TranSouth Financial Corp. v. Bell

Citations: 739 So. 2d 1110; 1999 Ala. LEXIS 200; 1999 WL 424337Docket: 1971442

Court: Supreme Court of Alabama; June 25, 1999; Alabama; State Supreme Court

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TranSouth Financial Corporation and affiliated companies are defendants in a legal action initiated by Ronald A. Bell in the Lowndes Circuit Court, challenging the trial court's refusal to compel arbitration for Bell's claims. Bell alleges fraud related to loans obtained from TranSouth between 1993 and 1995, asserting that a loan officer misrepresented the necessity of purchasing credit-life insurance and the requirement to take out new loans instead of advancing funds from existing loans, leading to additional fees and higher interest rates.

On September 17, 1996, Bell signed an Arbitration Agreement that explicitly stated the implications of arbitration, including the limitation of his rights to file a lawsuit or pursue a jury trial. This agreement covers all disputes between Bell and TranSouth, including those arising from the loans, related documents, insurance purchases, allegations of fraud, and claims involving the company's affiliates. By entering into this agreement, both parties consented to resolve disputes through arbitration, with the arbitrator's decision being final and binding. The agreement also extends to disputes involving TranSouth’s employees and affiliates. The court ultimately reversed the trial court's decision and remanded the case for arbitration.

You are not required to initiate arbitration prior to repossession or nonjudicial foreclosure actions, as these can be pursued without court intervention. Any disputes related to these actions must be arbitrated under the American Arbitration Association's 'Commercial Arbitration Rules,' which will prevail over conflicting terms in this agreement. A copy of these rules will be provided at signing, and additional copies can be requested if lost. 

Arbitration can be initiated by either party at any time by completing a Demand for Arbitration, submitting it along with this agreement and a $125 filing fee to the American Arbitration Association in Atlanta, Georgia, and providing a copy to the opposing party. If you initiate arbitration, you are responsible for the initial $125 fee, while we will cover any excess fees and the costs for one day of hearings. Additional costs, such as attorney's fees and travel expenses, will be determined by the Commercial Arbitration Rules.

Arbitrators will be selected from a list maintained by the American Arbitration Association, and arbitration will occur in your county unless another location is mutually agreed upon. Post-arbitration, either party may seek enforcement of the arbitrator's decision in appropriate federal or state courts. Key provisions include the applicability of statutes of limitations, the governing of this agreement by the Federal Arbitration Act due to interstate commerce, the ability to file lawsuits to enforce the agreement in any court with jurisdiction, and the agreement's applicability to all assigns and heirs. If any term is found unenforceable, the remaining terms will still be valid. This agreement supersedes any prior arbitration agreements and remains effective even if the loan is fully paid, charged-off, or discharged in bankruptcy.

The arbitration agreement established between Ronald A. Bell (the Borrower) and TranSouth (the Lender) on the 'Date of Loan' limits Bell's rights, including the right to pursue court action. Bell alleges he was fraudulently induced to sign the agreement, claiming the loan officer misrepresented its scope as only applying to the September 17, 1996, loan and failed to disclose that it referred to all previous loans and allowed TranSouth to enforce it in federal court. The trial court recognized a factual dispute regarding the agreement's validity and ordered a jury trial on arbitrability. However, it was determined that the trial court erred by not compelling arbitration since the defendants provided prima facie evidence that Bell agreed to arbitrate disputes related to prior loans, and that the agreement involved interstate commerce under the Federal Arbitration Act. Consequently, the burden shifted to Bell to substantiate his fraud claims with evidence, which he failed to do, as the record lacked support for his allegations. Bell's assertion that he was not obligated to read the agreement was noted, along with his claim that reliance on the loan officer's statements was justifiable, but this was not sufficient to negate the arbitration agreement's validity.

Bell submitted an affidavit to the trial court and provided a copy to the defendants, which the defendants dispute, stating that Bell presented no evidence for his fraud claims. Bell did not file a motion to supplement the record with the affidavit. Consequently, the court will not consider the document attached to Bell's brief. The absence of evidence in the record contradicts the defendants' prima facie case for arbitrability. As a result, the court reverses the trial court's order denying the defendants' motion to compel arbitration. The Chief Justice and other justices concur. Additionally, the argument regarding the McCarran-Ferguson Act and its impact on Alabama law concerning arbitration agreements is not sufficiently developed in the trial court record to be addressed. The case was reassigned to Justice Houston, and the 'justifiable reliance' standard applies as Bell filed his action before March 15, 1997.