Case Title: TitleMax of Alabama, Inc. v. Falligant

Citation: 

Docket Number: 1190670

State: alabama

Court: Alabama Supreme Court

Date: 2020-12-04T00:00:00Z

Document:
REL: December 4, 2020
Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. 
Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue,
Montgomery, Alabama 36104-3741 ((334) 229-0649), of any typographical or other errors, in order that corrections
may be made before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2020-2021
____________________
1190670
____________________
TitleMax of Alabama, Inc.
v.
Michael Falligant, as next friend of Michelle McElroy
Appeal from Jefferson Circuit Court
(CV-19-904794)
MENDHEIM, Justice.
Michael Falligant, as next friend of Michelle McElroy, who Falligant
alleges is an incapacitated person, filed an action in the Jefferson Circuit
1190670
Court against TitleMax of Alabama, Inc. ("TitleMax"), alleging that
TitleMax wrongfully repossessed and sold McElroy's vehicle.  TitleMax
filed a motion to compel arbitration of Falligant's claims, which the circuit
court denied.  TitleMax appeals.  We reverse and remand.
Facts and Procedural History
Falligant's affidavit testimony is crucial to his claims, brought on
behalf of McElroy, against TitleMax.  Falligant is the director of mental-
health services for the Crisis Center, a nonprofit organization that
"provides a variety of community-based services for people experiencing
personal crisis or mental health issues."  Based on his work at the Crisis
Center, Falligant stated that he has "known Ms. McElroy for several years
at the Crisis Center and ha[s] had numerous occasions to be with her." 
Falligant's affidavit testimony states that McElroy "suffers from a variety
of mental and emotional illnesses which make her extremely vulnerable
and incapable of handling [her] finances."  Falligant's affidavit testimony
further states that, "[t]hroughout [the] 2017 period of time, [McElroy] has
been, in my opinion, mentally incompetent due to her mental illness to
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conduct her own business and financial affairs or to understand business
contracts and terms."
McElroy receives Social Security disability benefits, but the
disability for which she receives the benefits is unclear from the record. 
In his affidavit testimony, Falligant asserts that McElroy is mentally ill,
but he does not state that her mental illness is the basis for her receipt of
Social Security disability benefits.  In a letter dated September 1, 2016,
the Social Security Administration indicated that "C[h]risti Naslund for
... McElroy" will receive $1,251 per month; the letter does not indicate the
reason McElroy is to receive the monthly payments.  Falligant's affidavit
testimony provides the following explanation of a specific service it
provides as related to McElroy:
"In this mission, we also serve as a payee for many of these
mentally ill consumers for their Social S[ecurity] Disability
Benefits.  We receive referrals from Social Security for
individuals who have had a history of instability and mental
illness, and are not competent to handle their own financial
affairs or the SSI benefits or other Social Security benefits
being paid to them.  In that capacity, the Crisis Center serves
as a payee for approximately 300 people in the greater
Birmingham area.  Those persons for which the Crisis Center
serves as payee include Ms. Michelle McElroy.  In my capacity
at the Crisis Center, I am very familiar with that program and
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the payees who we serve.  The Social Security payee program
tries to provide financial management for beneficiaries such as
Ms. McElroy who due to mental illness are incapable of
managing their Social Security or SSI payments.  The Crisis
Center, as the designated payee for Ms. McElroy, receives her
monthly disability check from Social Security on her behalf
and provides financial management for those funds and her
needs."
On May 8, 2017, McElroy entered into a "pawn-ticket" contract with
TitleMax ("the original contract").  McElroy was receiving Social Security
disability benefits at the time she entered into the original contract, and
Christi Naslund was the payee for McElroy's benefits; the Crisis Center
became the payee in the fall of 2017.  Falligant's affidavit testimony
indicates that McElroy "provided to TitleMax documentation showing that
she had [S]ocial [S]ecurity disability income being paid to ... Naslund."  Id. 
