Title: Jennifer Ritter and Daryl Ritter v. Grady Automotive Group, Inc.
Citation: N/A
Docket Number: 1051362
State: Alabama
Issuer: Alabama Supreme Court
Date: May 18, 2007

REL: 5/18/2007 Ritter v. Grady Automotive Group, Inc.
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
____________________
1051362
____________________
Jennifer Ritter and Daryl Ritter
v.
Grady Automotive Group, Inc.
Appeal from Mobile Circuit Court 
(CV-06-116)
SEE, Justice.
Following an accident in which the air bags in Jennifer
Ritter's automobile did not deploy, Jennifer Ritter and her
husband Daryl Ritter 
sued 
Grady 
Automotive Group, 
Inc. ("Grady
Automotive"), the dealership where she had purchased the
1051362
The arbitration agreement signed by Mrs. Ritter contains
1
the following language:  "READ THIS ARBITRATION [AGREEMENT]
CAREFULLY.  IT LIMITS CERTAIN OF YOUR RIGHTS, INCLUDING THE
RIGHT TO BRING A COURT ACTION.  SIGN IT ONLY IF YOU UNDERSTAND
IT."  (Capitalization in original.)  It purports to cover 
"all claims, demands, disputes, or controversies of
every kind or nature that may arise between [the
buyer and the dealer] concerning any of the
negotiations leading to the sale, lease or financing
of the vehicle, terms and provisions of the sale,
2
vehicle; BMW of North America, LLC ("BMW"), the manufacturer
of the vehicle; and fictitiously named parties.  The trial
court granted the motion to compel arbitration filed by "Grady
Buick 
Company, 
Inc., 
incorrectly 
named 
Grady 
Automotive 
Group,
Inc.," as to both Mr. Ritter's and Mrs. Ritter's claims, based
on an arbitration agreement signed by Mrs. Ritter.  The
Ritters appeal.  We affirm.
Facts and Procedural History
Jennifer Ritter purchased a new 2003 BMW 745Li automobile
from Grady Automotive.  Her husband, Daryl, did not accompany
her to the dealership to buy the car.  To purchase the car,
Mrs. Ritter executed several documents, including a "Motor
Vehicle Purchase Contract" ("the purchase contract"), a
retail-installment 
contract, 
a power of attorney, 
an
arbitration agreement,  and an application for a certificate
1
1051362
lease or financing agreement, arrangements for
financing, purchase of insurance, purchase of
extended warranties or service contracts, the
performance or condition of the vehicle, or any
other aspects of the vehicle and its sale, lease or
financing."
3
of title.  Mrs. Ritter alleges that the dealership represented
to her that the BMW 745Li was the safest car on the road,
partly because it had air bags both in the front and on the
sides of the car.  
While driving the 745Li several months later, Mrs. Ritter
was involved in a car accident.  None of the air bags in the
car deployed.  Moreover, the seatbelt allegedly failed to hold
Mrs. Ritter in place, and she sustained injuries.  Mr. Ritter
was not in the car at the time of the accident.  Mrs. Ritter
sued 
Grady 
Automotive, 
BMW, 
and 
fictitiously 
named 
defendants,
alleging 
misrepresentations, 
manufacturing 
defects, 
defective
design, negligent and/or wanton installation of the air-bag
and seatbelt systems, breach of contract, and breach of
warranties.  Mr. Ritter also sued the defendants, asserting a
derivative loss-of-consortium claim. 
Grady Buick Company, Inc. ("Grady Buick"), which
maintained that it was incorrectly named on the Ritters'
1051362
4
complaint as "Grady Automotive Group, Inc.," moved the trial
court to compel arbitration of the claims against it based on
the arbitration agreement Mrs. Ritter signed at the time she
purchased the 745Li.  The Ritters objected to the motion, but
the trial court compelled arbitration.  The Ritters then moved
the trial court to alter, amend, vacate, or reconsider its
order 
compelling arbitration, 
but 
the 
trial 
court 
denied their
motion.  The Ritters appeal, arguing that Grady Buick could
not compel arbitration because, they argue, it was neither a
party to the legal action nor a party to the purchase
contract; they argue that they named Grady Automotive in their
complaint and that Grady Automotive was the party with whom
Mrs. Ritter entered into the purchase contract, although some
other sales documents were executed in the name of Grady
Buick.  Further, they argue that the merger clause in the
purchase contract rendered the separate arbitration agreement
invalid and that in any event the arbitration agreement does
not bind Mr. Ritter because he did not sign it.
