542 S.E.2d 360 (S.C. 2001), 25238, Munoz v. Green Tree Financial Corp.

Docket Nº:25238.
Citation:542 S.E.2d 360, 343 S.C. 531
Party Name:343 S.C. 531 Anthony L. MUNOZ and Patricia A. Munoz, Petitioners, v. GREEN TREE FINANCIAL CORP. a/k/a Green Tree Acceptance Corp. and Gerald Sealey d/b/a Tri-State Builders, Defendants, of whom Green Tree Financial Corp. is Respondent.
Case Date:January 22, 2001
Court:Supreme Court of South Carolina

Page 360

542 S.E.2d 360 (S.C. 2001)

343 S.C. 531

Anthony L. MUNOZ and Patricia A. Munoz, Petitioners,


GREEN TREE FINANCIAL CORP. a/k/a Green Tree Acceptance Corp. and Gerald Sealey d/b/a Tri-State Builders, Defendants,

of whom Green Tree Financial Corp. is Respondent.

No. 25238.

Supreme Court of South Carolina

Jan. 22, 2001.

Heard April 6, 2000.

Rehearing Denied March 7, 2001[343 S.C. 532].

Page 361

[Copyrighted Material Omitted]

Page 362

[343 S.C. 535] Mary Leigh Arnold, of Mt. Pleasant; and Bradford P. Simpson, of Suggs & Kelly Lawyers, P.A., of Columbia, for petitioners.

Herbert W. Hamilton and W. Keith Martens, both of Kennedy, Covington, Lobdell & Hickman, L.L.P., of Rock Hill, for respondent.

Helen Fennell and Danny Collins, both of Columbia, for amicus curiae South Carolina Dept. of Consumer Affairs.

John T. Moore, William C. Hubbard, and B. Rush Smith, III, all of Nelson, Mullins, Riley & Scarborough, L.L.P., of Columbia; and Alan S. Kaplinsky and Martin C. Bryce, Jr., both of Ballard, Spahr, Andrew & Ingersoll, L.L.P., of Philadelphia, for amici curiae South Carolina Bankers Assoc., American Bankers Assoc., American Financial Services Assoc., and Consumer Bankers Assoc.

Timothy Eble, of Ness, Motley, Loadholt, Richardson & Poole, of Mt. Pleasant; and Victoria Nugent and F. Paul Bland, Jr., both of Washington, D.C., for amicus curiae Trial Lawyers for Public Justice.

MOORE, Justice:

We granted a writ of certiorari to review the Court of Appeals' unpublished decision reversing the denial of a motion to compel arbitration. We affirm[343 S.C. 536].


On December 28, 1993, petitioners (the Munozes) signed an installment contract and security agreement with Gerald Sealy (Builder) to finance home improvements in the amount of $15,000 secured by a mortgage on their home. Builder assigned the agreement the same day to respondent Green Tree Financial Corporation (Creditor).

In December 1996, the Munozes commenced this action against Creditor and Builder. The Munozes claimed they had been "grossly overcharged for materials and work performed" and alleged several causes of action including an unconscionable consumer credit transaction, violations of the South Carolina Consumer Protection Code, negligent misrepresentation, fraud, and unfair trade practices.

Creditor moved to compel arbitration pursuant to the arbitration clause in the agreement which provides:

All disputes, claims, or controversies arising from or relating to this contract or the relationships which result from this contract, or the validity of this arbitration clause or the entire contract, shall be resolved by binding arbitration by one arbitrator selected by us with consent of you. This arbitration contract is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. section 1.... THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL, EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY U.S. (AS PROVIDED HEREIN). The parties agree and understand that all disputes arising under case law, statutory law, and all other laws including, but not limited to, all contract, tort, and property disputes, will be subject to binding arbitration in accord with this contract.... Notwithstanding anything hereunto the contrary, we retain an option to use judicial or non judicial relief to enforce a mortgage, deed of trust, or other security agreement relating to the real property secured in a transaction underlying this arbitration agreement, or to enforce the monetary obligation secured by the real property, or to foreclose on the real property. Such judicial relief would take the form [343 S.C. 537] of a lawsuit. The institution and maintenance of an action for judicial relief in a court to foreclose upon any collateral, to obtain a monetary judgment or to enforce the mortgage or deed of trust shall not constitute a waiver of the right of any party to compel arbitration regarding any other dispute or remedy subject to arbitration in this contract, including the filing of a counterclaim in a suit brought by us pursuant to this provision.

(underscoring added).

The trial judge found this arbitration clause was unconscionable, essentially because

Page 363

it was part of an adhesion contract, it lacked mutuality, and it did not comply with statutory provisions of South Carolina law specifically relating to consumer transactions and arbitration clauses. He concluded the arbitration clause was unenforceable and denied the motion to compel arbitration. Creditor appealed.

On appeal, the Court of Appeals reversed finding that a contract of adhesion is not per se unconscionable, mutuality is not required, and the Federal Arbitration Act (FAA) preempts state law because the transaction involved interstate commerce.


1. Does the FAA apply? If so, what is its effect?

2. Is the arbitration clause unconscionable as an adhesion...

To continue reading