Ex Parte Bill Heard Chevrolet, Inc.
Ex Parte Bill Heard Chevrolet, Inc.
Opinion
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Bill Heard Chevrolet, Inc., and Chuck Berry petition this Court for a writ of mandamus directing the trial court to vacate its order allowing discovery and to enter an order compelling arbitration. We grant the petition and issue the writ.
Two weeks after she had left the dealership in the Durango, Bill Heard informed Dunlap that the trade-in value of her Rodeo and the price of the Durango needed to be adjusted so that she could qualify for financing. Dunlap returned to Bill Heard to sign a new series of documents, including a second "Retail Purchase Contract," a second "Bailment/Conditional Delivery Agreement," and a second arbitration agreement.
First Service Finance, Inc., which had financed Dunlap's purchase of the Isuzu Rodeo, later repossessed Dunlap's Rodeo from Bill Heard because of a lapse in payments on Dunlap's loan secured by the Rodeo. Immediately after the Rodeo was repossessed, Bill Heard took the Durango back from Dunlap and told her that she did not qualify for financing.
Dunlap sued Bill Heard and its employee, Chuck Berry, alleging legal fraud, deceit, and conversion, as well as fraudulent, reckless, and negligent misrepresentation. Dunlap also alleged that Bill Heard and Berry had violated various provisions of the Truth-in-Lending Act and the Equal-Credit-Opportunity Act. In addition to seeking relief for herself, Dunlap asked the trial court to certify her lawsuit as a class action.
Bill Heard and Berry moved the trial court to stay the action and to compel *Page 797 Dunlap to submit her claims to arbitration. Citing the two arbitration agreements Dunlap signed, Bill Heard and Berry asserted the existence of a contract that calls for arbitration and that involves an interstate commercial transaction. In support of their motion, Bill Heard and Berry attached an affidavit from Edward D. Allen, the custodian of business records for Bill Heard. Allen's affidavit states that Dunlap signed arbitration agreements in which she agreed to arbitrate any dispute between her, Bill Heard, and any of Bill Heard's employees. Allen's affidavit also attests that Chuck Berry was an employee of Bill Heard at the time of the transaction between Dunlap and Bill Heard.
Allen's affidavit also states that the Durango had been registered as a lease vehicle in Oak Park, Michigan, until it was sold to a car dealer at an auction in Knoxville, Tennessee. Allen states that Bill Heard purchased the Durango from the car dealer in Tennessee and brought it to Alabama for the purpose of selling it. Allen attached 21 documents to his affidavit, including the two Retail Purchase Contracts, the two Bailment/Conditional Delivery Agreements, and the two arbitration agreements signed by Dunlap.
Dunlap responded by filing a brief in opposition to the motion to compel arbitration, which opposed Bill Heard and Berry's motion on three grounds. First, Dunlap asserted that the contractual documents relating to the sale of the Durango were unenforceable because, she argued, the condition precedent in the contracts — financing — never occurred. Dunlap argued that the arbitration agreements were components of the Retail Purchase Contracts and were, therefore, also unenforceable. Second, Dunlap argued that "the entire transaction" was fraudulent and, as a result, the arbitration agreements are void. Third, Dunlap argued that the arbitration agreements do not cover her dispute because, she says, her claims are based on Bill Heard's failure to pay off the loan on the Isuzu Rodeo that she had traded in on the Durango, not on the purchase of the Durango.
Dunlap asked the trial court to set a hearing on her request for class certification and to "permit the parties a reasonable period of time in which to submit evidence obtained through discovery pertinent to the determining factors." Dunlap did not attach affidavits or any other supporting evidence to her brief to the trial court.
After hearing arguments and considering the briefs and accompanying evidentiary submissions, the trial court issued the following order on December 21, 2004:
"The Court is of the opinion that the Motion to Compel Arbitration is due to be STAYED pending limited discovery solely on the issue of whether the case should be compelled to arbitration. The Parties will have 120 days to conduct such discovery, after which the Court will reconvene to consider the Motion to Compel Arbitration."