Under the original contract, TitleMax agreed to loan McElroy $500 at an
annual percentage interest rate of 170.21% that McElroy was to pay back
on June 7, 2017; the finance charge for the repayment period amounted
to $69.95.  In exchange for the loan, the original contract required
McElroy to deliver to TitleMax the title to her vehicle, a 2007 Toyota
Camry.  The original contract stated that TitleMax would return to
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McElroy the title to her vehicle if McElroy paid the $500 loan principal
and the $69.95 finance charge on June 7, 2017.  The original contract
further stated that, if McElroy did not repay the loan in its entirety on
June 7, 2017, the parties could enter into a new pawn-ticket contract.  The
original contract states that, in order to enter into a new contract,
McElroy "must pay the pawnshop charge provided in your previous pawn
ticket [contract]."
The original contract also contained an arbitration provision.  The
original contract notes that TitleMax drafted the arbitration clause "in
question and answer form so it is easier to understand."  The questions
and answers constituting the arbitration clause fill more than two pages
of the original contract.  Of particular note in this case is the following
question and answer:
"What disputes does the [arbitration] clause cover? 
"....
"This clause covers disputes that would usually be
decided in court and are between [TitleMax] (or a related
party) and you.  In this clause, the word disputes has the
broadest meaning. It includes all claims related to your
application, this pawn ticket [contract], the motor vehicle, the
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pawn, any other pawn or your relationship with us.  It includes
claims related to any prior applications or agreements.  It
includes extensions, renewals, refinancings, or payment plans.
It includes claims related to collections, privacy, and customer
information.  It includes claims related to the validity of this
pawn ticket [contract].  But, it does not include disputes about
the validity, coverage, or scope of this clause or any part of this
clause.  These are for a court and not the [third-party arbiter]
to decide.  Also, this clause does not cover our taking and
selling the vehicle.  It does not cover any individual case you
file to stop us from taking or selling the vehicle."
(Emphasis in original.)
Rather than repay the loan on June 7, 2017, McElroy elected to
enter into new pawn-ticket contracts with TitleMax on six different
occasions:  June 7, 2017; July 7, 2017; August 5, 2017; September 8, 2017;
October 6, 2017; and November 6, 2017 (all contracts, including the
original contract, are hereinafter referred to collectively as "the
contracts").  Each of the subsequent contracts contains the same
arbitration clause as does the original contract.
In his affidavit testimony, Falligant states that "[i]t is my opinion
that throughout [the transaction underlying the original contract] and the
ones that followed in 2017, Ms. McElroy lacked a mental capacity to
understand the contract terms with TitleMax due to her mental illness
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and disability."  Regardless, at  McElroy's request, the Crisis Center, now
serving as the payee of McElroy's Social Security disability benefits,
issued a cashier's check on November 6, 2017, to TitleMax on behalf of
McElroy in the amount of $105.40 in an effort, according to Falligant's
affidavit testimony, "to help Ms. McElroy maintain possession of her
vehicle."  Falligant states in his affidavit that he was unaware at the time
the Crisis Center issued the check that McElroy had entered into the
November 6, 2017, contract with TitleMax.  Falligant's affidavit testimony
states:  "When I learned of these transactions, I requested Alexandria
Parrish of The Evans Law Firm to write TitleMax and further alert them
of Ms. McElroy’s incapacity and her obvious disability since the proof of
income provided was based upon a Social Security [d]isability payee
program"; the referenced letter does not appear in the record.
Ultimately, McElroy failed to pay the balance owed under the
contracts and TitleMax exercised its option to repossess and sell McElroy's
vehicle.
On October 28, 2019, Falligant, as next friend of McElroy, filed a
complaint against TitleMax asserting claims of conversion, "wrongful
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repossession," and "recovery of chattels in specie" and requesting that the
circuit court "declare the contracts between Ms. McElroy and TitleMax to
be void ab initio and award to her restitution of the payments she made
to TitleMax and for the value of her vehicle which was wrongfully taken." 
On December 18, 2019, TitleMax filed an answer to Falligant's
complaint.  On the same day, TitleMax also filed a motion to compel
arbitration of Falligant's claims based on the arbitration clause in the
contracts and in accordance with the relevant provisions of the Federal
Arbitration Act, 9 U.S.C. § 1 et seq. ("the FAA").  On February 3, 2020,
Falligant filed a response to TitleMax's motion to compel arbitration
arguing that McElroy, based on her alleged mental incompetency, lacked
the capacity to enter into the contracts and, thus, that the contracts --
including the arbitration clause -- were void ab initio.  Falligant also
argued that the language of the arbitration clause in the contracts
excluded the claims asserted by Falligant against TitleMax.  On
February 5, 2020, TitleMax filed a reply to Falligant's response arguing
that Falligant had failed to present evidence of McElroy's alleged mental
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incompetency and arguing that the arbitration clause in the contracts did,
in fact, apply to Falligant's claims.