Standard of Review
1051362
5
We conduct a de novo review of a trial court's order
compelling arbitration.  Smith v. Mark Dodge, Inc., 934 So. 2d
375, 378 (Ala. 2006).  
"The party seeking to compel arbitration must first
prove both that a contract calling for arbitration
exists and that the contract evidences a transaction
involving interstate commerce. ...  Once this
showing has been made, the burden then shifts to the
nonmovant to show that the contract is either
invalid 
or 
inapplicable 
to 
the 
circumstances
presented." 
Smith, 934 So. 2d at 378.
Analysis
The Ritters do not dispute the existence of an
arbitration agreement, nor do they dispute that the contract
evidences a transaction involving interstate commerce.
Instead, they argue only that the arbitration agreement does
not apply to this case.
I.
First, the Ritters argue that Grady Buick cannot compel
arbitration of their claims because, they argue, Grady Buick
was not a party to the purchase contract and is not a party to
this action.  Instead, the Ritters argue, Grady Automotive is
the named defendant and the other party to the purchase
contract.  The purchase contract is a form contract, printed
1051362
Specifically, the retail-installment contract, power of
2
attorney, certificate of out-of-county buyer, application for
a certificate of title, and vehicle-invoice receipt refer to
Grady Buick.  Also, Mrs. Ritter made her checks to purchase
the car payable to Grady Buick.  However, the salesman's
worksheet, purchase contract, and delivery checklist used the
name Grady Automotive.
6
on letterhead bearing the name "Grady Automotive Group."
However, the disclaimer of warranties contained within the
purchase contract names Grady Buick as the "seller" of the
automobile, and other documents signed at the time of the
purchase name Grady Buick as the seller as well.2
Grady Buick argues that the Ritters have waived this
argument by failing to raise it in the trial court.  See
Totten v. Lighting & Supply, Inc., 507 So. 2d 502, 503 (Ala.
1987) ("[O]n appeal, this court is limited to a review of the
record alone, and an issue not reflected in the record as
having been raised in the trial court cannot be raised for the
first time on appeal." (citing Mobile Wrecker Owners v. City
of Mobile, 461 So. 2d 1303 (Ala. 1984))).  The Ritters respond
by arguing that Grady Buick raised the issue before the trial
court in its motion to compel arbitration.  In their reply
brief to the Court, the Ritters cite the following excerpt
from Grady Buick's motion to compel: "Comes now the Defendant,
1051362
7
Grady Buick Company, Inc. (hereinafter 'Grady'), incorrectly
named Grady Automotive Group, Inc."  (emphasis added in reply
brief).  However, Grady Buick's statement in its motion to
compel does not raise the issue the Ritters now argue to this
Court.  In the motion to compel arbitration, Grady Buick
asserted a naming error in the Ritters' complaint.  It made no
argument as to whether it was a party to the purchase
contract.  Moreover, the Ritters did not challenge Grady
Buick's assertion in the trial court.  In fact, in their
objection to the motion to compel arbitration, the Ritters
referred to the "'Motion to Compel Arbitration and For Stay
Pending Arbitration' filed by Defendant, Grady Buick Company,
Inc."  Instead of arguing that Grady Buick could not enforce
the arbitration agreement because it was not a party to the
action, the Ritters identified Grady Buick as the defendant.
In their objection to the motion to compel, they also failed
to argue that Grady Buick was not a party to the purchase
contract.  Because the Ritters first raise this identity issue
on appeal, we do not review it.  See Totten, 507 So. 2d at
503.
II.
1051362
8
Next, the Ritters argue that the arbitration agreement
does not apply because the purchase contract contains a merger
clause.  The purchase contract contains the following terms
enclosed in a box:
"DISCLAIMER OF WARRANTIES
"The Seller, GRADY BUICK CO., Inc. hereby expressly
disclaims all warranties, either expressed or
implied ....
"I COMPLETELY UNDERSTAND GRADY BUICK CO., INC. IS
NOT OBLIGATED TO FURNISH TRANSPORTATION WHILE MY
VEHICLE IS BEING SERVICED.
