Title: CitiFinancial Corporation, L.L.C., Citicorp Trust Bank, fsb, and First Family Financial Services, Inc. v. Veronica Hunt Peoples

State: alabama

Issuer: Alabama Supreme Court

Document:

REL: 05/18/2007 Citifinancial
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)
242-4621), 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, 2006-2007
_________________________
1051519
_________________________
CitiFinancial Corporation, L.L.C.; Citicorp Trust Bank, fsb;
and First Family Financial Services, Inc.
v.
Veronica Hunt Peoples
Appeal from Clarke Circuit Court
(CV-05-168)
LYONS, Justice.
CitiFinancial Corporation, L.L.C.; Citicorp Trust Bank,
fsb; and First Family Financial Services, Inc. (hereinafter
referred to collectively as "the lenders"), appeal from the
trial 
court's 
order 
denying 
their 
motion 
to 
compel
arbitration.  We reverse and remand.  
I. Factual Background and Procedural History
1051519
2
On July 16, 1997, Veronica Hunt Peoples obtained a loan
from Commercial Credit of Alabama, Inc., now known as
CitiFinancial Corporation, L.L.C.; the loan was secured by a
mortgage on real estate.  The lenders say that the mortgage
conveyed to Commercial Credit an interest in what the parties
believed to be the parcel of land on which Peoples's house was
located.  Peoples contends that the land described in the
mortgage is not the land on which her house is located, but is
instead an adjacent unimproved parcel of land.  The lenders
contend that the parties intended to enter into a real-estate
loan agreement that used as collateral the property on which
Peoples's house is located and that the loan documents
evidence this intent.  Peoples's mortgage was assigned to
Citicorp Trust Bank, fsb, on August 6, 2004.  The lenders say
that they are all either corporate parents, subsidiaries,
affiliates, or assignees of Commercial Credit of Alabama, Inc.
Among the loan documents Peoples executed on July 16,
1997, was a document styled "Disclosure Statement, Note, and
Security Agreement," which included within it a separately
executed arbitration provision.  The arbitration provision
states:
"ARBITRATION PROVISION:
1051519
3
"READ THE FOLLOWING ARBITRATION PROVISION CAREFULLY.
IT LIMITS CERTAIN OF YOUR RIGHTS, INCLUDING YOUR
RIGHT TO OBTAIN REDRESS THROUGH COURT ACTION.  
"In consideration of Lender making the extension of
credit described above and other good and valuable
considerations, the receipt and sufficiency of which
is acknowledged by both parties, it is further
agreed as follows:
"Definitions for Arbitration Provision.  As used in
this 
Arbitration 
Provision 
('Provision'), 
the
following definitions will apply:
"'You' or 'Your' means any or all of Borrower(s) who
execute this Provision, and their heirs, survivors,
assigns, and representatives.
"'We' or 'Us' means Lender, any assignee, together
with 
their 
respective 
corporate 
parents,
subsidiaries, affiliates, predecessors, assignees,
successors, 
employees, 
agents, 
directors, 
and
officers (whether acting in their corporate or
individual capacity).  
"'Credit Transaction' means any one or more past,
present, 
or 
future extension, application, or
inquiry of credit or forbearance of payment such as
a loan, retail credit agreement, or otherwise from
any of Us to You.
"'Claim' means any case, controversy, dispute, tort,
disagreement, lawsuit, or claim now or hereafter
existing between You and Us.  A Claim includes,
without limitation, anything that concerns:
"•
This Provision;
"•
Any past, present, or future Credit
Transaction;
"•
Any 
past, 
present, 
or 
future
insurance, service, or product that is
offered in connection with a Credit
Transaction;
1051519
4
"•
Any documents or instruments that
contain information about any Credit
Transaction, insurance, service, or
product; or
"•
Any act or omission by any of Us
regarding any Claim.
"Agreement to Arbitrate Claims.  Upon written
request by either party that is submitted according
to the applicable rules for arbitration, any Claim,
except those specified below in this Provision,
shall 
be 
resolved 
by 
binding 
arbitration 
in
accordance with (i) the Federal Arbitration Act;
(ii) the Expedited Procedures of the Commercial
Arbitration 
Rules 
of the American Arbitration
Association 
('Administrator'); 
and 
(iii) 
this
Provision, unless we both agree in writing to forgo
arbitration.  ...
