Case Name: Michelle FRADELLA and GBS Properties, LLC, d/b/a Prudential Gardner Realtors ("Prudential Gardner"), Appellants, v. James E. SEABERRY and Wife, Rosella M. Seaberry, Appellees
Court: Mississippi Court of Appeals
Jurisdiction: Mississippi
Decision Date: 2006-04-11
Citations: 952 So. 2d 195
Docket Number: No. 2005-CA-00404-COA
Parties: Michelle FRADELLA and GBS Properties, LLC, d/b/a Prudential Gardner Realtors (“Prudential Gardner”), Appellants, v. James E. SEABERRY and Wife, Rosella M. Seaberry, Appellees.
Judges: MYERS, P.J., AND ROBERTS, J., CONCUR. IRVING, J., CONCURS IN RESULT. BARNES, J., CONCURS IN PART AND IN RESULT. GRIFFIS, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY LEE, P.J., SOUTHWICK, CHANDLER AND ISHEE, JJ.
Reporter: Southern Reporter, Second Series
Volume: 952
Pages: 195–206

Head Matter:
Michelle FRADELLA and GBS Properties, LLC, d/b/a Prudential Gardner Realtors (“Prudential Gardner”), Appellants, v. James E. SEABERRY and Wife, Rosella M. Seaberry, Appellees.
No. 2005-CA-00404-COA.
Court of Appeals of Mississippi.
April 11, 2006.
Rehearing Denied Aug. 1, 2006.
Richard Eugene Cassady, Frank D. Montague, Hattiesburg, W. Edward Hat-ten, Gulfport, attorneys for appellants.
Richard C. Fitzpatrick, attorney for ap-pellees.

Opinion:
KING, C.J., for the Court.
¶ 1. Michelle Fradella (Fradella) and GBS Properties, LLC d/b/a Prudential Gardener Realtors (Prudential Gardner) appeal the decision of the Pearl River County Chancery Court denying their motion to compel arbitration. Finding no error, we affirm and remand to the trial court.
STATEMENT OF FACTS
¶ 2. On February 29, 2004, James and Rosella Seaberry (Seaberrys), acting through Fradella, an agent with Prudential Gardner Realtors, submitted a written offer to purchase a house and 18 acres of land at 31 Global Lane in Picayune, Mississippi, from Sammy and Joy Germany (Germanys). Because the Germanys were also represented by Fradella, the Seaber-rys signed a dual agency acceptance form that day. On March 2, 2004, the Germa-nys submitted a written counteroffer to sell to the Seaberrys 16.68 acres and the house. The Seaberrys executed a written acceptance of the counteroffer on March 3, 2004. On April 19, 2004, the Seaberrys executed a contract for the sale and purchase of real estate (Seaberry-Germany contract) of the Global Lane property. The legal description of the property set forth in the Seaberry-Germany contract was "As Per Title". Each of these documents was a realty form prepared by Fra-della.
¶ 3. The Seaberrys closed on the Picayune property on April 26, 2004. After the closing, the Seaberrys discovered several alleged discrepancies between what they bargained for and what they received. Aggrieved by these alleged discrepancies, the Seaberrys initiated suit on September 28, 2004, in the Pearl River County Chancery Court against the sellers, Fradella, Prudential Gardner, and several other parties involved in their purchase. Aggrieved by the chancellor's denial of their motion to compel, Fradella and Prudential Gardner raise two issues on appeal:
1. WHETHER THE LOWER COURT ERRED IN DENYING THE MOTION TO COMPEL ARBITRATION, WHEN IT FOUND THAT PARAGRAPH 11 AND PARAGRAPH 26 OF THE CONTRACT CREATED AN AMBIGUITY, THEREBY RENDERING THE MANDATORY ARBITRATION CLAUSE OF THE CONTRACT INEFFECTIVE; AND
2. WHETHER THE LOWER COURT ERRED WHEN IT FOUND THAT NEITHER FRADELLA NOR PRUDENTIAL GARDNER ARE SIGNATORIES TO THE CONTRACT, THEREFORE PREVENTING THEM FROM OBTAINING THE BENEFIT OF THE MANDATORY ARBITRATION CLAUSE OF THE CONTRACT SIGNED BY THE SEABERRYS.
Finding no error, the chancellor's denial of the motion to compel arbitration is affirmed.
