Court Opinion

ID: 4294591
Source: CourtListenerOpinion
Date Created: 2018-07-16 20:08:11.371343+00
Date Added: 2024-06-11T09:33:49.834528
License: Public Domain

[Cite as Bunta v. Superior Vacupress L.L.C., 2018-Ohio-2823.]

                                       COURT OF APPEALS
                                     HOLMES COUNTY, OHIO
                                   FIFTH APPELLATE DISTRICT

                                                             JUDGES:
VASILE BUNTA                                         :       Hon. John W. Wise, P.J.
                                                     :       Hon. W. Scott Gwin, J.
                         Plaintiff-Appellee          :       Hon. Earle E. Wise, J.
                                                     :
-vs-                                                 :
                                                     :       Case No. 17CA023
SUPERIOR VACUPRESS LLC, ET                           :
AL                                                   :
                                                     :       OPINION
                 Defendants-Appellants

CHARACTER OF PROCEEDING:                                 Civil appeal from the Homes County Court
                                                         of Common Pleas, Case No. 17CV030

JUDGMENT:                                                Affirmed

DATE OF JUDGMENT ENTRY:                                  July 13, 2018

APPEARANCES:

For Plaintiff-Appellee                                   For Defendants-Appellants

THOMAS WHITE                                             CARI EVANS
209 N. Washington St                                     3521 Whipple Avenue N.W.
Millersburg, OH 44654                                    Canton, OH 44718
[Cite as Bunta v. Superior Vacupress L.L.C., 2018-Ohio-2823.]

Gwin, P.J.

         {¶1} Appellants appeal the November 30, 2017 judgment entry of the Holmes

County Court of Common Pleas denying their motion to stay proceeding and refer case

to arbitration.

                                          Facts & Procedural History

         {¶2} On June 15, 2017, appellee Vasile Bunta filed a complaint against

appellants Superior VacuPress, LLC (“VacuPress”), Firman D. Mast, Mervin D. Mast,

Dennis Mast, Sr., and Superior Lumber, LLC (“Superior Lumber”). Appellee also named

Commercial and Savings Bank (“CSB”) as a defendant to the complaint.

         {¶3} The complaint alleges Firman and appellee agreed to form VacuPress with

appellee owning 34%, Firman owning 51%, and Dennis owning 15% of the company and

that appellee designed the plans for electrical and gas systems for a lumber vacuum

drying process. Further, that the parties obtained a capital loan from CSB. Appellee

alleges VacuPress was to compensate him and Firman each $2,000 per month from the

profits of the company starting in August of 2015 and $4,000 per month beginning January

of 2016.

         {¶4} Appellee also states in the complaint that the VacuPress operating

agreement was amended and reinstated on January 1, 2016, with the following

allocations of 1000 units: Mervin – 106 units; Dennis – 135 units, appellee – 300 units,

and Firman – 459 units. Appellee alleges that in March of 2016, Firman told appellee he

wanted appellee out of VacuPress. Further, that on August 15, 2016, Firman sent a letter

to appellee seeking to liquidate and dissolve VacuPress.
Holmes County, Case No. 17CA023                                                         3

       {¶5} Appellee alleges that on November 1, 2016, prior to the dissolution and

liquidation of VacuPress, the Mast appellants formed Superior Lumber at the same

location as VacuPress and that Superior Lumber occupies and operates at the same

location as VacuPress did. Appellants admit in their answer that Superior Lumber was

formed on November 1, 2016; that Firman sent a letter to appellee on August 15, 2016

with a notice of intent to terminate VacuPress; and that Superior Lumber occupies and

operates at the same location as VacuPress did.

