Hudson v. Outlet Rental Car Sales, Inc.
Decision Date | 05 September 2003 |
Citation | 876 So.2d 455 |
Parties | C.T. HUDSON v. OUTLET RENTAL CAR SALES, INC. |
Court | Alabama Supreme Court |
Albert Adams, Jr., and Russell L. Irby of Law Offices of Russell L. Irby, Eufaula, for appellant.
Peter A. McInish and William W. Nichols of Lee & McInish Attorney, P.C., Dothan, for appellee.
This arbitration case involves allegations of fraud in the factum and unconscionability. C.T. Hudson sued Outlet Rental Car Sales, Inc. ("Outlet"), and others,2 asserting various claims stemming from Hudson's acquisition of a used truck from Outlet. The trial court granted Outlet's motion to compel arbitration, and this appeal followed. We reverse and remand.
The crux of this action is Hudson's allegation that he wanted to purchase a truck from Outlet but instead was defrauded into leasing a truck. Hudson claims that he visited Outlet's place of business, selected a used pickup truck, and began negotiating with an Outlet representative, Rickie Withrow, regarding the terms by which Hudson would trade in his vehicle and purchase the truck. Hudson claims that he specifically informed Withrow that he wanted to purchase, rather than lease, the truck and that he wanted to own the truck "free and clear" after making the necessary payments.
According to Hudson, when Withrow asked him to sign some documents, Hudson informed Withrow that he could not read very well.3 In his affidavit, Hudson describes his conversation with Withrow as follows:
Hudson claims that the day after he signed the documents (hereinafter referred to collectively as the "lease contract") he went to his insurance agent's office and was informed that his insurance would increase because he was leasing the truck. Hudson immediately returned to Outlet's place of business, but, according to Hudson, Withrow stated that the lease contract was already signed and asked Hudson to leave the premises.
Hudson sued Outlet asserting various claims (including fraud) stemming from Hudson's acquisition of the vehicle from Outlet through the lease contract. Outlet answered the complaint and filed a motion to stay the action and to compel arbitration based on an arbitration agreement in the lease contract. Hudson opposed this motion. Following a hearing, the trial court granted Outlet's motion to compel arbitration, and this appeal followed.
We review de novo a trial court's ruling on a motion to compel arbitration. Green Tree Fin. Corp. v. Vintson, 753 So.2d 497, 502 (Ala.1999). Initially, the party seeking to compel arbitration must prove 1) the existence of a contract calling for arbitration, and 2) that the contract "is `a contract evidencing a transaction involving commerce' within the meaning of the Federal Arbitration Act (FAA)." Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 53, 123 S.Ct. 2037, 2038, 156 L.Ed.2d 46 (2003) (quoting 9 U.S.C. § 2). "[A]fter 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." Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (Ala.1995).
Hudson argues that Outlet committed fraud in the factum in that he was deceived as to the true nature of what he signed: he actually signed a lease contract when he thought he was signing a purchase contract. See Harold Allen's Mobile Home Factory Outlet, Inc. v. Early, 776 So.2d 777, 783 n. 6 (Ala.2000) ( ). Outlet appears to admit that Hudson's fraud claim alleges fraud in the factum;4 however, Outlet contends that all of Hudson's claims, including his fraud-in-the-factum claim, should be resolved by an arbitrator. We disagree.
There is no question that Hudson's claim alleging fraud in the factum is directed at the entire contract rather than to just the arbitration agreement. Typically, challenges directed at a contract that contains an arbitration agreement, and not at the arbitration agreement itself, are for an arbitrator to resolve. Mason v. Acceptance Loan Co., 850 So.2d 289, 294 (Ala.2002); Investment Mgmt. & Research, Inc. v. Hamilton, 727 So.2d 71, 78 (Ala.1999) (Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)) . However, "a challenge to the very existence of the contract ... is an issue for a court, not an arbitrator, to decide." Mason, 850 So.2d at 295; J.C. Bradford & Co. v. Vick, 837 So.2d 271, 273 (Ala.2002) (). In J.C. Bradford & Co. we explained this distinction:
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