"Examples of Claims that are governed by this
Agreement include those involving:
"•
The 
Truth 
in 
Lending 
Act 
and
Regulation Z;
"•
The Equal Credit Opportunity Act and
Regulation B;
"•
State insurance, usury, and lending
laws; 
fraud 
or 
misrepresentation,
including 
claims 
for 
failing 
to
disclose materials facts;
"•
Any other federal or state consumer
protection statute or regulation;
"•
Any 
party's 
execution 
of 
this
Provision and/or willingness to be
bound by its terms and provisions; or
"•
Any dispute about closing, servicing,
collecting, or enforcing a Credit
Transaction.
1051519
5
"Judgment.  Judgment upon any arbitration award may
be entered in any court having jurisdiction.  
"Claims Excluded from Arbitration.  The following
types of matters will not be arbitrated.  This means
that neither one of us can require the other to
arbitrate:
"•
Any action to effect a foreclosure to
transfer title to the property being
foreclosed; or
"•
Any matter where all parties seek
monetary damages in the aggregate of
$15,000.00 or less in total damages
(compensatory and punitive), costs,
and fees.
"However, should either party initiate arbitration,
the other party, at its option, may seek injunctive
and monetary relief in arbitration.  Participating
in a lawsuit or seeking enforcement of this section
by a court shall not waive the right to arbitrate
any other Claim.  
"Additional Terms.  
"....
"Costs.  The cost of any arbitration proceeding
shall be divided as follows:
"•
The party making demand upon the
Administrator for arbitration shall
pay $125.00 to the Administrator when
the demand is made.  
"•
We will pay to the Administrator all
other 
costs 
for 
the 
arbitration
proceeding up to a maximum of one day
(eight hours) of hearings.
"•
All 
costs 
of 
the 
arbitration
proceeding that exceed one day of
hearings will be paid by the non-
prevailing party.  
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6
"•
In 
the 
case 
of 
an 
appeal, 
the
appealing party will pay any costs of
initiating 
an 
appeal. 
 
The 
non-
prevailing party shall pay all costs,
fees, and expenses of the appeal
proceeding and, if applicable, shall
reimburse the prevailing party for the
cost of filing an appeal.  
"•
Each party shall pay his/her own
attorney, expert, and witness fees and
expenses, unless otherwise required by
law.  
"....
"Special Acknowledgments.
"You understand and acknowledge by signing Your name
to this Provision that: (i) a court and/or jury will
not hear or decide any Claim governed by this
Provision, 
(ii) 
the 
funding 
for 
Your 
Credit
Transaction will come in whole or in part from
sources outside this state, which will constitute
interstate commerce within the meaning of the United
States Arbitration Act, 9 U.S.C. §§ 1-9, (iii)
discovery in an arbitration proceeding can be much
more limited than in a court proceeding, (iv) the
arbitrator may not give written reasons for his/her
award, (v) rights to appeal an arbitration award are
very limited, and (vi) the rights of the parties
hereunder may not be exactly mutual in all respects.
"READ THE ABOVE ARBITRATION PROVISION CAREFULLY.  IT
LIMITS CERTAIN OF YOUR RIGHTS, INCLUDING YOUR RIGHT
TO OBTAIN REDRESS THROUGH COURT ACTION."
(All boldface type in original.)
Peoples later defaulted on the loan, and the lenders
proceeded with a nonjudicial foreclosure of the property
described in the mortgage.  Peoples was evicted from her house
1051519
7
as a result of the foreclosure sale.  She contends that that
action was wrongful because, she asserts, the mortgage was
secured by an unimproved lot, not the property on which her
house is located.  
Peoples sued the lenders, alleging in her complaint that
before she filed it, they initiated "foreclosure proceedings
and/or legal process to displace [Peoples] from her home ...
having no legal right to do so."  Her complaint alleges
wrongful foreclosure or collection and seeks injunctive relief
in the form of declaring the foreclosure deed void.  
The lenders filed a motion to compel arbitration and to
stay the proceedings in the trial court pending arbitration,
stating (1) that the Federal Arbitration Act, 9 U.S.C. § 1 et
seq., 
requires 
enforcement 
of 
Peoples's 
arbitration 
provision;
(2) that the agreement to arbitrate is contained in a written
document; (3) that the transaction between Peoples and the
lenders involved and affected interstate commerce; and (4)
that Peoples's claims fall within the broad scope of the
arbitration provision.  In support of their motion, the
lenders submitted a copy of the "Disclosure Statement, Note,
and Security Agreement," which contains the arbitration
provision Peoples executed, and the affidavit of Teresa M.
