COURT OF APPEALS OF OHIO

                             EIGHTH APPELLATE DISTRICT
                                COUNTY OF CUYAHOGA

THE MENTER FAMILY REVOCABLE                           :
LIVING TRUST,

                Plaintiff-Appellant,                  :
                                                           No. 111405
                v.                                    :

RICHARD MENTER, ET AL.,                               :

                Defendants-Appellees.                 :

                               JOURNAL ENTRY AND OPINION

                JUDGMENT: REVERSED AND REMANDED
                RELEASED AND JOURNALIZED: February 9, 2023

            Civil Appeal from the Cuyahoga County Court of Common Pleas
                                Case No. CV-21-956010

                                           Appearances:

                Michael K. Ashar & Associates and Michael K. Ashar;
                Halberg & Associates, LPA, Leslie A. Weiss, and William
                S. Halberg, for appellant.

                Matasar Jacobs, LLC, Jennifer A. Lesny Fleming, Scott C.
                Matasar, and Annamarie E. Braga, for appellees.
MICHAEL JOHN RYAN, J.:

             Plaintiff-appellant, The Menter Family Revocable Living Trust

(“appellant” or “The Trust”), appeals from the trial court’s March 2, 2022 judgment

granting the motion to stay proceedings and compel arbitration filed by defendants-

appellees, Michael Mawby and We Are One Seven, LLC, d.b.a. One Seven

(collectively “appellees”). The trial court’s judgment also dismissed the case without

prejudice. After a careful review of the facts and pertinent law, we reverse the trial

court’s judgment and remand the case to the trial court for further proceedings.

Factual and Procedural History

             The Trust was created in June 1998 by Jerome and Therese Menter,

husband and wife, as grantors and initial co-trustees. At that time, Jerome and

Therese had five living sons who were contingent beneficiaries of The Trust:

Michael, Richard, Christopher, Joseph, and John.

             Appellee Mawby is an investment advisor at appellee We Are One

Seven. According to the complaint, in the summer of 2020, Richard Menter and

Mawby went to Jerome and Therese’s home, where they met with Therese. As a

result of that meeting, “[d]ocuments were executed and a financial account for the

[Trust] was created to be managed by defendants Mawby and One Seven and

administered through defendant Ameritrade.” Complaint, ¶ 4. Later in December

2020, Therese had a stroke and “suffered a loss of competency which continued

through and until her death on January 31, 2021.” Id. at ¶ 5.
             When Therese Menter died, Michael Menter became a co-trustee with

his father, Jerome Menter.       As a co-trustee, Michael initiated this action for

appellant.1 In addition to appellees Mawby and We Are One Seven, the other named

defendants are Richard Menter, John Menter and his wife Susan Menter,

TD Ameritrade, and John Does 1-4.

             Appellant alleges that Richard Menter “assumed an identification and

relationship of trust and dominance over his mother.” Id. at ¶ 5. It further alleges

that a few days before Therese’s death, defendant Richard Menter and appellee

Mawby met at Richard’s house, where Therese was then living. As a result of the

meeting, approximately $545,000 was transferred from The Trust account, which

was approximately 85% of the funds in the account, to “an individual account

partially or completely owned and controlled by defendant Richard Menter and/or

his wife, defendant Susan Menter.” Id. at ¶ 10. Allegations continue that the transfer

was intentional and/or negligent and appellees and defendant Ameritrade assisted

in it, without the knowledge and/or consent of Jerome, and at a time when Therese

was physically and mentally incapacitated. Based on these allegations, The Trust

asserted claims for theft, fraud, receiving stolen property, breach of fiduciary duty,

and negligence.

      1
        At the time this action was initiated, certain additional estate planning measures
had been undertaken and defendants Richard and John Menter were no longer
beneficiaries of The Trust. Christopher and Joseph Menter are deceased.
Appellees’ Motion to Stay Proceedings and Compel Arbitration

             Appellees filed a motion to stay proceedings and compel arbitration

under “the Ohio Arbitration Act, Ohio Rev. Code [Section] 2711.01, et seq., and the

Federal Arbitration Act, 9.U.S.C. [Section] 2.” In their motion, appellees relied on

R.C. 2711.02 and its federal counterpart, 9 U.S.C. 3, which contains almost identical

language to R.C. 2711.02.

             In support of their motion, appellees submitted a five-page document

titled “Investment Advisory Agreement.” The first page of the document indicates

that it is dated July 9. The year is partially illegible; “20” is clear, but the remaining

part is not. The client identified on the first page is Therese Menter. Other than the

illegible year on the first page, the first three pages of the document are clearly

legible. Section 12 of the document, set forth on the third page, provides for

mandatory, binding arbitration.