On April 24, 2020, following a hearing, the circuit court entered an
order denying TitleMax's motion to compel arbitration.  In its order, the
circuit court noted that McElroy entered into the original contract, and
the subsequent contracts, "[i]n 2017 after ... McElroy became a recipient
of Social Security [d]isability benefits, based upon her mental disability,
and [after] the Social Security Administration appoint[ed] a payee to
receive and manage funds for ... McElroy...."  In denying TitleMax's
motion, the circuit court stated:
" 'If the validity or scope of an arbitration agreement is
in issue, the parties are entitled to a trial by jury on those
questions.'  Ex parte Williams, 686 So. 2d 1110, 1111 (Ala.
1996), citing Allied-Bruce Terminix Companies v. Dobson, 684
So. 2d 102 (Ala. 1995).
"Here, the issue is whether ... McElroy had the capacity
to enter the agreement for the $500.00 loan.  The validity of
the arbitration agreement depends upon [McElroy's] capacity
to contract.  This court concludes that [TitleMax's] MOTION
is due to be DENIED."
On the same day, the circuit court entered an order setting the matter for
a status conference to occur on May 26, 2020; the order stated, in
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pertinent part, that "a trial scheduling order shall be considered" at the
status conference.  On May 22, 2020, TitleMax appealed the denial of its
motion to compel arbitration.
Standard of Review
" 'Our standard of review of a ruling denying a motion to
compel arbitration is well settled:
" ' " 'This Court reviews de novo
the denial of a motion to compel
arbitration.  Parkway Dodge, Inc. v.
Yarbrough, 779 So. 2d 1205 (Ala. 2000).
A motion to compel arbitration is
analogous to a motion for a summary
judgment.  TranSouth Fin. Corp. v.
Bell, 739 So. 2d 1110, 1114 (Ala. 1999).
The party seeking to compel arbitration
has the burden of proving the existence
of a contract calling for arbitration and
proving that the contract evidences a
transaction 
affecting 
interstate
commerce.  Id.  "[A]fter a motion to
compel arbitration has been made and
supported, the burden is on the
non-movant to present evidence that
the supposed arbitration agreement is
not valid or does not apply to the
dispute in question."  Jim Burke
Automotive, Inc. v. Beavers, 674 So. 2d
1260, 1265 n. 1 (Ala. 1995) (opinion on
application for rehearing).' "
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" 'Elizabeth Homes, L.L.C. v. Gantt, 882 So. 2d 313,
315 (Ala. 2003) (quoting Fleetwood Enters., Inc. v.
Bruno, 784 So. 2d 277, 280 (Ala. 2000)).'
"SSC Montgomery Cedar Crest Operating Co. v. Bolding, 130
So. 3d 1194, 1196 (Ala. 2013)."
Rainbow Cinemas, LLC v. Consolidated Constr. Co. of Alabama, 239
So. 3d 569, 573 (Ala. 2017).
Discussion
The question presented in this case is whether the circuit court
properly determined that Falligant is entitled to a trial on the issue
whether the contracts are void ab initio based on McElroy's alleged mental
incapacity to contract with TitleMax.  Of course, implicit in the circuit
court's determination is that the circuit court, and not an arbitration
proceeding, is the proper forum in which to determine whether the
contracts are void.  In other words, the circuit court implicitly determined
that the parties did not agree to submit the issue of the voidness of the
contracts to arbitration.  TitleMax has not challenged this aspect of the
circuit court's order.  We recognize that TitleMax mentions the issue of
arbitrability generally in its original appellate brief by noting that "[t]he
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FAA requires arbitration agreements to be liberally enforced and any
doubts concerning arbitrability should be weighed in favor of compelling
arbitration."  TitleMax's brief, at p. 14.  However, TitleMax makes no
specific argument concerning the appropriate forum in which to determine
whether the contracts are void in light of the specific facts and issues in
this case.  Instead of addressing that conclusion of the circuit court,
TitleMax simply sets forth generally applicable principles of arbitration
law to establish the uncontroversial position that arbitration agreements
are to be liberally construed and any question as to the arbitrability of an
issue should be resolved in favor of arbitration.1  Accordingly, we will
1We note that TitleMax makes a more in-depth argument relying
upon numerous additional authorities in its reply brief.  See TitleMax's
reply brief, at pp. 3-10.  The argument in TitleMax's reply brief is
essentially a new argument and, thus, will not be considered on appeal. 