Ex parte Greenstreet, Inc.,
"[I]f the party opposing a properly supported motion to compel arbitration desires discovery, that party must present a factually based predicate before a right to conduct discovery regarding matters that could invalidate the agreement to arbitrate arises. At a minimum, a party opposing a properly supported motion to compel arbitration and seeking discovery on issues that could invalidate the arbitration agreement must provide an affidavit describing the circumstances that are within its knowledge and that are relevant to its claimed defenses to arbitration."
Thus, our inquiry into whether Bill Heard and Berry are entitled to the writ of mandamus consists of two components. This Court must first determine whether Bill Heard and Berry have "satisfied [their] burden of production by making a prima facie showing that an agreement to arbitrate exists in a contract relating to a transaction substantially affecting interstate commerce." Greenstreet, Inc.,
As support for their motion to compel arbitration, Bill Heard and Berry attached copies of the two arbitration agreements Dunlap signed in connection with the purchase of the Durango. Those agreements state in relevant part:
"[Dunlap] and [Bill Heard] agree that all claims, demands, disputes, or controversies of every kind or nature that may arise between them concerning any of the negotiations leading to the sale . . . or financing of the vehicle, terms and provisions of the sale . . . or financing agreement, arrangements for financing, . . . or any other aspects of the vehicle and its sale . . . or financing shall be settled by binding arbitration conducted pursuant to the provision of
9 U.S.C. Section 1 et seq. . . . Without limiting the generality of the foregoing, it is the intention of [Dunlap] and [Bill Heard] to resolve by binding arbitration all disputes between them concerning the vehicle, its sale . . . or financing, . . . including disputes concerning the terms and conditions of the sale . . . or financing, . . . the terms and meaning of any documents signed or given in connection with negotiations for the sale . . . or financing, any representations, promises or omissions made in connection with negotiations for the sale . . . or financing of the vehicle. . . ."This Agreement is binding upon, and inures to the benefit of [Dunlap] and [Bill Heard] and the officers, employees, agents and affiliated entities of each of them. This Agreement will survive payment of [Dunlap's] obligation and any termination, cancellation or performance of the transactions between [Dunlap] and [Bill Heard]."
Dunlap does not dispute that she signed the arbitration agreements, nor does she dispute that Berry, as an employee of Bill Heard, is included within the scope of those agreements. Instead, Dunlap argues that Bill Heard and Berry cannot prove that a contract calling for arbitration exists because, she argues, the arbitration agreements are components of the Retail Purchase Contracts, which she says were rendered unenforceable because of the nonoccurrence of a condition precedent to those contracts, namely, Dunlap's qualifying for financing. Dunlap argues that Bill Heard and Berry cannot enforce arbitration agreements that are part of unenforceable contracts.
A provision in a contract "making the contract subject to the procurement of a loan to finance the purchase price is a valid condition precedent to performance." Duncan v. Rossuck,
Ex parte Payne,"`[W]here the parties to a proposed contract have agreed that the contract is not to be effective or binding until certain conditions are performed or occur, no binding contract will arise until the conditions specified have occurred or been performed.'"
"[O]n a credit transaction the purchaser(s) [sic] offer is not accepted and the transaction is not consummated until (a) approval in writing by . . . a responsible Bank or Finance Company."
No valid contract can exist without the acceptance of an offer.Southern Energy Homes, Inc. v. Hennis,
In arguing that the arbitration agreements are components of the Retail Purchase Contracts, Dunlap invites us to apply the principle this Court discussed in Weeden v. Asbury,
"[I]n the absence of anything to indicate a contrary intention, writings executed at the same time by the same parties for the same purpose, and in the course of the same transaction, are in the eye of the law one instrument, and will be received and construed together as constituting one contract and evidencing the intention of the parties."
