Jatsek Constr., Co., Inc. v. Burton Scot Contrs., L.L.C.

2012 Ohio 3966

• Court: Ohio Court of Appeals
• Decided: August 30, 2012
• Docket: 98142
• Status: Published

Opinion

[Cite as Jatsek Constr., Co., Inc. v. Burton Scot Contrs., L.L.C., 2012-Ohio-3966.]

Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 98142

JATSEK CONSTRUCTION CO., INC. PLAINTIFF-APPELLEE

vs.

BURTON SCOT CONTRACTORS, LLC, ET AL. DEFENDANTS-APPELLANTS

JUDGMENT: REVERSED AND REMANDED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-758171

BEFORE: Jones, J., Blackmon, A.J., and Boyle, J.

RELEASED AND JOURNALIZED: August 30, 2012

ATTORNEYS FOR APPELLANTS Andrew J. Natale Philip J. Truax Frantz Ward LLP 2500 Key Center 127 Public Square Cleveland, Ohio 44114

ATTORNEYS FOR APPELLEES

For Jatsek Construction Co.

John R. Christie Stafanik & Christie 1375 East Ninth Street, Suite 2450 Cleveland, Ohio 44114

City of Warren

James A. Climer Mazanec, Raskin & Ryder Co, L.P.A. 100 Franklin’s Row 34305 Solon Road Solon, Ohio 44139

For Cuyahoga County

Colleen Majeski Assistant County Prosecutor Justice Center, 9th Floor 1200 Ontario Street Cleveland, Ohio 44113

For Lorain County

Daniel F. Petticord Lorain County Prosecutors Office 225 Court Street, 3rd Floor Elyria, Ohio 44035 LARRY A. JONES, SR., J.:

{¶1} This case came to be heard upon the accelerated calendar pursuant to App.R.

11.1 and Loc.R. 11.1.

{¶2} Defendants-appellants, Burton Scot Contractors, L.L.C. and Westfield

Insurance Company (collectively “Burton Scot”) appeal from the trial court’s judgment

denying Burton Scot’s motion to stay proceedings pending arbitration. We reverse and

remand.

I. Procedural History and Facts

{¶3} In June 2011, plaintiff-appellee Jatsek Construction Company, Inc. initiated

this action against the Burton Scot defendants and three other defendants: Cuyahoga

County, Lorain County, and the city of Warren. According to the complaint, Burton Scot

was the general contractor for three separate public improvement projects. The first

project was for the resurfacing of Russia Road in Lorain County; the second project was

for the resurfacing of Usher Road in Cuyahoga County; and the third project was for work

to be completed for the Greenway bike trail (“Greenway project”) in the city of Warren.

The Greenway project is the subject of this appeal.

A. Jatsek’s Complaint Against Burton Scot Relative to the Greenway Project

{¶4} According to Jatsek’s complaint, it was contacted by Burton Scot to submit a

subcontractor bid for the Greenway project. Jatsek submitted a bid, but Burton Scot

informed the company that it was attempting to find a different contractor for the work.

Jatsek’s complaint further alleged that Burton Scot contacted Jatsek again and submitted a proposed subcontract agreement for some, but not all, of the work previously bid on by

Jatsek.

{¶5} Jatsek alleged that it informed Burton Scot that, because of the lapse of time

from the initial discussions to the proposed amended contract, it was “unable to perform

the tasks as originally bid.” Complaint, ¶ 40. According to Jatsek’s complaint, “Burton

Scot requested that Jatsek perform whatever duties it was able to, with the understanding

that the bid prices for the work performed would be honored.” Id. at ¶ 41.

{¶6} The complaint alleged that Jatsek modified the proposed subcontract and

submitted it to Burton Scot. “Jatsek did complete the tasks it agreed to in the modified

subcontract agreement, although Burton Scot never executed the document and thus no

contract was ever formed.” Id. at ¶ 43. Jatsek further alleged that it was not paid for

its work. According to Jatsek, it “understood, by the acts, words, and deeds of Burton

Scot that it would be paid the unit prices as set forth in the original bid and in the various

proposed subcontracts.” Id. at ¶ 44.

B. Burton Scot’s Answer and Motion to Stay

{¶7} Burton Scot answered, and relative to the Greenway project, admitted that

Jatsek performed work on the project, but had not been paid. In its motion to stay

proceedings pending arbitration, Burton Scot contended that the subcontract agreement

required mandatory and binding arbitration. Burton Scot submitted the affidavit of its

vice president in support of the motion to stay. The vice president averred that on May

26, 2010, Jatsek submitted a bid proposal for the Greenway project, Burton Scot accepted the bid on August 5, 2010, and issued the written contract for the project to Jatsek on

September 17, 2010.

{¶8} The vice president further averred that Jatsek began working at the Greenway

project on October 18, 2010, and on October 30, 2010, issued its first invoice for work

performed on the project. According to the vice president, on November 7, 2010, Jatsek

executed and returned the written contract. In executing the contract, however, Jatsek

made handwritten modifications to certain provisions in the contract. The vice president

averred that those modifications were not acceptable to Burton Scot and Burton Scot did

not consent in writing to them.