See Steele v. Rosenfeld, LLC, 936 So. 2d 488, 493 (Ala. 2005) (" '[A]n
argument may not be raised, nor may an argument be supported by
citations to authority, for the first time in an appellant's reply brief.'
Improved Benevolent & Protective Order of Elks v. Moss, 855 So. 2d 1107,
1111 (Ala. Civ. App. 2003), abrogated on other grounds, Ex parte Full
Circle Distribution, L.L.C., 883 So. 2d 638 (Ala. 2003)."); see also Meigs v.
Estate of Mobley, 134 So. 3d 878, 889 n. 6 (Ala. Civ. App. 2013) (noting
that "Rule 28(a)(10)[, Ala. R. App. P.,] requires compliance in an
appellant's initial brief"). 
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assume that the circuit court is the proper forum in which to determine
whether 
a 
contract 
calling 
for 
arbitration 
exists.2 
 
See 
2Although TitleMax has failed to put this issue before us, we note
that there is authority for concluding that the circuit court, and not an
arbitration proceeding, is the appropriate forum for determining whether
McElroy had the mental capacity to contract with TitleMax.  In Buckeye
Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006), the United States
Supreme Court, citing Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388
U.S. 395 (1967), noted that a challenge to a contract as a whole, as
distinguished from a challenge to an arbitration clause within a contract,
is to be "considered by the arbitrator in the first instance."  546 U.S. at
446.  However, the United States Supreme Court made the following
significant distinction:  "The issue of the contract's validity is different
from the issue whether any agreement between the alleged obligor and
obligee was ever concluded. Our opinion today addresses only the former,
and does not speak to the issue decided in the cases cited by respondents
..., which hold that it is for courts to decide ... whether the signor lacked
the mental capacity to assent, Spahr v. Secco, 330 F.3d 1266 (C.A.10
2003)."  Buckeye Check Cashing, 546 U.S. at 444 n. 1 (emphasis added.)
We note that there is some disagreement among the federal courts
of appeals as to the specific issue of the arbitrability of an individual's
alleged mental incapacity to contract; the following language from Spahr
v. Secco, 330 F.3d 1266, 1272 (10th Cir. 2003), highlights the rift:
"In Primerica [Life Insurance Co. v. Brown, 304 F.3d 469
(5th Cir. 2002)], the Fifth Circuit recently concluded that a
mental capacity defense to a contract that contains an
arbitration clause is 'part of the underlying dispute between
the parties,' and must be submitted to the arbitrator. 304 F.3d
at 472. Relying on Prima Paint [Corp. v. Flood & Conklin Mfg.
Co., 388 U.S. 395 (1967)], the court held that 'unless a defense
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Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) ("The
question whether the parties have submitted a particular dispute to
arbitration, i.e., the 'question of arbitrability,' is 'an issue for judicial
determination [u]nless the parties clearly and unmistakably provide
relates specifically to the arbitration agreement, it must be
submitted to the arbitrator as part of the underlying dispute.'
Id. We disagree, and hold that the rule announced in Prima
Paint does not extend to a case where a party challenges a
contract on the basis that the party lacked the mental capacity
to enter into a contract."
See also generally Burden v. Check Into Cash of Kentucky, LLC, 267 F.3d
483, 488 (6th Cir. 2001) ("Several of our sister circuits have found that
Prima Paint [Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967),] does
not apply to allegations of nonexistent contracts.  See Sphere Drake Ins.
Ltd. v. All Am. Ins. Co., 256 F.3d 587, 590-91 (7th Cir. 2001); Sandvik AB
v. Advent Int'l Corp., 220 F.3d 99, 107 (3d Cir. 2000); Three Valleys [Mun.
Water Dist. v. E.F. Hutton & Co.], 925 F.2d [1136,] 1140 [(9th Cir. 1991)];
Chastain v. Robinson-Humphrey Co., Inc., 957 F.2d 851, 855 (11th Cir.
1992); I.S. Joseph Co. v. Mich. Sugar Co., 803 F.2d 396, 400 (8th Cir.