Baer, a manager for CitiFinancial dealing with licensing and
1051519
8
corporate records.  Baer testified that the parties'
transaction involved interstate commerce and that the copy of
the "Disclosure Statement, Note, and Security Agreement" was
authentic.  
Peoples filed a one-page response to the lenders' motion
to compel arbitration, arguing that the arbitration provision
should not be enforced because, she said, her action is not an
action on contract, but an action for wrongful foreclosure
upon a parcel of land that is not subject to the mortgage, and
because, she said, she cannot afford to pay any of the costs
of arbitration.  She did not submit any supporting evidence
with her response.  The lenders answered Peoples's complaint,
including in their answer an affirmative defense alleging that
Peoples is precluded from proceeding in a judicial forum
because she agreed to arbitrate her claims.  
The trial court denied the motion to compel arbitration
on the separate bases (a) that the lenders had substantially
invoked the litigation process when they instituted the
foreclosure and eviction proceedings, a ground not argued by
Peoples, and (b) that the litigation arises from a matter not
covered by the arbitration provision.  The lenders appealed
from that order. 
II. Standard of Review
1051519
9
"'[T]he standard of review of a trial court's ruling on
a motion to compel arbitration at the instance of either party
is a de novo determination of whether the trial judge erred on
a factual or legal issue to the substantial prejudice of the
party seeking review.'" Vann v. First Cmty. Credit Corp., 834
So. 2d 751, 752-53 (Ala. 2002) (quoting Ex parte Roberson, 749
So. 2d 441, 446 (Ala. 1999)).  Accord, General Motors Corp. v.
Stokes Chevrolet, Inc.,  885 So. 2d 119, 121 (Ala. 2003).  
III. Analysis
The lenders argue a multitude of reasons why we should
reverse the trial court's order denying their motion to compel
arbitration.  We will first address the bases upon which the
trial court denied the motion.  Peoples concedes that the
arbitration provision is in writing, that she signed it, and
that the transaction evidenced by the contract that contains
the arbitration provision involved interstate commerce.  We
therefore need not address those issues argued by the lenders.
A. Whether the Lenders Waived Their Right to Arbitrate
The lenders contend that the trial court erred when it
determined that the lenders had waived their right to
arbitrate because they substantially invoked the litigation
process when they foreclosed on the mortgage and instituted
eviction proceedings.  In Ocwen Loan Servicing, LLC v.
1051519
10
Washington, 939 So. 2d 6, 14 (Ala. 2006), this Court discussed
the burden a party opposing arbitration must bear when it
attempts to show that the movant has waived its right to
arbitration by substantially invoking the litigation process:
"In order to show waiver by litigation-related
conduct, 
the 
party 
opposing 
arbitration 
must
demonstrate 
that the movant has substantially
invoked the litigation process and thereby the
opposing party would be substantially prejudiced if
the case were submitted to arbitration.  Companion
Life Ins. Co. v. Whitesell Mfg., Inc., 670 So. 2d
897, 899 (Ala. 1995).  In Moses H. Cone Memorial
Hospital [v. Mercury Constr. Corp., 460 U.S. 1
(1983)], the United States Supreme Court recognized
a strong federal policy favoring arbitration:
"'The 
[Federal] 
Arbitration 
Act 
establishes
that, as a matter of federal law, any
doubts concerning the scope of arbitrable
issues should be resolved in favor of
arbitration, whether the problem at hand is
the construction of the contract language
itself or an allegation of waiver, delay,
or a like defense to arbitrability.'
"460 U.S. at 24-25, 103 S. Ct. 927 (emphasis added;
footnote omitted).  In order to establish waiver,
the party opposing arbitration bears a heavy burden,
and waiver is not lightly to be inferred.  Thompson
v. Skipper Real Estate Co., 729 So. 2d 287, 292
(Ala. 1999), and cases cited therein."
Moreover, "the issue whether a party has waived the right to
arbitration by its conduct during litigation is a question for
the court and not the arbitrator."  Ocwen Loan Servicing, 939
So. 2d at 14.   