{¶9} Burton Scot also submitted the written contract in support of its motion to

stay. Paragraph 31 of the contract provided in relevant part as follows:

At the sole option of Contractor, any and all claims, disputes, controversies, demands, and causes of action of whatever nature, kind or description arising from or relating to this Agreement, including without limitation contract, equity, tort or legal claims, and further including without limitation claims relating to rights of payment or interpretations hereof, shall be submitted to mandatory and binding arbitration in the Cleveland Tribunal of the American Arbitration Association in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association. The decision and Award of the Arbitrator(s) shall be final and binding on Contractor and Subcontractor, and the decision and Award may be reduced to judgment and enforced in any Court of competent jurisdiction.

{¶10} The contract was signed and dated (November 7, 2010) by Jatsek’s vice

president, but was not signed by a Burton Scot representative. The contract had

handwritten changes, but not to the arbitration provision.

{¶11} Jatsek opposed the motion to stay. The company argued that Burton Scot never executed the agreement, but even if a contract was formed, Jatsek was entitled to

judgment because there was no dispute that it performed the work agreed to under the

contract, but had not been paid.

{¶12} The trial court ruled that no contract existed for the Greenway project. The

motion for stay was therefore denied as it related to that project.1 For its sole assigned

error, Burton Scot contends that: “The trial court erred as a matter of law in denying

Appellant Burton Scot Contractors, LLC’s Motion to Stay Proceedings Pending

Arbitration as it relates to the City of Warren Greenway Bike Trail public improvement

project in Warren, Ohio.”

II. Law and Analysis

{¶13} Burton Scot notes that there is a split of authority on whether this court’s

standard of review is abuse of discretion or de novo. Burton Scot contends that the split

is “immaterial” to this case because reversal is required under either standard. Jatsek, on

the other hand, contends that this court has “consistently reviewed the denial of a motion

to stay proceedings under an abuse of discretion standard.”

{¶14} In McCaskey v. Sanford-Brown College, 8th Dist. No. 97261,

2012-Ohio-1543, this court recently held that the standard of review in these type of cases

depends on the type of question raised regarding the applicability of the arbitration

1 A stay was granted, however, relative to the other two projects. Jatsek had also filed a motion for partial summary judgment relative to the Greenway project, which the trial court granted. That portion of the trial court’s judgment is not a final appealable order and therefore is not now before this court. provision. This court noted that when the issue to be resolved involves “whether a party

has agreed to submit an issue to arbitration,” a de novo standard applies. Id. at ¶ 7, citing

Shumaker v. Saks Inc., 163 Ohio App.3d 173, 2005-Ohio-4391, 837 N.E.2d 393 (8th Dist.)

and Vanyo v. Clear Channel Worldwide, 156 Ohio App.3d 706, 2004-Ohio-1793, 808

N.E.2d 482 (8th Dist.).

{¶15} In this case, the trial court ruled that no contract existed for the Greenway

project; that is, that the parties did not agree to submit to arbitration any disputes relative

to the project. Thus, we review the trial court’s decision de novo. A de novo review

involves “an appeal in which the appellate court uses the trial court’s record but reviews

the evidence and law without deference to the trial court’s rulings.” Black’s Law

Dictionary 94 (7th Ed.2001). The issue to be decided in our review is whether a contract

existed between Jatsek and Burton Scot for the Greenway project. We find that it did.

{¶16} In so finding, we follow this court’s precedent as set forth in G. Herschman

Architects, Inc. v. Ringco Mfg. Co., Inc., 8th Dist. No. 67758, 1995 Ohio App. LEXIS

1940 (May 11, 1995). In Herschman, Herschman and Ringco entered into discussions in

an attempt to reach an agreement through which Herschman would provide Ringco with

architectural services in the design of department store display stands. Pursuant to their

discussions, Herschman faxed to Ringco a proposal, dated June 23, 1992, in which it

outlined the scope of, as well as fees for, the project.

{¶17} The parties engaged in negotiations of the June 23 proposal, and on June 29,

1992, Herschman sent a revised proposal to Ringco. The parties did not sign the revised June 29 proposal; nonetheless, Herschman began working on the project as outlined in the

proposal. Herschman exceeded the number of hours as set forth in the June 29 proposal

in performing its duties. The parties attempted to come to an agreement on the

reasonable value of Herschman’s services, but did not, and Herschman filed suit. The

matter proceeded to trial, and the trial court entered judgment in favor of Herschman.

{¶18} On appeal, Ringco argued that the parties never agreed to Herschman’s June

29 proposal and, therefore, no written contract between the parties existed. This court

disagreed and found that the “terms of the final agreement were reflected in the June 29,

1992 proposal.” Id. at *10. In so finding, this court reasoned that “conduct sufficient to

show agreement, including performance, is a reasonable mode of acceptance” of an offer.