1986).  ...  [T]he the Fifth Circuit has found that Prima Paint applies even
to contracts that are 'void from ... inception.' See Lawrence v.
Comprehensive Bus. Servs. Co., 833 F.2d 1159, 1162 (5th Cir.1987)." ) .
In the present case, TitleMax has not presented an argument
requiring us to reach a definitive answer as to the issue at this time. 
Based on TitleMax's failure to present an argument, we will assume that
the circuit court is the appropriate forum in which to determine whether
McElroy had the mental capacity to contract with TitleMax.
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otherwise.' AT & T Technologies, Inc. v. Communications Workers, 475
U.S. 643, 649 (1986) (emphasis added) ....").
Assuming the circuit court as the appropriate forum, we next
consider TitleMax's arguments pertaining to whether the contracts are
void ab initio based on McElroy's alleged mental incapacity to contract
with TitleMax.  TitleMax argues that the circuit court erred in concluding
that there is an issue as to the voidness of the contracts and erred in
ordering a trial concerning that issue.  Specifically, TitleMax argues that
Falligant failed to produce sufficient evidence to create an issue of fact
concerning the existence of a contract calling for arbitration.  As a result,
TitleMax argues, the circuit court should have granted TitleMax's motion
to compel arbitration of Falligant's substantive claims rather than
ordering to trial the issue whether the contracts are or are not void.3
3We do not decide in this opinion the scope of the arbitration
agreement as it relates to the claims asserted by Falligant, and neither
did the circuit court.  Our decision is limited to whether the circuit court
erred in determining whether the evidence presented by Falligant is
sufficient to create an issue of fact concerning the voidness of the
contracts.  Whether the scope of the arbitration includes Falligant's claims
is yet to be determined.
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In Premiere Automotive Group, Inc. v. Welch, 794 So. 2d 1078, 1081
(Ala. 2001), this Court stated:  "Under the provisions of § 4 of the [Federal
Arbitration Act], '[i]f the making of the arbitration agreement ... be in
issue, the court shall proceed summarily to the trial thereof.' "  In Allied-
Bruce Terminix Cos. v. Dobson, 684 So. 2d 102, 108 (Ala. 1995), this Court
set forth the process by which a circuit court determines if "the making of
the arbitration agreement" is in issue:
"A court's duty in determining whether the making or the
performance of an agreement to arbitrate is in issue is
analogous to its duty in ruling on a motion for summary
judgment.  Cf. Par–Knit Mills, Inc. v. Stockbridge Fabrics Co.,
Ltd., 636 F.2d 51, 54 n. 9 (3d Cir. 1980).  The court is to hold
a hearing and determine whether there are genuine issues
concerning the making or performance of an agreement to
arbitrate, as a federal court would in proceeding under § 4.
Mere demand for a jury trial is insufficient to create a triable
issue on these questions.  Saturday Evening Post Co. v.
Rumbleseat Press, 816 F.2d 1191, 1196 (7th Cir. 1987) (noting
that the party demanding a jury trial 'can get one only if there
is a triable issue concerning the existence or scope of the
agreement').  As to the threshold issue of whether an
arbitration agreement exists between the parties (the 'making'
of an agreement), federal courts have held:  'To make a
genuine issue entitling the plaintiff to a trial by jury, an
unequivocal denial that the agreement had been made was
needed, and some evidence should have been produced to
substantiate the denial,' Almacenes Fernandez, S.A. v.
Golodetz, 148 F.2d 625, 628 (2d Cir. 1945); and 'the party must
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make at least some showing that under prevailing law, he
would be relieved of his contractual obligation to arbitrate if
his allegations proved to be true [and] he must [also] produce
at least some evidence to substantiate his factual allegations.'
Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961
F.2d 1148, 1154 (5th Cir. 1992)."
This Court stated in Southern Energy Homes, Inc. v. Harcus, 754 So. 2d
622, 626 (Ala. 1999): 
" ' "[A]fter a motion to compel arbitration has been made and
supported, the burden is on the non-movant to present
evidence that the supposed arbitration agreement is not valid
or does not apply to the dispute in question." '  Ryan's Family
Steak Houses, Inc. v. Regelin, 735 So. 2d 454, 457 (Ala. 1999)
(quoting Jim Burke Automotive, Inc. v. Beavers, 674 So. 2d
1260, 1265 n. 1 (Ala. 1995)) (alteration in Regelin)."
