Terrell v. Kernersville Chrysler Dodge, LLC

IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA16-429
Filed: 21 March 2017
Forsyth County, No. 15 CVS 3771
MICAH TERRELL, Plaintiff,
v.
KERNERSVILLE CHRYSLER DODGE, LLC, Defendant.
Appeal by defendant from order entered 17 December 2015 by Judge David L.
Hall in Superior Court, Forsyth County. Heard in the Court of Appeals 6 October
2016.
Public Justice, P.C., by Leah M. Nicholls, pro hac vice, and Norris Law Firm,
PLLC, by J. Matthew Norris, for plaintiff-appellee.
Jeffrey F. Hutchins for defendant-appellant.
STROUD, Judge.
Defendant Kernersville Chrysler Dodge, LLC (“defendant”) appeals from the
trial court’s order denying defendant’s motion to compel arbitration. Because the
trial court failed to include any findings of fact in its order denying defendant’s
motion, we must reverse its order and remand for the trial court to make findings
and conclusions on the motion.
Facts
TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
Plaintiff’s complaint set forth the following allegations. On 23 April 2015,
plaintiff contacted defendant about a vehicle defendant had advertised for sale (“the
vehicle”). Plaintiff placed a $500.00 hold on the vehicle over the phone, and
defendant’s employee, Larissa Santos, provided plaintiff with information and
photographs of the vehicle. Plaintiff also gave Ms. Santos several questions to ask
the service department about the vehicle’s condition. Ms. Santos contacted plaintiff
the following day and let him know that his questions had been given to the service
department and that the vehicle was currently being serviced. Ms. Santos gave
plaintiff a price quote for the vehicle, and on 25 April 2015, plaintiff drove down from
Charlottesville, Virginia, for a test drive and, if he decided to buy it, to complete his
purchase of the vehicle.
After arriving, plaintiff met salesperson Brandon Widener and took the car for
a test drive. During the test drive, plaintiff noticed a noise coming from the engine
compartment and brought it to Mr. Widener’s attention, who took the vehicle to one
of defendant’s mechanics for an inspection. After approximately two hours, plaintiff
was told that the “ ‘tensioner pulley’ ” was causing the noise and that the part had
been replaced. Plaintiff alleged that defendant “assured [p]laintiff that the Vehicle
had undergone a thorough inspection prior to sale, that it was a safe Vehicle, and
that there were no major structural or mechanical problems.” Relying on those
representations, plaintiff purchased the vehicle and drove it home.
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Opinion of the Court
On the way home, plaintiff noticed “some slight issues with the steering and
the u-joint/ball joint/axle area.” Shortly after getting back home, plaintiff contacted
defendant about these issues and let Ms. Santos know that he planned to have the
issues looked at by a repair shop in Charlottesville. Plaintiff dropped the vehicle off
on 30 April 2015, and two days later, the repair shop told plaintiff that the vehicle
“had significant ‘frame rot’, caused by rust and decay over the entire underside frame
and engine mount.” Because of this issue, the vehicle would not pass a Virginia State
Inspection and was unsafe to drive.
Plaintiff filed his complaint on 25 June 2015, alleging defendant engaged in
unfair and deceptive trade practices, fraud, and breach of an express warranty.
Defendant initially filed a pro se answer denying the material allegations in plaintiff’s
complaint, which was stricken by the trial court on 1 September 2015. Defendant
then filed a new answer on 17 September 2015, followed by a motion to compel
arbitration on 13 November 2015. Defendant attached to the motion copies of the
documents it alleged were the governing arbitration agreement and the retail
purchase agreement. The copy of the retail purchase agreement -- as attached by
defendant – appears to be signed and dated by plaintiff. The form has two signature
lines for “purchaser” at the bottom left side and the signature appears on one of the
lines. There are two additional blank lines at the bottom of the form on the right.