1051519
11
The lenders cannot be considered to have invoked
litigation by foreclosing on the mortgage for two reasons.
First, 
the 
arbitration 
provision 
specifically 
excludes
foreclosure from matters that must be arbitrated.  Second, the
foreclosure was nonjudicial; it involved no litigation at all.
Therefore, the only proceeding that involved any litigation
before Peoples filed her complaint was the separate eviction
proceeding instituted by the lenders after they had foreclosed
on the mortgage.  
We examined a similar situation in Conseco Finance Corp.-
Alabama v. Salter, 846 So. 2d 1077 (Ala. 2002).  In Salter,
the purchaser of a mobile home signed a contract containing an
arbitration clause that gave the finance company the right to
use judicial or nonjudicial relief to enforce a security
agreement relating to the mobile home or to foreclose on the
home.  After the purchaser defaulted, the finance company
sued, seeking possession of the mobile home or damages for the
purchaser's 
retention 
of 
the 
home. 
 
The 
purchaser
counterclaimed, alleging negligence and the tort of outrage
based upon the finance company's efforts to collect delinquent
payments.  The finance company then filed a motion to compel
the purchaser to arbitrate his counterclaim, but the trial
court denied the motion on the basis that the finance company
1051519
12
had substantially invoked the litigation process and had
waived its right to arbitrate when it filed the action.  In
Companion Life Insurance Co. v. Whitesell Manufacturing, Inc.,
670 So. 2d 897, 899 (Ala. 1995), this Court said:
"Whether a party's participation in an action
amounts to an enforceable waiver of its right to
arbitrate depends on whether the participation
bespeaks an intention to abandon the right in favor
of the judicial process and, if so, whether the
opposing party would be prejudiced by a subsequent
order requiring it to submit to arbitration.  No
rigid rule exists for determining what constitutes
a 
waiver 
of 
the 
right 
to 
arbitrate; 
the
determination as to whether there has been a waiver
must, instead, be based on the particular facts of
each case."
We reversed the trial court's order denying the motion to
compel, noting that the parties' arbitration agreement
specifically allowed the finance company to file the action to
regain possession of the mobile home.  We held in Salter that
because "[t]he relief requested by [the finance company] in
its complaint [fell] within the parameters of the judicial
relief specifically agreed to by [the purchaser]," the
company's action did not "'bespeak an intention to abandon the
right [of arbitration] in favor of the judicial process.'"
846 So. 2d at 1081 (quoting First Family Fin. Servs., Inc. v.
Jackson, 786 So. 2d 1121, 1128 (Ala. 2000)).  
The arbitration provision signed by Peoples specifically
excludes 
from 
arbitration 
"[a]ny 
action 
to 
effect 
a
1051519
13
foreclosure 
to 
transfer 
title 
to 
the 
property 
being
foreclosed."  (Emphasis added.)  The verb "effect" means "to
cause to come into being"; or "to bring about often by
surmounting 
obstacles." 
 
Merriam-Webster's 
Collegiate
Dictionary 397 (11th ed. 2003).  Once the lenders conducted
the nonjudicial foreclosure and Peoples did not vacate the
property, the unlawful-detainer action would have been
necessary to allow the lenders to bring about the complete
relief that should have been obtained by the nonjudicial
foreclosure, that is, surmounting the obstacle of the
mortgagor's failure to surrender possession to the mortgagee.
As was the case in Salter, the relief sought by the lenders
here fell "within the parameters of the judicial relief
specifically agreed to by [Peoples]."  846 So. 2d at 1081.
Indeed, had Peoples considered the lenders' commencement of
the unlawful-detainer action as a waiver of their right to
arbitrate, she could have counterclaimed, but we have no
indication that she did so.  Peoples has not presented any
evidence concerning the eviction process; the record reflects
only that it occurred.  In fact, as previously noted, Peoples
did not even assert this ground as a basis for the
unenforceability of the arbitration provision.  In all events,
Peoples did not bear her burden of proving that the lenders
1051519
14
substantially invoked the litigation process by instituting
the separate eviction proceeding; therefore, we conclude that
the lenders did not waive their right to arbitration.  