In the present case, it is undisputed that TitleMax met its initial
burden of producing the contracts, which contain the arbitration
agreement and are signed by McElroy.  Further, there is no dispute that
the contracts affect interstate commerce.  Accordingly, the burden then
shifted to Falligant to present evidence indicating that the arbitration
agreement is void or does not apply to the dispute in question.  To this
end, Falligant argued that, because of McElroy's alleged mental illness,
McElroy lacked the capacity to enter into the contracts and, thus, the
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contracts, including the arbitration agreement, are void.  To be entitled to
a trial on the question of the voidness of the contracts, Falligant must
have presented evidence sufficient to create a question of fact concerning
McElroy's capacity to contract.
In Stephan v. Millennium Nursing & Rehab Center, Inc., 279 So. 3d
532, 539-40 (Ala. 2018), this Court applied the following principles set
forth in Troy Health & Rehabilitation Center v. McFarland, 187 So. 3d
1112, 1119 (Ala. 2015), to determine whether an individual was mentally
competent at the time an arbitration agreement was signed on his behalf:
"In Troy Health & Rehabilitation Center v. McFarland,
187 So. 3d 1112 (Ala. 2015), this Court discussed the
enforceability of an arbitration agreement and whether a
nursing-home resident was mentally competent when he
executed a durable power of attorney naming his nephew as
his attorney-in-fact.  We find the following reasoning from that
case to be analogous:
" ' "[T]he standard for determining
whether a person is competent to
execute a power of attorney is whether
that person is able to understand and
comprehend his or her actions.  Queen
v. Belcher, 888 So. 2d 472, 477 (Ala.
2003).  The burden initially falls on the
party claiming that the person who
executed the power of attorney was
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incompetent when he or she executed
the power of attorney.  Id.  If, however,
it is proven that the person who
executed the power of attorney was
habitually or permanently incompetent
before executing the power of attorney,
the burden shifts to the other party to
show that the power of attorney was
executed during a lucid interval.  Id."
" 'Yates v. Rathbun, 984 So. 2d 1189, 1195 (Ala.
Civ. App. 2007).'
"187 So. 3d at 1119.
"We held that the presumption is that every person has
the capacity to understand until the contrary is proven.
McFarland, 187 So. 3d at 1119 (citing Yates v. Rathbun, 984
So. 2d 1189, 1195 (Ala. Civ. App. 2007), Thomas v. Neal, 600
So. 2d 1000, 1001 (Ala. 1992), and Hardee v. Hardee, 265 Ala.
669, 93 So. 2d 127 (1956)).  The Court differentiated between
the burden of proving permanent incapacity and temporary
incapacity.  Specifically, we held that proof of incapacity
" ' " ' "at intervals or of a temporary character would
create no presumption that it continued up to the
execution of the instrument, and the burden would
be upon the attacking party to show [incapacity] at
the very time of the transaction." ' "  Wilson v.
Wehunt, 631 So. 2d 991, 996 (Ala. 1994) (quoting
Hall v. Britton, 216 Ala. 265, 267, 113 So. 238, 239
(1927) (emphasis added)).'
"McFarland, 187 So. 3d at 1119.
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"Thus, a party seeking to avoid a contract based on the
defense of incapacity must prove either permanent incapacity
or contractual incapacity at the very time of contracting.  See
Ex parte Chris Langley Timber & Mgmt., Inc., 923 So. 2d
1100, 1106 (Ala. 2005)."
Stephan, 279 So. 3d at 539-40 (footnote omitted).
In his response to TitleMax's motion to compel arbitration and on
appeal, Falligant argues that McElroy lacks the mental capacity to enter
into a contract.  It appears that Falligant is arguing that McElroy suffers
permanent incapacity.  Based on the above authority, Falligant must
present substantial evidence indicating that McElroy does not have the
capacity to "understand and comprehend" her actions at all times.