STANDARD OF REVIEW
¶ 4. A lower court's grant or denial of a motion to compel arbitration is reviewed de novo. Pre-Paid Legal Services, Inc. v. Battle, 873 So.2d 79, 82(¶ 8) (Miss.2004).
DISCUSSION
¶ 5. This case presents us with a unique factual scenario. Fradella and Prudential Gardner, who were not parties to the Seaberry-Germany contract, seek to enforce an arbitration clause contained within paragraph 26 of the Contract. Paragraph 26 reads:
MANDATORY ARBITRATION: Both buyer and seller (hereinafter "parties") acknowledge, understand and agree that (1) may controversy, claim, action or inaction arising out of, or relating to, that "purchase" set out herein, as against the listing company or selling company and/or their agents or representatives (hereinafter "company") involved in this transaction shall be resolved by arbitration administered by the American Arbitration Association in accordance with its arbitration rules, and (2) judgment on the award rendered by the arbitrator(s) may. be entered in any court of competent jurisdiction, and (3)the arbitration proceeding shall be conducted within the county in which the dispute arose or such other location as agreed upon by the parties, and (4) if fault is found, the award of damages will conform to the terms and conditions of the "purchase" and (5) this transaction involves interstate commerce such that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (1947 as amended) shall govern the interpretation and enforcement of this agreement along with all claims between or among the parties and the company(ies) involved in this transaction.
The Federal Arbitration Act (FAA), 9 U.S.C. § 2 (2000), provides that:
A written provision in any . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract . or refusal, shall be valid, irrevocable, and enforce able, save upon such grounds as exist at law or in equity.
¶ 6. There is a liberal federal policy favoring arbitration agreements, based on section 2 of the FAA. Terminix International Inc. v. Rice, 904 So.2d 1051, 1054(¶ 7) (Miss.2004). Therefore, we will always respect the right of an individual or an entity to agree in advance of a dispute to arbitration or other alternative dispute resolution. Id. However, arbitration is contractual by nature and a party cannot be required to submit to arbitration any dispute to which he or she has not agreed so to submit. Thomson-CSF, S.A. v. American Arbitration Association, 64 F.3d 773, 776 (2nd Cir.1995). "Thus while there is a strong and liberal federal policy favoring arbitration agreements, such agreements must not be so broadly construed as to encompass claims and parties that were not intended by the original contract." Id.
¶ 7. In considering motions to compel arbitration, this Court must first determine whether the parties' dispute is within the scope of a valid arbitration agreement. Terminix Intern., Inc., 904 So.2d at 1055(¶ 8). The next step, then, is to consider whether legal constraints external to the parties' agreement foreclosed arbitration of those claims. Id. (citing Sullivan v. Mounger, 882 So.2d 129, 132(¶ 14) (Miss.2004)). In order to determine whether legal constraints exist which would preclude arbitration, courts should generally apply ordinary state-law contract principles. East Ford, Inc. v. Taylor, 826 So.2d 709, 713-14(¶ 12) (Miss.2002).
¶ 8. Although Fradella and Prudential Gardner treat paragraph 26 as a provision of the Seaberry-Germany contract, we find it to be a separate contract all together. The essence of the Seaberry-Germany contract was for the sale of land from the Germanys to the Seaberrys. Paragraph 26, however, mandates arbitration between either the Germanys or the Seaberrys against Fradella or Prudential Gardner, non-parties to the Seaberry-Germany contract. This paragraph was non-essential to the heart of the Seaberry-Germany contract, and was solely for the benefit of the non-party dual agent. It must thus be analyzed as a separate contract, triggering an elementary contract formation analysis.
¶ 9. In applying state-law contract principles, Mississippi requires that parties to a contract first come to an agreement, or "meeting of the minds," on the essential elements of the contract in order for it to be enforceable. Hunt v. Davis, 208 Miss. 710, 45 So.2d 350, 352 (1950). More importantly, an enforceable contract must contain an offer, acceptance, and consideration. Gatlin v. Methodist Medical Center, Inc., 772 So.2d 1023, 1029(¶ 20) (Miss.2000).
