Court: Supreme Court of Alabama; July 15, 2011; Alabama; State Supreme Court
Alabama Title Loans, Inc., Accurate Adjustments, LLC, and Kevin Scott Sanders appeal a trial court's denial of their motions to compel arbitration in a case filed by Kimberly C. White. The appellate court reverses the trial court's decision and remands with directions.
In the factual background, on May 29, 2009, White borrowed $1,700 from Alabama Title Loans, securing the loan with her 2006 Nissan Sentra. As part of the loan process, she surrendered the original vehicle title and a key and signed a title-loan agreement that included a broad arbitration clause. This clause defined "Claim" to encompass any disputes arising from the agreement or the vehicle, covering various legal grounds, but excluding actions for replevin or small claims unless transferred to a different court. The arbitration provision survives the repayment of the loan and any subsequent legal actions.
On June 30, White made a payment on the initial loan and signed a second title-loan agreement for the remaining balance, which also contained an identical arbitration clause.
On July 30, White made a $425 interest payment and signed a new title-loan agreement for $1,697.91, reflecting the remaining balance of her June loan. This July agreement included an arbitration clause similar to those in her previous May and June agreements. On August 17, White informed an employee at Alabama Title Loans that she intended to pay off her loan. The employee began preparing the necessary paperwork and instructed White to return later for her original certificate of title and car key. Upon returning, White paid the loan in full with cash, receiving the key and a certificate of title that indicated the lien had been discharged.
On October 12, 2009, White secured a new loan for $3,627.48 from Harrison Finance Company, unrelated to Alabama Title Loans, using her 2006 Nissan Sentra as collateral. Harrison Finance obtained a lien on the vehicle and held the original certificate of title. Before January 10, 2010, Alabama Title Loans arranged for a 'self-help' repossession of White's Nissan. On January 10, White witnessed a man
White opposed the motions to compel arbitration filed by the title-loan parties, asserting that she never signed a title-loan agreement with Alabama Title Loans in September 2009 and that the signature on the document they produced was not hers. She submitted an affidavit affirming the absence of her signature on the title-loan agreement dated September 30 and detailed her loan repayment process on August 17, 2009, alongside the circumstances of her loan from Harrison Finance on October 12, 2009. White provided a photocopy of her title certificate showing a lien discharge from Alabama Title Loans dated August 17, 2009, and an affidavit from Karen McGrew, the local branch manager of Harrison Finance, confirming that they held the original title to White’s vehicle since October 12, 2009, and would not have provided a loan without securing a lien on the car.
In response, Alabama Title Loans submitted a reply with documents filed shortly before the hearing, including various title-loan agreements allegedly signed by White, along with payment receipts. They argued that arbitration could be demanded based on any of these agreements, not solely the one dated September 30, 2009. White presented additional evidence in court, including a photograph of the Alabama Title Loan office's hours and a probate court record indicating that Harrison Finance held the only lien on her Nissan. Following the hearing, the trial court denied the motions to compel arbitration without issuing findings of fact.
The excerpt also outlines the standard of review for appeals regarding motions to compel arbitration, indicating that the court will review such cases de novo. The party seeking to compel arbitration must first demonstrate the existence of a contract requiring arbitration and that it involves interstate commerce, after which the burden shifts to the opposing party to prove the arbitration agreement's invalidity or inapplicability.
The Federal Arbitration Act (FAA) governs this case, stipulating that written arbitration provisions in contracts involving commerce are valid and enforceable except under certain legal grounds. The title-loan parties bear the initial burden to prove the existence of a contract with an arbitration clause and that the transaction involved interstate commerce, both of which were established with a title-loan agreement dated September 30, 2009. White does not contest that the agreement involved interstate commerce but denies signing it, claiming forgery. She asserts that she fully repaid a loan in August 2009 and later secured another loan, necessitating discharge of previous liens.
In response to White's forgery claims, the title-loan parties presented additional agreements and receipts allegedly signed by her. White maintains that she did not sign any agreements post-July 2009. The title-loan parties argue that the repossession of White's vehicle stems from the established relationship through multiple agreements executed from May to September, asserting that each contains a valid arbitration clause. They contend that White should be compelled to arbitrate her claims based on these agreements, despite her assertion that the earlier contracts were extinguished upon repayment or signing a new agreement.
A general arbitration clause in an expired contract cannot compel arbitration for disputes not arising during the contract's term or involving rights that accrued under it. The court must first determine the validity of the September title-loan agreement, which White claims may be a forgery. The key issues are whether the arbitration clauses in the May, June, or July title-loan agreements are valid against White, who acknowledged signing them, and whether those clauses are broad enough to cover her claims. The court finds both issues affirmative. It emphasizes that unambiguous contract terms govern interpretation, disregarding the subjective intentions of the parties. The arbitration clause explicitly states it "shall survive the repayment of all amounts owed," indicating intent for arbitration of any disputes post-repayment. Consequently, the title-loan parties can compel arbitration under any agreement White signed. The clause applies to all disputes "arising from or relating to" the contract, which is broader than clauses limited to claims "arising from" the agreement. The definition of "claim" includes disputes related to both the agreement and the vehicle involved, reinforcing its broad applicability. Additionally, the strong federal policy favoring arbitration dictates that uncertainties regarding arbitrable issues should favor arbitration.
The freedom to contract is a fundamental public policy protected by the Alabama state constitution, recognized as a significant liberty interest. Courts are mandated to uphold contractual obligations and cannot alter clearly expressed terms or create new contracts for the parties involved. In the case at hand, the arbitration clause in the title-loan agreements signed by White was deemed broadly applicable to her claims. The trial court erred in denying the title-loan parties' motions to compel arbitration, leading to a reversal of that order and a remand for enforcement of arbitration. White had previously borrowed $500 from Alabama Title Loans and fully repaid it before a subsequent loan arrangement. The title-loan parties provided evidence of their business's impact on interstate commerce, which White did not contest. Additionally, while White claimed that certain documents were forged, the title-loan parties disputed this. The court noted that Accurate Adjustments and Sanders, though nonsignatories to the agreements, could still compel arbitration, a point not contested by White, allowing the court to bypass further discussion on their entitlement to arbitration.