Falligant's argument that McElroy suffers permanent incapacity is
based, in part, on the fact that McElroy receives Social Security disability
benefits and that a payee has been named to receive and manage those
benefits on McElroy's behalf.  In his brief before this Court, Falligant
states that, "[i]n order to receive these benefits, [McElroy's] mental illness
had to be established to the Social Security Administration."  Falligant's
brief, at p. 19.  Falligant then proceeds to make extensive argument
concerning the method and evidence by which a mental disability is
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proven to the Social Security Administration to receive disability benefits
based on a mental disability.  Falligant also relies upon his own opinion
of McElroy's mental disability, as set forth in his affidavit.
Initially, we note that nothing in the record indicates that McElroy
is receiving Social Security disability benefits based on her mental
disability.  To be sure, there is no question that McElroy is receiving a
monthly Social Security disability benefit, but nothing indicates that she
is receiving those benefits based on a mental disability.  For instance, the
letter from the Social Security Administration informing McElroy of the
amount that she would be receiving per month does not indicate the
reason McElroy is receiving that monthly benefit.  Falligant's affidavit
testimony likewise indicates that McElroy is receiving a monthly Social
Security disability benefit, but nothing in Falligant's affidavit testimony
indicates that McElroy is receiving that benefit based on a finding by the
Social Security Administration that McElroy has a mental disability.  We
note that the circuit court also stated that McElroy "became a recipient of
Social Security Disability benefits, based upon her mental disability,"
(emphasis added), but, again, nothing in the record before us indicates
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that McElroy's receipt of the benefits is actually based on a mental
disability.  The circuit court did not receive any oral testimony; it made its
decision upon the same documentary evidence we have before us. 
Therefore, under our de novo review, the circuit court's factual
determinations are not entitled to any deference.  We cannot assume, as
Falligant does, that McElroy's receipt of Social Security disability benefits
is based on a finding by the Social Security Administration that McElroy
suffers from a mental disability.  Falligant's argument that McElroy is
receiving Social Security disability benefits based on a mental disability
is simply not established in the record; thus, any argument built upon
that premise is unavailing.
Other evidence Falligant says indicates that McElroy suffers from
a mental disability is the fact that the Crisis Center was appointed payee
of McElroy's Social Security disability benefits.  The only evidence
concerning the implications of McElroy's having a payee to receive her
Social Security disability benefit comes from Falligant's affidavit
testimony, which states, in pertinent part:
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"The Social Security payee program tries to provide financial
management for beneficiaries such as Ms. McElroy who due to
mental illness are incapable of managing their Social Security
or SSI payments. ... Each of these payees has exhibited a
history of instability and a lack of competence to handle their
financial affairs, resulting in Social Security making this
assignment through the payee program to the Crisis Center."
As TitleMax points out in its brief, however, the Social Security
Administrative "may  appoint a representative payee even if the
beneficiary is a legally competent individual."  20 C.F.R. § 404.2001(b)(2)
(emphasis added).  Therefore, the mere fact that the Crisis Center was
appointed McElroy's payee does not, in and of itself, indicate that McElroy
is permanently incapacitated.
Falligant's affidavit testimony further includes Falligant's opinion
as to McElroy's mental state and her ability to enter into contracts
generally.  Falligant's affidavit testimony indicates that he has "known
Ms. McElroy for several years" and that his opinion is that McElroy
"suffers from a variety of mental and emotional illnesses which make her
extremely vulnerable and incapable of handling [her] finances." 
Falligant's affidavit testimony states that McElroy "has had a long history
of mental illness."  It is also Falligant's opinion that McElroy "will sign
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anything placed in front of [her]" and that she "lacked a mental capacity
to understand the contract terms with TitleMax due to her mental illness
and disability." 
We cannot say that the evidence presented by Falligant
demonstrates that McElroy lacks the mental capacity to understand and
comprehend her actions.  Reading Falligant's affidavit testimony in a light
most favorable to him, we can perhaps conclude that McElroy suffers from
some undefined mental illness and lacks the mental capacity to
appropriately manage her financial affairs.  We can even conclude that
McElroy is vulnerable and did not understand the terms of the contracts
she entered into with TitleMax.  However, Falligant's affidavit testimony
gives no specifics as to McElroy's mental capacity or whether she is able
to generally understand and comprehend the actions she takes.  The fact
that McElroy did not understand the terms of the contracts is not
necessarily evidence that she cannot understand and comprehend her
actions generally; there are many competent people who would have
difficulty understanding a contract full of legal terms of art.  In fact,
Falligant's affidavit testimony indicating that McElroy sought financial
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help from the Crisis Center to pay off what she owed under the contracts
is an indication that she does have the capacity to understand and
comprehend her actions.