"The dealer is not a party to any manufacturer's or
third party warranty ....
"No oral representations are binding unless written
on this form and all terms of the agreement are
printed or written herein."
(Capitalization in original; emphasis added.)  The Ritters
argue that the last sentence of the disclaimer emphasized
above constitutes a merger clause and that all prior or
contemporaneous agreements and negotiations have thereby been
merged into the purchase contract.  Therefore, they argue, the
separate agreement to arbitrate, which was not mentioned in
the purchase contract, is not part of the contract with Grady
Buick and does not apply to this case.
1051362
9
A merger clause creates "a presumption that the writing
represents an integrated, that is, the final and complete,
agreement of the parties."  Ex parte Palm Harbor Homes, Inc.,
798 So. 2d 656, 660 (Ala. 2001).  A merger clause invokes the
parol evidence rule, which precludes a court from considering
extrinsic evidence of prior or contemporaneous agreements in
order to "change, alter, or contradict" the terms of the
integrated contract.  Palm Harbor Homes, 798 So. 2d at 660. 
A merger clause, however, does not bar evidence of
contemporaneous collateral agreements between the parties.
See Alabama Elec. Coop., Inc. v. Bailey's Constr. Co., 950 So.
2d 280, 288 (Ala. 2006) ("'"It is only when the instrument
shows that it does not contain all the terms of the contract
as to both parties to it that evidence may be offered to show
further stipulation than those expressed, unless it is
proposed to prove an engagement independent of and collateral
to the matters embraced in such written instrument."'"
(quoting Hartford Fire Ins. Co. v. Shapiro, 270 Ala. 149, 153,
117 So. 2d 348, 352 (1960), quoting in turn Woodall v. Malone-
Harrison Motor Co., 219 Ala. 366, 368, 122 So. 357, 358 (1929)
(emphasis added in Shapiro))); and Southern Guar. Ins. Co. v.
1051362
10
Rhodes, 46 Ala. App. 454, 459, 243 So. 2d 717, 721 (1971)
("This 
[merger-clause] 
principle 
does 
not 
prohibit 
negotiation
of more than one agreement at the same time ....  If such
agreements are 
clearly collateral, separate and 
distinct 
as 
to
subject matter there is no problem presented.  They are two
separate contracts and are to be considered as such.").
In Hartford Fire, this Court quoted various tests used by
other courts to determine whether an agreement is collateral
and therefore outside the scope of a merger clause.  The Court
quoted Mitchill v. Lath, 247 N.Y. 377, 160 N.E. 646 (1928), a
"leading 
case," which gave 
three 
requirements for an agreement
to be beyond the scope of a merger clause:  "'(1) The
agreement must in form be a collateral one; (2) it must not
contradict express or implied provisions of the written
contract; (3) it must be one that parties would not ordinarily
be expected to embody in the writing.'"  Hartford Fire, 270
Ala. at 154, 117 So. 2d at 353 (quoting Mitchill v. Lath, 247
N.Y. at 381, 160 N.E. at 647).  The Court also quoted
Professor Wigmore, IX Wigmore, Evidence § 2430, 98 (3d ed.):
"'This intent [to form a collateral agreement] must be sought
where always intent must be sought ..., namely, in the conduct
1051362
11
and 
language 
of 
the 
parties 
and 
the 
surrounding
circumstances.'"  270 Ala. at 154, 117 So. 2d at 353.  In
Southern Guaranty, the Court of Civil Appeals looked to the
"conduct and language of the parties, the surrounding
circumstances and the written instrument" in order to
determine "whether it was the intent of the parties that the
written instrument embody all of the prior negotiations ... or
whether ... it was intended there be an additional, collateral
and separate oral agreement." 46 Ala. App. at 459, 243 So. 2d
at 721.  That court also looked to the Mitchill test to
evaluate the collateral nature of the agreements.
We held in Alabama Electric Cooperative that an oral
agreement to insure was not collateral to an insurance policy,
"[i]n light of the fact that the written contract dealt
expressly with the subject matter of the alleged collateral
oral agreement."  950 So. 2d at 289.  The oral agreement "was
one the parties would naturally have included in the written
agreement."  950 So. 2d at 289.  Similarly, we held in
Hartford Fire that an oral agreement to insure was not
collateral to an insurance policy because it was "closely
bound to the written one, and no doubt intended to be made
1051362
12
part and parcel thereto."  270 Ala. at 155, 117 So. 2d at 354.
