Pitchford v. Oakwood Mobile Homes, Inc.

• Decision Date: 13 November 2000
• Docket Number: Civil Action No. 5:99CV00053.
• Citation: 124 F.Supp.2d 958
• Court: U.S. District Court — Western District of Virginia
• Parties: Kimberly R. PITCHFORD, Plaintiff, v. OAKWOOD MOBILE HOMES, INC., et al., Defendants.

124 F.Supp.2d 958

Kimberly R. PITCHFORD, Plaintiff, v. OAKWOOD MOBILE HOMES, INC., et al., Defendants.

Civil Action No. 5:99CV00053.

United States District Court, W.D. Virginia, Harrisonburg Division.

November 13, 2000.

COPYRIGHT MATERIAL OMITTED

Timothy Earl Cupp, Cupp & Cupp, P.C., Harrisonburg, VA, Thomas Dean Domonoske, Dale Wood Pittman, Law Office of Dale W. Pittman, Petersburg, VA, for Plaintiff.

Rosalie Pemberton Fessier, Boyce Eugene Brannock, Timerlake, Smith, Thomas & Moses, P.C., Staunton, VA, for Defendants.

MEMORANDUM OPINION

MICHAEL, Senior District Judge.

Before the court is a motion by the defendants to compel arbitration and stay proceedings in the above-captioned civil action, pursuant to an arbitration agreement between the parties. The matter was referred to the presiding United States Magistrate Judge, B. Waugh Crigler, pursuant to 28 U.S.C. § 636(b)(1)(B) for recommended findings of fact and a proposed disposition. The Magistrate recommended that the court deny the defendants' motion to compel. Both parties filed timely objections to the Report and Recommendation and the court shall make a de novo review. See 28 U.S.C. § 636(b)(1)(C).

I.

Kimberly Pitchford signed a Retail Installment Contract ("contract") with Oakwood Mobile Homes, Inc ("Oakwood") on June 19, 1997, agreeing to purchase a mobile home for $46,200. Pitchford paid a cash down payment of $2500 and financed the balance through defendant Oakwood Acceptance Corporation ("Oakwood Acceptance").

Pitchford was in immediate need of a place to live due to her personal circumstances of recently being divorced and caring for her four young children. Pitchford responded to an advertisement by Oakwood for a mobile home, went to Oakwood's Harrisonburg Office to view the mobile homes one day, and returned the following day to purchase a mobile home. The plaintiff met with a sales agent¹ for approximately 20-30 minutes to execute all of the relevant documents. The plaintiff apparently took considerable care in reviewing the six-page contract, which purported to embody the entire agreement of the parties. The sale was "subject to the terms of this Contract," the term "Contract" being defined as "this document and any separate document that secures this Contract." After signing the contract, the plaintiff was presented with sixteen pages of documents, eight of which required her signature, none of which "secured the contract." Of these documents, the only one to purport to add materially to the terms of the contract was the Arbitration Agreement.

The Arbitration Agreement is the source of the present dispute between the parties, the plaintiff contending on various grounds that the agreement is unenforceable. While many of the plaintiff's arguments would require an analysis of the surrounding facts, the court's determination that the Magnuson-Moss Act precludes enforcement of the Arbitration Agreement dispenses with the need to go into the factual situation in further detail at this time. For a further factual analysis, the court refers the reader to the Report and Recommendation of the Magistrate Judge, at 1-6.

II.

A.

The defendant objects to the evidentiary hearing held in this matter on October 15, 1999. Defendants object on the grounds that the agreements between the parties are unambiguous on their faces, thereby triggering the parol evidence rule and prohibiting evidence of anything other than the documents themselves. District courts have jurisdiction under the sections 3 and 4 of the Federal Arbitration Act ("FAA") to adjudicate questions concerning the validity of any arbitration contract or clause. See 9 U.S.C. §§ 3,4; Hooters of America, Inc. v. Phillips, 173 F.3d 933, 937-38 (4th Cir.1999) (Wilkinson, C.J.); Glass v. Kidder Peabody & Co., 114 F.3d 446 (4th Cir.1997). The FAA states that, in any suit brought in federal court on any issue referable to arbitration, "upon being satisfied that the issue involved in such a suit ... is referable to arbitration [the court] shall stay the trial." 9 U.S.C. § 3 (emphasis added). The Supreme Court has interpreted this as calling for a hearing with a restricted inquiry into factual issues. See Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).

