E-Z Cash Pawn Shop, Inc. v. Minor

[Cite as E-Z Cash Pawn Shop, Inc. v. Minor, 2017-Ohio-4405.]
IN THE COURT OF APPEALS OF OHIO

TENTH APPELLATE DISTRICT

E-Z Cash Pawn Shop, Inc., :
d/b/a Affordable Loan,
:
Plaintiff-Appellee/
Cross-Appellant, : No. 15AP-911
(M.C. No. 2014 CV 29531)
v. :
(REGULAR CALENDAR)
Janice Minor, :

Defendant-Appellant/ :
Cross-Appellee.
:

D E C I S I O N

Rendered on June 20, 2017

On brief: Kevin O'Brien & Associates, and Kevin O'Brien, for
appellee/cross appellant. Argued: Kevin O'Brien.

On brief: The Legal Aid Society of Columbus, and Scott E.
Torguson, for appellant/cross-appellee. Argued: Scott E.
Torguson.

APPEAL from the Franklin County Municipal Court

BROWN, J.
{¶ 1} This is an appeal by defendant-appellant/cross-appellee, Janice Minor,
from a judgment of the Franklin County Municipal Court, overruling her objections to a
magistrate's decision and entering judgment in favor of plaintiff-appellee/cross-appellant,
E-Z Cash Pawn Shop, Inc., d.b.a. Affordable Loan ("E-Z Cash"), in an action for breach of
a loan agreement. E-Z Cash has filed a cross-appeal from the trial court's denial of its
motions to dismiss appellant's counterclaim and to stay the case and compel arbitration.
No. 15AP-911 2

{¶ 2} The following facts, which are essentially undisputed, are drawn primarily
from the May 29, 2015 decision of the magistrate, as well as a stipulation entered by the
parties on January 28, 2015. On July 6, 2010, E-Z Cash issued a loan to appellant in the
amount of $569.49, with 25 percent simple interest. According to the terms of the written
loan instrument entered between the parties, the loan was made pursuant to the Ohio
Mortgage Loan Act ("OMLA"). Appellant provided E-Z Cash with a check in the amount
of $575, and E-Z Cash agreed not to cash the check until July 20, 2010.
{¶ 3} E-Z Cash subsequently presented appellant's check to a bank, which
returned the check to E-Z Cash with the notation "unable to locate account." Appellant
made one partial payment to E-Z Cash in the amount of $100 but made no other
payments on the loan.
{¶ 4} On September 10, 2014, E-Z Cash filed a complaint against appellant
alleging breach of the loan agreement. E-Z Cash sought judgment for the principal
amount due on the loan ($569.49), plus simple interest at the rate of 25 percent per
annum from July 6, 2010, a returned check charge of $20, and a loan default charge of
$15.
{¶ 5} On October 6, 2014, appellant filed an answer and counterclaim. In the
counterclaim, appellant alleged that E-Z Cash had violated R.C. 1321.591 by failing to
comply with practices set forth in the federal Fair Debt Collection Practices Act
("FDCPA"); specifically, appellant argued that E-Z Cash charged an interest rate in excess
of the rate authorized under R.C. 1321.57(A).
{¶ 6} On November 3, 2014, E-Z Cash filed an answer to the counterclaim
asserting in part that FDCPA was inapplicable and that, in the alternative, appellant failed
to commence her counterclaim within one year of the alleged violation. E-Z Cash also
filed a motion to stay the case and compel arbitration in the event the case was transferred
out of the small claims division of the municipal court. On November 4, 2014, E-Z Cash
filed a motion to dismiss appellant's counterclaim on the grounds it was time-barred.
{¶ 7} Appellant subsequently filed a memorandum contra E-Z Cash's motion to
stay the case and compel arbitration, as well as a memorandum contra E-Z Cash's motion
to dismiss the counterclaim. On the date scheduled for trial, December 9, 2014, the
parties appeared before the magistrate and agreed to submit trial briefs in lieu of an
evidentiary hearing. At that time, appellant orally requested leave to amend her
No. 15AP-911 3

