Anderson v. Ashby

873 So.2d 168

Michael J. ANDERSON et al. v. Mary Jean ASHBY, individually, and as personal representative of the estate of Jimmy Ashby, deceased.

1011740.

Supreme Court of Alabama.

May 16, 2003.

Rehearing Denied August 29, 2003.

Robert H. Rutherford, F.A. Flowers III, and Richard C. Keller of Burr & Forman, LLP, Birmingham, for appellants. B. Scott Shipman of Sherrill, Batts & Shipman, LLC, Athens, for appellee.

PER CURIAM.

Michael J. Anderson, American General Finance, Inc., and Merit Life Insurance Company appeal from an order denying their motions to compel arbitration in an action filed against them in the Limestone Circuit Court by Mary Jean Ashby. We affirm.

Background

On April 15, 1999, Mary Jean Ashby and Jimmy Ashby, her now-deceased husband, visited the American General Finance office located in Athens, Alabama,¹ to obtain a $2,000 loan to be secured by their automobile. The loan was to be paid over a period of three years. Mr. Ashby indicated on the loan application that his only source of income was "disability" and "soc. sec."; Mrs. Ashby indicated on the loan application that her only source of income was "disability." According to Mrs. Ashby, Mr. Ashby wanted to obtain credit-life insurance so that she would not have to worry about the payments on the loan in the event something happened to him. It is undisputed that Mr. Ashby agreed to pay $827.10 in order to purchase $5,000 of credit-life insurance during the term of their three-year note.

While at American General Finance's office, the Ashbys met with Michael Anderson, the branch manager for American General Finance; Anderson is also an insurance agent for Merit Life Insurance Company, an affiliate of American General Finance. Mr. Anderson acknowledges that, as a result of doing business with the Ashbys, he knew that Mr. Ashby was unable to read and write and that he could not sign his own name. Anderson also admits that he knew Mrs. Ashby was limited in her reading ability.²

Mrs. Ashby claims that she and Mr. Ashby asked Anderson to explain the loan documents because they were unable to read and understand the documents. Additionally, the operating procedures of American General Finance applicable to customers who are blind or who cannot read require the company's representative to explain the documents to the customer before obtaining the customer's signature.

Anderson alleges that he explained the loan and credit-life insurance documents to the Ashbys. Anderson claims that, in accordance with American General Finance's operating procedures applicable to illiterate customers, he wrote at the bottom of each document involved in the loan transaction "THIS DOCUMENT EXPLAINED AND UNDERSTOOD BY THE BORROWER." According to Anderson, he then had the Ashbys sign the documents. Mrs. Ashby denies that the documents she executed bore any handwritten statements when she signed them.

The note and security agreement executed by the Ashbys on April 15, 1999, contained an arbitration agreement, which included the following provisions:

"ARBITRATION OF CLAIMS AND WAIVER OF JURY TRIAL:

"Borrower(s) hereby acknowledge that the transactions evidenced by this agreement involve interstate commerce. Borrower(s) and Lender agree that, except as otherwise set forth in this provision, all claims, disputes, or controversies of every kind and nature between Borrower(s) and Lender shall be resolved by arbitration including (i) those based on contract, tort or statute, (ii) those arising out of or relating to the transaction(s) evidenced by this agreement, the disclosures relating to this agreement, the Federal Disclosure Statement, any insurance certificates or policies, any documents executed at or about the same time this agreement was executed or (iii) those arising out of, [or] relating to any other prior, proposed or actual loan or extension of credit (and the relationships which result from these transactions or any other previous transactions between Borrower(s) and Lender). Borrower(s) and Lender further agree that all issues and disputes as to the arbitrability of claims must also be resolved by the arbitrator.

"BORROWER(S) AND LENDER UNDERSTAND THAT EACH HAS THE RIGHT TO LITIGATE SUCH DISPUTES THROUGH A COURT, AND BORROWER(S) AND LENDER VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL OR JUDGE TRIAL OF SUCH DISPUTES.

". . . .

"BORROWER(S) AND LENDER AGREE THAT THE ARBITRATOR MAY AWARD PUNITIVE DAMAGES ONLY UNDER CIRCUMSTANCES WHERE A COURT OF COMPETENT JURISDICTION COULD AWARD SUCH DAMAGES. HOWEVER, IN NO EVENT SHALL AN AWARD OF DAMAGES EXCEED FIVE (5) TIMES THE ECONOMIC LOSS SUFFERED BY THE PARTY. BORROWER(S) AND LENDER FURTHER AGREE THAT THE ARBITRATOR SHALL NOT CONDUCT ANY CLASS-WIDE PROCEEDINGS AND WILL BE RESTRICTED TO RESOLVING THE INDIVIDUAL DISPUTES BETWEEN THE PARTIES.

