Crimson Industries, Inc. v. Kirkland, 1972202.

• Decision Date: 04 June 1999
• Docket Number: No. 1972202.,1972202.
• Citation: 736 So.2d 597
• Parties: CRIMSON INDUSTRIES, INC. v. Howard R. KIRKLAND and Linda Kirkland.
• Court: Alabama Supreme Court

736 So.2d 597

CRIMSON INDUSTRIES, INC. v. Howard R. KIRKLAND and Linda Kirkland.

No. 1972202.

Supreme Court of Alabama.

June 4, 1999.

David L. Selby II and Michael L. Jackson of Wallace, Jordan, Ratliff & Brandt, L.L.C., Birmingham, for appellant.

Donald H. Brockway, Jr., Birmingham, for appellees.

PER CURIAM.

This appeal involves the question whether the manufacturer of a mobile home is entitled to enforce an arbitration agreement.

The basic facts are undisputed. Howard Kirkland and Linda Kirkland ordered a mobile home from a retailer, Youngblood Enterprises, Inc. ("Youngblood"). The mobile home was manufactured by Crimson Industries, Inc. ("Crimson"). On October 17, 1996, the Kirklands and Youngblood executed a sales contract that contained a merger clause, which read: "This agreement contains the entire understanding between you and me and no other representation or inducement, verbal or written, has been made which is not contained in this contract." The sales contract also specifically stated that the word "you" referred to the dealer, Youngblood, and that the word "me" referred to the buyers, the Kirklands. There was no indication that Crimson was a party to that sales contract.

In November 1996, the mobile home was delivered to the Kirklands and was "set up" on their property. The Kirklands paid connection fees to obtain electric, telephone, and water service. On January 11, 1997, a certificate of title was issued, and on January 14, 1997, at the closing of the sale, and "[a]s part of the consideration for the sale," Youngblood presented an arbitration agreement to Mr. Kirkland, which he executed. The arbitration agreement read as follows:

"AGREEMENT FOR BINDING ARBITRATION"

"This agreement for binding arbitration is this date entered between Howard R. Kirkland hereinafter called `Buyer' and Youngblood Enterprises, Inc., a corporation, hereinafter called `Seller'.

"Buyer has this date purchased from Seller a mobile home described as follows:

Crimson 1997 CALS 7540 Make Year Serial Number

"As part of the consideration for the sale of the said mobile home, Buyer and Seller hereby enter into this agreement for binding arbitration, each intending to be mutually bound by the terms of this agreement.

"Buyer and Seller acknowledge that the said mobile home is a product manufactured and sold in interstate commerce and that the provisions of the Federal Arbitration Act are applicable to this contract. The parties further acknowledge that the sale of the said mobile home is a transaction involving interstate commerce.

"Buyer and Seller agree, covenant and consent, that any and all controversies or claims arising out of or in any way relating to the sale of the said mobile home and the negotiations leading up to the sale, whether in the nature of covenant, warranty, misrepresentation, rescission, any breach of contract, or other tort, shall be settled solely by arbitration in accordance with the applicable Rules of the American Arbitration Association then in effect, and that judgment upon the award rendered by the arbitrators may be entered in and enforceable by any court of competent jurisdiction. Buyer and Seller further agree that they shall submit any and all disputes, controversies and cases arising out of the negotiations for and the sale and service of the mobile home, whether in the nature of contract, warranty, or tort, to the decision of the three-person arbitration panel. Buyer and Seller agree that they shall be bound by the determination of the said arbitration panel. The arbitration panel shall be appointed by the applicable national panel of arbitrators in accordance with the American Arbitration Association's rules for appointment of such panels. In accordance with the American Arbitration Association, the Buyer and Seller agree that any and all arbitration proceedings arising hereunder shall be held in the county of sale, which is Jefferson, Alabama.

"Buyer and Seller agree that this agreement shall cover any and all disputes, claims or controversies between them, including but not limited to warranty claims, service or repair disputes, set-up or installation disputes, breach of contract, misrepresentations claims [sic], rescission or revocation, loss of use, claims involving fitness for a particular purpose of merchantability [sic], and all other claims arising out of or in any way related to the sale and service of the said mobile home.