counterclaim to include an additional alleged FDCPA violation, which the magistrate
denied. On January 14, 2015, appellant filed a renewed motion for leave to amend her
counterclaim. In the accompanying memorandum in support, appellant argued she had
learned, during the parties meeting before the magistrate on December 9, 2014, that E-Z
Cash's complaint requested an amount that had not been offset by a payment. The
magistrate denied appellant's renewed motion for leave to amend the counterclaim.
{¶ 8} On May 9, 2015, the magistrate issued a decision finding the interest rate E-
Z Cash sought to recover "does not violate R.C. 1321.57(A) because the rate is specifically
authorized as an alternative rate by the plain language of R.C. 1321.571." Having found
that the rate was permissible, the magistrate further determined that appellant's
"counterclaim must fail."1 The magistrate found that E-Z Cash was entitled to judgment
in the amount of $469.49, "plus simple interest from the date of the loan at 25% per
annum, plus $35.00 for check-return and default charges."
{¶ 9} On June 12, 2015, appellant filed objections to the magistrate's decision
arguing the magistrate erred in denying leave to amend the counterclaim and in finding
that E-Z Cash was entitled to charge an interest rate of 25 percent. On June 16, 2015, E-Z
Cash filed a renewed motion to stay the case and to compel arbitration. By decision and
entry filed August 31, 2015, the trial court overruled appellant's objections to the
magistrate's decision and also denied E-Z Cash's motion to stay the case and compel
arbitration.
{¶ 10} Appellant appealed the judgment of the trial court, and E-Z Cash filed a
notice of cross-appeal from the trial court's decision denying its motions to dismiss
appellant's counterclaim and to stay the case and compel arbitration. On October 15,
2015, E-Z Cash filed a motion to dismiss appellant's appeal, which appellant opposed. By
entry filed November 10, 2015, this court held that E-Z Cash's motion to dismiss the
appeal, as well as appellant's memorandum contra, "shall be submitted to the court at
such time as the court addresses the merits of this appeal." On November 13, 2015, E-Z
Cash filed a motion to stay and to compel arbitration. By entry filed November 20, 2015,
this court denied E-Z Cash's motion to stay and ruled that E-Z Cash's motion to compel

1 The magistrate denied as moot E-Z Cash's motion to dismiss appellant's counterclaim.
No. 15AP-911 4

arbitration would be submitted to the court at the time it addresses the merits of the
appeal.
{¶ 11} On appeal, appellant sets forth the following two assignments of error for
this court's review:
ASSIGNMENT OF ERROR I: The Trial Court Abused Its
Discretion By Denying Ms. Minor's Motion For Leave To
Amend Her Counter Claim.

ASSIGNMENT OF ERROR II: The Trial Court Erred By
Granting Judgment For E-Z Cash On Its Complaint At The
Interest Rate Of 25%, And By Granting E-Z Cash Judgment
On Ms. Minor's Counter Claim.

{¶ 12} On cross-appeal, E-Z Cash sets forth the following two assignments of error
for review:
I. THE TRIAL COURT ERRED IN FAILING TO STAY THIS
CASE AND COMPEL ARBITRATION AFTER EZ CASH
MOVED FOR SAME.

II. THE TRIAL COURT ERRED IN FAILING TO DISMISS
MS. MINOR'S COUNTERCLAIM AS TIME-BARRED.

{¶ 13} Under her two assignments of error, appellant contends the trial court erred
in (1) denying her motion for leave to amend her counterclaim, and (2) granting judgment
for E-Z Cash on its complaint at the interest rate of 25 percent. We will address
appellant's assignments of error in inverse order.
{¶ 14} In general, R.C. 1343.03(A) "establishes interest rates for both prejudgment
and post-judgment interest." Midwestern Auto Sales, Inc. v. Lattimore, 12th Dist. No.
CA2014-02-029, 2015-Ohio-53, ¶ 24. Under R.C. 1343.03(A), "a creditor is entitled to
interest at the rate per annum determined pursuant to R.C. 5703.47, unless a written
contract provides for a different rate of interest." Zanesville Glass Supply, Inc. v. Goff,
5th Dist. No. CT2007-0026, 2008-Ohio-1243, ¶ 48. Ohio courts have held that interest
rates higher than the statutory rates are permissible when provided for in a contract.
Ohio Neighborhood Fin,. Inc. v. Adkins, 7th Dist. No. 09-CO-38, 2010-Ohio-3164, ¶ 10.
See also Ohio Neighborhood Fin., Inc. v. Evert, 5th Dist. No. 09CA000034, 2010-Ohio-
797, ¶ 10 ("when a written contract contains a legal rate of interest, then the contractual
rate should be applied to the judgment").
No. 15AP-911 5