             Pages four and five of the agreement are partially legible, including the

following. On page four there is a signature block, directly above which provides:

“By executing this Agreement, the parties acknowledge and accept their respective

rights, duties, and responsibilities. This Agreement contains a binding arbitration

clause that is acceptable by the Parties.” Therese Menter and Jerome Menter signed

in the signature block. There is no notation that they signed as trustees of The Trust

or otherwise on behalf of The Trust.

             Page five is “Schedule A – Custodian and Accounts” and provides that

“[t]he Client has appointed TD Ameritrade, Inc. as its Custodian * * * pursuant to
the terms in Item 4 of this Agreement.” There is a “Client Acknowledgment” dated

July 9, 2020, and contains the initials “T.M.” and “J.M.” There is no indication that

T.M. and or J.M. initialed as trustees or otherwise on behalf of The Trust.

Appellant’s Opposition

              Appellant opposed the motion and requested a hearing. Appellant

contended that the Investment Advisory Agreement “is a blatantly questionable

document which has seemingly been pieced together with miscellaneous pages that

appear to be nonconforming.” According to appellant, the date on the first page is

July 9, 2018, which conflicts with the date of July 9, 2020, on the last page.

Appellant further contended that it is suspect that only Therese Menter is named as

a client on the first page. Appellant also noted that The Trust is not mentioned

anywhere in the document.

              In support of its opposition, appellant submitted an affidavit from

Jerome Menter. Jerome averred that he never met or spoke with Mawby “until a

few months following the death of [Therese] who died on January 31, 2021.” Jerome

Menter affidavit, ¶ 4. Jerome further averred that the first time he saw the subject

agreement was “within the past two weeks” “when it was presented to him.” Id. at

¶ 5. According to Jerome’s affidavit, he did “not believe that [his] signature appears

on that document.” Id. Further, appellant contended that “[e]ven if the Court finds

that [The Trust] is subject to the Investment Advisory Agreement * * * Defendants

Mawby and [One] Seven failed to comply with Ohio Revised Code 2711.03(A).”
Appellees’ Reply

               Appellees vehemently denied appellant’s assertion of irregularities

with the agreement and accusation of forgery. Appellees contended that the date on

the first page of the agreement is the same as the date on the last

page — July 9, 2020. They submitted an affidavit from Michael Mawby in support

of their claims and denials.

               Mawby averred that he met with Therese Menter on July 9, 2020, to

have her sign the agreement, which indeed she did. Both John Menter and Jerome

Menter were present at the meeting. Therese had “physical CSX stock certificates”

that she wanted transferred “into a more easily liquidated form that could be held in

a brokerage account.” Michael Mawby affidavit, ¶ 3. Mawby averred that Jerome

executed paperwork to be submitted to TD Ameritrade; the paperwork was dated

July 9, 2020, and Mawby witnessed him execute it.

               Mawby explained why the Investment Advisory Agreement is not

made out in the name of The Trust as follows:

       It is the practice of One Seven to have clients sign an omnibus “master”
       Investment Advisory Agreement governing the client’s overall
       relationship with One Seven. This is because clients often establish
       multiple accounts with One Seven for themselves, children,
       grandchildren and other relatives — as was the case with the Menters.
       The [Investment Advisory Agreement] therefore applies with equal
       force to the Trust as [d]o other accounts maintained by Therese and/or
       Jerome Menter with One Seven.

Id. at ¶ 6.

               Mawby averred that The Trust has been charged investment

management fees since July 2020 pursuant to the Investment Advisory Agreement.
He further averred that the date on the first page of the agreement is July 2020, not

July 2018.

                Mawby also explained the difference in the physical appearance

between the first three pages and the last two pages of the agreement as follows:

       After I met with Therese Menter at her residence on July 9, 2020 to
       sign the [agreement], I determined that Jerome Menter’s signature also
       was required on the [agreement], as well as on paperwork to transfer
       the proceeds of an annuity purchased from Jackson National Life,
       which was to be used to help fund the Trust’s corpus.

       Accordingly, I returned to Therese and Jerome Menter’s residence on
       July 13, 2020 to meet with Jerome.

       ***

       During my July 13, 2020 meeting with Jerome Menter, I witnessed him
       execute a signature page for the [agreement] with his own hand.

       ***

       After Jerome Menter executed the signature page for the [agreement]
       on July 13, 2020, I photographed the document and transmitted it
       electronically to my administrative assistant at One Seven. This is why
       the last two pages of the [agreement] have a physical appearance
       different from that of the first three pages of the [agreement].

