Pellegrini v. Codecon, L.L.C.

2015 Ohio 4266

• Court: Ohio Court of Appeals
• Decided: October 13, 2015
• Docket: 2015 CA 00001
• Status: Published

Opinion

[Cite as Pellegrini v. Codecon, L.L.C., 2015-Ohio-4266.]

COURT OF APPEALS STARK COUNTY, OHIO FIFTH APPELLATE DISTRICT

DANIEL D. PELLEGRINI, et al. JUDGES: Hon. William B. Hoffman, P. J. Plaintiffs-Appellants Hon. John W. Wise, J. Hon. Patricia A. Delaney, J. -vs- Case No. 2015 CA 00001 CODECON, LLC dba ALL-N-ONE INSPECTION SERVICE OPINION Defendant-Appellee

CHARACTER OF PROCEEDING: Civil Appeal from the Court of Common Pleas, Case No. 2014 CV 01283

JUDGMENT: Affirmed

DATE OF JUDGMENT ENTRY: October 13, 2014

APPEARANCES:

For Plaintiff-Appellants For Defendant-Appellee

JASON M. WEIGAND COLIN P. SAMMON NIEKAMP, WEISENSELL AUDREY K. BENTZ MUTERSBAUGH & MASTRANTONIO JANIK LLP The Nantucket Building 9200 South Hills Boulevard 23 South Main Street, Third Floor Suite 300 Akron, Ohio 44308 Cleveland, Ohio 44147 Stark County, Case No. 2015 CA 00001 2

Wise, J.

{¶1}. Appellants Daniel and Kathleen Pellegrini appeal the decision of the Court

of Common Pleas, Stark County, which granted a stay pending arbitration in favor of

Appellee Codecon, LLC d/b/a All-N-One Inspection Service. The relevant facts leading

to this appeal are as follows.

{¶2}. In October 2013, Plaintiffs-Appellants Daniel D. Pellegrini ("Daniel") and

Kathleen M. Pellegrini ("Kathleen") purchased a home in Stark County from Defendant

Millionaires In Motion, LLC. Before purchasing the home, appellants obtained a home

inspection from Appellee Codecon, LLC d/b/a All-N-One Inspection Service.

{¶3}. The inspection was conducted on October 7, 2013. On that day, Daniel,

Kathleen, and the real estate agent were present at the house. Daniel went outside to

meet Sam Psaris, the inspector sent by appellee. After about ten minutes, Daniel went

to wait inside with Kathleen and the real estate agent. At the conclusion of the

inspection, appellants met with Psaris in the kitchen of the home. Daniel asked Psaris

how much he owed him for the inspection, at which point Psaris produced a one-page,

two-sided document. On the reverse page is a section marked "DISPUTE

RESOLUTION AND REMEDY LIMITATION", under which is a provision captioned

"Arbitration," the details of which are not in dispute.

{¶4}. Also on the reverse page of the document provided to Daniel is the

following language:

{¶5}. "THE INSPECTION, ANCILLARY SERVICES, INSPECTION

AGREEMENT AND REPORT DO NOT CONSTITUTE A WARRANTY, AN

INSURANCE POLICY, OR A GUARANTEE OF ANY KIND; NOR DO THEY Stark County, Case No. 2015 CA 00001 3

SUBSTITUTE FOR ANY DISCLOSURE STATEMENT AS MAY BE REQUIRED BY

LAW.

{¶6}. "By signing below, you acknowledge that you have read, understand and

agree to the terms and conditions of this agreement, including (but not limited to) the

limitation of liability, arbitration clause and limitations period, and agree to pay the fee

listed in the box above."

{¶7}. Daniel proceeded to sign and initial the inspection agreement document

as requested, even though he did not have his reading glasses with him. He also wrote

a check to Psaris for payment. He later admitted that when he signed the agreement on

the reverse page, he saw that there was other writing on that page, and that he was

able to see where he was signing and initialing. Tr. at 49, 50.

{¶8}. Shortly after their purchase, appellants allegedly discovered various

concealed material defects with the home.

{¶9}. On May 29, 2014, appellants filed a civil complaint against Appellee

Codecon, LLC dba All-In-One Inspection Service ("Appellee" or "Codecon"), as well as

Millionaires in Motion, LLC, Sam Psaris ("Psaris"), Cutler and Associates, Inc., Jennifer

Mucci, and Sheila Croasmun. Appellants therein inter alia alleged negligence in the

performance of a general home inspection, negligent misrepresentation with respect to

conditions of the residence, and breach of contract.

{¶10}. On July 31, 2014, Appellee Codecon filed an answer to the complaint,

generally denying the allegations of negligence, negligent misrepresentation and breach

of contract. Codecon also asserted defenses arising out of the contract with appellants, Stark County, Case No. 2015 CA 00001 4

i.e., the inspection agreement dated October 7, 2013. Specifically, Codecon asserted

that appellants' claims were subject to the arbitration provision therein.

{¶11}. On September 18, 2014, Appellee Codecon and Psaris filed a motion to

stay the proceedings pending arbitration.