"Borrower(s) and Lender agree that, notwithstanding the foregoing, Lender retains the right to use judicial or self-help remedies (i) to repossess or foreclose on collateral or to enforce the security interests relating to this transaction, and (ii) to pursue collection actions against the Borrower(s) where the amount of the debt is $10,000 or less. The exercise of this right by Lender to pursue judicial or self-help remedies shall not constitute a waiver of Lender's right to compel the arbitration of any claim or dispute subject to this arbitration clause—including the filing of a counterclaim by Borrower(s) in a lawsuit filed by Lender.

"This arbitration clause shall be binding upon the assigns, directors, officers, representatives, employees, parent companies, affiliate companies, subsidiaries and successors of lender, and the administrators, assigns, executors, heirs and representatives of Borrower(s). In addition, the parties agree to submit to arbitration not only the foregoing claims or disputes against each other, but also all claims or disputes they have against (i) all other persons or entities involved with the transactions subject to this clause, (ii) all persons or entities who signed or executed any of the documentation subject to this clause, and (iii) all persons or entities who may be jointly or severally liable to any of the parties to this agreement regarding matters or events relating to the transactions and documentation subject to this clause.

"Borrower(s) and Lender agree that if any provision of this arbitration clause is invalid or unenforceable under the Federal Arbitration Act, the provision which is found to be invalid or unenforceable shall be inapplicable and deemed omitted, but shall not invalidate the remaining provisions of this arbitration clause, and shall not diminish the parties' obligation to arbitrate the disputes subject to this clause."

(Capitalization in original.) Above the signature line on the note and security agreement is written "THIS DOCUMENT EXPLAINED AND UNDERSTOOD BY THE BORROWER"; on the signature line is an "X," presumably Jimmy Ashby's mark, and Mrs. Ashby's signature.

Included with the application for credit-life insurance submitted to Merit Life Insurance by Jimmy Ashby on April 15, 1999, was a separate, stand-alone document, on which was printed another arbitration agreement.³ That arbitration agreement provided, in pertinent part:

"ARBITRATION OF CLAIMS AND WAIVER OF JURY TRIAL

"Merit Life Insurance Co. and I hereby acknowledge that the transactions covered by the Policy being applied for involve interstate commerce. We agree that all claims, disputes, or controversies of every kind and nature between us shall be resolved by arbitration including (i) those based on contract, tort, or statute, (ii) those arising out of or relating to the transaction(s) evidenced by a policy, the disclosures relating to a policy, any documents executed at or about the same time a policy was executed or (iii) the relationships which result from these transactions or any other previous transactions between us. Merit Life Insurance Co. and I further agree that all issues and disputes as to the arbitrability of claims must also be resolved by the arbitrator.

"WE UNDERSTAND THAT EACH HAS THE RIGHT TO LITIGATE SUCH DISPUTES THROUGH A COURT, AND WE VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT WE HAVE TO A JURY TRIAL OR JUDGE TRIAL OF SUCH DISPUTES.

". . . .

"WE AGREE THAT THE ARBITRATOR MAY AWARD PUNITIVE DAMAGES ONLY UNDER CIRCUMSTANCES WHERE A COURT OF COMPETENT JURISDICTION COULD AWARD SUCH DAMAGES. HOWEVER, IN NO EVENT SHALL AN AWARD OF DAMAGES EXCEED FIVE (5) TIMES THE ECONOMIC LOSS SUFFERED BY THE PARTY. MERIT LIFE INSURANCE CO. AND I FURTHER AGREE THAT THE ARBITRATOR SHALL NOT CONDUCT ANY CLASS-WIDE PROCEEDINGS AND WILL BE RESTRICTED TO RESOLVING THE INDIVIDUAL DISPUTES BETWEEN THE PARTIES.

"This arbitration clause shall be binding upon the assigns, directors, officers, representatives, employees, agents, parent companies, affiliated companies, subsidiaries and successors of Merit Life Insurance Co. and my administrators, assigns, executors, heirs and representatives. In addition, the parties agree to submit to arbitration not only the foregoing claims or disputes against each other, but also all claims or disputes they have against (i) all other persons or entities involved with the transactions subject to this clause, (ii) all persons or entities who signed or executed any of the documentation subject to this clause, and (iii) all persons or entities who may be jointly or severally liable to any of the parties to this agreement regarding matters or events relating to the transactions and documentation subject to this clause.

"Merit Life Insurance Co. and I agree that if any provision of this arbitration clause is invalid or unenforceable under the Federal Arbitration Act, the provision which is found to be invalid or unenforceable shall be inapplicable and deemed omitted, but shall not invalidate the remaining provisions of this arbitration clause, and shall not diminish the parties' obligation to

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