Hemphill v. Ford Motor Co.

• Decision Date: 17 April 2009
• Docket Number: No. 98,966.,98,966.
• Citation: 206 P.3d 1
• Parties: Mark HEMPHILL and Monessa Hemphill, Appellants, v. FORD MOTOR CO., Fenton Motors of El Dorado, and DaimlerChrysler Services North America, LLC, d/b/a Chrysler Financial, Appellees.
• Court: Kansas Court of Appeals

206 P.3d 1

Mark HEMPHILL and Monessa Hemphill, Appellants, v. FORD MOTOR CO., Fenton Motors of El Dorado, and DaimlerChrysler Services North America, LLC, d/b/a Chrysler Financial, Appellees.

No. 98,966.

Court of Appeals of Kansas.

April 17, 2009.

Barry Arbuckle, of Wichita, for appellants.

Creath L. Pollak, of Minter & Pollak, of Wichita, for appellee DaimlerChrysler Services of North America, LLC.

Darren E. Fulcher, of Fulcher & Brooks, LLC, of Kansas City, Missouri, for appellees Ford Motor Company and Fenton Ford of El Dorado, Inc.

Before CAPLINGER, P.J., MALONE and LEBEN, JJ.

LEBEN, J.

Mark and Monessa Hemphill filed suit against Ford Motor Company, Fenton Motors (a Ford dealer), and DaimlerChrysler Services North America, LLC (a car-financing entity doing business as "Chrysler Financial") for claims arising from the Hemphills' purchase of a Ford Mustang convertible. The purchase was financed through an agreement between the Hemphills, Fenton Motors, and Chrysler Financial, and the finance agreement contained an arbitration clause. When the Hemphills filed suit, all three defendants moved to compel arbitration, and the district court granted that motion and stayed the suit pending arbitration.

The arbitrator issued an award granting some of the Hemphills' claims against Fenton Motors but also, in an amended award, granted Chrysler Financial's cross-claim against the Hemphills for a deficiency judgment on amounts still owed on the purchase. After the district court confirmed the arbitration award without objection, the Hemphills appealed, challenging the decision to compel arbitration and the arbitrator's authority to amend the arbitration award.

The Hemphills have appealed for different reasons as to each defendant:

• As to Fenton Motors, the Hemphills claim that because the initial purchase order didn't include an arbitration provision, Fenton Motors can't require arbitration based on an arbitration provision signed later in a financing document.

• As to Chrysler Financial, the Hemphills claim that the arbitrator had no authority to issue an amended award. Thus, because the arbitrator's initial award omitted the deficiency judgment for what the Hemphills still owed on the car, they contend that the arbitrator couldn't later amend the award to grant the deficiency judgment to Chrysler Financial.

• As to Ford Motor Company, the Hemphills claim that because Ford wasn't a signatory to the financing contract, it can't require arbitration.

We do not reach the merits of the Hemphills' appeal regarding Fenton Motors and Chrysler Financial. In both cases, the Hemphills have not preserved their appellate rights.

After arbitration, Fenton Motors paid the Hemphills the money awarded by the arbitrator, and the Hemphills cashed the check. Under the rule of acquiescence, a litigant who accepts the benefits of a judgment may not appeal that judgment. Troyer v. Gilliland, 247 Kan. 479, Syl., 799 P.2d 501 (1990). Having obtained the benefit of a money judgment against Fenton Motors, the Hemphills may not appeal that same judgment in the hope of obtaining greater damages on the same claims that led to the arbitrator's award.

The Hemphills waived any right to appeal the arbitrator's authority to amend the award in favor of Chrysler Financial: they didn't raise the issue in the district court and didn't object to a motion to confirm the award. An arbitration award may be challenged at confirmation on the basis that the arbitrator exceeded his or her authority, see K.S.A. 5-412(a)(3); 9 U.S.C. § 10(a)(4) (2006), so the issue could have—and should have—been raised first before the district court. But an issue not raised before the district court may not be raised on appeal. Miller v. Bartle, 283 Kan. 108, 119, 150 P.3d 1282 (2007).

We are left, then, only with the Hemphills' appeal regarding Ford Motor Company. At issue is whether Ford, which wasn't a party to the contract containing the arbitration agreement, may nonetheless compel arbitration of the Hemphills' claims against it. We don't find that the Hemphills have acquiesced in the judgment in favor of Ford; the Hemphills didn't recover a money judgment against Ford, and their acceptance of payment from Fenton Motors doesn't logically relate to whether the Hemphills' claims against Ford are subject to arbitration. But because the Hemphills' claims against Ford were inextricably intertwined with their substantive claims against Fenton Motors and Chrysler Financial, the parties to the arbitration agreement, we conclude that the Hemphills were estopped from avoiding arbitration with Ford.