B. Who Is Authorized to Decide Arbitrability
The lenders argue that the trial court also erred when it
determined that Peoples's claims were not "covered by"
arbitration.  They contend that the arbitration provision
clearly reflects the parties' intention to arbitrate the
question of arbitrability, and, therefore, that that question
must be submitted to arbitration.  In Smith v. Mark Dodge,
Inc., 934 So. 2d 375, 379 (Ala. 2006), we stated:
"A threshold issue is which forum should decide
the question of the scope of the arbitration
agreement.  In First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938, 115 S. Ct. 1920, 131 L. Ed. 2d
985 (1995), the United States Supreme Court stated:
"'Just as the arbitrability of the merits
of a dispute depends upon whether the
parties agreed to arbitrate that dispute,
see, e.g., Mastrobuono v. Shearson Lehman
Hutton, Inc., [514 U.S. 52, 57 (1995)];
Mitsubishi 
Motors 
Corp. 
v. 
Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626
(1985), so the question "who has the
primary power to decide arbitrability"
turns upon what the parties agreed about
that matter.'
"514 U.S. at 943, 115 S. Ct. 1920.  However, the
Court warned, '[c]ourts should not assume that the
parties agreed to arbitrate arbitrability unless
there is "clea[r] and unmistakabl[e]" evidence that
they did so.'  514 U.S. at 944, 115 S. Ct. 1920
(quoting AT&T Techs. v. Communications Workers, 475
1051519
15
U.S. 643, 649, 106 S. Ct. 1415, 89 L. Ed. 2d 648
(1986)).  This Court has similarly required that
trial courts order arbitration of the issue of
arbitrability when the plain language of the
agreement unquestionably shows that the parties
agreed to arbitrate the issue of arbitrability.
Polaris Sales, Inc. v. Heritage Imports, Inc., 879
So. 2d 1129, 1133-34 (Ala. 2003); and Ex parte
Perry, 744 So. 2d 859, 866-67 (Ala. 1999)."
The question presented by this case is whether the
arbitration provision clearly and unmistakably provides that
the arbitrator shall decide arbitrability.  The lenders argue
that incorporation into the arbitration provision of the
Commercial Rules of the American Arbitration Association,
conferring authority to decide such issues on the arbitrator,
evidences such an intent.  This Court has not decided whether
the incorporation of such rules is sufficient to show the
parties' intent to delegate the issue of arbitrability to an
arbitrator, but federal courts have so held.  In Terminix
International Co. v. Palmer Ranch Ltd. Partnership, 432 F.3d
1327, 1332 (11th Cir. 2005), the United States Court of
Appeals for the Eleventh Circuit stated:
"[T]he parties have agreed that the arbitrator will
[decide the issue of arbitrability] by providing (in
all three of the arbitration clauses at issue) that
'arbitration shall be conducted in accordance with
the Commercial Arbitration Rules then in force of
the American Arbitration Association' (AAA).  AAA
1051519
On the date this opinion was released, the quoted
1
language appeared in Rule 7, not Rule 8.  
On the date this opinion was released, the Commercial
2
Arbitration Rules could be found, not at this Web address, but
at http://www.adr.org/sp.asp?id=22440.
See note 1 above.  
3
16
Rule 
8(a),
 
in 
turn, 
provides 
that 
'[t]he
[1]
arbitrator shall have the power to rule on his or
her own jurisdiction, including any objections with
respect to the existence, scope or validity of the
arbitration agreement.'  Am. Arbitration Ass'n,
Commercial 
Arbitration 
Rules, 
http://www.adr.org/sp.
asp?id=22173#Toc13029601.
  By incorporating the
[2]
AAA Rules, including Rule 8,
 into their agreement,
[3]
the parties clearly and unmistakably agreed that the
arbitrator should decide whether the arbitration
clause is valid.  See, e.g., Contec Corp. v. Remote
Solution, Co., 398 F.3d 205, 208 (2d Cir. 2005)
('when ... parties explicitly incorporate rules that
empower 
an 
arbitrator 
to 
decide 
issues 
of
arbitrability, the incorporation serves as clear and
unmistakable evidence of the parties' intent to
delegate such issues to an arbitrator'); Apollo
Computer, Inc. v. Berg, 886 F.2d 469, 473 (1st Cir.
1989) ('By contracting to have all disputes resolved
according to the Rules of the ICC ..., Apollo agreed
to be bound by Articles 8.3 and 8.4. These
provisions 
clearly and unmistakably allow the
arbitrator to determine her own jurisdiction when,
as here, there exists a prima facie agreement to
arbitrate whose continued existence and validity is
being questioned.')...." 