Id. at ¶ 8, 9, 11, and 13.

                Mawby averred that after his meeting with Therese and Jerome on

July 13, he exchanged text messages with the Menters’ son Richard. A screenshot of

the messages accompanied his affidavit. Mawby texted Richard, “I met with [your

mother], and your father signed where we needed. He was very pleasant to me.

Thanks Rick!”
               The appellees also submitted an affidavit from John Menter in

support of their reply brief. John averred that, at the relevant time, he was living in

Therese and Jerome Menter’s home. He stated that he was present for the July 9,

2020 meeting that Mawby and Therese had and that Jerome was at the meeting as

well. John averred that he saw “both Therese and Jerome affix their signatures to

new account paperwork to be submitted to TD Ameritrade, which was to be the

custodian for their securities brokerage account.” John Menter affidavit, ¶ 6. John

also averred that Mawby returned to his parents’ house on July 13 so that Jerome

could sign additional paperwork, and that he (John) “saw [Jerome] sign the

signature page for additional paperwork required by Mr. Mawby with his own

hand.” Id. at ¶ 9.

               In regard to appellant’s contention about appellees’ failure to comply

with R.C. 2711.03(A), appellees stated that “it is unclear if R.C. 2711.03(A) even

applies to [appellees’] Motion to Stay and Compel Arbitration filed in this case.”

Trial Court’s Judgment

               The trial court granted appellees’ motion to compel arbitration and

ordered the “parties to initiate arbitration proceedings immediately under the terms

of the investment advisory agreement.” The trial court also dismissed the case

without prejudice and advised the parties to inform the court if the case needed to

be reactivated following the arbitration proceeding.

Assignments of Error
     I.   The trial court erred by dismissing plaintiff’s complaint and
          referring this matter to arbitration as the court failed to hold an
          evidentiary hearing pursuant to law.

    II.   The trial court erred by granting arbitration and dismissing
          plaintiff’s complaint and referring this matter to arbitration where
          the court failed to hold an evidentiary hearing to determine if there
          was a valid arbitration clause and there was no valid contract
          between the parties providing for arbitration.

   III.   The trial court erred by granting arbitration and dismissing
          plaintiff’s complaint and referring this matter to arbitration where
          the court failed to hold an evidentiary hearing to determine whether
          the case was suitable for arbitration and where the case was not
          suitable for arbitration and therefore not referable for arbitration
          pursuant to law where there are allegations of criminal misconduct
          and wrongdoing.

   IV.    The trial court erred by granting arbitration and (a) dismissing
          plaintiff’s complaint in its entirety rather than staying this matter as
          it relates to defendants Mawby and We are One Seven LLC only
          pursuant to law and (b) dismissing plaintiff’s complaint in its
          entirety against defendants Richard Menter, Susan Menter and
          John Menter and TD Ameritrade as they are not parties to an
          alleged arbitration clause and have not joined in or otherwise
          requested arbitration.

    V.    The trial court erred by dismissing plaintiff’s complaint and
          referring this matter to arbitration upon the trial court considering
          defendants’ reply brief although the reply brief was not permitted to
          be filed without leave of court, the filing was contrary to law, and the
          reply brief included new and contested allegations and plaintiff was
          not given an opportunity to respond.

Law and Analysis

               We first consider one of the issues raised in appellant’s fifth

assignment of error, that is, whether appellees’ reply brief was properly before the

trial court. Appellant contends that the trial court erred by considering appellees’
reply brief because it was filed without leave of court and included “new and

contested allegations,” which left appellant unable to respond.

               The decision of a trial court to consider a reply brief is left to the

court’s sound discretion. Farmer v. Luntz Corp., 8th Dist. Cuyahoga No. 61873,

1993 Ohio App. LEXIS 196, 4 (Jan. 21, 1993). In Farmer, this court held that it was

not an abuse of discretion to deny a motion to strike a reply brief, or the attached

evidentiary documents, that was filed without leave of court. Id.

               Parties are not permitted to raise new arguments or evidence in a

reply brief because the nonmoving party does not have an adequate opportunity to

respond under the Ohio Rules of Civil Procedure. Foradis v. Marc Glassman, Inc.,

8th Dist. Cuyahoga No. 103454, 2016-Ohio-5235, ¶ 8. However, courts permit the

filing of a reply brief containing a supplemental affidavit where the reply rebuts

arguments set forth in the brief opposing the initial motion and the supplemental

affidavit clarifies previously raised issues. Deutsche Bank Natl. Trust Co. v. Ayers,

11th Dist. Portage No. 2019-P-0094, 2020-Ohio-1332, ¶ 47-48.