This contemporaneous-writing principle is a rule of construction this Court uses when it is "necessary to ascertain the intention of the parties." Hunter-Benn Co. v. Bassett Lumber Co.,
This Court takes note of the fact that the arbitration agreements and the Retail Purchase Contracts are part of a series of documents Dunlap and Bill Heard signed essentially contemporaneously. We also note that both sets of documents were executed for the same broad purpose: to govern Dunlap and Bill Heard's obligations with respect to the sale of the Durango. However, the Retail Purchase Contracts Dunlap signed are not ambiguous when addressing the relationship of those contracts to the arbitration agreements:
"This contract expresses the entire agreement between the parties, all previous verbal or written communications between the parties with reference to the subject matter hereof, excluding [sic] Arbitration Agreement, are merged herein."
The Retail Purchase Contracts expressly prohibit construing the arbitration agreements as part of the contracts. The Bailment/Conditional Delivery Agreement, also signed by Dunlap, stresses the independence of the arbitration agreement in even greater detail:
"The Arbitration Agreement remains effective and enforceable even if your offer is not accepted or credit is not approved, accepted, and funded. [F]unding of the Contract is not a condition precedent to enforceability of the Arbitration Agreement."
In Lilley v. Gonzales,
Accordingly, Dunlap incorrectly relies on Ex parte Payne, supra, and Ex parte Cobb,
Although Cobb held that a financing condition precedent in a retail buyer's order rendered an arbitration provision in a separate lease agreement unenforceable, there was no evidence before this Court showing that the parties intended that the documents be treated as separate contracts. Instead, the evidence in the record showed that Serra Toyota viewed the Cobbs' failure to obtain financing as having voided both agreements:
Cobb,"[T]he record before this Court shows that, after the Cobbs' financing request was rejected, Serra did not view the Lease Agreement as a binding contract. Attached to the Cobbs' mandamus petition is a copy of the Lease Agreement containing the arbitration provision Serra seeks to enforce. Written across the first page of the Lease Agreement and across the first page of the Retail Buyer's Order are the words `VOID' and `TURNED DOWN.'"
Dunlap argues that, even if the arbitration agreements are not made unenforceable by the failure to meet the financing condition precedent in the Retail Purchase Contracts, Bill Heard and Berry still cannot prove the existence of a contract calling for arbitration because the arbitration agreements are not, by themselves, valid contracts. "The requisite elements of [a contract] include: an offer and an acceptance, consideration, and mutual assent to the terms essential to the formation of the contract." Strength v. Alabama Dep't of Fin.,
In the arbitration agreements, Bill Heard offered to disclaim its rights to pursue litigation in return for Dunlap's promise to do the same. Dunlap accepted Bill Heard's offer by signing the arbitration agreements. See Merrill Lynch, Pierce, Fenner Smith, Inc. v. Kilgore,
Further, both Dunlap and Bill Heard forfeited their right to a jury trial by agreeing to pursue arbitration. The destruction of this legal right was sufficient consideration for the agreements.See Smoyer v. Birmingham Area Chamber of Commerce,
Finally, Dunlap does not dispute that the arbitration agreements bear both her signature and the signature of a representative from Bill Heard. In Crown Pontiac, Inc. v.McCarrell,
Dunlap next argues that the arbitration agreements are not enforceable contracts because, she says, the entire underlying transaction was fraudulent. However, in Johnson Mobile Homes ofAlabama v. Hathcock,
Finally, Dunlap argues that the arbitration agreements that Bill Heard and Berry rely upon to prove that a contract calling for arbitration exists are not broad enough to cover the claims raised in her complaint. Yet Dunlap's complaint asserts that the essence of her agreement with Bill Heard "was that [Dunlap] would trade in her 1999 Isuzu Rodeo; Bill Heard would pay off the remaining balance owed on the Rodeo; [and Dunlap] would purchase a 2002 Dodge Durango."
In the arbitration agreements, Dunlap agreed "to resolve by binding arbitration all disputes between them concerning the vehicle, its sale . . . or financing, . . . including disputes concerning . . . any representations, promises or omissions made in connection with negotiations for the sale . . . or financing of the vehicle." Dunlap's promise to trade in her Rodeo, as well as Bill Heard's promise to pay off any money she owed on the Rodeo, was part of the negotiations involved in the purchase and financing of the Durango. Thus, the language used in the arbitration agreements is broad enough to encompass Dunlap's claims. Accordingly, Bill Heard and Berry have met their burden of proving the existence of a contract calling for the arbitration of Dunlap's dispute.