{¶12}. On September 22, 2014, appellants filed their first amended complaint,

asserting the same causes of action against Appellee Codecon for negligence,

negligent misrepresentation and breach of contract. 1

{¶13}. On or about October 16, 2014, appellee filed its answer and affirmative

defenses to the first amended complaint, again asserting that appellants' claims were

subject to the arbitration provision of the Inspection Agreement.

{¶14}. On October 9, 2014, appellants filed a memorandum in opposition to the

motion to stay the proceedings pending arbitration.

{¶15}. On October 23, 2014, appellee filed a reply brief in support of said motion

to stay the proceedings.

{¶16}. The trial court conducted a hearing on the motion to stay the proceedings

on October 30, 2014. Daniel and Kathleen were the only witnesses. Appellants and

Appellee Codecon each filed post-hearing briefs shortly thereafter.

{¶17}. On December 4, 2014, the trial court issued a judgment entry granting

Appellee Codecon's motion to stay the proceedings pending arbitration.

{¶18}. On January 2, 2015, appellants filed a notice of appeal. They herein raise

the following sole Assignment of Error:

1 In the amended complaint, appellants did not include Sam Psaris as an individual defendant. As such, the appellee in this matter is Codecon only. Stark County, Case No. 2015 CA 00001 5

{¶19}. “I. THE TRIAL COURT ERRED IN GRANTING DEFENDANT'S MOTION

TO STAY PENDING ARBITRATION.”

I.

{¶20}. In their sole Assignment of Error, appellants contend the trial court erred in

granting appellee's motion to stay pending arbitration. We disagree.

Arbitration Clause - Fraud in the Factum

{¶21}. R.C. 2711.02(B) states 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."

{¶22}. Generally, an order under R.C. 2711.02(B) that grants or denies a stay of

a trial of an action pending arbitration is a final appealable order. See R.C. 2711.02(C).

Ohio public policy favors enforcement of arbitration provisions. See Harrison v. Toyota

Motor Sales, U.S.A., Inc., 9th Dist. Summit No. 20815, 2002-Ohio-1642, ¶ 9.

{¶23}. Parties cannot be compelled to arbitrate a dispute which they have not

agreed to submit to arbitration. Rona Enterprises, Inc. v. Vanscoy, 5th Dist. Perry Nos.

09CA6, 09CA8, 2010–Ohio–1836, ¶ 28. In the instant matter, appellants' defense to the

applicability of the arbitration clause is based on "fraud in the factum." Fraud in the

factum arises when “a legal instrument as actually executed differs from the one

intended for execution by the person who executes it, or when the instrument may have Stark County, Case No. 2015 CA 00001 6

had no legal existence.” Lou Carbone Plumbing, Inc. v. Domestic Linen Supply &

Laundry Co., 11th Dist. Trumbull No. 2002-T-0026, 2002-Ohio-7169, ¶ 11, quoting

Black's Law Dictionary (7 Ed. Abridged 2000) 530. "An agreement that is obtained

through fraud in the factum would void an arbitration clause because such an

agreement is considered void ab initio and does not constitute any agreement

whatsoever." Terry v. Bishop Homes of Copley, Inc., 9th Dist. Summit No. 21244, 2003-

Ohio-1468, ¶ 20, citing Krist v. Curtis, 8th Dist. Cuyahoga No. 76074, 2000 WL 640616.

(Kilbane, J., dissenting). "A release is obtained by fraud in the factum where an

intentional act or misrepresentation of one party precludes a meeting of the minds

concerning the nature or character of the purported agreement." Haller v. Borror Corp.,

50 Ohio St.3d 10, 13, 552 N.E .2d 207 (1990).

Standard of Review

{¶24}. As a prefatory matter, we note both briefs in the case sub judice propose a

"de novo" standard of review for the issues presently before us. See Appellants' Brief at

8; Appellee's Brief at 5. Appellants maintain there are no facts in dispute and the only

question is whether appellants' undisputed evidence established fraud in the factum as

a matter of law. Appellee in turn maintains that R.C. 2711.02(B), supra, imposes a

mandatory duty to stay proceedings where the trial court is satisfied that a matter is

subject to arbitration, thus leaving no discretion for the trial court.

{¶25}. We have long recognized that "[a] trial court abuses its discretion when it

fails or refuses properly to apply the law to conceded or undisputed facts." Wood v.

Wood, 5th Dist. Muskingum No. CA 80-28, 1981 WL 6387. Generally, an appellate court

reviews a trial court's stay of proceedings pending arbitration under R.C. 2711.02 under Stark County, Case No. 2015 CA 00001 7

an abuse of discretion standard. Featherstone v. Merrill Lynch, Pierce, Fenner & Smith,

Inc., 159 Ohio App.3d 27, 30, 2004-Ohio-5953, citing Pinette v. Wynn's Extended Care,

Inc., Summit App. No. 21478, 2003-Ohio-4636, ¶ 5. Furthermore, where arbitration

clauses are challenged before the trial court by allegations of waiver and/or fraud in the

factum, such claims involve questions of fact, not law, and the appropriate appellate

standard of review is indeed abuse of discretion. See Dunkelman v. Cincinnati Bengals,

Inc., 821 N.E.2d 198, 201, 158 Ohio App.3d 604, 606, 2004-Ohio-6425, ¶ 18 (1 Dist.),

additional citations omitted.