Where the parties contest the enforceability of an agreement and an evidentiary hearing is necessary to determine whether a contract is valid, as in the present case, the court would be remiss not to hold a hearing. This case has raised a myriad of complex problems that the court has labored to resolve. The Magistrate, recognizing that such a situation was present, was proper and responsible to hold the October 15, 1999 hearing in this case.

B.

The parties contest whether the Arbitration Agreement is a part of the contract for the purchase and sale of the mobile home, or whether the Arbitration Agreement is a separate agreement. The Magistrate found that the contract and the Arbitration Agreement were two separate agreements. Furthermore, the Magistrate found that, because the contract was fully executed and capable of standing on its own prior to any mention of the arbitration agreement, the two documents are separate. The defendant objects to this holding on the grounds that the Arbitration Agreement itself purports to be a part of the contract. The Arbitration Agreement begins by stating:

This Arbitration Agreement ("Agreement") is executed contemporaneously with, and as an inducement and consideration for, an installment and sales contract ("Contract") for the purchase of a manufactured home ("Home") as described in the Contract ... The parties hereto acknowledge that this Agreement is part of the Contract and that this contract evidences a transaction in interstate commerce governed by the Federal Arbitration Act.

However, the Contract states:

Your purchase of the Manufactured Home is subject to the terms of this Contract. "Contract" means this document and any separate document that secures this Contract.

The Arbitration Agreement does not secure the Contract. Although the Contract incorporates other documents by reference, such as the warranty, one searches the six pages of the contract in vain for any reference to arbitration or an arbitration agreement. Virginia contract law requires a plain reading of a contract where the language therein is unambiguous. See Dominion Sav. Bank, FSB v. Costello, 257 Va. 413, 416, 512 S.E.2d 564 (1999); Management Enterprises, Inc. v. Thorncroft Co., Inc., 243 Va. 469, 472, 416 S.E.2d 229 (1992). The plain reading of the Contract — the validity of which is not challenged by any party — is that the Contract and any attendant securing document, plus those documents incorporated by reference, shall constitute the entire agreement between the parties as to the purchase of the home. To hold that the Arbitration Agreement is a part of the Contract, the court must look beyond the four corners of the valid, fully executed Contract. Thus, the Contract indicates that the Arbitration Agreement is not part of the Contract, but rather, is a separate agreement between the parties.

The court has considered whether the Contract and the Arbitration Agreement should be treated as one contract based on the fact that they appear to be part of a contemporaneous transaction. In the context of deeds and underlying notes, Virginia law holds that they shall be deemed separate agreements. Virginia Housing Development Authority v. Fox Run Ltd. Partnership, 255 Va. 356, 364-65, 497 S.E.2d 747 (1998). However, where notes and agreements are contemporaneous, they may be treated as one, "[s]o long as neither document varies or contradicts the terms of the other." Id. On their faces, the Contract and the Arbitration Agreement conflict with one another: the Contract explicitly details that which shall be considered part of the contract, clearly omitting the Arbitration Agreement, whereas the Arbitration Agreement plainly states that it is part of the Contract. The parties do not challenge the validity of the Contract, but vehemently disagree over the propriety of the Arbitration Agreement. The parties also do not dispute that the Contract was fully executed by the parties prior to any mention of arbitration.² The court relies on the plain meaning of the document that is relied upon by both of the parties which, read for its plain meaning, indicates that the Arbitration Agreement is not contemplated as part of the Contract.

Having determined that the Arbitration agreement and the Contract are two separate agreements, between the parties, the court shall look to the Arbitration Agreement to determine whether it is a valid document such that the defendants' motion to compel arbitration can be granted.

III.

The defendants invoke the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq., as authority for their motion to compel arbitration. The judiciary has recognized that Congress, in enacting the FAA, expressed a preference in favor of arbitration, which the judiciary has enforced. See Moses H. Cone, 460 U.S. at 24-25, 103 S.Ct. 927. The FAA creates a "`heavy presumption of arbitrability,'" such that "`when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration.'" American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 92 (4th Cir.1996) (quoting Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809, 812 (4th Cir.1989)). Nevertheless, "[a]rbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free to structure their arbitration agreements as they see fit." Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior University, 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).

The FAA serves the purpose of putting arbitration agreements "on the same footing" as other contracts. See Gilmer v. Interstate/Johnson Lane...