Credit Sales, Inc. v. Crimm

• Decision Date: 14 September 2001
• Parties: CREDIT SALES, INC., et al. v. Lizzie CRIMM.
• Court: Alabama Supreme Court

815 So.2d 540

CREDIT SALES, INC., et al. v. Lizzie CRIMM.¹

1000296.

Supreme Court of Alabama.

September 14, 2001.

John Martin Galese and Jeffrey L. Ingram of Galese & Ingram, P.C., Birmingham, for appellants Credit Sales, Inc., and Credit Finance, Inc.

Frank R. Farish and John P. Graves, Birmingham, for appellee.

SEE, Justice.

I.

Lizzie Crimm and James Whitehead sued Credit Sales, Inc., and Credit Finance, Inc., stating various causes of action arising from Crimm and Whitehead's purchase of an automobile. Pursuant to an arbitration provision in the "Buyer's Order" signed by Whitehead, Credit Sales and Credit Finance moved to compel arbitration; although the trial court granted the motion as to Whitehead's claims, it denied the motion as to Crimm's claims because Crimm was not a signatory to the Buyer's Order. The defendants appeal from the order denying arbitration as to Crimm's claims. We reverse and remand.

On June 30, 1998, James Whitehead and Lizzie Crimm entered a contract to purchase a 1992 Chevrolet Lumina automobile from Credit Sales. Pursuant to that agreement, both Whitehead and Crimm signed a "Retail Installment Contract and Security Agreement" (RICSA); that document does not contain an arbitration clause and does not refer to any other document that purports to contain an arbitration provision.

Whitehead, but not Crimm, also signed a "Buyer's Order," which states, in pertinent part:

"This contract consists of the following documents and no others: the window form for the vehicle (if applicable), this retail buyers order, the Limited Warranty for Used Vehicle Car Sales (if applicable), and the retail sales contract and security agreement. These documents contain all terms of sale and the entire agreement between Seller and Buyer regarding this transaction. Buyer acknowledges that verbal promises by salesmen are not valid and any promises or undertakings not specified in writing are hereby expressly waived by the Buyer. No modification of this Buyer's Order shall be valid unless in writing and signed by Seller."

(C.R. at 33.)

The following arbitration provision appears on the front side of the Buyer's Order:

"DISPUTE RESOLUTION AGREEMENT

"BUYER HEREBY ACKNOWLEDGES AND AGREES THAT ALL DISPUTES AND CONTROVERSIES OF EVERY KIND AND NATURE BETWEEN BUYER AND J.D. BYRIDER SALES,² ARISING OUT OF OR IN CONNECTION WITH THE PURCHASE OF THIS VEHICLE WILL BE RESOLVED BY ARBITRATION IN ACCORDANCE WITH THE PROCEDURE SET FORTH ON THE REVERSE SIDE OF THIS BUYER'S ORDER."

(C.R. at 33.) (Emphasis in original.) The reverse side of the agreement reads in pertinent part:

"DISPUTE RESOLUTION PROCESS

"All disputes and controversies of every kind and nature between the parties hereto arising out of or in connection with this contract, its subject matter or its negotiation, as to the existence, construction, validity, interpretation or meaning, performance, non-performance, enforcement, operation, breach of contract, breach of warranty, continuance or termination thereof or any claim alleging fraud in fact, fraud in the inducement, deceit or suppression of any material fact shall be submitted to binding arbitration pursuant to the provisions of the Federal Arbitration Act and according to the commercial rules of the American Arbitration Association then in effect in Birmingham, Alabama. Such arbitration proceedings may be initiated by either party by notice in writing to the other and to the American Arbitration Association. Each party shall bear his own arbitration costs and expenses, except to the extent provided on the reverse side hereof.

". . . .

"The parties stipulate that the provisions hereof shall be a complete defense to any suit, action or proceeding instituted in any federal, state, or local court or before any administrative tribunal with respect to any controversy or dispute arising hereunder."

(C.R. at 69.) Immediately above Whitehead's signature at the bottom of the Buyer's Order is the statement: "CAUTION: IT IS IMPORTANT THAT YOU READ THIS BUYER'S ORDER THOROUGHLY BEFORE YOU SIGN IT." (C.R. at 33.) A Credit Sales representative also signed the Buyer's Order.

Finally, Whitehead, but not Crimm, signed a document entitled "Condition for Return of Down Payment," which reads, in pertinent part:

"THE FOLLOWING TERMS AND CONDITIONS WILL GOVERN AND DETERMINE WHEN, IF AT ALL; AND HOW MUCH, IF ANY, DOWN PAYMENT MONEYS WILL BE REFUNDED.

". . . .

"2. The amount of refund will not exceed $900.

