Quality Truck and Auto Sales, Inc. v. Yassine

• Decision Date: 26 March 1999
• Parties: QUALITY TRUCK AND AUTO SALES, INC., and Joann Pardue v. Gail YASSINE.
• Court: Alabama Supreme Court

730 So.2d 1164

QUALITY TRUCK AND AUTO SALES, INC., and Joann Pardue v. Gail YASSINE.

1971088.

Supreme Court of Alabama.

March 26, 1999.

Troy Grayson of Riverchase Legal Center, L.L.C., Birmingham, for appellants.

John A. Hamilton, Jr., of Culp & Thomason, Vestavia Hills, for appellee.

SEE, Justice.

Quality Truck and Auto Sales, Inc., and its managing agent, Joann Pardue (collectively, "Quality"), appeal from the Shelby Circuit Court's order denying their motion to compel arbitration of claims brought against them by Gail Yassine. Quality argues that the trial court erred in denying arbitration of Yassine's claims. Quality asserts that the arbitration clause contained in the bill of sale for the vehicle Yassine purchased from Quality was enforceable, notwithstanding the absence of a signature by an officer of Quality, and that the arbitration clause is broad enough to encompass the claims brought by Yassine. Because we hold that the arbitration clause was contained in a binding contract and that Yassine's claims fall within the coverage of the arbitration clause, we reverse and remand.

I.

In March 1997, Yassine negotiated with Quality to purchase a used 1991 Mercury Capri automobile for a price of $7,193. Yassine alleged that during the course of negotiations, Quality made factual misrepresentations and that she relied on those misrepresentations in making the purchase. After the purchase, Yassine began to experience problems with the car. She sued Quality in the Shelby Circuit Court, claiming to have suffered damage as the result of the alleged misrepresentations made by Quality. In November 1997, Quality moved to compel arbitration of Yassine's claims, based on an arbitration agreement that was executed when Yassine purchased the car. The arbitration agreement was contained in the bill of sale. Yassine signed the bill of sale, but Quality did not. Although the bill of sale contained a signature line for Quality, under the terms of the bill of sale Quality was required only to accept the bill of sale before it became effective. Quality also moved to stay proceedings pending arbitration. In February 1998, the trial court denied Quality's motions.¹ Quality appealed.² The bill of sale, which contained the arbitration agreement, included the following provisions:

"F. The undersigned purchaser and Dealer further agree as follows:

"1. That the motor vehicle described in this sale document has been heretofore traveling in interstate commerce, and has an impact upon interstate commerce.

"2. That in the event of any dispute(s), under the terms of this contract of sale arise, (including but not limited to, the terms of the agreement, the condition of the motor vehicle sold, the conformity of the motor vehicle sold, to the contract, the representations, promises, undertakings or covenants made by Dealer in connection with the sale of the motor vehicle, or otherwise dealing with the motor vehicle; any terms of financing in connection therewith, or any terms of any credit life and/or disability insurance purchased simultaneously herewith, or extended service or maintenance agreement), that Dealer and the purchaser agree to submit such dispute(s) to binding arbitration, pursuant to the provisions of 9 USC para. 1, et seq. and according to the commercial rules of the American Arbitration Association then existing, in Birmingham, Al.

"3.(a) That in the event any dispute arises between the parties, as to conformity or conditions of the motor vehicle, the parties will permit a third-party (to be mutually agreed upon), to inspect the motor vehicle to determine its conformity and condition, and that the findings of such third-party shall be binding upon Dealer and the purchaser, in connection with any litigation, arbitration or request for adjustment, pursuant to the provisions of para. 7-2-515(b) of the Code of Alabama.

"(b) In the event Dealer and purchaser cannot mutually agree upon a third party to conduct such inspection, either party shall have the right to petition any Court of competent jurisdiction, or panel of arbitrators, to appoint an expert to act as such third-party.

"(c) The costs of such third-party inspection shall be borne equally by the Dealer and the purchaser, or as may be directed by any Court or panel of arbitrators."

