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Koudela v. Johnson & Johnson Custom Builders, LLC

Court of Appeals of Ohio, Eleventh District, Lake

December 29, 2017

NICHOLAS KOUDELA, et al., Plaintiffs-Appellants,
JOHNSON & JOHNSON CUSTOM BUILDERS, LLC, et al., Defendants-Appellees.

         Civil Appeal from the Lake County Court of Common Pleas, Case No. 2016 CV 000895.

          Jay F. Crook, Shryock, Crook & Associates, LLP, (For Plaintiffs-Appellants).

          Jeffrey A. Ford and Jason L Fairchild, Andrews & Pontius, L.L.C., 4817 State Road, #100, (For Defendants-Appellees).



         {¶1} Appellants, Nicholas and Monica Koudela ("the Koudelas"), appeal from the January 17, 2017 judgment of the Lake County Court of Common Pleas, granting appellees', Johnson & Johnson Custom Builders, LLC, William J. Johnson, and Robert W. Johnson, motion to stay proceedings pending binding arbitration. Finding no error, we affirm.

         {¶2} On January 7, 2015, the Koudelas entered into a construction contract for a single-family craftsman style home located in Willowick, Lake County, Ohio with a purchase price of $227, 200.00.[1] The contract contained the following binding arbitration provision:[2]

         {¶3} "22. ARBITRATION. Aside from warranty claims that shall be processed in accordance with the Limited Warranty procedure in Exhibit E, should any disputes arise between the parties as to the meaning or interpretation of this Agreement or the Contract Documents, or as the result of any controversy which may arise by virtue of the construction of the Dwelling, and the parties are unable between themselves to resolve such disputes, it is mutually agreed that the parties will submit all disputes to binding arbitration in Cleveland, Ohio, through Construction Industry Arbitration Rules of the Ohio Arbitration and Mediation Center ('OAMC'), or a similar Alternative Dispute Resolution forum mutually accepted by the parties. The cost of such arbitration shall be borne by the party initiating the claim. The parties further agree and consent to the application of the Ohio Rules of Civil procedure to govern the scope and extent of discovery in preparation for such arbitration. Contractor and Owner hereby acknowledge that by agreeing to binding arbitration, they are waiving their right to a trail (sic) by jury." (Emphasis sic.)

         {¶4} Disputes later arose regarding work performed under the contract. On May 27, 2016, the Koudelas filed a complaint against appellees alleging claims for fraud in the inducement (that appellee William Johnson, under the name of a fictitious entity, "Johnson & Johnson Builders" instead of "Johnson & Johnson Custom Builders, LLC, " entered into the construction contract), breach of contract, negligence, conversion, unjust enrichment/detrimental reliance, and declaratory judgment (that the arbitration clause in the parties' contract is unenforceable).

         {¶5} Appellees were granted leave and filed a Civ.R. 12(B)(6) motion to dismiss, or in the alternative, a motion to stay pending binding arbitration on August 5, 2016. Appellees stress that the contract has an arbitration provision in which the parties agreed to arbitrate disputes and give up their right to a trial by jury.

         {¶6} The Koudelas filed a brief in opposition on September 2, 2016 on the grounds that appellees' failure to disclose the unregistered and fictitious nature of the contractor identified in the agreement amounts to fraud which prevented a meeting of the minds. As such, the Koudelas posit that the arbitration clause is void.

         {¶7} Appellees filed a reply brief ten days later maintaining they are entitled to seek arbitration pursuant to the parties' agreement. Appellees point out that the alleged failure to disclose any unregistered and fictitious name prevents appellees as contractor from bringing an action but it does not prevent appellees as contractor from defending an action. Appellees also stress that the Koudelas have alleged that the contract was fraudulently induced but not that the arbitration clause itself was fraudulently induced.

         {¶8} On January 17, 2017, the trial court denied appellees' Civ.R. 12(B)(6) motion to dismiss, based upon the parties' agreement to arbitrate in lieu of litigation, but granted appellees' alternative motion to stay proceedings pending binding arbitration pursuant to the terms of the contract finding that the arbitration provision is valid and enforceable. The Koudelas filed a timely appeal asserting the following assignment of error:

         {¶9} "The trial court committed reversible error in granting the stay of proceedings to Defendant-Appell[ees] when none of them were named parties to the contract containing the arbitration clause and the fictitious entity with whom the contract was made is not a party to the lawsuit."

         {¶10} "Ohio and federal courts encourage arbitration to settle disputes. Kelm v. Kelm (1993), 68 Ohio St.3d 26, 27 * * *; Southland Corp. v. Keating (1984), 465 U.S. 1, 10 * * * Our General Assembly also favors arbitration. R.C. 2711.02 requires a court to stay an action if the issue involved falls under an arbitration agreement[.]" ...

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