The top line is labeled as “salesperson” and is filled in with the typewritten name
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Opinion of the Court
“Brandon P. Widener.” The bottom line is labeled “accepted by authorized dealership
representative” and the handwritten initials “RCM” appear above this line. We also
note that it is not clear if the retail purchase agreement as it appears in our record
has only one page or if the “Governing Arbitration Agreement” is a separate form,
although the arbitration agreement may be on the reverse side of the retail purchase
agreement.1 One section of the retail purchase agreement, entitled “OTHER
MATERIAL UNDERSTANDINGS AND INCORPORATED DOCUMENTS” has a
provision which states as follows:
4. I understand that any dispute arising from, or relating
to this transaction, shall be settled by neutral arbitration
pursuant to the GOVERNING ARBITRATION
AGREEMENT signed by my hand and incorporated into
this Agreement.
(CONTINUED ON THE REVERSE SIDE OF
THIS AGREEMENT)
I HAVE BEEN GIVEN AMPLE OPPORTUNITY TO
EXAMINE THIS ENTIRE RETAIL PURCHASE
AGREEMENT, FRONT AND BACK, AND I HEREBY
ACCEPT THE TERMS AND CONDITIONS INCLUDING
THOSE LISTED ON THE REVERSE SIDE OF THIS
AGREEMENT.
The retail purchase agreement also has the following provision just above the
signature lines:
1 We are unable to determine if the arbitration agreement is on the reverse side of the retail
purchase agreement because only one of the three copies in our record presents the document in this
manner. But based upon the provisions of paragraph 4 of the retail purchase agreement, it appears
that the arbitration agreement was probably on the reverse side.
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TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
I HEREBY ACKNOWLEDGE THIS AGREEMENT IS
COMPLETE AND ACCURATELY REFLECTS ANY AND
ALL RELATED DOCUMENTS SIGNED BY MY HAND
AND REFERENCED AS INCORPORATED INTO THIS
AGREEMENT BETWEEN THE DEALERSHIP AND
MYSELF.
I ACKNOWLEDGE RECEIPT OF A COPY OF THIS
AGREEMENT WITH THE UNDERSTANDING THIS
AGREEMENT IS NOT BINDING UPON THE
DEALERSHIP OR PURCHASER(S) UNTIL SIGNED BY
AN AUTHORIZED DEALERSHIP REPRESENTATIVE.
The arbitration agreement states at the beginning as follows:
This Governing Arbitration Agreement shall be
incorporated into the vehicle purchase/lease contract
executed as of the date recorded below and is between the
“Purchaser(s)” and the “Retailing Dealership” listed below
herein referred to as the “Parties.”
The copy of the arbitration agreement attached to the defendant’s motion has
two signature lines for “purchaser” at the bottom left and the top line was signed by
plaintiff. The form has two signature lines at the bottom right side. The top line is
labeled “RETAILING DEALERSHIP” and is filled in with typewritten
“KERNERSVILLE CHRYSLER DODGE JEEP.” The bottom signature line is labeled
“DEALERSHIP REPRESENTATIVE” and is blank.
At a hearing on the motion to compel arbitration on 7 December 2015,
defendant presented evidence in support of the motion and counsel for both parties
made arguments. Defendant called Ronald Craig McCullough to testify at the
hearing, who explained that he was one of defendant’s finance managers at the time
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Opinion of the Court
of the sale of the vehicle to plaintiff. Mr. McCullough testified that his initials,
“RCM,” were on the retail purchase agreement. However, another copy of the retail
purchase agreement in the addendum to the record, apparently Plaintiff’s copy of the
retail purchase agreement, shows no signature on the purchaser line for plaintiff and
does not have the initials “RCM.” Mr. McCullough also testified that he did not sign
the governing arbitration agreement. Plaintiff argued that without a signature from
the dealership on the arbitration agreement, “it creates a one-sided obligation to
arbitrate disputes[,]” and plaintiff “could not compel the defendant to arbitrate a
dispute that it had against him if the defendant did not have a signature agreeing to
arbitrate.”