{¶26}. We will therefore herein apply the "abuse of discretion" standard.2

Analysis

{¶27}. Appellants concede that the inspector, Psaris, did not pressure Daniel into

signing the document in question. Appellants' Reply Brief at 5. However, appellants

emphasize that Daniel has no legal training or expertise with contracts; in fact, he has

never even owned a credit card. After graduating from high school in 1968, Daniel

served for eight years in the U.S. Army Reserve, while in his civilian career he has

worked as a laborer and machine operator for the Timken Company for forty years. He

has never worked in any management capacity. Kathleen, Daniel's wife, is a high school

graduate who, after raising her children, worked in a high school cafeteria and as a

waitress. Daniel needs prescription glasses to read fine print, and he also wears special

2 As an additional prefatory matter, we note appellee argues in its response brief that appellants have waived an assertion of fraud in the factum by failing to plead the issue in their complaint. See Civ.R. 9(B). This raises the question of whether a plaintiff in appellants' claimed situation must raise the issue of fraud in the factum at the trial court level prior to a defendant raising the existence of a written contract containing an arbitration clause. However, in the interest of judicial economy, we will proceed directly to the merits in the within appeal Stark County, Case No. 2015 CA 00001 8

safety glasses to see properly at work. Kathleen indicated that she usually observes her

husband wearing glasses when he is at his desk or reading fine print.

{¶28}. On the day of the inspection, Psaris was on the property for about two

hours. During the inspection process, he did not supply appellants with or mention any

paperwork. When Psaris was finished, he came into the kitchen area, where Daniel was

standing near a countertop. Daniel asked: "Well, how much do I owe you?" Tr. at 22.

Psaris presented him with a document showing inter alia the amount of the charges and

told Daniel to initial and sign at spaces on the reverse side. Daniel did so, and then

retrieved his checkbook and wrote out a check. Daniel later testified he did not see the

“Page 2 of 2” designation on the reverse side to the document, even though he

admittedly had signed and initialed that side. See Tr. at 24-25, 45. Daniel only had the

document in his possession for a few seconds. He later recalled: "And the presentation

was quick, to the point, there's the bill, basically, that's it; initial it, sign it." Tr. at 47.

Daniel was under the impression that he was being presented with a bill for services

rendered. He did not have his glasses with him at the time. Daniel testified that if he

had known there were additional terms, he would have had someone, such as

Kathleen, read it to him, and if he had known the full contents of the document, he

would not have signed it. Tr. at 28, 52.

{¶29}. At the time the document was signed, Kathleen was standing several feet

away. Psaris never gave the document to her to review or sign. Kathleen also believed

the document was a receipt and only kept it to prove the bill was paid.

{¶30}. Appellants further have not alleged that Psaris made any false

representations as to the nature of the agreement, although Daniel recalled that Psaris Stark County, Case No. 2015 CA 00001 9

essentially presented the document as a summary of charges. However, "[e]ven when

there is misrepresentation by one party of the contents of an agreement, the agreement

is not void for fraud in the factum when the signer has an opportunity to read and

understand the documents before execution." W.K. v. Farrell, 167 Ohio App.3d 14, 853

N.E.2d 728, 2006-Ohio-2676 (2d Dist. 2006), ¶ 20, citing Haller v. Borror Corp., 50 Ohio

St.3d 10, 14, 552 N.E.2d 207 (1990). Daniel was specifically asked if Psaris had

prevented him from reading the inspection agreement, to which he replied: "No, he

didn't prevent me, but he *** also didn't tell me I had to." Tr. at 43. In addition, in regard

to the factors of Daniel's level of legal expertise and his need to wear reading glasses,

the Ohio Supreme Court has plainly stated: "If a person can read and is not prevented

from reading what he signs, he alone is responsible for his omission to read what he

signs." Dice v. The Akron, Canton & Youngstown Rd. Co. (1951), 155 Ohio St. 185,

191, reversed on other grounds, 342 U.S. 359 (1952). As aptly recognized by a

Massachusetts court: " *** [O]nly in the most extreme situations have courts of any

jurisdiction found a fraud in the factum defense to be viable. Such cases typically

involve lingustic [sic] or literacy barriers, or special circumstances making it reasonable

for the signer to rely on the representations of another." Brown v. Carlson, 26

Mass.L.Rptr. 61, 2009 WL 2914191 (Mass.Super.).

{¶31}. Accordingly, we hold the trial court did not abuse its discretion or commit

reversible error in granting appellee's motion to stay pending arbitration. Stark County, Case No. 2015 CA 00001 10

{¶32}. Appellants' sole Assignment of Error is overruled.

{¶33}. For the reasons stated in the foregoing opinion, the judgment of the Court

of Common Pleas, Stark County, Ohio, is hereby affirmed.

By: Wise, J.

Hoffman, P. J., and

Delaney, J., concur.

JWW/d 0828 Stark County, Case No. 2015 CA 00001 11