Dunlap filled out credit applications as part of the negotiations for obtaining financing to pay for the Durango. Allen's affidavit states that Bill Heard used those *Page 803 applications to obtain Dunlap's credit information from Equifax Services, Inc., a company based in Atlanta, Georgia. Allen's affidavit also states that Bill Heard contacted five different out-of-state corporations in an attempt to obtain financing for Dunlap's purchase of the Durango. Bill Heard also introduced evidence showing that the used Durango Dunlap negotiated to purchase had been bought and sold at auctions in Michigan and Tennessee.
Prior cases have held that evidence similar to that introduced here by Bill Heard and Berry was enough to show that a contract involved an interstate commercial transaction. See, e.g., DanWachtel Ford, Lincoln, Mercury, Inc. v. Modas,
The fact that the sale of the Durango was not completed is irrelevant to our inquiry. In the arbitration agreements, Dunlap, Bill Heard, and Berry agreed to arbitrate disputes concerning "any of the negotiations leading to the sale . . . or financing of the vehicle." Dunlap does not dispute that she filled out the credit applications as part of the negotiations to obtain financing nor does she dispute that those applications were forwarded to an out-of-state company in order for Bill Heard to obtain her credit information. Because this interstate transaction between Bill Heard and Equifax was undertaken in an effort to determine whether it would be possible for Dunlap to obtain financing to purchase the Durango, the transaction was part of the "negotiations leading to the sale or financing of the vehicle." Accordingly, Bill Heard and Berry have met their burden of proving that the agreements involve an interstate commercial transaction.2
Ordinarily, a trial court is required to grant a motion to compel arbitration when the opposing party fails to introduce evidence in opposition. See, e.g., First Family Fin. Servs. v.Jackson,
"Under certain circumstances, the evidence necessary to challenge the enforceability of an arbitration provision may be exclusively within the other party's possession. Under those circumstances, the party opposing arbitration will be unable or virtually unable to obtain the necessary evidence except through discovery."Greenstreet, Inc.,
However, a trial court's discretion to delay ruling on a properly supported motion to compel arbitration to allow the opposing party to conduct discovery is not without restraints. "[I]n arbitration, . . . `discovery is the exception and not the norm.'" Horton Family Housing, Inc.,
"[a] party must present a factually based predicate before a right to conduct discovery regarding matters that could invalidate the agreement to arbitrate arises. At a minimum, a party opposing a properly supported motion to compel arbitration and seeking discovery on issues that could invalidate the arbitration agreement must provide an affidavit describing the circumstances that are within its knowledge and that are relevant to its claimed defenses to arbitration."Greenstreet, Inc.,
Dunlap failed to attach an affidavit to her response in opposition to Bill Heard and Berry's motion to compel arbitration or to introduce any other evidence describing how the discovery she requested would relate to the issue whether the arbitration agreements are enforceable. Moreover, Dunlap's brief in opposition to the motion to compel arbitration did not request discovery on issues regarding arbitration, but instead requested discovery on the factors relating to determining class certification. In an effort to defend the trial court's ruling, Dunlap now makes the conclusory argument that the "same discovery that would seek evidence relevant to a fraudulent scheme perpetrated on Dunlap would be relevant to the issue of class certification." However, our determination of whether the trial court exceeded its discretion in ruling on a discovery order is limited to examining the "facts that were before the trial court." Greenstreet, Inc.,
"Under the factually-based-predicate standard . . . it would be a clear abuse of the trial court's discretion to allow . . . discovery without a factual showing as to *Page 805
why that discovery was justified." Greenstreet, Inc.,
PETITION GRANTED; WRIT ISSUED.
NABERS, C.J., and STUART and BOLIN, JJ., concur.
HARWOOD, J., concurs in the result.
Reference
- Full Case Name
- Ex Parte Bill Heard Chevrolet, Inc., and Chuck Berry. (In Re Angela Dunlap v. Bill Heard Chevrolet, Inc., and Chuck Berry).
- Cited By
- 12 cases
- Status
- Published