Elizabeth Homes, L.L.C. v. Cato

• Citation: 968 So.2d 1
• Decision Date: 13 April 2007
• Docket Number: 1050048.
• Parties: ELIZABETH HOMES, L.L.C., Carl Smith, and Jimmy Flanagan v. Cynthia L. CATO and Danny Cato.
• Court: Supreme Court of Alabama

968 So.2d 1

ELIZABETH HOMES, L.L.C., Carl Smith, and Jimmy Flanagan v. Cynthia L. CATO and Danny Cato.

1050048.

Supreme Court of Alabama.

April 13, 2007.

Mark D. Ryan and Robin A. Mahan of Mark D. Ryan, P.C., Bay Minette, for appellants.

G. Houston Howard II of Howard, Dunn, Howard & Howard, Wetumpka, for appellees.

SMITH, Justice.

The defendants below, Elizabeth Homes, L.L.C., Jimmy Flanagan, and Carl Smith, appeal from the trial court's order denying their motion to compel arbitration of the claims asserted against them by the plaintiffs, Danny Cato and Cynthia L. Cato. We reverse and remand.

Facts and Procedural History

Elizabeth Homes sells and constructs what it describes as "single-family residential structures." In June 2003, the Catos and Elizabeth Homes entered into a "purchase agreement" for the construction of a house on property owned by the Catos. The document contains an arbitration provision, which states:

"[Elizabeth Homes] and [the Catos] acknowledge that this agreement necessarily involves interstate commerce by virtue of the materials and components contained in the dwelling and each of the undersigned hereby agrees to arbitrate any and all disputes arising under this agreement and to be bound by the decision of the arbitrator which shall be conducted pursuant to the Construction Industry Rules of the American Arbitration Association."

(Emphasis added.)

After the Catos moved into the house, they sued Elizabeth Homes, seeking damages for promissory fraud, breach of warranty, breach of contract, breach of implied contract, negligence and wantonness in constructing the house and the setting of its elevation, and negligence and wantonness in damaging the flooring in the house. The complaint further named Elizabeth Homes' "managing member," Jimmy Flanagan, and Elizabeth Homes' office manager, Carl Smith, as defendants.

The defendants filed a motion to compel the Catos to arbitrate their claims pursuant to the arbitration provision in the purchase agreement. The motion was supported by an affidavit by Flanagan and a copy of the purchase agreement. The Catos filed a response, which included no evidentiary support, and the trial court held a hearing on the motion. Subsequently, the trial court denied the motion by a notation on the case-action summary. Elizabeth Homes, Smith, and Flanagan appeal.

Standard of Review

"`[T]he standard of review of a trial court's ruling on a motion to compel arbitration at the instance of either party is a de novo determination of whether the trial judge erred on a factual or legal issue to the substantial prejudice of the party seeking review.' Ex parte Roberson, 749 So.2d 441, 446 (Ala.1999). Furthermore:

"`A motion to compel arbitration is analogous to a motion for summary judgment. TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999). The party seeking to compel arbitration has the burden of proving the existence of a contract calling for arbitration and proving that that contract evidences a transaction affecting interstate commerce. Id. "After a motion to compel arbitration has been made and supported, the burden is on the non-movant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question."'

"Fleetwood Enters., Inc. v. Bruno, 784 So.2d 277, 280 (Ala.2000) (quoting Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (Ala.1995) (emphasis omitted))."

Vann v. First Cmty. Credit Corp., 834 So.2d 751, 752-53 (Ala.2002).

Discussion

The Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA"), provides that "[a] written provision in . . . 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 . . . ." 9 U.S.C. § 2. The FAA "mandates the arbitration of claims encompassed by an arbitration clause that is contained in a binding contract that involves interstate commerce." Ex parte Conference America, Inc., 713 So.2d 953, 955 (Ala.1998).

The defendants produced substantial evidence — the purchase agreement and Flanagan's affidavit — indicating that the parties entered into a contract containing a written provision to settle by arbitration a controversy thereafter arising out of the contract. Additionally, there is no dispute in the record or on appeal as to whether the transaction in this case involved interstate commerce.¹ Therefore, the defendants' motion to compel arbitration was properly supported by substantial evidence, and the burden then shifted to the Catos to present evidence indicating that the arbitration provision was invalid or that it did not apply to the dispute here.

I.

First, as a threshold matter, the Catos argue that Smith and Flanagan have failed to present any arguments on appeal, because the appellants' brief contends that the judgment should be reversed only as to "Elizabeth Homes." Thus, the Catos argue, Smith and Flanagan have waived any error as to them.