At the hearing, there was factual dispute over if and how an authorized
representative for the dealership had signed the retail purchase agreement. The
retail purchase agreement form was apparently a triplicate form with a white top
page, a yellow middle page, and a pink last page. Plaintiff had received the yellow
middle page, which is the version in the addendum to the record that has no
signatures. The copy as attached to the motion by defendant had both plaintiff’s
signature and the initials “RCM” for the dealership. According to Mr. McCullough,
the dealership normally scanned forms to be stored in a digital format and after a
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TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
period of time, the original documents are shredded.2 But the copies of the
“Governing Arbitration Agreement” are all the same, and unsigned by a dealership
representative.
It appears from the transcript that the trial court ultimately agreed with
plaintiff and stated at the hearing that “the contract should be construed against the
drafter and it is just not sufficient for this Court to find a binding, a mutual binding,
arbitration agreement.” On 17 December 2015, the court entered its order simply
denying defendant’s motion to compel arbitration, without any findings of fact or any
explanation of the basis for the ruling. Defendant timely appealed to this Court.
Discussion
We first note that while an order denying a motion to compel arbitration is
interlocutory, it is nevertheless immediately appealable, “because the right to
arbitrate a claim is a substantial right which may be lost if review is delayed.”
T.M.C.S., Inc. v. Marco Contractors, Inc., __ N.C. App. __, __, 780 S.E.2d 588, 592
(2015) (citations, quotation marks, and brackets omitted).
Defendant argues that the trial court erred by failing to find that a valid
agreement to arbitrate was entered into by the parties and by not granting its motion
to compel arbitration. Noting that this State “has a strong public policy favoring
2 There was some discussion at the hearing by counsel regarding the dealership’s document
retention policies and an inspection of the defendant’s records by a DMV inspector, but there was no
testimony or evidence offered on these matters.
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TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
arbitration[,]” defendant contends that the parties had a valid agreement to arbitrate,
claiming both parties signed “the contract which incorporated the arbitration
agreement into the agreement. The plaintiff also signed the arbitration agreement.
No evidence was ever presented by either party that the plaintiff failed to provide a
copy of the arbitration agreement. No [e]vidence was ever presented by either party
that the plaintiff did not sign the arbitration agreement or the contract.”
A trial court reviewing a motion to compel arbitration must conduct “a two-
step analysis . . . to ascertain both (1) whether the parties had a valid agreement to
arbitrate, and also (2) whether the specific dispute falls within the substantive scope
of that agreement.” Slaughter v. Swicegood, 162 N.C. App. 457, 461, 591 S.E.2d 577,
580 (2004) (citations and quotation marks omitted). See also T.M.C.S., Inc., __ N.C.
App. at __, 780 S.E.2d at 593 (“When, as here, one party claims a dispute is covered
by an agreement to arbitrate and the other party denies the existence of an
arbitration agreement, the trial court must determine whether an arbitration
agreement actually exists.” (Citation and quotation marks omitted)).
The trial court’s findings regarding the existence of an
arbitration agreement are conclusive on appeal where
supported by competent evidence, even where the evidence
might have supported findings to the contrary.
Accordingly, upon appellate review, we must determine
whether there is evidence in the record supporting the trial
court’s findings of fact and if so, whether these findings of
fact in turn support the conclusion that there was no
agreement to arbitrate.
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TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
Sciolino v. TD Waterhouse Inv’r Servs., Inc., 149 N.C. App. 642, 645, 562 S.E.2d 64,
66 (2002) (citations omitted).
In this case, the hearing transcript indicates that the trial court found
plaintiff’s counsel’s argument regarding lack of mutuality and the ability of plaintiff
to enforce the arbitration agreement against defendant to be most persuasive. The
court noted that “basic contract law is that the contract should be construed against
the drafter. Here the drafter is the dealership. Given the totality of the submissions
before me, I am unable to conclude that there is a binding arbitration agreement.”
The trial judge pointed out to defendant’s trial counsel that the arbitration agreement
“is not signed by your client.” The court then concluded:
All right. I am denying the motion to compel
arbitration because I do not find -- I find that there is no
binding arbitration agreement between the parties.