{¶ 15} In order for there to be a deviation from the statutory rate of interest, "two
prerequisites must be met: (1) there must be a written contract between the parties; and
(2) the contract must provide a rate of interest with respect to money that becomes due
and payable." Ohio Neighborhood Fin., Inc. v. Marsh, 7th Dist. No. 09 MA 164, 2010-
Ohio-3163, ¶ 8, citing Hobart Bros. Co. v. Welding Supply Serv., Inc., 21 Ohio App.3d
142, 144 (10th Dist.1985).
{¶ 16} Under the OMLA (R.C. 1321.51 through 60, et seq.), certain loan providers
are required to register with the Ohio Department of Commerce, and a registrant under
the act is subject to the requirements of R.C. 1321.57(A) and 1321.571. Ohio Neighborhood
Fin., Inc. v. Massey, 10th Dist. No. 10AP-1020, 2011-Ohio-2165, ¶ 14.
{¶ 17} In general, a registrant under OMLA "may contract for and receive interest
at a rate not exceeding 21 percent per year on the unpaid principal balances of a
precomputed loan." Ohio Neighborhood Fin., Inc. v. Christie, 8th Dist. No. 94821, 2010-
Ohio-5017, ¶ 8. In this respect, R.C. 1321.57(A) states in part: "Notwithstanding any other
provisions of the Revised Code, a registrant may contract for and receive interest,
calculated according to the actuarial method, at a rate or rates not exceeding twenty-one
per cent per year on the unpaid principal balances of the loan."
{¶ 18} The OMLA, however, "also contains an alternative rate provision." Christie
at ¶ 8. Specifically, R.C. 1321.571 provides in part: "As an alternative to the interest
permitted in division (A) of section 1321.57 * * * of the Revised Code, a registrant may
contract for and receive interest at any rate or rates agreed upon or consented to by the
parties to the loan contract or open-end loan agreement, but not exceeding an annual
percentage rate of twenty-five per cent."
{¶ 19} Appellant argues the provisions of R.C. 1321.57(A) and 1321.571, which set
forth different permissible rates, appear to be contradictory; appellant maintains that the
rate set forth under R.C. 1321.57(A) should prevail and that the trial court erred in
granting judgment in favor of E-Z Cash based on the alternative rate under R.C. 1321.571.
Appellant acknowledges, however, that this court has previously determined the rate
under R.C. 1321.571 is permissible where the amount was part of a contract between the
parties. See Massey.
{¶ 20} Under the facts of Massey, the appellant loan company sued the appellee-
debtor, alleging default on a loan agreement. The agreement in that case provided a
No. 15AP-911 6

promise on the part of the debtor to pay interest at a rate of 25 percent per annum, but the
trial court applied an interest rate of four percent. On appeal, this court determined that
the trial court erred in failing to apply an interest rate of 25 percent where the parties had
a written contract providing for such rate, holding in part:
It is unclear to us why the General Assembly provided an
interest rate of 21 percent in one section and then provided an
alternative rate of 25 percent in the very next section, using
substantially similar language. Nevertheless, we will not
second-guess the wisdom of the General Assembly. R.C.
1321.571 expressly allows a registrant to provide an alternative
interest rate up to 25 percent, as long as the amount is part of
a consensual contract between the parties. The undisputed
evidence shows that Cashland and Mills agreed to an interest
rate of 25 percent. Therefore, the interest rate of 25 percent is
lawful, and the trial court erred by not applying it.