               Here, appellees’ reply brief did not raise new arguments. Rather, it

responded to arguments made by appellant in its brief in opposition. Specifically,

appellees attempted to contradict Jerome Menter’s contention that he did not sign

the Investment Advisory Agreement.

               Moreover, appellant neither filed a motion to strike the reply brief nor

a leave to file a surreply brief. Further, almost two months elapsed from the filing

of appellees’ reply brief to the court’s ruling and appellant did not request additional
time to depose Mawby or conduct further discovery. Absent an objection, the trial

court was free to consider the affidavits attached to the reply brief. Lewis Potts, Ltd.

v. Zordich, 11th Dist. Trumbull No. 2018-T-0028, 2018-Ohio-5341, ¶ 41; see also

Brown v. Ohio Cas. Ins. Co., 63 Ohio App.2d 87, 90-91, 409 N.E.2d 253

(8th Dist.1978) (the trial court did not err when it considered unverified documents

to support a summary judgment motion where neither party objected to the other’s

use of those materials).

               There was no abuse of discretion by the trial court in allowing

appellees’ reply brief and the attached affidavits to stand. That issue raised in the

fifth assignment of error is therefore overruled.

               We next consider appellant’s arguments raised in the first, second,

and third assignments of error relative to the trial court’s failure to hold a hearing.

               In its first assignment of error, appellant contends that the trial court

erred by not holding a hearing on appellees’ motion because “an evidentiary hearing

is mandatory for the purpose of determining whether or not conditions necessary to

enforce arbitration are met,” and appellant requested a hearing.

               In its second assignment of error, appellant contends that the trial

court failed to hold a hearing to determine if there is a valid arbitration clause and

whether there is a valid contract between appellant and appellees. Appellant argues

that the Investment Advisory Agreement “fails to identify the trust in any way

whatsoever as a party” to the contract.        Appellant further contends that the
agreement is not a valid, binding contract because it is not signed by either appellee

and, moreover, does not bind arbitration between appellant and appellees.

               For its third assigned error, appellant contends that the trial court

erred by not holding a hearing to determine whether the subject matter was suitable

for arbitration given its allegations of criminal misconduct and wrongdoing.

Arbitration Generally and Standard of Review

               Ohio law recognizes a presumption favoring arbitration when the

parties’ dispute falls within the scope of an arbitration provision. Taylor Bldg. Corp.

of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 27.

Because of this strong presumption favoring arbitration, all doubts should be

resolved in its favor. Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054,

908 N.E.2d 408, ¶ 15.

               When addressing whether a trial court has properly granted a motion

to stay and compel arbitration, the appropriate standard of review depends on “the

type of questions raised challenging the applicability of the arbitration provision.”

McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-

1543, ¶ 7.

               Generally, an abuse of discretion standard applies as to whether a

trial court has properly granted a motion to stay litigation pending arbitration. Id.,

citing U.S. Bank, N.A. v. Wilkens, 8th Dist. Cuyahoga No. 96617, 2012-Ohio-263,

¶ 13; Milling Away, L.L.C. v. UGP Properties, L.L.C., 8th Dist. Cuyahoga No. 95751,

2011-Ohio-1103, ¶ 8. However, when the issue is whether a party has agreed to
submit an issue to arbitration or questions of unconscionability are raised, we review

the matter under a de novo standard of review. McCaskey at id.; see also Taylor

Bldg. at ¶ 2.

R.C. 2711.02 and 2711.03

                In Ohio, arbitration is codified in Chapter 2711 of the Revised Code.

Westerfield v. Three Rivers Nursing & Rehab. Ctr., L.L.C., 2d Dist. Montgomery

No. 25347, 2013-Ohio-512, ¶ 17. R.C. 2711.02 and 2711.03 govern arbitration

agreements.

                R.C. 2711.02 is titled “Court may stay trial.” Under R.C. 2711.02(B),

on application of one of the parties, a trial court may stay litigation in favor of

arbitration pursuant to a written arbitration agreement.                 Taylor Bldg.,

117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, at ¶ 28. R.C. 2711.02(B)

provides:

      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 the stay is not in default in
      proceeding with arbitration.

                Thus, R.C. 2711.02 requires a trial court to stay an action

      on application of one of the parties if (1) the action is brought upon any
      issue referable to arbitration under a written agreement for
      arbitration[;] (2) the court is satisfied the issue is referable to
      arbitration under the written agreement[;] and (3) the applicant is not
      in default in proceeding with arbitration.
Fields v. Herrnstein Chrysler, Inc., 4th Dist. Pike No. 12CA827, 2013-Ohio-693,

¶ 14.