We find the reasoning of the Eleventh Circuit and other
Circuit Courts of Appeal that have addressed this issue
persuasive and hold that an arbitration provision that
incorporates rules that provide for the arbitrator to decide
issues of arbitrability clearly and unmistakably evidences the
1051519
17
parties' intent to arbitrate the scope of the arbitration
provision.  We therefore conclude that under the arbitration
provision Peoples executed, issues of arbitrability are to be
decided by the arbitrator.  
C. Unconscionability
In her response to the lenders' motion to compel
arbitration, Peoples makes the bare assertion that she "cannot
pay any cost of arbitration."  Although the trial court did
not deny the motion to compel arbitration on this basis, we
address it because 
"this Court will affirm a judgment for any reason
supported 
by 
the 
record 
that 
satisfies 
the
requirements of due process, Taylor v. Stevenson,
820 So. 2d 810, 814 (Ala. 2001), even where the
ground upon which we affirm was not argued before
the trial court or this Court. Ex parte CTB, Inc.,
782 So. 2d 188, 191 (Ala. 2000)."  
Smith v. Mark Dodge, Inc., 934 So. 2d at 380.  Here, Peoples
argued to the trial court during the hearing on the motion to
compel arbitration that she could not pay the costs of
arbitration, and the lenders argued to this Court that
Peoples's alleged inability to pay such costs does not render
the arbitration provision unconscionable.  
Here, the arbitration provision provides that the cost to
initiate arbitration--to be paid by Peoples--is $125.  The
provision assigns to the lenders the responsibility for the
1051519
18
costs of a hearing up to a maximum of eight hours, then to the
nonprevailing party any costs exceeding one day of hearings.
We examined a similar provision in Commercial Credit Corp. v.
Leggett, 744 So. 2d 890, 898 (Ala. 1999), in which we stated:
"It is difficult to see how a party who truly
believes she has a meritorious cause of action can
view these provisions as particularly onerous.
Leggett would initially have to pay only $125.00 to
commence the process.  Subsequently, the defendants
would pay for the first day of proceedings,
regardless of the outcome.  The losing party would
then pay for the remainder of the proceedings.  In
fact, the only parties disadvantaged by these cost
provisions are the losing parties--whoever they
might be."
Moreover, we have stated that "unconscionability is an
affirmative defense, and the party asserting the defense bears
the burden of proving unconscionability."  Blue Cross Blue
Shield of Alabama v. Rigas, 923 So. 2d 1077, 1086 (Ala. 2005).
Peoples presented no evidence that would support her claim
that she could not pay the $125 filing fee to initiate
arbitration. 
IV. Conclusion
The trial court erred in denying the lenders' motion to
compel arbitration.  We therefore reverse the order and remand
the case.  On remand, the trial court shall grant the motion
to compel arbitration and either issue a stay of these
proceedings pending arbitration or dismiss the case.  
1051519
19
REVERSED AND REMANDED WITH DIRECTIONS.
Cobb, C.J., and See, Woodall, Stuart, Smith, Bolin, and
Parker, JJ., concur.
Murdock, J., concurs in the result.
1051519
20
MURDOCK, Justice (concurring in the result).
I concur in the result reached by the main opinion.  I
cannot, however, agree with the analysis by which that result
is reached, and I write separately to address two sections of
that analysis. 
A.  Did the lenders waive their right to arbitrate?
The main opinion reasons that the lenders did not waive
their right to arbitration by pursuing a judicial eviction of
the borrower because the parties' arbitration agreement
contains an express exclusionary clause applicable to "any
action to effect a foreclosure to transfer title to the
property being foreclosed."  If this exclusion were worded so
as to apply to actions to "give effect" to a foreclosure, then
I could come closer to agreeing with the main opinion that
this exclusion specifically encompassed the lenders' eviction
action.