....
. . . . Again, the contract should be construed against
the drafter and it is just not sufficient for this Court to find
a binding, a mutual binding, arbitration agreement. I wish
the parties well in resolving the matter.
The court then entered a written order on 17 December 2015. But the trial
court’s order simply stated, without any findings of fact:
THIS MATTER coming to be heard, and being
heard, at the December 7, 2015, civil session of the Forsyth
County Superior Court, on Defendant’s Motion to Compel
Arbitration and the Court, having carefully considered the
matters of record including pleadings, authorities and
arguments of both counsel, finds that Defendant’s Motion
to Compel Arbitration should be denied.
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TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC
Opinion of the Court
NOW, THEREFORE, it is ORDERED, ADJUDGED,
and DECREED as follows:
1. Defendant’s Motion to Compel Arbitration is
denied.
This Court has addressed the sufficiency of written orders denying motions to
compel arbitration many times. In Cornelius v. Lipscomb, this Court reversed an
order denying a motion to compel and remanded for additional findings of fact:
As an initial matter, defendants argue that the order
denying their motion to compel arbitration is facially
defective because it “contains no findings whatsoever” and
does not “identify any basis for the refusal to dismiss or
stay this action and compel arbitration.” We agree.
This Court has repeatedly held that an order
denying a motion to compel arbitration must include
findings of fact as to whether the parties had a valid
agreement to arbitrate and, if so, whether the specific
dispute falls within the substantive scope of that
agreement. When a trial court fails to include findings of
fact in its order, this Court has repeatedly reversed and
remanded to the trial court for a new order containing the
requisite findings.
In this case, the trial court’s order denying
defendants’ motion to compel arbitration stated in relevant
part only:
Prior to ruling on the motions, the
Court considered all pleadings and other
materials contained in the file. The Court
considered the briefs submitted by the
parties with regard to the motions. Further,
the Court considered the materials and
testimony submitted at the hearing on the
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Opinion of the Court
motions. Finally, the Court considered the
arguments of counsel with regard to the
motions.
After consideration of all matters as
set forth above in this Order, it appears to
the Court that both Motions as to both
Defendants should be denied.
NOW, THEREFORE, IT IS ORDERED:
1. The Defendants Sunset Financial
Services, Inc. and Jeffrey Lipscomb’s
Joint Motion to Compel Arbitration and
to Stay Court Action is denied as to both
Defendants.
The order provides no findings and no explanation
for the basis of the court’s decision to deny the motion to
compel arbitration. We, therefore, must reverse the trial
court’s order and remand for findings of fact regarding
whether the parties had a valid agreement to arbitrate
and, if so, whether the dispute between the parties falls
within the substantive scope of that agreement.
Cornelius v. Lipscomb, 224 N.C. App. 14, 16-17, 734 S.E.2d 870, 871-72 (2012)
(citations and quotation marks omitted).
Here, as in many of the cases stated as examples in Cornelius, the trial court’s
order contained absolutely no findings and simply concluded without explanation
that the motion would be denied. Although it seems from the hearing transcript that
the trial judge may have determined that defendant did not sign the retail purchase
agreement, the governing arbitration agreement, or both, the court did not include
any findings whatsoever in its written order. It is also possible that the trial court
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Opinion of the Court
determined that plaintiff had not signed the retail purchase agreement, as one
version of that agreement in our record is unsigned by either party. Nor did the court
resolve the question of whether signatures only on the retail purchase agreement,
which explicitly incorporated by reference the Governing Arbitration Agreement
(which may have been on the reverse side of the form) would be sufficient to bind the
dealership. Our review on appeal of a trial court’s denial of a motion to compel
arbitration is limited to the trial court’s findings and conclusions of law. Accordingly,
we must remand for the trial court to enter an order that clearly states its findings
and conclusions supporting its decision to denying the motion to compel arbitration.
REVERSED AND REMANDED.
Judges McCULLOUGH and ZACHARY concur.
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