                  R.C. 2711.03, titled “Enforcing arbitration agreement,” provides:

          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. R.C. 2711.03(A).

                  The statute further provides that “[t]he 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.”

Id. “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.” R.C. 2711.03(B).

                  To the extent appellees’ motion was made under R.C. 2711.02, this

court has held that a trial court is not required to hold a hearing when a party moves

for a stay under R.C. 2711.02. AJZ’s Hauling, LLC v. Trunorth Warranty Programs

of N. Am., 8th Dist. Cuyahoga No. 109632, 2021-Ohio-1190, ¶ 41. Rather, “[t]he trial

court may stay proceedings ‘upon being satisfied that the issue involved in the action

is referable to arbitration under an agreement in writing for arbitration[.]’” Id.,

quoting Maestle v. Best Buy Co., 100 Ohio St.3d 330, 2003-Ohio-6465, 800 N.E.2d

7, ¶ 7.
                To the extent appellees’ motion is construed as being made under

R.C. 2711.03, this court acknowledged in AJZ’s Hauling that “the plain language of

R.C. 2711.03 requires a trial court to hold a hearing on a motion to compel

arbitration when the arbitration agreement’s enforceability is raised.” Id. at ¶ 44.2

                Regardless of whether appellees’ motion was made under

R.C. 2711.02 or 2711.03, the trial court needed to satisfy itself that arbitration is

proper. See Molina v. Ponsky, 8th Dist. Cuyahoga No. 86057, 2005-Ohio-6349, ¶ 18

(noting that the party in that case opposing a hearing on the ground that the request

for arbitration was made under R.C. 2711.02 rather than R.C. 2711.03 “puts too fine

a point on the distinction between the two statutory provisions,” and acknowledging

that although a hearing is not required under R.C. 2711.02, “the court must be

satisfied of arbitrability before granting a motion to stay”).

                Here, appellant is challenging the execution of the arbitration

provision itself. However, there is no evidence in the record that the trial court took

this into consideration when granting appellees’ motion to stay proceedings and

compel arbitration. No hearing was held, and the trial court’s judgment does not

offer any reasoning for us to review as to it satisfying itself that arbitration is proper

in this case.

       2
        The AJZ’s Hauling panel found that, in that case, the trial court’s failure to hold
a hearing for a request for arbitration made under R.C. 2711.03 did not constitute
reversible error. Id. at ¶ 45. We note that AJZ Hauling has been accepted for review by
the Ohio Supreme Court and one of the issues to be decided is the hearing requirement
under R.C. 2711.03. See AJZ’S Hauling, L.L.C. v. TruNorth Warranty Programs of
N. Am., 09/14/2022 Case Announcements, 2022-Ohio-3214.
              On this record, appellant’s first, second, and third assignments of

error are well taken and sustained only to the extent that they challenge the lack of

a hearing.

Trial Court Erred in Dismissing Complaint

              In its fourth assignment of error, appellant contends that the trial

court erred by dismissing the complaint, rather than staying the action. The

dismissal dismissed not only appellees, but also the remaining defendants who are

not parties to the Investment Advisory Agreement. Appellant contends that the

dismissal “creates unnecessary challenges such as the requirement of refiling the

case, the need for additional service on all the parties, timeliness issues, potential

problems related to the alleged theft of funds, costs and other miscellaneous issues

which may arise due to a dismissal of a case.” Appellees do not object to this

assignment of error.

              To the extent that appellees’ motion to stay proceedings and compel

arbitration was made under R.C. 2711.02(B), that statute provides in relevant part

as follows:

      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 the stay is not in default in
      proceeding with arbitration.

(Emphasis added.) R.C. 2711.02(B).
               Thus, if after the trial court conducts its hearing pursuant to our

mandate herein and determines that the subject issues are arbitrable, because

R.C. 2711.02 calls for a stay, not a dismissal, of an action referable to arbitration, the

trial court should stay the case. Appellant’s fourth assignment of error is sustained.

Conclusion

               There was no abuse of discretion by the trial court in allowing

appellees’ reply brief to remain part of the trial court record.

               The trial court’s judgment compelling appellant and appellees to

arbitration, without a hearing, is reversed.

               Judgment reversed; case remanded for further proceedings

consistent with this opinion.

      It is ordered that appellant recover from appellees costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      It is ordered that a special mandate be sent to said court to carry this judgment

into execution.

      A certified copy of this entry shall constitute the mandate pursuant to Rule

27 of the Rules of Appellate Procedure.

_________________________
MICHAEL JOHN RYAN, JUDGE

MICHELLE J. SHEEHAN, P.J., and
MARY J. BOYLE, J., CONCUR