       {¶6} Appellee asserts the following counts in his complaint: (1) declaratory

judgment against the Mast appellants and Superior Lumber determining the Mast

appellants abandoned VacuPress in favor of Superior Lumber with a determination that

the parties are no longer bound to the operating agreement of VacuPress; (2) a

declaration that VacuPress is dissolved and requiring the Mast appellants to fully account

for VacuPress; (3) accounting by VacuPress and the Mast appellants for all monies

received and disbursed by them; (4) breach of fiduciary duty of the Mast appellants; (5)

civil conspiracy by VacuPress, Superior Lumber, and the Mast appellants to breach the

fiduciary duty owed to appellee and/or conversion of appellee’s property; (6) conversion

by VacuPress, Superior Lumber, and the Mast appellants; and (7) unjust enrichment by

VacuPress, Superior Lumber, and the Mast appellants. Appellee requests the following

relief: a declaratory judgment that appellants abandoned VacuPress and the parties are

no longer bound by the operating agreement, judicial dissolution, accounting, and winding

up of VacuPress, and an award of compensatory damages. Appellee does not name

CSB in any of the counts, nor does he request relief from CSB. Rather, appellee only

asserts that CSB “may have an interest in the subject matter of this case.”
Holmes County, Case No. 17CA023                                                           4

       {¶7} Exhibit C to the complaint is the amended and reinstated operating

agreement of VacuPress. The operating agreement states it is entered into by and

between Mervin, Dennis, Firman, and appellee. Article 17 of the operating agreement is

entitled “Arbitration” and Section 17.1 provides the following:

       Controversies.     Any controversy between the Manager or Members

       relating to this Agreement, the operation of the Company or the

       transactions contemplated hereby shall be submitted to arbitration in

       Millersburg, Ohio, in accordance with the Commercial Arbitration Rules of

       the American Arbitration Association then in effect.       The arbitrator or

       arbitrators may decide due to the nature of the dispute that the Company

       should be dissolved, that a winding up of the affairs should occur and that

       liquidation should result. In such event the provisions of Section 15 shall

       control.

       {¶8} The operating agreement is signed by Mervin, Dennis, Firman, and

appellee.

       {¶9} Appellants filed an answer denying the allegations in the complaint and

asserting as their first affirmative defense that the operating agreement contains a binding

arbitration clause. On July 27, 2017, appellants filed a motion to stay proceedings and

refer case to arbitration pursuant to R.C. § 2711.02(B). Appellants argued the claims

asserted by appellee are required to be submitted to arbitration pursuant to the operating

agreement.

       {¶10} CSB filed a response to the motion to stay. In the response, CSB stated

they believed they had been added to the case “solely as a basis of protecting and
Holmes County, Case No. 17CA023                                                             5

adjudicating [their] rights as a secured party and first lien holder in the assets of Superior

VacuPress, LLC and/or successors thereto in the event of a dissolution or winding up”

and “no affirmative claims of wrongdoing or relief have been made by Plaintiff in regards

to CSB.” Thus, CSB took no position on the motion to stay other than to state it is not a

signatory to the operating agreement and it is not a necessary party to arbitration.

        {¶11} Appellee filed a memorandum in opposition to the motion to stay on August

9, 2017 and supplemental memorandum in opposition on November 27, 2017. Appellee

argued the case could not be referred to arbitration because the case involves parties

that are not parties to the operating agreement and because appellee requests

declaratory judgment that appellants abandoned the operating agreement. Appellants

filed a reply on November 27, 2017.

        {¶12} On November 30, 2017, the trial court issued a judgment entry denying

appellants’ motion to stay proceeding and refer case to arbitration. The trial court found

the case involved Superior Lumber and CSB, parties that are not parties to the VacuPress

operating agreement.      Further, that appellee requests a declaratory judgment that

appellants have abandoned the operating agreement which the, “court must first

determine said cause of action prior to determining whether referral to arbitration is

appropriate.”

        {¶13} Appellants appeal the November 30, 2017 judgment entry of the Holmes

County Court of Common Pleas and assign the following as error:

        {¶14} “THE TRIAL COURT ERRED IN FAILING TO STAY THE LITIGATION AND

REQUIRE ARBITRATION PURSUANT TO THE TERMS OF THE OPERATING

AGREEMENT OF SUPERIOR VACUPRESS LLC.”
Holmes County, Case No. 17CA023                                                            6

        {¶15} “A trial court’s decision granting or denying a stay of proceedings pending

arbitration is * * * subject to de novo review on appeal with respect to issues of law, which

will commonly predominate because such cases generally turn on issues of contractual

interpretation * * *.” Hudson v. John Hancock Fin. Servs., 10th Dist. Franklin No. 06AP-

1284, 2007-Ohio-6997; McFarren v. Emeritus at Canton, 5th Dist. Stark No.

