Green Tree Financial Corp. v. Vintson

• Decision Date: 01 October 1999
• Citation: 753 So.2d 497
• Parties: GREEN TREE FINANCIAL CORPORATION OF ALABAMA v. Johnny VINTSON and Bonnie Vintson.
• Court: Alabama Supreme Court

753 So.2d 497

GREEN TREE FINANCIAL CORPORATION OF ALABAMA v. Johnny VINTSON and Bonnie Vintson.

1972191.

Supreme Court of Alabama.

October 1, 1999.

Robert A. Huffaker and Rachel Sanders-Cochran of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for appellant.

Garve Ivey, Jr., and Allison Shelley of Ivey & Ragsdale, Jasper, for appellees.

SEE, Justice.

Johnny Vintson and his wife, Bonnie Vintson, sued Green Tree Financial Corporation of Alabama ("Green Tree"), alleging that Green Tree had fraudulently induced them to purchase a mobile home, had violated the Alabama Mini-Code, and had breached an agreement to pay off several of the Vintsons' preexisting debts. Green Tree moved to compel arbitration of the Vintsons' claims. The trial court granted the motion, and the Vintsons filed a motion to "reconsider" the order compelling arbitration. The trial court denied the motion, and the Vintsons filed a second motion to reconsider. The trial court granted this second motion and granted the Vintsons a jury trial on the issue of arbitrability. Green Tree appealed the trial court's order denying arbitration. We reverse and remand.

I.

In December 1995, the Vintsons purchased a mobile home from Cooner Enterprises, d/b/a Jasper West Manufactured Homes ("Cooner"). Green Tree financed the purchase. As part of the transaction, Cooner promised to pay off several of the Vintsons' preexisting debts and to give the Vintsons an additional $1,000. In connection with the purchase, the Vintsons signed a retail installment agreement, which was assigned to Green Tree. The installment agreement contained an arbitration provision, which stated:

"14. ARBITRATION: ALL DISPUTES, CLAIMS, OR CONTROVERSIES ARISING FROM OR RELATING TO THIS CONTRACT OR THE PARTIES THERETO SHALL BE RESOLVED BY BINDING ARBITRATION BY ONE ARBITRATOR SELECTED BY YOU [Seller] WITH MY [Buyer's] CONSENT. THIS AGREEMENT 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. JUDGMENT UPON THE AWARD RENDERED MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE PARTIES AGREE AND UNDERSTAND THAT THEY CHOOSE ARBITRATION INSTEAD OF LITIGATION TO RESOLVE DISPUTES. THE PARTIES UNDERSTAND THAT THEY HAVE A RIGHT TO LITIGATE DISPUTES IN COURT, BUT THAT THEY PREFER TO RESOLVE THEIR DISPUTES THROUGH ARBITRATION, EXCEPT AS PROVIDED HEREIN. 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 YOU (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. THE PARTIES AGREE AND UNDERSTAND THAT THE ARBITRATOR SHALL HAVE ALL POWERS PROVIDED BY LAW, THE CONTRACT AND THE AGREEMENT OF THE PARTIES. THESE POWERS SHALL INCLUDE ALL LEGAL AND EQUITABLE REMEDIES INCLUDING, BUT NOT LIMITED TO, MONEY DAMAGES, DECLARATORY RELIEF, AND INJUNCTIVE RELIEF. NOTWITHSTANDING ANYTHING HEREUNTO [sic] THE CONTRARY, YOU RETAIN AN OPTION TO USE JUDICIAL (FILING A LAWSUIT) OR NONJUDICIAL RELIEF TO ENFORCE A SECURITY AGREEMENT RELATING TO THE MANUFACTURED HOME SECURED IN A TRANSACTION UNDERLYING THIS ARBITRATION AGREEMENT, TO ENFORCE THE MONETARY OBLIGATION SECURED BY THE MANUFACTURED HOME OR TO FORECLOSE ON THE MANUFACTURED HOME. THE INSTITUTION AND MAINTENANCE OF A LAWSUIT TO FORECLOSE UPON ANY COLLATERAL, TO OBTAIN A MONETARY JUDGMENT OR TO ENFORCE THE SECURITY AGREEMENT 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 YOU PURSUANT TO THIS PROVISION. "15. WAIVER OF JURY TRIAL: I HEREBY WAIVE ANY RIGHT TO A TRIAL THAT I HAVE IN ANY SUBSEQUENT LITIGATION BETWEEN ME AND THE SELLER, OR ME AND ANY ASSIGNEE OF THE SELLER, WHERE SUCH LITIGATION ARISES OUT OF, IS RELATED TO, OR IS IN CONNECTION WITH ANY PROVISION OF THIS CONTRACT WHETHER THE CONTRACT IS ASSERTED AS THE BASIS FOR A CLAIM, COUNTERCLAIM OR CROSSCLAIM, OR A DEFENSE TO A CLAIM, COUNTERCLAIM OR CROSSCLAIM. "NOTICE: ANY HOLDER OF THIS CONSUMER CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER. "MY SIGNATURE BELOW ACKNOWLEDGES I UNDERSTAND PARAGRAPHS 14 AND 15 ABOVE REQUIRE

