[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