2013CA00040, 2013-Ohio-3900.          Further, the “issue of whether a controversy is

arbitrable under an arbitration provision of a contact is a question of law for the court to

decide upon examination.” Id.; Rona Ents., Inc. v. Vanscoy, 5th Dist. Perry Nos. 09CA6,

09CA8, 2010-Ohio-1836. In this case, both appellants and appellee agree that the trial

court’s determination to deny the motion to stay is reviewable under a de novo standard,

as the conclusions involve legal determinations. Accordingly, we need not defer to the

trial court’s decision. McFarren v. Emeritus at Canton, 5th Dist. Stark No. 2013CA00040,

2013-Ohio-3900; Estate of Heath v. Grange Mut. Cas. Co., 5th Dist. Delaware No.

02CAE05023, 2002-Ohio-5494.

        {¶16} Appellants contend the trial court erred in denying their motion to stay and

refer to arbitration based upon the inclusion of defendants who are not parties to the

operating agreement and argue that the language of the operating agreement and R.C.

2711 require arbitration of appellee’s claims against them. Appellee argues the policy

favoring arbitration does not compel a party to arbitrate with parties outside the scope of

the operating agreement.

        {¶17} Ohio’s public policy favoring arbitration is codified at R.C. Chapter 2711.

Under R.C. 2711.01(A), a written arbitration clause “shall be valid, irrevocable, and

enforceable, except upon grounds that exist at law or in equity for the revocation of any
Holmes County, Case No. 17CA023                                                             7

contract.” If a party moves to stay proceedings pending arbitration, pursuant to “an

agreement in writing for arbitration,” the court must first satisfy itself “that the issue

involved in the action is referable to arbitration” under the agreement. R.C. 2711.02(B).

Thus, the trial court must “determine ultimately whether an arbitration provision is

enforceable” and be satisfied that that relief sought is appropriate before issuing an order

to stay pending arbitration. Maestle v. Best Buy Co., 100 Ohio St. 3d 330, 800 N.E.2d 7

(2003).

          {¶18} The Ohio Supreme Court has recognized Ohio’s public policy favoring

arbitration. Taylor Bldg. Corp of America v. Benfield, 117 Ohio St. 3d 352, 884 N.E.2d 12

(1998). However, arbitration is a matter of contract and, despite the strong policy in its

favor, a party cannot be compelled to arbitrate any dispute that he has not agreed to

submit. Grady v. Winchester Place Nursing & Rehab. Center, 5th Dist. Fairfield No. 08

CA 59, 2009–Ohio–3660; Neofores v. Brandddirect Marketing, Inc., 5th Dist. Richland

No. 02–CA–0012, 2002–Ohio–4841; Council of Smaller Enterprises v. Gates, McDonald

& Co., 80 Ohio St. 3d 661, 687 N.E.2d 1352 (1998). 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.” Id. While arbitration is encouraged as a form

of dispute resolution, the policy favoring arbitration does not trump the constitutional right

to seek redress in court. Peters v. Columbus Steel Castings Co., 115 Ohio St. 3d 134,

2007–Ohio–4787, 873 N.E.2d 1258.

          {¶19} In this case, the arbitration section of the operating agreement states it

applies to any controversies between the members of the agreement and the operation

of VacuPress. However, the arbitration agreement clearly does not encompass Superior
Holmes County, Case No. 17CA023                                                         8

Lumber, as the “company” referred to in the arbitration section of the operating agreement

is VacuPress, not Superior Lumber. Thus, while appellee’s claims against the Mast

partners individually may be contemplated by the arbitration agreement, appellee’s claims

against Superior Lumber are not covered by the arbitration agreement and are beyond

the scope of the operating agreement. Appellee cannot be forced to arbitrate his claims

against Superior Lumber, as he did not sign an arbitration agreement with Superior

Lumber.

       {¶20} Appellants argues appellee cannot defeat the arbitration clause by adding

an unnecessary party as a defendant. While we agree with this assertion with regards to

CSB, considering the assertions made in the complaint by appellee regarding Superior

Lumber, we do not agree that Superior Lumber is simply an unnecessary party defendant.