BINDING ARBITRATION AND WAIVE MY RIGHT TO A JURY TRIAL IF A DISPUTE ARISES UNDER THIS CONTRACT. "YOU HAVE THE OPTION TO PROVIDE SUCH PHYSICAL DAMAGE INSURANCE AS IS REQUIRED, IN CONNECTION WITH THIS PURCHASE, EITHER THROUGH AN EXISTING POLICY OR BY A POLICY INDEPENDENTLY OBTAINED BY YOU. "BUYER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE CONTRACT. CAUTION — IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT. " [/s/] Johnny R. Vintson [/s/] Bonnie J. Vintson"

(Emphasis and enlarged print in original.)

Less than two months after purchasing the mobile home, the Vintsons sued Green Tree,¹ alleging that Green Tree had fraudulently induced them to purchase the mobile home, had violated the Alabama Mini-Code, and had breached its agreement to pay off several of the Vintsons' preexisting debts. Pursuant to the arbitration provision in the installment agreement, Green Tree moved to compel arbitration of the Vintsons' claims. The trial court granted the motion, holding that the language of the provision was clear and unambiguous and that the language of the provision encompassed all of the Vintsons' claims. The Vintsons moved the trial court to "reconsider" its order, arguing that Green Tree could not enforce the provision because it was not a signatory to the contract; that they were entitled to a jury trial on the issue of arbitrability; and that it was improper to order arbitration, because they had sought class certification. The trial court denied the motion. The Vintsons filed a second motion to reconsider. The Vintsons, citing Allstar Homes, Inc. v. Waters, 711 So.2d 924, 925 (Ala. 1997), argued that they were entitled to have a jury determine the validity of the arbitration provision because there was a dispute about whether they had agreed to arbitrate their claims. After an evidentiary hearing, the court granted this second motion to reconsider and ruled that the Vintsons were entitled to a jury trial on the issue of arbitrability. The court held that the arbitration provision was contained in a contract of adhesion and was unconscionable. It also held that there was a question of fact as to whether Green Tree had suppressed material facts regarding the arbitration provision and held that Alabama law prohibits arbitration of claims alleging intentional torts.² Green Tree appealed from the order denying arbitration.

II.

Section 2 of the Federal Arbitration Act ("FAA") provides that "[a] written provision in any ... contract evidencing a transaction involving [interstate] 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. Moreover, the Supreme Court of the United States has stated that the FAA establishes a strong federal policy favoring arbitration. Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983) (the FAA "establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration"). Accordingly, trial courts are required to stay or dismiss proceedings and to compel arbitration when the parties have entered into a valid contract containing an arbitration agreement, and a trial court's denial of a motion to compel arbitration is subject to appeal. See, e.g., Patrick Home Center, Inc. v. Karr, 730 So.2d 1171, 1172 (Ala.1999). This Court will apply the de novo standard of review to a trial court's order denying a motion to compel arbitration. Id.

A.

The Vintsons concede that they signed the installment agreement that contains the arbitration provision. The Vintsons do not claim that their purchase of the mobile home did not involve interstate commerce. See Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995) (holding that all arbitration provisions dealing with transactions involving interstate commerce are subject to the FAA). The Vintson argue, however, that they did not knowingly, willingly, or voluntarily agree to waive their right to a jury trial.³ Specifically, the Vintsons argue that they did not know there was an arbitration provision in the installment agreement and that the arbitration provision did not give the Vintsons sufficient information to permit them to make an informed decision.

"[O]rdinarily when a competent adult, having the ability to read and understand an instrument, signs a contract, he will be held to be on notice of all the provisions contained in that contract and will be bound thereby." Power Equipment Co. v. First Alabama Bank, 585 So.2d 1291, 1296 (Ala.1991). Directly above the lines on which the Vintsons signed, the retail installment agreement stated in large, bold letters: "BUYER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE CONTRACT. CAUTION—IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU SIGN IT." This statement should have alerted the Vintsons that they should read the entire contract.⁴ See Green Tree Agency, Inc. v. White, 719 So.2d 1179, 1180 (Ala.1998). Had the Vintsons read the contract, they would have seen paragraph 14, which provided that they agreed to waive their right to a jury trial and to arbitrate all of their disputes arising under, or...