McDougle v. Silvernell
Decision Date | 09 April 1999 |
Parties | Charles H. McDOUGLE, Jr., and Ramsey, Baxley & McDougle v. Gary D. SILVERNELL and Barbara J. Silvernell. |
Court | Alabama Supreme Court |
Joe Espy III and Suzanne D. Edwards of Melton, Espy, Williams & Hayes, P.C., Montgomery, for appellants.
Deborah W. Hicks, Eufaula; and F. Paul Bland, Jr., Trial Lawyers for Public Justice, Washington, D.C., "of counsel."
The defendants, Charles H. McDougle, Jr., and the law firm of Ramsey, Baxley & McDougle appeal from the trial court's order denying their motion to compel arbitration of the various claims made against them by the plaintiffs, Gary D. Silvernell and his wife, Barbara J. Silvernell. We reverse and remand.
The Silvernells' claims arise out of their purchase of land in Barbour County. Charles McDougle, a licensed attorney, handled the closing and also served as the agent and signatory for First American Title Insurance Company ("First American"), which, during the closing, issued to the Silvernells a "Commitment For Title Insurance." That commitment read in part:
(Emphasis added.) Following the closing, First American issued a title insurance policy to the Silvernells; that policy contained the following arbitration provision:
Upon discovering certain defects in their title, the Silvernells sued McDougle, his law firm, and others, seeking damages based on allegations of fraud, wantonness, negligence, and breach of fiduciary duty. (McDougle and his law firm will hereinafter be referred to together as "McDougle.") McDougle moved to compel arbitration of the Silvernells' claims, based on the arbitration provision in the title policy. McDougle argues that the commitment issued during the closing incorporated by reference the arbitration provision in the policy that was later issued and that he had standing, as First American's agent, to enforce that provision. The Silvernells contend that the commitment for the title policy did not contain an arbitration provision; they argue that they did not agree before the closing to arbitrate any future claims they might have and that it was too late after the closing for First American to, as they say it, materially modify the insuring agreement by issuing a policy with an arbitration provision. The Silvernells categorize the policy as merely a "confirmation" of the terms set out in the commitment. The Silvernells also argue, in the alternative, that even if the arbitration provision is binding on them, McDougle has no standing to enforce it because he was not a party to the insurance policy.
After carefully examining the record and the briefs, we conclude that the Silvernells are subject to the arbitration provision in their title policy and that McDougle has standing to enforce that provision.
Section 2 of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("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."1 Whether a contract to arbitrate exists must be determined under general state-law contract principles. Crown Pontiac, Inc. v. McCarrell, 695 So.2d 615 (Ala.1997); Ex Parte Rush, 730 So.2d 1175 (Ala.1999). This Court recognized long ago that a contract may incorporate the terms of another document by reference. In Ben Cheeseman Realty Co. v. Thompson, 216 Ala. 9, 12, 112 So. 151, 153 (1927), this Court stated:
This Court has recently recognized this rule in the arbitration context. See Ex parte Dan Tucker Auto Sales, Inc., 718 So.2d 33, 36 (Ala.1998) ( ); Ex parte Conference America, Inc., 713 So.2d 953 (Ala.1998) ( ). In addition, see 17A Am.Jur.2d Contracts § 400 (1991), which states in part:
The Silvernells do not argue that the arbitration provision itself was induced by fraud.2 We also note that arbitration provisions are not per se unconscionable, Ex parte McNaughton, 728 So.2d 592 (Ala. 1998), and that they cannot be singled out for discriminatory treatment. Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). The arbitration provision in the Silvernells' policy appears to be standard in form. The commitment issued during the closing clearly apprised the Silvernells that the commitment was subject to the conditions and stipulations in the policy that would later be issued and that once that policy was issued it would then govern the rights and liabilities of the parties. Contrary to the Silvernells' contentions, First American did not materially alter its insuring agreement by issuing a title policy.3 The commitment required First American to issue the policy, provided certain conditions were met. Because the conditions and stipulations set out in the policy, which included the arbitration provision, were expressly incorporated by reference into the commitment, the Silvernells' obligation to arbitrate was a part of the insuring agreement from the effective date of the commitment.4
Last term, in Fidelity National Title Ins. Co. of Tennessee v. Jericho Management, Inc., 722 So.2d 740 (Ala.1998), this Court held enforceable an arbitration provision virtually identical to the one at issue here. Although the specific issue presented here was not raised in Fidelity National, this Court in Fidelity National was concerned that a strained and unreasonable construction of the arbitration provision would cause unnecessary confusion in an industry that provides an invaluable service to those purchasing real property in Alabama. We have the same...
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