R.C. 1343.03(A) does not require a different result. That
section applies a statutory rate of interest to a judgment, but,
as this court has stated, that statutory rate "is simply a default
rate to be charged should the parties not contract otherwise."
First Bank of Ohio v. Wigfield, 10th Dist. No. 07AP-561,
2008-Ohio-1278, ¶ 19, citing Ohio Valley Mall Co. v. Fashion
Gallery, Inc. (1998), 129 Ohio App.3d 700, 704 * * *. R.C.
1343.03(A) states that the statutory rate applies unless that
contract provides a different interest rate, "in which case the
creditor is entitled to interest at the rate provided in that
contract."

Here, it is undisputed that Cashland and Mills entered into a
written contract that provides an interest rate of 25 percent.
Therefore, that rate of interest applies to the judgment against
Mills, and the trial court erred by applying a different rate.

Massey at ¶ 17-19.
{¶ 21} Appellant contends this court expressed "confusion" in Massey as to the
proper construction of OMLA and argues there is an historical explanation as to why the
OMLA has two separate maximum rates of interest. Specifically, appellant argues the
legislature provided two separate rates to allow a lender a choice between a 21 percent
interest rate or a 25 percent annual percentage rate. According to appellant, the OMLA
did not define the term "annual percentage rate" at the time of the statute's enactment in
1982, meaning the federal definition was utilized. Appellant asserts "what now looks like
No. 15AP-911 7

a conflict makes sense: R.C. 1321.57(A) only allows an interest rate of 21%
'notwithstanding any other provisions of the Revised Code,' while R.C. 1321.571 only
allows loans with a maximum [annual percentage rate] of 25%." Appellant requests this
court to construe the "notwithstanding" language of R.C. 1321.57(A) as rendering any loan
with an interest rate above 21 percent a violation of the OMLA. As such, appellant
effectively asks this court to overrule our prior decision in Massey.
{¶ 22} The magistrate rejected appellant's argument on this issue, relying on this
court's decision in Massey to conclude that the 25 percent interest rate charged by the
underlying contract was lawful under R.C. 1321.571. The magistrate found that, "in light
of the plain language of R.C. 1321.571 identifying 25% as a specific alternative to the rate
authorized under R.C. 1321.57(A), the statute is not reasonably susceptible to differing
interpretations," and thus "engaging in legislative 'historical' analysis * * * to determine
whether the code section means something other than what it plainly states is not
appropriate."
{¶ 23} On review, we find that the magistrate, as well as the trial court, properly
relied on Massey to find that the 25 percent rate was lawful in accordance with the
provisions of R.C. 1321.571. As stated in Massey, "R.C. 1321.571 expressly allows a
registrant to provide an alternative rate up to 25 percent, as long as the amount is part of
a consensual contract between the parties." Id. at ¶ 17. Accordingly, the trial court did not
err in finding E-Z Cash was entitled to interest at the contractually stipulated rate.
{¶ 24} We note, in addition to this court's pronouncement in Massey, other Ohio
appellate courts have similarly held that R.C. 1321.571 permits a lender to provide an
alternative interest rate of up to 25 percent and that such rate is permissible if provided
for in a contract. See, e.g., Adkins at ¶ 12 (reversing trial court's award of interest at
statutory rate where parties had written contract specifying interest rate higher than the
statutory amount; lender was entitled to the contractually stipulated 25 percent interest
rate); Evert at ¶ 11 (trial court erred in applying the statutory interest rate of 5 percent to
the judgment instead of 25 percent as agreed upon by contract and allowed by R.C.
1321.571); Marsh at ¶ 12 (25 percent interest rate in loan contract was permitted by R.C.
1321.571, and lender was entitled post-judgment interest at the same 25 percent rate
contained in the loan agreement); Ohio Neighborhood Fin., Inc. v. Dotson, 4th Dist. No.
09CA27, 2010-Ohio-3366, ¶ 6 (noting that "R.C. 1321.571 allows [the lender] to contract
No. 15AP-911 8

