TD Auto Fin. LLC v. Reynolds

Decision Date10 April 2020
Docket NumberNo. 18-0605,18-0605
Citation842 S.E.2d 783
CourtWest Virginia Supreme Court
Parties TD AUTO FINANCE LLC, Focus Receivables Management, and Northstar Location Services, LLC, Defendants Below, Petitioners v. Freddie REYNOLDS and Shelby Reynolds, Plaintiffs Below, Respondents

Daniel J. Konrad, Esq. DINSMORE & SHOHL LLP, Huntington, West Virginia, Attorney for Petitioners

Raymond S. Franks, II, Esq., BAILEY & GLASSER, LLP, Charleston, West Virginia, Steven J. Broadwater, Jr., Esq., HAMILTON, BURGESS, YOUNG & POLLARD, PLLC, Fayetteville, West Virginia, Attorneys for Respondents

WORKMAN, Justice:

This is an appeal from the Circuit Court of Mercer County's denial of petitioners TD Auto Finance LLC ("TD Auto Finance"), Focus Receivables Management, LLC, and Northstar Location Services, LLC's (collectively "petitioners") motion to compel arbitration of respondents Freddie and Shelby Reynolds("respondents") claims against them. The circuit court found that a merger clause in the Retail Sales Installment Contract supplanted a prior agreement to arbitrate contained in a credit application executed by respondents.

Upon careful review of the briefs, the appendix record, the arguments of the parties, and the applicable legal authority, we conclude that the credit application and Retail Installment Sales Contract did not constitute contemporaneously-executed documents which were part of a singular transaction. As such, the merger clause contained in the Retail Installment Sales Contract served to supersede the arbitration agreement contained in the previously-executed credit application and contained no requirement to arbitrate. Accordingly, we affirm the circuit court's denial of petitionersmotion to compel arbitration.


On November 14, 2014, respondents purchased a new 2014 Chevrolet Silverado truck from Crossroads Chevrolet ("Crossroads"). During their interactions with Crossroads, respondents executed a credit application permitting Crossroads to effectively investigate and "shop" their credit around to potential financing companies for the purchase of a vehicle. Upon negotiating and reaching an agreement as to the purchase of a 2014 Chevrolet Silverado, respondents subsequently executed a Retail Installment Sales Contract ("RISC") for the purchase of the truck.

The credit application first executed by respondents states that by executing the application, respondents "authorize dealer and any finance company, bank or other financial institution to which the Dealer submits my application," to investigate their credit and employment history. The form credit application contains a paragraph that applies to "applications submitted to TD Auto Financial LLC Only" and provides that "in exchange for the time, effort, and expense in reviewing your application and for other valuable consideration ... [respondents] agree to all of the terms of the TD Auto Finance LLC Contract of Arbitration contained in [the] application ...." The "Contract of Arbitration," which comprises page six1 of the credit application, provides:

Any claim or dispute, whether in contract, tort or otherwise (including any dispute over the interpretation, scope, or validity of this Important Contract of Arbitration or the arbitrability of any issue), between our employees, parents, subsidiaries, affiliate companies, agents, successors or assignees, which arises out of or relates to this application and Important Contract of Arbitration, any installment sale contract or lease agreement, or any resulting transaction or relationship (including any such relationship with third parties who do not sign this application and important Contract of Arbitration) shall, at the election of any of us .... be resolved by a neutral, binding arbitration and not by a court action.

The record contains no information about precisely when, during the course of respondents’ interaction with Crossroads, this document was executed. However, in oral argument below and before this Court, counsel for petitioners conceded that common sense suggests it was executed at some point prior to the RISC, as a necessary precursor to the sales transaction.

The RISC was executed by respondents and Crossroads to consummate the purchase of the truck. The RISC provides that it is for the purchase of a 2014 Chevrolet Silverado in the amount of $37,700.21 and financing in the amount of $46,811.18. The final page of the document contains what is commonly known as a "merger" or "integration" clause, as follows: "HOW THIS CONTRACT CAN BE CHANGED. This contract contains the entire agreement between you and us relating to this contract. Any change to this contract must be in writing and we must sign it. No oral changes are binding."

This specific paragraph is signed by both respondents and a representative of Crossroads. Importantly, however, the document concludes with a contemporaneous assignment of the RISC from Crossroads to petitioner TD Auto Finance. The final paragraph states: "Seller assigns its interest in this contract to TD AUTO FINANCE LLC (Assignee) under the terms of Seller's agreement(s) with Assignee." It is signed by the President of Crossroads Chevrolet LLC. Petitioner TD Auto Finance's name has been typed into the form.

