Court Opinion

ID: 2717637
Source: CourtListenerOpinion
Date Created: 2014-08-13 14:10:28.556694+00
Date Added: 2024-06-11T15:27:52.453578
License: Public Domain

[Cite as McGlumphy v. Richard T. Kiko Agency, Inc., 2014-Ohio-3479.]

STATE OF OHIO                   )                        IN THE COURT OF APPEALS
                                )ss:                     NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT                )

EDWIN V. MCGLUMPHY                                       C.A. No.      27043

        Appellee

        v.                                               APPEAL FROM JUDGMENT
                                                         ENTERED IN THE
RICHARD T. KIKO AGENCY, INC., et al.                     COURT OF COMMON PLEAS
                                                         COUNTY OF SUMMIT, OHIO
        Appellants                                       CASE No.   CV-2012-07-3991

                                DECISION AND JOURNAL ENTRY

Dated: August 13, 2014

        MOORE, Judge.

        {¶1}    Defendant-Appellants, Richard T. Kiko Agency, Inc. and Russ Kiko Associates,

Inc. (collectively known as “Kiko”), appeal from the July 18, 2013 judgment entry of the

Summit County Court of Common Pleas. We reverse.

                                                    I.

        {¶2}    Wanda C. Miller and K. Bret Apple, Co-Executors of the estate of Clementine

Gore, hired Kiko to sell real property located at 836 Lorain Street, Akron, Ohio 44305 (“836

Lorain Street”) at auction on July 12, 2010. Edwin McGlumphy successfully bid $9,900.00 on

the property, signed the Purchase Agreement, and issued the “Richard Kiko Agency” a check in

the amount of $9,900.00. The Purchase Agreement contained an arbitration clause, stating:

        In the event a dispute arises concerning this contract and/or the performance of
        Owner(s) or Realtor (including any Owner, officer, agent or employee of Realtor)
        arising out of or in any way related to this contract or any of their acts or
        performance in connection therewith, the dispute shall be submitted to binding
        arbitration through and pursuant to the rules of the American Arbitration
        Association or similar arbitration organization. By agreeing to arbitration, all
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       parties waive their right to court or jury trial. The party first filing shall have the
       right to select the arbitration association to hear the matter. All claims, including
       crossclaims and counterclaims, must be brought in the arbitration or are waived.
       It is understood that the arbitration will be administered by said arbitration
       association and will include the use of its arbitrators. The arbitration shall be held
       in Stark County unless otherwise agreed to by Owner(s) and Realtor. The
       arbitrator shall have actual experience with the sale of the type of property being
       sold pursuant to this contract. All issues of arbitrability shall be determined solely
       by the arbitrator. All costs and/or fees of the arbitration shall be equally divided
       among all parties to the arbitration and all parties to the arbitration shall be solely
       responsible for paying their own attorney’s fees. All incidental, consequential,
       and punitive damages of any type or nature are hereby waived by all parties to
       this contract. Any and all disputes, whether by arbitration or otherwise, shall be
       venued, heard and decided in Stark County, Ohio.

At the close of the auction, Mr. McGlumphy was given keys to the property and proceeded to

make improvements to it over time. He claimed that Kiko delayed the closing of the real estate

transaction and transfer of title which caused him to incur damages and costs.

       {¶3}    On July 10, 2012, Mr. McGlumphy filed a complaint in Common Pleas Court

alleging (1) breach of contract, (2) fraud, (3) imposition of vendor’s lien, and (4) specific

performance.

       {¶4}    In response, Kiko filed an answer, an amended answer, and a motion to stay

proceedings pending arbitration. In its motion, Kiko asserted that Mr. McGlumphy’s claims “fall

within the scope of the arbitration provision contained in the Purchase Agreement,” and, as such,

Mr. McGlumphy is legally bound to arbitrate this dispute.

       {¶5}    After a hearing on the matter, the trial court denied Kiko’s motion, stating that

“the [c]ourt finds the subject [a]rbitration provision to be procedurally unconscionable in these

particular circumstances and therefore unenforceable.” (Emphasis added.)

       {¶6}    Kiko timely appealed, raising two assignments of error for our consideration.
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                                                 II.