for interest not to exceed an annual rate of twenty-five percent (25%)," and that "[w]hen a
written contract contains a legal rate of interest, that rate should be applied to the
judgment"); Christie at ¶ 10 (where parties entered into a loan agreement and agreed to
an interest rate not exceeding an annual percentage rate of 25 percent and given the clear
statutory authority under R.C. 1321.571 allowing lender to impose a maximum annual
interest rate of 25 percent, "the trial court should have enforced the interest rate agreed to
by the parties").
{¶ 25} Accordingly, appellant's second assignment of error is overruled.
{¶ 26} Under the first assignment of error, appellant contends the trial court erred
in denying leave to amend her counterclaim to plead an additional alleged violation of the
FDCPA. Appellant argues that leave to amend should be freely granted and that the
request for leave to amend was made in good faith.
{¶ 27} As noted under the facts, appellant filed a counterclaim on October 6, 2014
asserting that E-Z Cash was attempting to collect a judgment at an illegal rate of interest
in violation of OMLA and FDCPA. The matter was set for trial on December 9, 2014; on
that date, the parties appeared before the magistrate and agreed to submit trial briefs in
lieu of an evidentiary hearing. During that proceeding, appellant made an oral motion to
amend the counterclaim, seeking to assert a new FDCPA claim, which the magistrate
denied. The magistrate subsequently issued an order noting that the parties had agreed
to waive trial of the matter and instead to present a statement of stipulated facts on or
before January 26, 2014; the order further noted that appellant had already filed a trial
brief, and the magistrate required E-Z Cash to file its brief on or before January 26, 2014.
On January 14, 2015, appellant filed a renewed motion for leave to amend her
counterclaim.
{¶ 28} In the decision filed May 29, 2015, the magistrate, noting that appellant's
prior oral motion for leave to amend her counterclaim had been denied as untimely under
R.C. 1925.02(C), denied the renewed motion for leave to amend "for the same reason."
The trial court, in overruling appellant’s objections to the magistrate’s decision, similarly
determined that appellant's request for leave to amend her counterclaim was not timely
under R.C. 1925.02(C).
{¶ 29} R.C. 1925.02(C) states: "Any person who files a counterclaim or cross-claim
shall file it with the small claims division and serve it on all other parties at least seven
No. 15AP-911 9

days prior to the date of the trial of the plaintiff’s claim in the original action." Under
Ohio law, "[w]hile leave to amend should be freely given 'when justice so requires,'
whether to grant leave to amend the pleadings lies within the sound discretion of the trial
court and will not be reversed absent an abuse of that discretion." Martin v. Block
Communications, 6th Dist. No. L-16-1213, 2017-Ohio-1474, ¶ 30.
{¶ 30} The record in this case indicates that appellant's oral request for leave to
amend the counterclaim was made on the date set for trial (December 9, 2014) and sought
to add a new claim under the FDCPA; further, at the time of the oral request, the case had
been pending on the court’s docket for approximately three months. Although the parties
agreed on that date to submit evidence to the magistrate by way of stipulation, the
magistrate did not set a new trial date; rather, the magistrate set a deadline for the
submission of the stipulation and the remaining trial briefs. With respect to the renewed
motion to amend, the magistrate apparently deemed the request disruptive to the briefing
schedule, noting that such motion was made "in the midst of the parties preparing and
filing their trial briefs." Under the facts and circumstances presented, we find no abuse of
discretion by the trial court in denying the motion for leave to amend. See, e.g., Fifth
Third Bank v. Gen. Bag Corp., 8th Dist. No. 92793, 2010-Ohio-2086, ¶ 39 (where party
sought to amend their counterclaim seven days before trial and was not seeking to remedy
an apparent oversight or omission in the original complaint but, instead, sought to add an
entirely new claim, trial court did not abuse its discretion in denying a motion for leave to
amend).
{¶ 31} Accordingly, appellant's first assignment of error is not well-taken and is
overruled.
{¶ 32} We next address E-Z Cash's assignments of error on cross-appeal, as well as
its pending motions to compel arbitration and to dismiss the appeal. Under these
assignments of error, E-Z Cash argues the trial court erred in failing to stay the case and
compel arbitration and that the court erred in failing to dismiss appellant's counterclaim
as time-barred.
{¶ 33} The issue raised under E-Z Cash's first assignment of error on cross-appeal
is interrelated with its motions before this court to compel arbitration and to dismiss
appellant's appeal. In those motions, E-Z Cash contends in part that the loan agreement
in this case contains an agreement to resolve any disputes not in small claims court via
No. 15AP-911 10