"3. The customer agrees that if ANY payment during the term of the loan is past due, the customer will no longer be eligible to receive a refund of the down payment....

"4. In order to qualify, the account must remain with CNAC for at least 75% of the contract term. Additionally, the account must be paid in full before any refund will be issued and applies to original contract term.

"5. It shall be the responsibility of the customer to notify J.D. Byrider within 30 days of loan payoff that they wish to receive a refund. J.D. Byrider will not be responsible for notifying the customer of their eligibility for a refund.

". . . .

"I/We do hereby agree to and understand the aforementioned terms and conditions. I also agree that failure to meet one or more of the qualifying criteria shall result in forfeiture of any and all down payment moneys."

(C.R. at 56.) (Emphasis in original.)

In the RICSA, which both Whitehead and Crimm signed, Credit Sales assigned its interest in the contract between it, Whitehead, and Crimm to Credit Finance. The RICSA states:

"Seller sells and assigns this Retail Installment Contract and Security Agreement (Contract) to the Assignee, its successors and assigns, including all its rights, title and interest in this Contract, and any guarantee executed in connection with this Contract. Seller gives Assignee full power, either in its own name, or in Seller's name, to take all legal or other actions which Seller could have taken under this Contract."

Whitehead and Crimm contend that in April 2000 they made the final payment on the Lumina and that, pursuant to the provisions of the "Condition for Return of Down Payment" document, they demanded the return of the $900 "down payment." According to Whitehead and Crimm, Credit Sales and Credit Finance refused to return the down payment.

On May 18, 2000, Whitehead and Crimm sued Credit Sales³ and Credit Finance.⁴ On July 10, 2000, Credit Sales and Credit Finance moved the trial court to dismiss or stay the action and to require Whitehead and Crimm to submit their claims to binding arbitration. In support of their motion, Credit Sales and Credit Finance submitted copies of the Buyer's Order, the RICSA, and an affidavit executed by Dave Martin.⁵ On August 8, 2000, Credit Sales and Credit Finance filed a supplemental affidavit from Dave Martin and a copy of the document styled "Conditions for Return of Down Payment."

On September 15, 2000, Whitehead and Crimm filed a supplemental brief and copies of the RICSA and the document styled "Conditions for Return of Down Payment." On September 26, 2000, Credit Sales and Credit Finance filed, as a supplement to their motion to compel arbitration, a copy of the reverse side of the "Buyer's Order."

On September 27, 2000, the trial court denied the motion to compel arbitration of Crimm's claims, but granted the motion as to Whitehead's claims. Credit Sales and Credit Finance appeal that portion of the trial court's order denying their motion as to Crimm's claims.⁶

II.

"A direct appeal is the proper procedure by which to seek review of a trial court's order denying a motion to compel arbitration." Tefco Fin. Co. v. Green, 793 So.2d 755, 758 (Ala.2001) (citing Homes of Legend, Inc. v. McCollough, 776 So.2d 741 (Ala.2000)). (See Rule 4(d), Ala. R.App. P., to be effective October 1, 2001, and the Court Comment to the amendment adopting Rule 4(d)—"[a]n order granting or denying a motion to compel arbitration is appealable as a matter of right" (emphasis added).) We review de novo a trial court's denial of a motion to compel arbitration. Id. at 758.

The Federal Arbitration Act (FAA) provides:

"A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

9 U.S.C. § 2; see Tefco Fin. Co., 793 So.2d at 758 (quoting this provision). However, "the duty to arbitrate is a contractual obligation and ... a party cannot be required to arbitrate any dispute that he or she has not agreed to submit to arbitration." Georgia Power Co. v. Partin, 727 So.2d 2, 5 (Ala.1998) (citing AT & T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), and A.G. Edwards & Sons, Inc. v. Clark, 558 So.2d 358 (Ala.1990)).

Whether one has agreed to arbitrate her claims is determined according to ordinary principles of state statutory and common law governing the formation of contracts. Ex parte Stamey, 776 So.2d 85, 88 (Ala.2000). Assent to arbitration is typically "manifested through a party's signature on the contract containing an arbitration provision," Stamey, 776 So.2d at 89; however, this Court has recognized exceptions to this general rule when a thirdparty beneficiary to a contract containing an arbitration provision seeks the benefits of the contract while seeking to avoid the arbitration clause. Stamey, 776 So.2d at 92; see Ex parte Dyess, 709 So.2d 447, 450 (Ala.1998); Ex parte Warren, 718 So.2d 45, 47 n. 4 (Ala.1998). The critical question presented in this appeal, then, is whether Crimm, who did not sign the Buyer's Order containing the arbitration agreement, is nevertheless bound by the terms of that agreement.

III.

Credit Sales and Credit Finance argue that, although Crimm did not sign the arbitration...