                                  ASSIGNMENT OF ERROR I

       THE TRIAL COURT ERRED AS A MATTER OF LAW AND/OR AGAINST
       THE MANIFEST WEIGHT OF THE EVIDENCE IN HOLDING THAT THE
       ARBITRATION PROVISION IN THE PURCHASE AGREEMENT WAS
       PROCEDURALLY      UNCONSCIONABLE      AND     THEREFORE
       UNENFORCEABLE.

       {¶7}      In its first assignment of error, Kiko argues, among other things, that the trial

court erred in denying its arbitration motion to stay proceedings pending arbitration “based

solely on a finding of procedural unconscionability.” Specifically, Kiko argues that, in order to

properly deny its motion, the trial court must find both procedural and substantive

unconscionability. We agree.

       {¶8}      It is well-settled that, “[i]n examining an arbitration clause, a court must be

cognizant of the strong presumption in favor of arbitrability, and any doubts should be resolved

in favor of coverage under the arbitration clause.” Dept. of Adm. Servs. v. Moody/Nolan Ltd.,

Inc., 10th Dist. Franklin No. 00AP-336, 2000 WL 1808330, *2 (Dec. 12, 2000), citing Sasaki v.

McKinnon, 124 Ohio App. 3d 613, 616-617 (8th Dist.1997), quoting Didado v. Lamson &

Sessions Co., 81 Ohio App. 3d 302, 304 (9th Dist.1992); see also Hayes v. Oakridge Home, 122
Ohio St. 3d 63, 2009-Ohio-2054, ¶ 15. “‘[A]rbitration is favored because it provides the parties

thereto with a relatively expeditious and economical means of resolving a dispute.’” Hayes at ¶

15, quoting Schaefer v. Allstate Ins. Co., 63 Ohio St. 3d 708, 712 (1992); see also Mahoning Cty.

Bd. of Mental Retardation & Dev. Disabilities v. Mahoning Cty. TMR Edn. Assn., 22 Ohio St. 3d
80, 83 (1986).

       {¶9}      Further, R.C. 2711.01(A) states that:

       A provision in any written contract, except as provided in division (B) of this
       section, to settle by arbitration a controversy that subsequently arises out of the
                                                  4

       contract, or out of the refusal to perform the whole or any part of the contract, or
       any agreement in writing between two or more persons to submit to arbitration
       any controversy existing between them at the time of the agreement to submit, or
       arising after the agreement to submit, from a relationship then existing between
       them or that they simultaneously create, shall be valid, irrevocable, and
       enforceable, except upon grounds that exist at law or in equity for the revocation
       of any contract.

(Emphasis added.)

       {¶10} “Unconscionability is a ground for revocation of an arbitration agreement.”

Hayes at ¶ 19, citing Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938,

¶ 33. The Supreme Court of Ohio has explained that “[u]nconscionability includes both ‘an

absence of meaningful choice on the part of one of the parties together with contract terms which

are unreasonably favorable to the other party.’” Taylor Bldg. at ¶ 34, quoting Lake Ridge

Academy v. Carney, 66 Ohio St. 3d 376, 383 (1993). “The party asserting unconscionability of a

contract bears the burden of proving that the agreement is both procedurally and substantively

unconscionable.” (Emphasis added.) Taylor at ¶ 34., citing Collins v. Click Camera & Video,

Inc., 86 Ohio App. 3d 826, 834 (2d Dist.1993) (“One must allege and prove a ‘quantum’ of both

prongs in order to establish that a particular contract is unconscionable.”).

       {¶11} “Procedural unconscionability concerns the formation of the agreement and

occurs when no voluntary meeting of the minds is possible.” Ball v. Ohio State Home Servs.,

Inc., 9th Dist. Summit No. 23063, 2006-Ohio-4464, ¶ 7, quoting Porpora v. Gatliff Building

Co.,160 Ohio App.3d 843, 2005-Ohio-2410, ¶ 7 (9th Dist.), citing Bushman v. MFC Drilling,

Inc., 9th Dist. Medina No. 2403-M, 1995 WL 434409 (July 19, 1995). “This court has held that

when determining procedural unconscionability, a reviewing court must consider factors bearing

directly on the relative bargaining position of the parties.” Ball at ¶ 7, citing Porpora at ¶ 7.

“Such factors include ‘age, education, intelligence, business acumen, experience in similar
                                                5

transactions, whether terms were explained to the weaker party, and who drafted the contract.’”

