Parkway Dodge, Inc. v. Yarbrough

Citation779 So.2d 1205
PartiesPARKWAY DODGE, INC. v. Patricia YARBROUGH. DaimlerChrysler Corporation v. Patricia Yarbrough.
Decision Date01 September 2000
CourtSupreme Court of Alabama

John Martin Galese and David A. Norris of Galese & Ingram, P.C., Birmingham, for appellant Parkway Dodge, Inc.

James F. Walsh and Michael J. Velezis of Lange, Simpson, Robinson & Somerville, L.L.P., Birmingham, for appellant DaimlerChrysler Corporation.

Jackie M. McDougal, Bessemer, for appellee.

BROWN, Justice.

Parkway Dodge, Inc. ("Parkway"), and DaimlerChrysler Corporation, defendants in an action pending in the Jefferson Circuit Court, separately appeal from the circuit court's order denying their motions to compel arbitration of the plaintiff's claims. We affirm in part and reverse and remand in part. On April 1, 1997, Patricia Yarbrough purchased a new 1997 Dodge Intrepid automobile from Parkway, an automobile dealership; the automobile had been manufactured by DaimlerChrysler. The automobile soon began to leak oil. Yarbrough returned it to Parkway several times for repairs to correct the leak. During an inspection of the vehicle made pursuant to the informal dispute-resolution process of the DaimlerChrysler warranty, a Parkway mechanic discovered a hole in the engine block; a patching compound had been placed on the hole.

Yarbrough sued Parkway and Daimler-Chrysler, alleging fraud and misrepresentation in the sale of the vehicle; suppression of material facts regarding the vehicle; deceit; and breach of an express warranty and an implied warranty. Parkway answered and moved to stay the action and to compel arbitration of Yarbrough's claims. In support of its motion, Parkway submitted a "Retail Buyer's Order," which contained the language of an arbitration agreement between the dealer and the purchaser. The buyer's order contains the following provision:

"I. Alternative dispute resolution agreement by binding arbitration. The Dealer and Purchaser(s) mutually covenant, stipulate and agree, in connection with the resolution of any dispute arising out of the contract(s) entered into by the parties of and concerning the within described motor vehicle, as follows: That the vehicle described within was manufactured outside of Alabama; has operated and will continue to operate on interstate highways; has been traveling in interstate commerce; the manufacture, transportation, sale and use thereof has been and will continue to be regulated by the laws of the United States of America; and, that the contract(s) entered into by the parties concerning said motor vehicle evidence transactions involving and affecting commerce. The undersigned agree that all disputes not barred by applicable statutes of limitations or otherwise barred by law, resulting from or arising out of the sale transaction entered into, (including but not limited to: the terms of this agreement and all clauses herein contained, their breadth and scope, and any term of any agreement contemporaneously entered into by the parties concerning any goods or services acquired by the purchaser(s); the condition of the motor vehicle; the conformity of the motor vehicle sold to the contract of sale; the representations, promises, undertakings, warranties or covenants made by Dealer in connection with the sale of the motor vehicle, or otherwise dealing with the motor vehicle; the terms of financing in connection therewith; any terms or provisions of any credit life and/or disability insurance purchased simultaneously herewith; or any terms or provisions of any extended service contract purchased simultaneously herewith); that Dealer and the purchaser(s) agree to submit such dispute(s) to BINDING ARBITRATION, pursuant to the provisions of 9 U.S.C. Section 1, et seq. and according to the Commercial Rules of the American Arbitration Association then existing in the County where the dealer maintains its principal place of business, except as follows: (1) The arbitrators impaneled to arbitrate this matter shall be selected by the parties to this agreement as follows—The dealer shall select an arbitrator. The Purchaser(s) shall select an arbitrator. The two arbitrators so selected shall select a third arbitrator, who shall be a certified A.S.E. Master Mechanic; (2) The prepaid arbitration filing fees and all costs of the arbitration proceeding shall be paid by the party seeking affirmation relief. THIS ARBITRATION SHALL BE IN LIEU OF ANY CIVIL LITIGATION IN ANY COURT, AND IN LIEU OF ANY TRIAL BY JURY.
". . . .
"THE UNDERSIGNED HAS READ, UNDERSTANDS AND
AGREES TO BE BOUND BY EACH OF THE PROVISIONS, COVENANTS, STIPULATIONS, AGREEMENTS AND DEFINITIONS SET FORTH HEREINABOVE."

(Emphasis original.)

