Steele v. Walser

880 So.2d 1123

Robert L. STEELE v. Maxine WALSER.

1020652.

Supreme Court of Alabama.

October 31, 2003.

H.E. Nix, Jr., and M. Todd Russell of Nix Holtsford Gilliland Higgins & Hitson, P.C., Montgomery, for appellant.

Joseph C. McCorquodale III of McCorquodale & McCorquodale, Jackson, for appellee.

HARWOOD, Justice.

Maxine Walser sued Robert L. Steele, president of S.S. Steele and Company, Inc. (hereinafter "the company"), alleging fraud, mental anguish, and emotional distress arising from the construction of a new house. Steele filed a "Motion to Dismiss and Compel Arbitration," with supporting evidentiary submissions. Walser filed a response in opposition, and Steele filed a reply to Walser's opposition. The trial court entered an order denying Steele's motion, stating, in relevant part:

"Upon consideration thereof, the Court is of the opinion that the acts complained of in the Complaint in this action do not substantially [a]ffect interstate commerce sufficiently to invoke the Federal Arbitration Act as discussed in length in Rogers Foundation Repair, Inc. v. Powell, 748 So.2d 869 (Ala.1999); Sisters of the Visitation v. Cochran Plastering Company, Inc., 775 So.2d 759 (Ala.2000); McConnell Automotive Corp. v. Jackson, (Ala. 2002). It is therefore,

"Ordered and adjudged that defendant's motion to dismiss and compel arbitration is hereby denied."

The standard of review for the denial of a motion to compel arbitration is well settled. This Court stated in SouthTrust Bank v. Ford, 835 So.2d 990, 993 (Ala.2002) (quoting American General Finance, Inc. v. Morton, 812 So.2d 282, 284 (Ala.2001)):

"`This Court reviews the denial of a motion to compel arbitration de novo. Green Tree Fin. Corp. v. Vintson, 753 So.2d 497, 502 (Ala.1999); Patrick Home Ctr., Inc. v. Karr, 730 So.2d 1171, 1172 (Ala.1999). The party seeking to compel arbitration has the initial burden of proving the existence of a contract calling for arbitration and proving that the contract evidences a transaction substantially[¹] affecting interstate commerce. TranSouth Fin. Corp. v. Bell, 739 So.2d 1110, 1114 (Ala.1999).... "[A]fter a motion to compel arbitration has been made and supported, the burden is on the nonmovant to present evidence that the supposed arbitration agreement is not valid or does not apply to the dispute in question." Jim Burke Auto., Inc. v. Beavers, 674 So.2d 1260, 1265 n. 1 (opinion on application for rehearing) (Ala.1995).'"

I. Facts

The record reveals that Walser entered into a contract with the company for the construction of a new house (hereinafter "the construction and sales contract").² Steele stated in his affidavit, which was filed with his motion to dismiss and to compel arbitration, that the company, an Alabama corporation, "is in the business of constructing new homes, and constructing and selling trusses and garage kits." The construction and sales contract was signed by Steele and Walser, and it contained an arbitration clause, which stated:

"Any controversy or claim arising out of or relating to this contract or any other agreement relating in any way to the matters addressed in this contract, or the breech [sic] thereof, and any controversy or claim arising out of any other document or representation relating to the construction and purchase of the purchaser's home, shall be settled by binding arbitration administered by the American Arbitration Association in accordance with its commercial arbitration rules, and judgment on the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof."

Steele stated in his affidavit that "[t]he construction of Ms. Walser's home involved many materials that were purchased from out of state companies, and which were transported to Alabama from those companies." He stated in his affidavit that those materials included: steel strappings, eave strips, felt disks, and rafter ties purchased from Jacksonville, Florida; truss plates purchased from Pompano Beach, Florida; lumber, shutters, wire mesh, lap siding, nails, bath accessories, and doorstops purchased from Atlanta, Georgia; prime trim, lumber, and vent hoods purchased from Charlotte, North Carolina; wall ties purchased from Orlando, Florida; sheathing purchased from Dallas, Texas; lumber purchased from Laurel, Mississippi; waterproofing membrane purchased from Jefferson, Louisiana; columns purchased from Russia, Ohio; strapping for transport purchased from Jackson, Mississippi; and windows purchased from Woodville, Texas. Steele stated in his affidavit that the construction of Walser's house involved the use of machinery and tools purchased from out-of-state companies, including:

"(1) component saw, manufactured by Clary Corporation, located in Texas, and transported to Mobile, Alabama from Texas; (2) component saw and two truss machines, manufactured by Mitek Corporation and transported to Mobile, Alabama from Earth City, Missouri; (3) framing table, manufactured by Merrick Machine Company and transported to Mobile, Alabama from Alda, Nebraska; (4) forklifts, custom manufactured by Heister and transported to Mobile, Alabama from Danville, Illinois; (5) lumber stackers, manufactured by Kenwell Jackson Machine, Inc., and transported to Mobile, Alabama from Dallas, Texas; and (6) chopsaw, manufactured by Whirlwind and transported to Mobile, Alabama from Dallas, Texas."

Steele further stated in his affidavit that "[t]he contract with Ms. Walser also integrally involved other agreements made with either foreign corporations or corporations that do business in multiple states," including the following:

"Payment of the purchase price for the home was handled through an escrow agreement with ... Regions Bank, which upon information and belief is an Alabama corporation which does business all across the Southeast.... Ms. Walser was required as a condition of this contract to obtain homeowners insurance, which she did through Nationwide Insurance Company, which is a foreign corporation doing business all across the United States.... As a condition of the contract, [the company] obtained a termite bond on the home with Killingsworth Pest Control, which is upon information and belief a Florida corporation with offices in various states, including Alabama."

Walser stated in her complaint that Steele represented to her that the plans for the house needed to be modified so that "water pipes would be run over the house instead of under the house, and that constructing the house in this manner would not alter or diminish the value of the home, and that the quality of living would not be altered or diminished in any way." Walser stated in her complaint that Steele knew that those representations "were false or [he] made said representations with a reckless disregard for the truth." She stated in her complaint that she relied on these representations and agreed to the modification. Walser's complaint states that she has been damaged because "the home is defective, not as presented, and is less valuable than represented."

II. Analysis

In his brief to this Court, Steele argues that "[t]he arbitration agreement clearly affects interstate commerce in that many of the components and parts used to build this particular home at issue were originally manufactured in other states and transported to Alabama...." As noted, the trial court, in its order denying Steele's motion to dismiss and to compel arbitration, concluded that the acts complained of in the complaint did not substantially affect interstate commerce sufficiently to invoke the Federal Arbitration Act.

As this Court explained in AmSouth Bank v. Dees, 847 So.2d 923, 929 (Ala.2002):

"Section 2 of the Federal Arbitration Act (`FAA'), 9 U.S.C. § 2, provides in pertinent part:

"`A written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'

"Section 2 preempts conflicting Alabama law, including in particular Ala.Code 1975, § 8-1-41(3), which states that `[a]n agreement to submit a controversy to arbitration' cannot be specifically enforced."

The United States Supreme Court in Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56, 123 S.Ct. 2037, 2040, 156 L.Ed.2d 46 (2003), recently rejected the test we set out in Sisters of the Visitation v. Cochran Plastering Co., 775 So.2d 759 (Ala.2000), which the trial court here relied on in denying Steele's motion to compel arbitration. In Citizens Bank, the Supreme Court held that debt-restructuring agreements, executed in Alabama by Alabama residents, "satisf[ied] the [Federal Arbitration Act's] `involving commerce' test," and explained:

"We have interpreted the term `involving commerce' in the FAA [Federal Arbitration Act] as the functional equivalent of the more familiar term `affecting commerce'—words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power. Allied-Bruce Terminix Cos. [v. Dobson], 513 U.S. [265], at 273-274, 115 S.Ct. 834 [ (1995) ]. Because the statute provides for `the enforcement of arbitration agreements within the full reach of the Commerce Clause,' Perry v. Thomas, 482 U.S. 483, 490, 107 S.Ct. 2520, 96 L.Ed.2d 426 (1987), it is perfectly clear that the FAA encompasses a wider range of transactions than those actually `in commerce'—that is, `within the flow of interstate commerce,' Allied-Bruce Terminix Cos., supra, at 273, 115 S.Ct. 834 (internal quotation marks, citation, and emphasis omitted).

". . . .

". . . Congress' Commerce Clause power `may be exercised in individual cases without showing any specific effect upon interstate commerce' if in the aggregate the economic activity in question would represent `a general practice ... subject to federal control.' Mandeville Island

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