Ball at ¶ 7, quoting Featherstone v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 159 Ohio

App.3d 27, 2004-Ohio-5953, ¶ 13, quoting Eagle v. Fred Martin Motor Co., 157 Ohio App. 3d
150, 2004-Ohio-829, ¶ 31.

       {¶12} “Substantive unconscionability goes to the terms of contract themselves.” Ball at

¶ 7, citing Porpora at ¶ 8; Eagle at ¶ 31. “Contractual terms are substantively unconscionable if

they are unfair and commercially unreasonable. (Emphasis added.) Ball at ¶ 7, citing Porpora at

¶ 8, citing Bank One, N.A. v. Borovitz, 9th Dist. Summit No. 21042, 2002-Ohio-5544, ¶ 16.

       {¶13} On appeal, we review a trial court’s determination of unconscionability de novo.

See Hayes, 2009-Ohio-2054, at ¶ 21.

       {¶14} In the present matter, the trial court made specific findings as to whether the

arbitration provision was procedurally unconscionable, concluding that Mr. McGlumphy “met

his burden” because he “was not made aware of the terms and conditions of the sale[,] and he

believed he had no option but to sign the Purchase Agreement after his bid was accepted and the

sale was over.” The trial court also noted Mr. McGlumphy’s argument that the arbitration

provision was substantively unconscionable because it contained a provision that leaves him

without “any relief or remedy.” However, the trial court failed to make any findings, or include

any discussion, regarding whether, in light of Mr. McGlumphy’s evidence, he met his burden of

proof that the arbitration provision was also substantively unconscionable; meaning that its terms

were unfair and commercially unreasonable. See Ball at ¶ 7.

       {¶15} The trial court’s judgment entry clearly denied Kiko’s motion solely on the basis

of procedural unconscionability. From its language, we cannot discern whether the trial court

considered any evidence submitted as to substantive unconscionability. As this Court remains a
                                                6

reviewing court, we will not consider this issue in the first instance. See Price v. Carter Lumber

Co., 9th Dist. Summit No. 26243, 2012-Ohio-6109, ¶ 22, citing Harris-Coker v. Abraham, 9th

Dist. Summit No. 26053, 2012-Ohio-4135, ¶ 4. See also Burr v. Nationwide Mut. Ins. Co., 9th

Dist. Lorain No. 12CA010231, 2013-Ohio-4406, ¶ 23.         As such, the trial court must analyze

whether, based upon the evidence in the record, Mr. McGlumphy met his burden to prove that

the arbitration provision was both procedurally and substantively unconscionable. See Taylor,

117 Ohio St. 3d 352, at ¶ 34.

       {¶16} Accordingly, Kiko’s first assignment of error is sustained.

                                ASSIGNMENT OF ERROR II

       THE TRIAL COURT ERRED IN DENYING KIKO’S MOTION FOR
       CONTINUANCE SO THAT KIKO’S FACT WITNESSES COULD BE
       AVAILABLE TO TESTIFY AT THE EVIDENTIARY HEARING.

       {¶17} Based upon our resolution of Kiko’s first assignment of error, the second

assignment of error is moot and we decline to address it. See App.R. 12 (A)(1)(c).

                                               III.

       {¶18} In sustaining Kiko’s first assignment of error and concluding that its second

assignment of error is moot, the judgment of the Summit County Court of Common Pleas is

reversed and remanded for further proceedings consistent with this decision.

                                                                                Judgment reversed,
                                                                               and cause remanded.

       There were reasonable grounds for this appeal.
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       We order that a special mandate issue out of this Court, directing the Court of Common

Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy

of this journal entry shall constitute the mandate, pursuant to App.R. 27.

       Immediately upon the filing hereof, this document shall constitute the journal entry of

judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the

period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is

instructed to mail a notice of entry of this judgment to the parties and to make a notation of the

mailing in the docket, pursuant to App.R. 30.

       Costs taxed to Appellee.

                                                     CARLA MOORE
                                                     FOR THE COURT

HENSAL, P. J.
WHITMORE, J.
CONCUR.

APPEARANCES:

MICHAEL S. GRUBER and JASON N. BING, Attorneys at Law, for Appellants.

R. SCOTT HALEY, Attorney at Law, for Appellee.