Moore v. Bob Howard German Imports, LLC

531 P.3d 657

Steve MOORE, Plaintiff/Appellant,

v.BOB HOWARD GERMAN IMPORTS, LLC, an Oklahoma limited liability company, d/b/a Mercedes-Benz of Oklahoma City and Bob Howard Luxury Auto Group, Defendants/Appellees.

Case No. 120,124

Court of Civil Appeals of Oklahoma, Division No. 4.

Filed: April 12, 2023

Mandate Issued: May 11, 2023

As Corrected: May 19, 2023

Joseph T. Acquaviva, Jr., WILSON, CAIN & ACQUAVIVA, Oklahoma City, Oklahoma, and Kevin Bennett, THE BENNETT LAW FIRM, Oklahoma City, Oklahoma, for Plaintiff/Appellant

Larry D. Ottaway, Michael T. Maloan, FOLIART, HUFF, OTTAWAY & BOTTOM, Oklahoma City, Oklahoma, for Defendants/Appellees

OPINION BY GREGORY C. BLACKWELL, PRESIDING JUDGE:

¶1 Steve Moore appeals the district court's granting of a motion to compel arbitration in favor of Bob Howard German Imports, d/b/a Mercedes-Benz of Oklahoma City and Bob Howard Luxury Auto Group (collectively, the dealership). Moore argues on appeal that the arbitration provision was invalid because it was induced by fraud. On review, we find that the record does not show fraudulent inducement and therefore affirm the trial court's decision.

BACKGROUND

¶2 This case begins with Moore's purchase of a used car.¹ After inquiring about the car and being told it was "certified" and "basically brand new," Moore, a Texas resident, traveled to Oklahoma City to see and possibly purchase the car. After a test drive and further assurances that the car had no negative vehicle history—that is, no prior accidents or repairs—Moore agreed to purchase it.

¶3 Sometime later, Moore alleges to have discovered that, despite the dealership's assertions to the contrary, the car had been involved in a prior accident and had undergone significant repairs, none of which had been disclosed to Moore. Moore filed suit and asserted causes of action for fraud, fraudulent inducement, negligence, violations of Oklahoma's consumer protection act, and "the tort of outrage."²

¶4 During the purchasing process, Moore signed many documents. As relevant here, however, at least two contained provisions allowing either party to compel arbitration in the event of a dispute. They were (1) the sales contract (sometimes referred to as the retail installment sales contract, or RISC) and (2) a dispute resolution clause, contained within a separate one-page agreement also addressing two other matters. The sales contract listed the interest rate that Moore would be paying on his vehicle loan. Moore was interested in obtaining a better interest rate, so he signed this document with the mutual understanding that the dealership would try to obtain a better rate, and if they could, a new sales contract would have to be prepared and signed. A few days later, after Moore returned home to Texas, the dealership was able to obtain a more favorable rate for Moore. The dealership sent Moore an updated, unsigned sales contract that was identical to the first sales contract except for the updated rate and payment information. Moore received the new contract, signed it at his home in Texas, and returned it.

¶5 One month after filing its answer, the dealership filed a motion to compel arbitration consistent with the sales contract and the dispute resolution clause. Moore opposed the motion, claiming that his agreement to the arbitration provisions was fraudulently induced. The trial court held an evidentiary hearing at which Moore and the dealership's finance director, who facilitated the signing of the sales documents, both testified.

¶6 From this testimony, we can distill the following facts as related to the sale. According to the finance director, she handed the dispute resolution clause to Moore and said, "This is the arbitration form and security agreement. If we have any issues between you or I or the dealership that arise, we'll go to arbitration." Similarly, the finance director testified that she handed the sales contract to Moore, stating in pertinent part, "You're going to sign the bottom of the contract for arbitration and then initial the bottom of the page."

¶7 Moore did not dispute that he signed the dispute resolution clause but claimed that he remembered being told that the clause "did not apply" to him. However, on cross-examination, he agreed that he had testified previously that he couldn't recall if the finance director had said that or not. Moore's testimony is also unclear as to whether he claimed to have been told the entire sales contract did not apply to him or just the arbitration provision. The finance director testified that she did not and has never told a customer that a provision did not apply to them.