There is, however, no merit to this argument. The statement of the case in Elizabeth Homes' brief states that Elizabeth Homes, L.L.C., Carl Smith, and Jimmy Flanagan would be referred to "collectively" as "Elizabeth Homes." The name "Elizabeth Homes" when used in the appellants' brief thus includes Smith and Flanagan. Additionally, the notice of appeal lists the "appellants" as Elizabeth Homes, Smith, and Flanagan, and the appellants' brief refers in several places to the "appellants." We find no waiver on the part of Smith and Flanagan.

II.

The Catos present numerous arguments on appeal as to why the arbitration provision does not apply in this case. First, the Catos maintain that the defendants "failed to present any evidence that the Purchase [Agreement] ever became a binding contract" because the copy of the purchase agreement submitted with the motion to compel arbitration was unauthenticated and unsigned by Elizabeth Homes.

Rule 56(e), Ala. R. Civ. P., generally requires that "[s]worn or certified copies" of documents referred to in an affidavit offered supporting or opposing a motion for a summary judgment be attached to the affidavit.² However, if an affidavit or the documents attached to an affidavit fail to comply with this rule, the opposing party must object to the admissibility of the affidavit or the document and move to strike. Ex parte Elba Gen. Hosp. & Nursing Home, Inc., 828 So.2d 308, 312-13 (Ala.2001) (noting that a party must object to evidence submitted in support of a motion for a summary judgment that does not comply with Rule 56(e), Ala. R. Civ. P.); Chatham v. CSX Transp., Inc., 613 So.2d 341, 344 (Ala.1993) ("A party must move the trial court to strike any nonadmissible evidence that violates Rule 56(e). Failure to do so waives any objection on appeal and allows this Court to consider the defective evidence."). The copy of the purchase agreement submitted with Flanagan's affidavit was not a certified copy. The Catos, however, did not object to or move to strike the purchase agreement when it was filed with Flanagan's affidavit. Therefore, they waived any objection based on improper authentication of the purchase agreement. See Berry Mountain Mining Co. v. American Res. Ins. Co., 541 So.2d 4, 4-5 (Ala.1989) (holding that a nonmovant who failed to move to strike unauthenticated documents submitted in support of a motion for a summary judgment waived objection on appeal as the admissibility of the documents).

The Catos also allege that the purchase agreement was not signed by Elizabeth Homes; thus, they argue, it is not binding. The record reveals that the signature line for Elizabeth Homes on the purchase agreement is unsigned, although Carl Smith's signature appears above it as a witness to the Catos' signatures. The purchase agreement states that it becomes binding "upon written acceptance by [an Elizabeth Homes] officer or upon [Elizabeth Homes'] commencing performance," but the Catos contend that Flanagan's affidavit fails to state that Elizabeth Homes commenced performance.

The defendants respond to this argument as follows:

"Elementary logic dictates that Elizabeth Homes could not have constructed the home without actually `commencing' construction. Furthermore, the Catos' Complaint is replete with assertions that Elizabeth Homes constructed the house. It is absurd to even suggest to this Court that despite the fact that all of the parties admit that Elizabeth Homes constructed the home, Elizabeth Homes must nevertheless specifically allege that it `commenced' construction. It is quite obvious from the record that Elizabeth Homes `commenced' construction. If Elizabeth Homes had not commenced construction the Catos would have absolutely no basis for relief against the [defendants] as the entirety of the Catos' Complaint is based on Elizabeth Homes' construction of the home."

(Appellants' reply brief at 5.)

The Catos cite Premiere Chevrolet, Inc. v. Headrick, 748 So.2d 891 (Ala.1999), for the proposition that a party cannot enforce an agreement to arbitrate found in a contract it has not signed. However, the document at issue in Premiere Chevrolet was part of a multi-document automobile transaction, and the arbitration provision was part of a "buyer's order" that specifically stated that it was not valid or "binding" unless signed and accepted by the automobile dealer.

Here, Flanagan's affidavit states that Elizabeth Homes "entered into a Purchase Agreement" with the Catos and discusses "[t]he terms of the Purchase Agreement between Elizabeth Homes, LLC[,] and Cynthia L. Cato and Danny Cato . . . ." The defendants further asserted in their motion to compel arbitration that Elizabeth Homes entered into the purchase agreement with the Catos and constructed the house. The Catos never denied these assertions or presented any affidavits or evidence demonstrating that they did not enter into the purchase agreement or that...