The exclusion does not apply, however, to actions to
"give effect" to a foreclosure; rather, it applies to actions
to "effect" a foreclosure.  The object of the word "effect" is
"foreclosure," not "eviction."  A foreclosure, of course, is
a process by which title to property is transferred; it does
not accomplish a physical eviction of the borrower (indeed,
the arbitration agreement itself explains that the exclusion
1051519
21
at issue applies to "a foreclosure to transfer title").  In
light of the meaning of the word "effect" as explained in the
main opinion, and the fact that the object of that word in the
arbitration agreement is "a foreclosure to transfer title," I
am not persuaded that the eviction proceedings pursued by the
lenders fell "'within the parameters of the judicial relief
specifically agreed to by [Peoples].'"  ___ So. 2d at ___
(quoting Conseco Fin. Corp.-Alabama v. Salter, 846 So. 2d
1077, 1081 (Ala. 2002)).
Notwithstanding the fact that the eviction action may not
have fallen within the express exception relied upon by the
main opinion, I believe the main opinion's conclusion that the
lenders did not waive their right to arbitrate nonetheless is
correct.  I come to this conclusion because, exclusions aside,
the eviction action did not fall within the affirmative reach
of the arbitration agreement in the first place.
By the time an eviction action is initiated by a
mortgagee, the mortgagee already has achieved the transfer of
title to itself, along with the corresponding right to
possession of the property.  Having an arbitrator reaffirm
that right to possession would add nothing.  In order to "give
effect" to that right -- i.e., to forcibly, physically remove
the mortgagor from the property -- it is necessary in any
1051519
22
event for the mortgagee to invoke the assistance of the courts
and law enforcement.  I do not believe the arbitration
agreement in the present case reasonably can be construed as
intending to require the parties to seek through arbitration
something that cannot be provided through arbitration, i.e.,
the forcible, physical removal of the plaintiff from the
property.  Since the mortgagee could obtain that removal
outside the provisions of the arbitration agreement (indeed,
only outside those provisions), the fact that the mortgagee
did so cannot logically be considered a waiver of any rights
under those provisions. 
B.  Who decides the issue of arbitrability?
Upon my initial review of this case, I questioned on what
basis this Court could turn over to an arbitrator the question
of the arbitrability of a dispute involving the alleged
wrongful eviction of a plaintiff from property where there is
not substantial evidence that the property from which she was
removed is covered by the mortgage to which the controlling
arbitration agreement applies.  Without such evidence, on what
basis could any tribunal reasonably conclude that the
arbitration agreement pertaining to the mortgage and the
mortgaged property governs the lenders' eviction of the
plaintiff from that property?  In other words, whether the
1051519
See, e.g., Capitol Chevrolet & Imports, Inc. v. Payne,
4
876 So. 2d 1106, 1110-11 (Ala. 2003) (See, J., dissenting)
(noting that, although it was possible to construe contract
language so as to limit arbitration to the initial sale of a
vehicle, it was "also reasonable to construe the language in
the arbitration agreement" (emphasis added) as applying to the
particular dispute at issue in that case and, with that
premise stated, concluding that the court should enforce the
further provisions in the arbitration agreement that "'any
question regarding whether a particular controversy is subject
to arbitration shall be decided by the Arbitrator'").   
23
issue is the arbitrability of a dispute or the issue is who
will decide the arbitrability of a dispute, on what basis are
we to distinguish this case from any case in which a lender
simply takes it upon itself to "foreclose" upon some parcel of
land (or for that matter, some automobile or other personal
property) that is not covered by the arbitration agreement?
At least for purposes of the present case, the answer
lies in the particular provisions of the arbitration agreement
at issue.  Those provisions are such that they satisfy each
step of what logically must be a two-step inquiry, namely:
(1) whether the arbitration agreement reasonably may be
construed -- that is, is it reasonably susceptible of being
construed -- as requiring arbitration of the dispute at issue,
and (2) if so, whether the arbitration agreement also provides
that it is to be the arbitrator who shall decide whether in
fact the arbitration agreement shall be construed as requiring
the parties to arbitrate the dispute.4
1051519
Although the definition of a "Claim" is indeed very
5
broad, covering by its terms any dispute now or at any time in
the future between the parties, the only question presented in
this appeal concerns the application of the arbitration
agreement to the particular dispute at issue.  That dispute
concerns the manner in which the lenders chose to protect
themselves from default under the loan agreement.  As to
whether such a dispute was intended by the parties to be
covered by their arbitration agreement, I note that there is
no evidence that the lenders' effort to foreclose upon and
evict Peoples from her home was a result of anything other
than a good-faith error on its part as to which parcel of real
property had been given as security for the loan agreement.