Id. at *9, citing Am. Bronze Corp. v. Streamway Prod., 8 Ohio App.3d 223, 456 N.E.2d

1295, paragraph two of the syllabus (8th Dist.1982). In Herschman, it was

undisputed by the parties that [Herschman] did engage in the performance of work for the design and manufacture of the display stands. Upon the beginning of the work by [Herschman], there was in effect an actual implied contract that Ringco acquiesced to by its language and conduct.

Id.

{¶19} Similarly, in this case, it is undisputed that Jatsek performed work on the

Greenway project. On the authority of Herschman, upon the start of the work by Jatsek,

an actual implied contract was formed to which the parties acquiesced.2

2 See also Nagle Heating & Air Conditioning Co. v. Heskett, 66 Ohio App.3d 547, 585 N.E.2d 866 (4th Dist.1990) and Hocking Valley Community Hosp. v. Community Health Plan of Ohio, 4th Dist. No. 02CA28, 2003-Ohio-4243, both holding that an unexecuted written contract is enforceable if the parties proceeded to act as if the contract was in effect. {¶20} Jatsek alternatively urges that if we find that a contract existed between the

parties, that “such agreement ‘must yield, at times, when justified by public policy

considerations of judicial economy.’” Jatsek’s appellate brief, p.4, quoting Dynamark

Sec. Ctrs., Inc. v. Charles, 9th Dist. No. 21254, 2003-Ohio-2156, ¶ 12. Dynamark

presented a different scenario, however, than is presented here.

{¶21} In Dynamark, the plaintiffs, a franchiser and its subsidiary, entered into a

franchise agreement with the defendant in 1993; the agreement contained an arbitration

clause. In 1996, a dispute between the parties arose, and resulted in the plaintiffs suing

the defendant in 1997. Various pretrial proceedings were had, including the filing of and

ruling on motions for summary judgment, an injunction proceeding, and mediation.

After numerous continuances were sought by both parties, and granted, the case was

ultimately set to proceed to trial on February 6, 2002. On January 22, 2002, the plaintiffs

filed a motion to stay pending arbitration, which the trial court denied.

{¶22} The Ninth Appellate District upheld the denial. In doing so, the appellate

court reviewed for an abuse of discretion; our review here, however, is de novo. The

appellate court applied the doctrine of waiver in finding that the trial court had not abused

its discretion. The Ninth District found that the plaintiffs “acted in a manner inconsistent

with their right to seek arbitration, rather than litigation, to resolve their contract dispute

with [the defendant].” Id. at ¶ 15. Specifically, the plaintiffs did the following: (1) filed

the complaint, rather than pursue arbitration in 1997; (2) did not raise the arbitration

provision as an affirmative defense in their answer to the defendant’s counterclaims; (3) went through years of trial preparation, including extensive discovery, motion practice,

and numerous hearings; (4) filed an amended complaint; and (5) mediated the dispute.

{¶23} On that record, the appellate court found that the plaintiffs “waived their

right to arbitration [because] they did not properly raise the arbitration provision before the

trial court, but instead actively participated in preparing for litigation of the case for five

years.” Id. at ¶ 19.

{¶24} This case presents a factual background distinguishable from Dynamark for

three reasons. First, the party seeking to enforce the arbitration provision, Burton Scot,

did not initiate the action as in Dynamark; rather it was defending against the action.

Second, Jatsek filed the action in June 2011, and Burton Scot filed its motion to stay in

July 2011, a stark contrast to the five-year delay in Dynamark. And third, because

Burton Scot filed its motion to stay approximately one month after Jatsek filed the action,

pretrial proceedings here were scant, as opposed to the extensive proceedings that were

had in Dynamark. Thus, disallowing arbitration in this case would not advance public

policy considerations of judicial economy.

{¶25} Moreover, resolving disputes through arbitration is generally favored in the

law. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 1998-Ohio-294, 700 N.E.2d

859. There is a strong presumption in favor of arbitration, and any doubt should be

resolved in favor of arbitrability. Melia v. OfficeMax N. Am. Inc., 8th Dist. No. 87249,

2006-Ohio-4765, ¶15, citing Neubrander v. Dean Witter Reynolds, Inc., 81 Ohio App.3d

308, 610 N.E.2d 1089 (9th Dist.1992). {¶26} In light of the above, the trial court erred in denying Burton Scot’s motion to

stay pending arbitration. Burton Scot’s sole assignment of error is therefore sustained.

{¶27} Judgment reversed; case remanded.

It is ordered that appellants recover of appellees costs herein taxed.

The court finds there were reasonable grounds for this appeal.

It is ordered that a special mandate issue out of this court directing the Cuyahoga

County Court of Common Pleas 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.

LARRY A. JONES, SR., JUDGE

PATRICIA ANN BLACKMON, A.J., and MARY J. BOYLE, J., CONCUR