Falligant relies upon Stephan, supra, in support of his argument. 
In Stephan, this Court considered whether a man who had been diagnosed
with dementia had the mental capacity to authorize a family member to
sign an arbitration agreement on his behalf.  In considering whether a
diagnosis of dementia was sufficient from which to conclude that the man
lacked the mental capacity to authorize his family member to sign the
contract, this Court stated:
"This Court recognizes that [the man's] diagnosis of
dementia, by itself, does not establish permanent incapacity.
[Troy Health & Rehab. Ctr. v.] McFarland, 187 So. 3d [1112,]
1120 [(Ala. 2015)] (citing Ex parte Chris Langley Timber [&
Mgmt., Inc.], 923 So. 2d [1100,] 1106 [(Ala. 2005)]).  Although
it may be apparent that [the man's] dementia was chronic in
nature as distinguished from temporary, it is not so apparent
that the state of [the man's] dementia constituted 'permanent
incapacity' as that term is used to describe the mental
incapacity necessary to justify the avoidance of the arbitration
provision.  See Ex parte Chris Langley Timber, 923 So. 2d at
1106.  The Court is unable to discern from the medical records
whether [the man's] mental-health condition had progressed
to the level of 'permanent incapacity' by the time he was
admitted to Crestwood.  Dr. Hitchcock's notes indicate that
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[the man's] dementia caused no more than short-term memory
loss.  The notations during visits to the clinic between August
2014 and September 2015 indicate that [the man] was 'not
oriented'; however, the record also indicates that [the man's]
condition was 'slowly progressive' and that he was able to
follow commands and sometimes converse with the physician.
Thus, this Court cannot conclude that [the appellant] has
overcome her burden of proving that [the man's] condition rose
to the level of permanent incapacity as that term is used under
the law to void a contract."
Stephan, 279 So. 3d at 540.
In Stephan, medical records were submitted into evidence explaining
the specific impact of the man's dementia on him and the mental
capacities that it effected.  This permitted the Court to analyze whether
the man's mental capacity was such that he could understand and
comprehend his actions.  In the present case, however, there is no
evidence explaining the specifics of McElroy's mental illness or how it
affects her mental capacities.  Falligant's affidavit testimony is conclusory
and generally asserts that McElroy is not able to manage her personal
financial affairs and that she did not understand the terms of the
contracts.  But there is no evidence explaining McElroy's mental illness
and whether the reasons she is unable to manage her personal finances
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or understand the terms of the contracts mean that she is unable to
understand and comprehend her actions generally.  The details concerning
the alleged mental incapacity set forth in Stephan are lacking in
Falligant's general and conclusory statements concerning McElroy's
alleged mental incapacity in the present case.
In short, evidence indicating that McElroy suffers from an undefined
mental illness, that she lacks the ability to manage her financial affairs,
and that she did not understand the terms of the contracts is not sufficient
evidence to create a genuine question of fact as to whether she is
permanently incapacitated and, thus, unable to contract; Falligant has
failed to meet his evidentiary burden.4
4We note that TitleMax also argues that the circuit court erred in
granting a trial on the issue of McElroy's mental capacity to contract with
TitleMax because Falligant never requested a jury trial on that issue.  We
need not address that argument, however, based on our determination
that Falligant failed to present sufficient evidence creating a question as
to McElroy's mental capacity to contract.
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Conclusion
TitleMax met its burden of proving that a contract affecting
interstate commerce existed and that that contract was signed by McElroy
and contained an arbitration agreement.  The burden then shifted to
Falligant to prove that the arbitration agreement is void.  Falligant failed
to present substantial evidence indicating that McElroy is permanently
incapacitated and, thus, lacked the mental capacity to enter into the
contracts.  Because Falligant has failed to create a genuine issue of fact,
the circuit court erred in ordering the issue of McElroy's mental capacity
to trial.  Accordingly, we reverse the circuit court's decision and remand
the cause to the circuit court for proceedings consistent with this opinion.
REVERSED AND REMANDED.
Bolin, Wise, and Bryan, JJ., concur.
Shaw and Sellers, JJ., concur in the result.
Parker, C.J., and Stewart, J., dissent.
Mitchell, J., recuses himself.
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