(Emphasis added.)

Count 1 of Yassine's complaint alleges that Quality intentionally or recklessly made false representations of fact concerning the vehicle and that she relied on those false representations in making her purchase. Count 2 alleges that during the sale Quality fraudulently concealed defects in the vehicle. Finally, Count 3 alleges that Pardue, Quality's agent, violated the Federal Truth-in-Lending Act by failing to include the "title and documents fee" charge in the "Finance Charge and Annual Percentage Rate" that was disclosed to Yassine. Yassine seeks compensatory and punitive damages in the amount of $350,000 plus costs, based on (1) the purchase of a vehicle that she asserts was not as valuable as represented by Quality, (2) the payment of charges that she alleges were not for the purpose represented by Quality, and (3) mental anguish she claims to have suffered as a result of the transaction with Quality.

II.

Quality maintains that the trial court erred in denying its motion to compel arbitration because, it argues, (1) the underlying transaction involved interstate commerce, (2) the claims brought by Yassine clearly fall within the scope of the arbitration clause, and (3) the arbitration clause contained in the bill of sale for the vehicle was enforceable despite the absence of a signature of an officer of Quality.³ Yassine argues that the arbitration agreement is not valid and enforceable because, she says, Quality fraudulently induced her to sign the sales contract containing that arbitration agreement. Yassine further contends that even if this Court does reverse the trial court's decision not to compel arbitration, discovery should not be stayed with respect to nonarbitrable issues.⁴

A.

Agreements to arbitrate disputes affecting interstate commerce are governed by the Federal Arbitration Act, as that Act is interpreted by the federal courts. U.S. Const. art I, § 8, cl. 3 (Commerce Clause); Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995); art. VI, cl. 2 (Supremacy Clause). This Court has stated:

"Section 2 of the Federal Arbitration Act (`FAA') provides:

"`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 (emphasis added). Consistent with the FAA, trial courts are required to stay or dismiss proceedings and compel arbitration when the parties have entered into a valid contract containing an arbitration agreement. Moreover, the Supreme Court of the United States has stated that the FAA establishes a strong federal policy favoring arbitration:

"`The [Federal] Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.'

"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). These principles provide the framework within which we must determine whether the trial court erred in [its decision whether to compel arbitration]."

Ex parte McNaughton, 728 So.2d 592, 594 (Ala.1998) (footnotes omitted).

This Court is required to compel arbitration if, under "ordinary state-law principles that govern the formation of contracts," the contract containing the arbitration clause is enforceable. Crown Pontiac, Inc. v. McCarrell, 695 So.2d 615, 617 (Ala. 1997). The United States Supreme Court has stated:

"[T]he text of § 2 [of the Federal Arbitration Act] declares that state law may be applied `if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.' [Perry v. Thomas, 482 U.S. 483, 492, n. 9, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987).]... Thus, generally applicable contract defenses, such as fraud, duress or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2."

Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996). This Court "may not, however, invalidate arbitration agreements under state laws applicable only to arbitration provisions.... By enacting § 2 [of the Federal Arbitration Act] ..., Congress precluded States from singling out arbitration provisions for suspect status, requiring instead that such provisions be placed `upon the same footing as other contracts.'" Id. at 687, 116 S.Ct. 1652 (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974)) (citations omitted); Crown Pontiac, 695 So.2d at 617 (turning to "general Alabama contract law to determine whether the parties created an enforceable agreement to arbitrate"). Thus, this Court must review, under general Alabama contract law, Quality's assertion that the trial court erred in refusing to compel arbitration, and this Court must recognize the strong federal policy favoring arbitration.

B.

Yassine attacks the validity of the contract in general by asserting that Quality fraudulently induced her to sign it.⁵ She argues that the trial court properly denied Quality's motion to compel arbitration because, she says, her claims are based on misrepresentations made before she signed the sales contract. This Court has stated that "[a]s long as an arbitration clause is broad enough to encompass claims of fraud in the inducement of the contract in which it is found, any claims as to fraud...