United Credit Corporation v. Frances Hubbard ( 2003 )

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2003-CA-02727-SCT
UNITED CREDIT CORPORATION AND UNITED
CREDIT CORPORATION OF MAGEE
v.
FRANCES HUBBARD
DATE OF JUDGMENT: 12/04/2003
TRIAL JUDGE: HON. ROBERT G. EVANS
COURT FROM WHICH APPEALED: SIMPSON COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANT: ROBERT E. SANDERS
ATTORNEY FOR APPELLEE: SUZANNE GRIGGINS KEYS
NATURE OF THE CASE: CIVIL - CONTRACT
DISPOSITION: REVERSED AND REMANDED - 12/09/2004
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE SMITH, C.J., CARLSON AND DICKINSON, JJ.
SMITH, CHIEF JUSTICE, FOR THE COURT:
¶1. This case comes to this Court from an order of the Simpson County Circuit Court
denying a motion to compel arbitration. Frances Hubbard borrowed money from United Credit
Corporation of Magee on two separate occasions: June 27, 2000, and May 24, 2002. Both
loans contained the same arbitration agreement providing that Hubbard would relinquish her
right to a jury trial if a dispute arose involving either loan.
¶2. On January 3, 2003, Hubbard filed suit against United Credit Corporation alleging
several causes of action including: breach of fiduciary duties, breach of implied covenants of
good faith and fair dealing, fraudulent misrepresentation and/or omission, negligent
misrepresentation and/or omission, civil conspiracy, negligence and unconscionability. After
UCC responded to the complaint, United Credit Corporation of Magee ( UCCM) filed a
motion to intervene as defendant, in accordance with Miss. R. Civ. P. 24(a), and for order
compelling arbitration.
¶3. Attached to this motion are exhibits A and B. Exhibit A is an affidavit of the acting
secretary/treasurer of UCC, who is also the acting secretary/treasurer of UCCM. This affidavit
was to support the intervention of UCCM. Exhibit B is a copy of the arbitration agreement at
issue.
¶4. Hubbard filed a response to UCCM’s motion asking the court to allow UCCM to
intervene in the action and not compel Hubbard to arbitrate this matter. Included in this
response were three exhibits A, B and C, as well as Hubbard’s contention that arbitration
should not be allowed. Exhibit A is a copy of the June 27th loan agreement; exhibit B is the
affidavit of Frances Hubbard stating her ignorance of arbitration; exhibit C is a copy of the
American Arbitration Association’s rules and procedures.
¶5. The circuit court allowed the intervention of UCCM as the proper defendant in the suit.
On the other hand, the circuit court denied the motion to compel arbitration, finding that the
defendants did not make an “adequate showing that the [p]laintiff voluntarily and knowingly
agreed to waive her rights and agree to arbitration.” UCC & UCCM appeal from the denial of
the motion.
DISCUSSION
¶6. Notwithstanding the lack of a final judgment or a grant of a petition for interlocutory
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appeal, this Court has jurisdiction over an appeal from a denial of a motion to compel
arbitration. Tupelo Auto Sales, Ltd. v. Scott, 844 So.2d 1167, 1170 (Miss. 2003). In Scott,
this Court adopted the procedure of the Federal Arbitration Act and established a bright-line
rule that an appeal may be taken from an order denying a motion to compel arbitration. Id.
¶7. The standard of review for a denied motion to compel arbitration is de novo. Id. at
1169 (citing East Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002)).
I. Whether the Circuit Court Erred by Denying the Motion to
Compel Arbitration.
A. Did Hubbard’s Signature Constitute a Voluntary and
Knowing Representation of Her Intent Regarding
Arbitration?
¶8. The first factor to consider is whether UCCM had the burden of proving that Hubbard
acted voluntarily and knowingly when signing the arbitration agreement. The trial court found
that “the [d]efendants have not made an adequate showing that the [p]laintiff voluntarily and
knowingly agreed to waive her rights and agree to arbitration . . . .” “[G]enerally applicable
contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate
arbitration agreements without contravening § 2 [of the FAA].” Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681, 687, 116 S.Ct.1652, 1656, 134 L.Ed.2d 902 (1996). “Knowing and
voluntary” is an element of procedural unconscionability. Sanderson Farms, Inc. v. Gatlin,
848 So. 2d 828, 845 (Miss. 2003) (citing Entergy Miss., Inc. v. Burdette Gin Co., 726 So.
2d 1202, 1207 (Miss. 1998)).