Parkway also submitted the affidavit of Rick Holt, Parkway's general manager. It reads, in pertinent part:

"Attached to Parkway Dodge, Inc.'s pending arbitration motion in this case, is a copy of a predispute arbitration agreement signed by Patricia Yarbrough as the purchaser of the vehicle described therein. This is one of the contract documents involving her purchase of a 1997 Dodge Intrepid automobile, that she signed on or about April 1, 1997 and is one of the business records which I maintain in the normal and ordinary course of my activities as General Manager. The contents of this document were neither suppressed from nor concealed from Ms. Yarbrough."

Yarbrough filed an opposition to Parkway's motion to compel arbitration, asserting fraud, misrepresentation, and/or suppression of material fact in regard to the formation of the arbitration agreement. She further alleged that the arbitration agreement was unconscionable and that it was made subject to a mutual mistake of fact, i.e., the patched hole in the car's engine block.

DaimlerChrysler also moved to compel arbitration, or in the alternative, to stay all pending litigation until Yarbrough had completed arbitration with Parkway. In opposition to DaimlerChrysler's motion to compel arbitration, Yarbrough alleged, among other things, that DaimlerChrysler could not rely on the arbitration agreement she had entered into with Parkway because (1) DaimlerChrysler was not a signatory to that arbitration agreement; (2) the arbitration agreement was not broad enough to include DaimlerChrysler; (3) Parkway was not an agent of Daimler-Chrysler; (4) DaimlerChrysler was not a third-party beneficiary of the arbitration agreement; (5) the claims against DaimlerChrysler were not intertwined with and founded upon the sales contract between Yarbrough and Parkway; and (6) DaimlerChrysler lacked standing to compel arbitration because the claims against DaimlerChrysler arose from a separate and distinct warranty agreement that contained no arbitration clause. Yarbrough further asserts that under the Magnuson-Moss Warranty Act express warranties are not the proper subject of arbitration agreements. The trial court denied both motions to compel arbitration.

In an appeal from the denial of a motion to compel arbitration, our review is de novo. See First American Title Ins. Corp. v. Silvernell, 744 So.2d 883, 886 (Ala. 1999); Crimson Indus., Inc. v. Kirkland, 736 So.2d 597, 600 (Ala.1999); Patrick Home Ctr., Inc. v. Karr, 730 So.2d 1171, 1171 (Ala.1999).

I.

Parkway contends that the trial court erred in denying its motion to compel arbitration. Yarbrough argues that we should affirm the trial court's ruling, on two theories. The first theory is that "Yarbrough's defenses of fraudulent inducement and mutual mistake of fact specifically related to the arbitration provision and therefore, were properly ruled upon by the court."

"A party must provide substantial evidence of fraud in the inducement, particularly related to the arbitration clause, in order to avoid arbitration." Ex parte Perry, 744 So.2d 859, 863 (Ala.1999). In Anniston Lincoln Mercury Dodge v. Conner, 720 So.2d 898, 901 (Ala.1998), this Court held:

"[W]hen a party claims fraud in the inducement relating to the validity of the arbitration clause itself, an issue that goes to the `making' of the agreement to arbitrate, a court may adjudicate that claim; however, if the claim of fraud in the inducement actually bears upon the entire agreement and upon the activities of the parties in general, then an arbitrator, rather than a court, shall adjudicate that claim, examining the making of the contract in its entirety."

Although Yarbrough alleges that she has challenged the making of the arbitration agreement itself, "`we must look beyond the ad hoc arguments of counsel in order to determine whether [Yarbrough's] claim actually bears upon the entire agreement' or just the arbitration clause." Nations-Banc Invs., Inc. v. Paramore, 736 So.2d 589, 591 (Ala.1999) (quoting Anniston Lincoln Mercury Dodge v. Conner, supra, 720 So.2d at 901-02).

Yarbrough's opposition to Parkway's motion to compel arbitration states, in pertinent part:

"2. The arbitration clause is clearly revocable because the plaintiff was fraudulently induced to enter into an arbitration agreement with Parkway Dodge, Inc., in consideration for a 1997 Dodge Intrepid.
"3. Parkway Dodge, Inc., fraudulently represented to the plaintiff that the subject of the arbitration agreement was new or in the same or similar condition as any other new 1997 Dodge Intrepid.
"4. The 1997 Dodge Intrepid was not in the same or similar condition as any other new 1997 Dodge and plaintiff would not have agreed to the arbitration clause if this fact had been disclosed to the plaintiff.
". . . .
"7. The arbitration clause should be rescinded because it was made subject to a mutual mistake of fact (patched hole in the engine block) as to the subject of the agreement and thus equity demands that the arbitration clause be rescinded."

Yarbrough's claims of fraudulent inducement and mutual mistake regarding the arbitration agreement in particular appear to be based on an ad hoc argument intended to avoid the arbitration agreement. We conclude that Yarbrough's challenge is...

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