arbitration pursuant to the provisions of the Federal Arbitration Act. E-Z Cash argues the
trial court erred in denying its motion to stay and compel arbitration, and that the court
should have referred the case to arbitration consistent with the parties' agreement and the
terms of the Federal Arbitration Act.
{¶ 34} Paragraph 18(a) of the parties' loan agreement states in part: "Any and all
claims, controversies, or disputes arising out of or related in any way to this Agreement
shall be subject to binding arbitration pursuant to * * * the Federal Arbitration Act."
Section 18(g) of the loan agreement states:
Small Claims Court: Notwithstanding any other provision of
this Arbitration Agreement, either you or we shall retain the
right to seek adjudication in Small Claims Court of any matter
within its jurisdiction. Any appeal from a Small Claims Court
judgment shall be conducted in accordance with Section 8 of
this Arbitration Agreement.

{¶ 35} Thus, Section 18(a) of the loan agreement contains an arbitration provision
to resolve any disputes arising out of or related to the agreement by binding arbitration in
accordance with the Federal Arbitration Act. However, Section 18(g) of the agreement
contains an exception permitting either party the right to seek adjudication in small
claims court with respect to any matter within that court's jurisdiction.
{¶ 36} As noted under the facts, E-Z Cash initiated the instant action by filing its
complaint in small claims court. As also noted, E-Z Cash filed (on November 3, 2014) a
motion to stay the case and compel arbitration "in the event the instant case is transferred
out of the Small Claims Division." In its memorandum in support, E-Z Cash asserted that
any objections to the magistrate's decision filed by either party would trigger arbitration,
i.e., E-Z Cash argued that the filing of objections would remove the case from the small
claims division. Subsequent to the filing of objections by appellant, E-Z Cash filed with
the trial court a renewed motion to stay the case and compel arbitration.
{¶ 37} In response, appellant argued that R.C. 1925.10, which sets forth the criteria
for transfer of a case from the small claims division, does not list the filing of objections to
a magistrate’s decision as one of the grounds for transfer. Appellant further argued that
E-Z Cash had cited no authority for the proposition that the filing of objections to a
magistrate's decision in small claims court triggers removal of the action from the small
claims docket.
No. 15AP-911 11

{¶ 38} In denying E-Z Cash's motion to stay and compel arbitration, the trial court
agreed with appellant’s position and ruled that the arbitration clause provided in the
parties' contract was inapplicable to actions in small claims court. On review, we find no
error by the trial court in rejecting E-Z Cash’s unsupported assertion that the filing of
objections to the magistrate’s decision somehow operated to remove the case from the
small claims division. Accordingly, the trial court did not err in denying E-Z Cash's
motion to stay the case and compel arbitration.2
{¶ 39} E-Z Cash's first assignment of error on cross-appeal is overruled.
{¶ 40} Under its second assignment of error on cross-appeal, E-Z Cash contends
the trial court erred in failing to dismiss appellant’s counterclaim as time-barred. As
noted, appellant's counterclaim alleged that E-Z Cash had failed to comply with the
FDCPA by charging an interest rate in excess of the rate authorized under R.C. 1321.57(A).
However, based on our disposition of appellant's second assignment of error, holding that
the trial court did not err in finding that the 25 percent rate charged by E-Z Cash was
authorized under R.C. 1321.571, the argument raised under E-Z Cash's second assignment
of error on cross-appeal is rendered moot.
{¶ 41} Based on the foregoing, appellant's first and second assignments of error
are overruled, E-Z Cash's first assignment of error on cross-appeal is overruled, E-Z
Cash's second assignment of error on cross-appeal is rendered moot, E-Z Cash's motions
to compel arbitration and to dismiss appellant's appeal are denied, and the judgment of
the Franklin County Municipal Court is hereby affirmed.
Judgment affirmed; Motion to compel arbitration denied;
Motion to dismiss appeal denied.

LUPER SCHUSTER and HORTON, JJ., concur.

_______________________

2In its pending motions to compel arbitration and to dismiss appellant's appeal, E-Z Cash relies on the same
arguments rejected by the trial court in denying its motion to compel arbitration. Having found no error by
the trial court, we similarly deny E-Z Cash's motion to compel arbitration, and we also deny its motion to
dismiss appellant's appeal.