Appellee alleges in his complaint that the Mast appellants created Superior Lumber

before they dissolved VacuPress and alleges the Mast appellants sold or gave all the

assets of Vacupress to Superior Lumber prior to the dissolution of VacuPress, leaving

appellee with the debt incurred by VacuPress and utilizing the technology he designed

for the electrical and gas systems for the lumber vacuum drying process in the new

company, Superior Lumber. Appellants admit that Superior Lumber was formed on

November 1, 2016 and occupies and operates at the same location as VacuPress did.

Since Superior Lumber was formed by the same individual Mast partners who were

members of VacuPress, excluding appellee, and because of the nature of the claims

asserted against Superior Lumber, the resolution of the dispute with the Mast appellants

will determine the issues against Superior Lumber, a party who is not subject to the

arbitration agreement.
Holmes County, Case No. 17CA023                                                           9

       {¶21} Appellants contend since the claims against the Mast appellants are

covered by the operating agreement and those against Superior Lumber are not, the case

must be stayed until the conclusion of the arbitration of the claims against the Mast

appellants. Appellants cite several cases in support of their argument. However, the

facts in this case are distinguishable from the cases cited by appellants in which the cases

with both non-arbitrable and arbitrable claims are stayed. In the cases cited by appellants,

there are separate claims against separate parties who were not signatories to the

arbitration agreements. In this case, the complaint contains claims against Superior

Lumber, a company consisting solely of the old partners in VacuPress, excluding

appellee.

       {¶22} Because the claims against Superior Lumber are the same as those against

the Mast appellants, the normal factors favoring arbitration, such as judicial economy and

efficiency, do not apply. Further, if the claims against the Mast appellants and Superior

Lumber are concluded in different forums, it may result in inconsistent decisions on the

issue of liability that cannot be reconciled and the parties would not achieve a permanent

resolution of their dispute. See Wascovich v. Personacare of Ohio, 11th Dist. Lake No.

2010-L-006, 2010-Ohio-4563; Peters v. Columbus Steel Castings Co., 115 Ohio St. 3d
134, 2007–Ohio–4787, 873 N.E.2d 1258. Accordingly, the trial court did not err in denying

appellants’ motion based upon the inclusion of claims against Superior Lumber.

       {¶23} Appellants also contend the trial court erred in denying their motion to stay

based upon the trial court’s decision that it must determine the declaratory judgment

cause of action prior to determining whether referral to arbitration is appropriate. We

disagree.
Holmes County, Case No. 17CA023                                                        10

        {¶24} Appellee’s declaratory judgment action is against both Superior Lumber and

the Mast appellants and seeks a determination that appellants abandoned VacuPress in

favor of Superior Lumber and also seeks a determination that the parties are no longer

bound to the operating agreement of VacuPress because appellants abandoned the

operating agreement. While a court may not rule on the potential merits of an underlying

claim when deciding whether the parties have agreed to submit a particular claim to

arbitration pursuant to Council of Smaller Enterprises v. Gates, McDonald & Co., 80 Ohio

St.3d 661, 687 N.E.2d 1352 (1998), “an analysis of whether a dispute falls within he scope

of an arbitration agreement should logically follow the initial determination whether the

parties ever entered into an agreement in the first place.” Trinity Health System v. MDX

Corp., 180 Ohio App. 3d 815, 2009-Ohio-417, 907 N.E.2d 746 (7th Dist.); Mason v.

Mason, 5th Dist. Stark No. 2016CA00208, 2017-Ohio-5787. In his declaratory judgment

claim, appellee essentially asserts that appellants abandoned or waived their right to

arbitrate.   The trial court did not make a determination as to whether appellants

abandoned or waived their right to arbitrate. Accordingly, the trial court did not err in

finding it must determine whether appellants’ waived or abandoned their right to arbitrate

prior to determining whether arbitration is appropriate.
Holmes County, Case No. 17CA023                                                   11

       {¶25} Based on the foregoing, we overrule appellants’ assignment of error. The

November 30, 2017 judgment entry of the Holmes County Court of Common Pleas is

affirmed.

By Gwin, P.J.,

Wise, John, P.J.,

Wise, Earle, J., concur