¶ 10. The totality of the arbitration contract which is the basis of this action is:
MANDATORY ARBITRATION: Both buyer and seller (hereinafter "parties") acknowledge, understand and agree that (1) may controversy, claim, action or inaction arising out of, or 'relating to, that "purchase" set out herein, as against the listing company or selling company and/or their agents or representatives (hereinafter "company") involved in this transaction shall be resolved by arbitration administered by the American Arbitration Association in accordance with its arbitration rules, and (2) judgment on the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction, and (3) the arbitration proceeding shall be conducted within the county in which the dispute arose or such other location as agreed upon by the parties, and (4) if fault is found, the award of damages will conform to the terms and conditions of the "purchase" and (5) this transaction involves interstate commerce such that the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (1947 as amended) shall govern the interpretation and enforcement of this agreement along with all claims between or among the parties and the company(ies) involved in this transaction.
¶ 11. The insertion of paragraph 26 into the Seaberry-Germany contract represented an offer by Fradella and Prudential Gardner to enter into individual arbitration agreements with the Seaberrys and the Germanys. Both the Seaberrys and the Germanys indicated their willingness to enter into individual arbitration agreements with Fradella and Prudential Gardner by initialing the arbitration contract. In addition to a willingness to enter into a contract, there must also be some mutual benefit, or consideration, for the contract. "Consideration may be said to be what is actually given or suffered and accepted for a promise . the price bargained and paid for a promise . something given in exchange for the promise. Covington Cadillac Co. v. South Aire, Inc., 242 Miss. 716, 136 So.2d 866, 870 (1962) (citing 12 Am.Jur., Contracts, § 75, p. 568). Sufficient consideration may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. Id.
¶ 12. In the case sub judice, no consideration was given by Fradella and Prudential Gardner to the Seaberrys or Germanys for the arbitration agreements. This separate arbitration contract was contained within the Seaberry-Germany contract, to which neither Fradella nor Prudential Gardner were parties. The consideration given from the Seaberrys to the Germa-nys, and from the Germanys to the Sea-berrys, does not transfer to the separate arbitration agreement. Both Fradella and Prudential Gardner stand to benefit from the arbitration agreement, while neither offer anything in exchange to the Seaber-rys or Germanys that may be classified as consideration. In order for the arbitration agreement to be enforceable, Fradella and Prudential Gardner must have some forbearance, detriment, loss or responsibility given or undertaken. Since there was none, this arbitration contract is void on its face.
¶ 13. The dissent evidently misses the mark in attempting to create consideration for the arbitration agreement. The dissent attempts wrongly to identify several matters which it calls consideration for the arbitration agreement.
¶ 14. The Germanys employed Prudential and Fradella to list and sell their real estate. As compensation for the activities associated with that listing and sale, Prudential and Fradella were to receive a commission. If the buyer of this real estate was found by another real estate agency and agent, then that commission would have to be split with the outside agency. If however, Prudential and Fra-della were able to represent both the buyer and the seller, then they would be entitled to retain the entire commission.
¶ 15. Fradella and Prudential were also employed to assist the Seaberrys in finding a home. For those efforts, Fradella and Prudential were to receive a percentage of the sales commission. As further compensation for those activities, by getting the Seaberrys to agree to a dual agency, Fradella became entitled to that portion of the commission which the listing broker and agent would receive, as well as that portion of the sales commission which the selling broker and agent were entitled to receive.
¶ 16. All of the things which the dissent stretches to call consideration were activities required under the earlier agreement. The arbitration agreement was a new contractual matter which was later injected by Fradella and Prudential. For this new contractual matter, neither Fradella nor Prudential was to provide the Seaberrys any additional services. This is by definition a failure of consideration.
¶ 17. Therefore, the judgment of the chancery court is affirmed, and this case is remanded to the trial court for further proceedings.
¶ 18. THE JUDGMENT OF THE PEARL RIVER COUNTY CHANCERY COURT DENYING THE MOTION TO COMPEL ARBITRATION IS AFFIRMED AND THIS CASE IS REMANDED FOR PROCEEDINGS CONSISTENT WITH THIS OPINION. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLANTS.
MYERS, P.J., AND ROBERTS, J., CONCUR. IRVING, J., CONCURS IN RESULT. BARNES, J., CONCURS IN PART AND IN RESULT. GRIFFIS, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY LEE, P.J., SOUTHWICK, CHANDLER AND ISHEE, JJ.
. The contract is a standard Mississippi Association of Realtors contract for the sale of land supplied to the parties by their agent, Fradella.