¶8 After hearing the testimony, the trial court granted the dealership's motion to compel arbitration finding no fraudulent inducement in the execution of the arbitration agreement. The dealership then prepared a proposed order, but Moore would not agree to sign it because the order did not identify which arbitration agreement was to be enforced.³ The dealership filed a motion to settle the journal entry and the trial court held a hearing on the matter. At the hearing Moore asked the trial court to disclose which provision was being enforced because the dispute resolution clause and the arbitration provision in the sales contract contain "different rights, duties, and obligations" that create "an ambiguity." At the end of the hearing the trial court ruled that, because there was a valid agreement to arbitrate, all other issues, including which arbitration provisions applied, were for the arbitrator. Moore appeals.

STANDARD OF REVIEW

¶9 Generally, "a determination of the existence of a valid enforceable agreement to arbitrate is a question of law to be reviewed by a de novo standard." Signature Leasing, LLC v. Buyer's Group, LLC , 2020 OK 50, ¶ 2, 466 P.3d 544, 545. However, such a determination may present mixed questions of law and fact regarding the existence of an arbitration agreement. Bruner v. Timberlane Manor Ltd. Partnership , 2006 OK 90, ¶ 8, 155 P.3d 16, 20. Where the dispute is over the legal conclusion drawn from undisputed facts, de novo review is proper.

Signature Leasing , 2020 OK 50, ¶ 2, 466 P.3d at 545. But where the facts are controverted, a more deferential standard of review is required. Bruner , 2006 OK 90, ¶ 8, 155 P.3d at 20. Thus, we will review trial court's legal conclusion regarding fraudulent inducement de novo , but we will review the trial court's factual findings for clear error.⁴ Under the clear error standard, we will reverse only if the trial court's factual findings lack support in the record or if, after reviewing all the evidence, we are left with a firm conviction that the trial court made a mistake. Atkinson v. Rucker , 2009 OK CIV APP 30, ¶ 8, 209 P.3d 796, 798.

ANALYSIS

¶10 We must decide whether the record supports a finding that Moore was not fraudulently induced into signing the arbitration agreement. Fraud is a generic term with multiple meanings and is divided into actual fraud and constructive fraud. Patel v. OMH Medical Center, Inc. , 1999 OK 33, ¶ 34, 987 P.2d 1185, 1199. The theory of constructive fraud is specifically relevant when dealing with fraudulent inducement of an arbitration provision in a sales contract. Sutton v. David Stanley Chevrolet, Inc. , 2020 OK 87, ¶ 12, 475 P.3d 847, 853. Constructive fraud may be defined as a breach of duty that gives the actor an advantage by misleading another. Patel , 1999 OK 33, ¶ 34, 987 P.2d at 1199.

The Duty to Clear a False Impression

¶11 Moore's fraudulent inducement claim is based on his allegation that the dealership's finance director did not explain to Moore any of the rights, duties, or obligations of the arbitration provisions he executed. In failing to do so, Moore argues, the finance director breached the duty established by the Oklahoma Supreme Court in Sutton v. David Stanley Chevrolet —a case that also involved the sale of a car and a dispute over the arbitration provision. Ultimately, the Supreme Court in Sutton held that the arbitration provision was fraudulently induced because the car dealer breached its duty to "clear the false impression created." Sutton , 2020 OK 87, ¶ 23, 475 P.3d at 858. Thus, the duty then hinges on the fraudulent actor creating a false impression.

¶12 The false impression in Sutton , the Court held, was created by both the finance manager's representations and the peculiar structure of the purchase agreement. Id. ¶ 20. The Court in Sutton based its holding on the following specific facts:

[T]he finance manager stated the purpose of the purchase agreement was for verifying Sutton's personal information, the vehicle information on both vehicles, and how much he would be paying.... Sutton executed the signature lines on the purchase agreement because of the representation he was only verifying information.... The trade-in vehicle section contained information on the trade-in. As with the other sections of the purchase agreement, Sutton's impression was that his signature was needed only for the purpose of verifying this information. However, unlike these other sections of the purchase agreement, a totally unrelated provision is tucked-in right before the apparent signature line for the trade-in vehicle section. This unrelated provision is the [arbitration provision] which is in a much smaller font size.

Id. These "representations of the finance manager combined with the structure of the purchase agreement created a false impression that the purpose of Sutton's signature was to only verify information concerning his trade-in vehicle." Id.

¶13 Here, the document structure and the representations of the dealership's finance director are sufficiently different to distinguish this case from Sutton . The dispute resolution clause in this case is a single-page document with a large, bold-faced title reading "DISPUTE RESOLUTION CLAUSE" in the middle of the page followed by a paragraph of text. Moore signed directly beneath this paragraph. At the...