Respondents ultimately defaulted on their loan and petitioner TD Auto Finance began collection efforts by referral to collection agencies—petitioners Focus Receivables Management, LLC and Northstar Location Services, LLC. Respondents allege that the collection agencies harassed them by phone even after being advised they were represented by counsel. As a result, they filed a complaint asserting violations of the West Virginia Consumer Credit and Protection Act, among other claims,2 and naming petitioners as defendants. Petitioners moved to compel arbitration on the basis of the arbitration provision contained in the credit application.3

The circuit court denied the motion, finding that the credit application and attendant arbitration clause constituted "an entirely separate transaction" from the RISC inasmuch as "typically" a credit check and application precedes the negotiations regarding the sale.4 Accordingly, it found that the credit application and RISC were not part of the same transaction and therefore were not required to be construed together. Further, the circuit court found that petitioners’ failure to have an arbitration agreement signed at the same time as the RISC, included in the RISC, or at a minimum, incorporated by reference into the RISC, was fatal to its claim for arbitration. Petitioners then filed the instant appeal.


This Court has held that "[w]hen an appeal from an order denying a motion to dismiss and to compel arbitration is properly before this Court, our review is de novo ." Syl. Pt. 1, W. Va. CVS Pharmacy, LLC v. McDowell Pharmacy, Inc ., 238 W.Va. 465, 796 S.E.2d 574 (2017). With this standard in mind, we consider the parties’ arguments.


With respect to a trial court's consideration of a motion to compel arbitration, this Court has held:

When a trial court is required to rule upon a motion to compel arbitration pursuant to the Federal Arbitration Act, 9 U.S.C. §§ 1 – 307 (2006), the authority of the trial court is limited to determining the threshold issues of (1) whether a valid arbitration agreement exists between the parties; and (2) whether the claims averred by the plaintiff fall within the substantive scope of that arbitration agreement.

Syl. Pt. 2, State ex rel. TD Ameritrade, Inc. v. Kaufman , 225 W.Va. 250, 692 S.E.2d 293 (2010). This case therefore requires this Court to determine whether the circuit court erred in determining that no valid arbitration agreement existed. To do so, we turn to governing West Virginia contract law: "[T]he issue of whether an arbitration agreement is a valid contract is a matter of state contract law and capable of state judicial review." State ex rel. Clites v. Clawges , 224 W. Va. 299, 305, 685 S.E.2d 693, 699 (2009) (emphasis in original). See also Chesapeake Appalachia, L.L.C. v. Hickman , 236 W. Va. 421, 436, 781 S.E.2d 198, 213 (2015) (observing that whether a valid arbitration agreement exists is determined "[u]nder general principles of state contract law"); Syl. Pt. 4, in part, State ex rel. Richmond Am. Homes of W. Va., Inc. v. Sanders , 228 W. Va. 125, 717 S.E.2d 909 (2011) ("[T]he trial court may rely on general principles of state contract law in determining the enforceability of the arbitration clause.").

The issue before the Court is whether the arbitration provision respondents agreed to in the credit application survives the "merger clause" in the RISC, which states that the RISC constitutes the "entire agreement" between the parties. This Court has explained that "[a] ‘merger clause’ is [a] provision in a contract to the effect that the written terms may not be varied by prior or oral agreements because all such agreements have been merged into the written document.’ "

Frederick Bus. Properties Co. v. Peoples Drug Stores, Inc ., 191 W. Va. 235, 240 n.2, 445 S.E.2d 176, 181 n.2 (1994) (quoting Black's Law Dictionary 989 (6th ed. 1990)). Under the credit application, there is a clear agreement to arbitrate with TD Auto Finance; however, the RISC contains no such arbitration agreement nor reference to the prior agreement, and explicitly purports to be the "entire agreement" between the parties.5

Petitioners contend that the arbitration agreement contained in the credit application and the RISC, which is silent on dispute resolution, are not in conflict and unmistakably demonstrate an agreement to arbitrate any claims involving petitioner TD Auto Finance. Citing highly similar extra-jurisdictional caselaw, petitioners contend that the arbitration agreement and RISC are "separate and distinct" collateral documents executed as part of a singular transaction and therefore must be construed together....

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    ...27 (1996)." Syl. Pt. 1, McDaniel v. Kleiss , 202 W. Va. 272, 273-74, 503 S.E.2d 840, 841-42 (1998).Syl. pt. 3, TD Auto Fin. LLC v. Reynolds , 243 W. Va. 230, 842 S.E.2d 783 (2020). WesBanco contends that this holding is not applicable to the circumstances herein presented because the docume......
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    ...Syl. Pt. 1, McDaniel v. Kleiss, 202 W. Va. 272, 273-74, 503 S.E.2d 840, 841-42 (1998)." Syllabus point 3, TD Auto Finance LLC v. Reynolds, 243 W. Va. 230, 842 S.E.2d 783 (2020). 3. "'A valid written instrument which expresses the intent of the parties in plain and unambiguous language is no......
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    ...on other grounds by Syl. pt. 2, Overfield v. Collins , 199 W.Va. 27, 483 S.E.2d 27 (1996). Accord , Syl. pt. 3, TD Auto Fin. LLC v. Reynolds , 243 W. Va. 230, 842 S.E.2d 783 (2020). Stated differently, "[i]t is a well-recognized principle of law that, even though writings may be separate, t......
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