Even though it appears that this appeal has been greatly simplified, since we reach the merits only of the Hemphills' appeal regarding Ford, most of the issues the parties have briefed and argued retain significance on whether Ford had a right to compel arbitration of the Hemphills' claims against it. That's because any right Ford had to compel arbitration was a derivative one based on the rights of Fenton Motors and Chrysler Financial to compel arbitration, which were gained through a written contract Ford was not a party to. So, in determining whether Ford had the right to compel arbitration, we first must assure ourselves that Fenton Motors or Chrysler Financial or both had that right as well. If so, then we must assure ourselves that the claims against Ford were sufficiently intertwined with those that the Hemphills agreed to arbitrate that the Hemphills should be required to pursue the claims against Ford in the same arbitration proceeding.

Factual Background

Before we get to the specific legal claims, let's review the key facts and contracts that will feature prominently in our analysis.

The Hemphills bought a 2004 Ford Mustang convertible from Fenton Motors. The first document they signed was a Retail Order for a Motor Vehicle, under which they agreed to buy the convertible. They paid $3,000 in cash and planned to finance the rest of the purchase price. The Hemphills took possession of the car the same day they signed the purchase order, and a request for financing was pending at that time with Ford Motor Credit. Fenton Motors told the Hemphills the next day that Ford Motor Credit turned them down for financing, and Chrysler Financial then approved financing.

Fenton Motors prepared a financing contract that was to be assigned to Chrysler Financial, and the Hemphills signed it. That financing contract was between the Hemphills, as buyers, and Fenton Motors, as creditor. By signing the agreement, the Hemphills chose to purchase the car on credit rather than for cash. The agreement contained an arbitration clause that allowed the Hemphills, Fenton Motors, or Chrysler Financial (as an assignee of Fenton Motors) to request arbitration to settle any dispute between them that related to the credit application, the financing contract, or the resulting transaction:

"Any claim or dispute, whether in contract, tort or otherwise (including any dispute over the interpretation, scope, or validity of this contract, the arbitration clause or the arbitrability of any issue), between us or Creditor's employees, agents, successors or assigns, which arise out of or relate to a credit application, this contract, or any resulting transaction or relationship (including any such relationship with third parties who do not sign this contract) shall, at the election of either of us (or the election of any such third party), be resolved by a neutral, binding arbitration and not by a court action."

The Hemphills claim that the car's convertible top leaked since shortly after they bought it and that several attempts to fix it were unsuccessful. After those repair attempts, the Hemphills sent notice that they were revoking acceptance of the car to Fenton Motors and Ford; they also told Chrysler Financial that no more payments would be made, which led Chrysler Financial to repossess the car.

The Hemphills filed suit against Fenton Motors, Ford, and Chrysler Financial. The defendants moved to compel the Hemphills to arbitrate the claims, and the district court granted that motion over the Hemphills' objection. The arbitrator granted an award in favor of the Hemphills against Fenton Motors for damages of $1,133.68 plus interest, a civil penalty of $1,500, and attorney fees of $3,000. In an amended award, the arbitrator granted a deficiency judgment in favor of Chrysler Financial against the Hemphills for $11,091.15 still owed on the car. The arbitrator denied the Hemphills' claims against Ford. The district court confirmed the arbitration award in an agreed order; no party objected to the confirmation of the award. The Hemphills then filed this appeal.

I. The Hemphills' Acceptance of Payment from Fenton Motors Does Not Constitute Acquiescence in the Judgment in Favor of Ford.

Ford argued in its joint brief with Fenton Motors that the Hemphills acquiesced in the judgment so they were barred from appealing the district court's decision that Ford could compel arbitration. Ford suggests that the Hemphills "accept[ed] full satisfaction of the judgment in their favor," but Ford overlooks the lack of any judgment in favor of the Hemphills against Ford. The Hemphills recovered only against Fenton Motors. Against Ford, the Hemphills lost on the choice of forum when the district court overruled their objection to arbitration; they then lost in arbitration on the merits of all claims against Ford.

The question, then, is this: when the Hemphills accepted Fenton Motors' payment for the judgment against it, did the Hemphills somehow also acquiesce to the separate judgment in favor of Ford? We think not.

A party's acceptance of payment on a judgment generally constitutes acquiescence and thus eliminates the right of appeal. But this general rule has exceptions even when partial payment is accepted from the party against which judgment was entered: "so long as the issues on appeal cannot affect the...