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¶9. UCCM contends that normal rules of contract construction apply and that Hubbard’s
signature on the agreement is sufficient proof that she acted voluntarily and knowingly.
¶10. In Russell v. Performance Toyota, Inc., 826 So. 2d 719, 726 (Miss. 2002), the
plaintiff Russell signed an arbitration agreement very similar to the agreement signed by
Hubbard. The agreement Russell signed was in all bold capital font and it almost immediately
preceded the signature line. Id. Similarly, in the present case, immediately preceding the
signature line the following clause appeared:
THE PARTIES UNDERSTAND THAT BY SIGNING THIS ARBITRATION
AGREEMENT THEY ARE LIMITING ANY RIGHT TO PUNITIVE
DAMAGES AND GIVING UP THE RIGHT TO A TRIAL IN COURT,
BOTH WITH AND WITHOUT A JURY.
(emphasis in original). Thus, there was no hidden text in the agreement, and Hubbard was not
deceived by the language of the actual document that she signed. Hubbard contends that she
was ignorant as to what arbitration was and the UCCM employee did not explain it to her
before she signed the agreement. Even assuming these contentions are correct, it is still
essentially Hubbard’s duty to read and understand any document she signs because “[i]n
Mississippi, a person is charged with knowing the contents of any documents that [she]
executes.” Russell, 826 So. 2d at 726 (citing J.R. Watkins Co. v. Runnels, 252 Miss. 87, 96,
172 So. 2d 567, 571 (1965) (holding that “A person cannot avoid a written contract which he
has entered into on the ground that he did not read it or have it read to.”)). Consequently,
because Hubbard signed the arbitration agreement we conclude that she voluntarily
acknowledged the terms of the arbitration agreement.
B. Was the Arbitration Agreement Valid and
Enforceable?
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¶11. The issue raised before this Court is whether the arbitration clause in the loan
agreement between Hubbard and UCCM is enforceable. Hubbard contends that the trial court
did not commit reversible error when it denied the motion to compel arbitration. Hubbard
bases this contention on the notion that UCCM waived its right to arbitration by participating
in discovery and that the arbitration clause contained in the loan agreement is both procedurally
and substantively unconscionable.
¶12. “Procedural unconscionability may be proved by showing ‘a lack of knowledge, lack of
voluntariness, inconspicuous print, the use of complex or legalistic language, disparity in
sophistication or bargaining power of the parties and/or a lack of opportunity to study the
contract and inquire about the contract terms.’” Taylor, 826 So. 2d at 714. In Taylor, the
plaintiff argued that the arbitration clause he signed was procedurally unconscionable because
he did not know what arbitration was and the employee of East Ford failed to inform the
plaintiff that he should read the arbitration agreement before signing it. Id. These facts are
identical to the present case, with one important fact that is different, in Taylor the arbitration
clause was in a font size that was less than one-third the size of the rest of the font in the
document. Id at 716-17.
¶13. The present arbitration agreement provided language that was conspicuous because it
was in all bold and capital letters. In addition, as previously stated, Hubbard was responsible
for reading and understanding any document that she may sign. Russell, 826 So. 2d at 726
(citing Runnels, 252 Miss. at 96, 172 So. 2d at 571). Thus, the arbitration clause was not
procedurally unconscionable and is enforceable against Hubbard.
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¶14. “Substantive unconscionability may be proven by showing the terms of the arbitration
agreement to be oppressive.” Taylor, 826 So. 2d at 714. This issue can be decided by looking
at the plain language of the agreement. The arbitration agreement equally binds both UCCM
and Hubbard. There is no disparity in bargaining power or either party’s ability to arbitrate any
issue stemming from the loans made to Hubbard. Therefore, the arbitration agreement was not
substantively unconscionable because both parties were guaranteed the same rights by the
agreement.
CONCLUSION
¶15. For the foregoing reasons, we reverse the circuit court’s order denying the motion to
compel arbitration, and we remand this case to the circuit court for entry of an appropriate
order referring this case to arbitration in accordance with the agreement.
¶16. REVERSED AND REMANDED.
WALLER AND COBB, P.JJ., EASLEY, CARLSON AND DICKINSON, JJ.,
CONCUR. DIAZ, GRAVES AND RANDOLPH, JJ., NOT PARTICIPATING.
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