"It is further agreed by the parties that all rights, privileges and responsibilities under this agreement shall expressly inure to the benefit of the manufacturer of the said mobile home insofar as any claims may exist or hereafter arise against the manufacturer, including but not limited to, enforcement of warranties, whether express or implied. It is further acknowledged, agreed and stipulated to by the partied [sic] hereto that each of them acknowledges the benefit of including any and all claims which might be asserted against the said manufacturer in relation hereto in any arbitration proceeding contemplated hereby and, as such, each part [sic] shall, for purposes of judicial economy, decreased expense and justice expressly acquiesce in and be bound to settle such claims against the manufacturer by arbitration.

"The agreement is part of the contract of sale this date entered into this date between Buyer and Seller [sic], the terms and provisions of which are incorporated herein by reference, and shall be binding upon and inure to the benefit of their respective heirs and assigns."

(Emphasis added.)

The Kirklands subsequently sued Youngblood and Crimson, asserting claims based on breach of contract, fraudulent misrepresentation, fraudulent suppression, negligence, wantonness, and breach of warranty. Crimson moved to dismiss the claims against it and also filed a motion asking the trial court to compel the Kirklands to arbitrate their claims.¹ The trial court denied Crimson's motion in part and granted it in part, ruling that the Kirklands must arbitrate all claims based on events occurring on or after January 14, 1997, the date the arbitration agreement was signed, but that the Kirklands did not have to arbitrate any claim based on events that had occurred before that date. Crimson appeals. We reverse and remand.

Before we address the reasons for reversing, we address this Court's power to entertain the appeal, and our scope of review. Crimson indicates in its reply brief that it is appealing only that portion of the trial court's order that denied arbitration, i.e., that part that denied arbitration of claims based on events that had occurred before January 14, 1997. Based on this Court's prior holding that "[i]n the absence of taking an appeal, an appellee may not cross-assign error," we will consider only that portion of the trial court's order that Crimson indicated it was appealing. Beaty v. Head Springs Cemetery Ass'n, 413 So.2d 1126, 1128-29 (Ala.1982).

Our caselaw holds that an appeal is the appropriate method for challenging a trial court's denial of a motion to compel arbitration. See A.G. Edwards & Sons, Inc. v. Clark, 558 So.2d 358, 360 (Ala.1990). This Court's review of a trial court's refusal to compel arbitration is de novo. See Ex parte Warrior Basin Gas Co., 512 So.2d 1364, 1368 (Ala.1987). This standard of review is similar to that employed in the federal courts, which have consistently said that "determinations of arbitrability, like the interpretation of any contractual provision, are subject to de novo review." Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469, 474 (9th Cir.1991), cert. denied, 503 U.S. 919, 112 S.Ct. 1294, 117 L.Ed.2d 516 (1992).²

In discussing the standard of review an appellate court should use in determining whether a trial court has correctly ruled on questions of law, this Court has held that the trial court's rulings "do not fall within the trial court's discretionary function; thus, if alleged error is properly preserved and presented on appeal, these rulings are subject to de novo review, i.e., a review without any assumption of correctness." King Mines Resort, Inc. v. Malachi Mining & Minerals, Inc., 518 So.2d 714, 716 (Ala.1987). See Otis Elevator of Gadsden, Inc. v. Scott, 586 So.2d 200 (Ala.1991); see also Jim Burke Automotive, Inc. v. Beavers, 674 So.2d 1260, 1270-71 (Ala.1995) (Maddox, J., dissenting on overruling application for rehearing). Based on these authorities, we apply the de novo standard of review.³

Having determined that we review the issue of arbitrability without any presumption in favor of the trial court's ruling, we address the legal issue presented: Did the Kirklands, under the particular facts and circumstances of this case, agree to arbitrate any claim they might have against Crimson? Although Crimson was not a signatory to the original sales contract, we conclude that the arbitration agreement, although executed separately and much later than the sales contract, is controlling.

It is undisputed that the sales contract was executed on October 17, 1996, and that it contained a merger clause. However, we do not find the merger clause to be controlling. A merger clause operates only to establish that a written agreement is a completely integrated document, into which all prior and contemporaneous negotiations are merged. E. Allan Farns-worth, Contracts § 7.3 (2d ed.1990). When an agreement contains a merger clause, as the initial sales contract did here, "the parol evidence rule bars evidence of prior negotiations for at least some purposes." Id. See generally, Crown Pontiac, Inc. v. McCarrell, 695 So.2d 615 (Ala.1997) (holding that an arbitration provision contained in an initial contract was unenforceable because a later contract containing a merger clause had no provision for arbitration). Because the parol evidence rule "applies only to evidence of prior—and, as is sometimes said, contemporaneous—negotiations, it does not exclude evidence of negotiations...