Further, Peoples does not contend that this dispute is not a
"controversy ... arising out of [the] contract" containing the
arbitration clause, or out of the "transaction" evidenced by
that contract.  See 9 U.S.C. § 2 (Federal Arbitration Act).
Nor is this a case in which the evidence indicates that
application of the arbitration agreement to the disputed issue
would be unconscionable.
24
As to the first step, the contractual provisions in this
particular case are in fact worded broadly enough reasonably
to be susceptible of a construction that covers the dispute at
issue.  To begin, the contract provides that, with certain
exceptions, "any Claim ... shall be resolved by binding
arbitration."  A "Claim" is defined in the arbitration
agreement very broadly to include "any case, controversy,
dispute, tort, disagreement, lawsuit, or claim now or
hereafter 
existing 
between 
[the 
lenders] 
and 
[the
plaintiff]."
 Further, the definition of "Claim" in the
5
contract states that "[a] claim includes, without limitation,
anything that concerns:  ...  Any documents or instruments
1051519
25
that contain information about any Credit Transaction ...."
"Credit Transaction" is itself broadly defined as any "past,
present, or future extension, application, or inquiry of
credit ... such as a loan."  Moreover, the agreement provides
the following "example" of a "Claim":  "Any dispute about
closing, 
servicing, 
collecting, or enforcing a Credit
Transaction."  I conclude that these contractual provisions
reasonably are susceptible of being construed as requiring the
parties to arbitrate the dispute at issue.  See Ex parte
Discount Foods, Inc., 789 So. 2d 842, 844 (Ala. 2001)
("Whether an arbitration provision encompasses a party's claim
is 
a 
matter 
of 
contract 
interpretation. 
... 
 
That
interpretation is guided by the intent of the parties ....");
Koullas v. Ramsey, 683 So. 2d 415, 417 (Ala. 1996) (explaining
that the court will not apply arbitration provisions to
matters not "contemplated by the parties when they entered
their contract").  See also Moses H. Cone Mem'l Hosp. v.
Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983) (holding that
"any doubts" as to the intent of the parties to subject a
matter to arbitration "should be resolved in favor of
arbitration"); Jones v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 604 So. 2d 332, 340 (Ala. 1991).
1051519
Unlike the presumption in favor of arbitration of the
6
underlying dispute, see Moses H. Cone Mem'l Hosp., supra,
there is no presumption in favor of the arbitrator when the
question is who should decide whether that dispute is
arbitrable.  First Options of Chicago, Inc. v. Kaplan, 514
U.S. at 944-45.  Indeed, the question of "who decides" is
governed by the opposite presumption, i.e., a presumption that
the court should decide.  Id. at 945.
26
I turn then to the second step of the analysis: whether
the parties' contract does in fact provide that it is to be
the arbitrator, rather than a court, who is to actually
construe the arbitration agreement and determine whether it
requires the parties to arbitrate their dispute.  As to this
step, it is not enough that the parties "objectively revealed
an intent to subject the arbitrability issue to arbitration."
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944
(1995).  As the main opinion notes, the question that must be
answered in this regard is whether the "'the plain language of
the 
[arbitration] 
agreement 
unquestionably 
shows,'" 
or
"'"'clea[rly] and unmistakabl[y]' evidence[s],"'" "'"that the
parties agreed to arbitrate arbitrability."'"  ___ So. 2d at
___ (quoting Smith v. Mark Dodge, Inc., 934 So. 2d 375, 379
(Ala. 2006), in turn quoting First Options of Chicago v.
Kaplan, 514 U.S. at 944).6
The main opinion addresses the foregoing question by
relying upon the fact that the arbitration agreement contains
1051519
27
a general incorporation by reference of the  "Commercial Rules
of the American Arbitration Association," without setting
forth any of the specific provisions of those Rules.   In this
case, however, it is not necessary to depend upon this
incorporation by reference to determine that the parties'
contract 
"unquestionably 
show[s]" 
their 
agreement 
to 
arbitrate
the issue of arbitrability.  Instead, we may proceed on the
more direct basis provided by the explicit terms of the
contract before us requiring "Claims" to be arbitrated and
defining a "Claim" to include "anything that concerns:  This
Provision," where "This Provision" is in fact the provision
that undertakes to define what is and is not to be arbitrated.