The Court of Civil Appeals held in Southern Guaranty that the
oral agreement to insure met none of the three factors of the
Mitchill test and, therefore, was not a collateral agreement.
In this case, the free-standing, written, and separately
executed arbitration agreement meets all three prongs of the
Mitchill test.  First, it is "collateral in form."  In
Southern Guaranty, the Court of Civil Appeals held that an
oral agreement to, among other things, provide coverage for
the insured's son under an automobile insurance policy was not
"collateral in form" because it was "identical with the
written policy as amended, except for coverage of appellee's
son as a driver."  46 Ala. App. at 460, 243 So. 2d at 722.
Moreover, "the property insured [was] the same."  46 Ala. App.
at 460, 243 So. 2d at 722.  The arbitration agreement in this
case is not identical in nature to the purchase contract.  The
purchase contract covers only that one specific transaction
and relates exclusively to Mrs. Ritter's purchase of the BMW
745Li, whereas the arbitration agreement governs 
the
relationship between the parties preceding and following the
sale of the car.  It covers "any of the negotiations leading
1051362
13
to the sale, lease or financing of the vehicle, terms and
provisions of the sale, lease or financing agreement,
arrangements 
for 
financing, 
purchase 
of 
insurance, 
purchase 
of
extended warranties or service contracts, the performance or
condition of the vehicle, or any other aspects of the vehicle
and its sale, lease or financing."  Unlike the agreements in
Alabama Electric Cooperative, the purchase contract does not
"deal[] expressly with the subject matter" of the arbitration
agreement.  950 So. 2d at 289.
Professor Williston states that "'there are cases where
it is so natural to make a separate agreement, frequently
oral, in regard to the same subject-matter, that the Parol
Evidence Rule does not deny effect to the collateral
agreement.'"  11 Richard A. Lord, Williston on Contracts §
33:28 (4th ed. 1999) (quoting Magee v. Robinson, 218 Ark. 54,
58, 234 S.W.2d 27, 29 (1950)).  In this case, we note that
Mrs. Ritter and Grady Buick entered into a separately executed
financing agreement, i.e., the retail-installment contract,
for the sale of the car.  Although the purchase contract makes
no mention of a separate financing agreement, the Ritters do
not claim that the financing agreement cannot be enforced
1051362
As we noted above, the intent to form a collateral
3
agreement "'must be sought where always intent must be sought
..., namely, in the conduct and language of the parties and
the surrounding circumstances.'" Hartford Fire, 270 Ala. at
154, 117 So. 2d at 353 (quoting IX Wigmore, § 2430).  The fact
that the parties executed a number of agreements on various
aspects 
of 
their 
relationship is persuasive 
evidence
indicating that they did not intend that only one of those
agreements would be effective. 
14
against them because of the merger clause in the purchase
contract.  It, like the agreement to arbitrate, is a
collateral agreement between the parties.  Just as it is
"natural" to enter into a separate financing agreement in
order to facilitate the purchase of a car, so it is natural to
enter into a separate arbitration agreement.  The arbitration
agreement covers disputes that may arise between the parties,
whether the disputes arise from the purchase contract, the
financing agreement, or other agreements such as the purchase
of insurance, extended warranties, or service contracts that
the parties executed.   Thus, the arbitration agreement is
3
"collateral in form."  See also Bank Julius Baer & Co. v.
Waxfield, Ltd., 424 F.3d 278 (2d Cir. 2005) (holding that a
merger clause in a pledge agreement did not void a previously
executed arbitration agreement between the parties).
1051362
15
Second, to be collateral, the arbitration agreement
"'must not contradict express or implied provisions of the
written contract.'" Hartford Fire, 270 Ala. at 154, 117 So. 2d
at 353 (quoting Mitchill, 247 N.Y. at 381, 160 N.E. at 647).
In this case, the arbitration agreement does not contradict
provisions of the purchase contract.  The purchase contract
makes no mention of disputes between the parties or procedures
for handling problems in the relationship between the dealer
and the buyer.  By contrast, in Palm Harbor Homes, this Court
enforced a merger clause in one instrument so as to exclude
two other contemporaneous agreements because the latter
instruments contradicted the terms of the first, which
included the merger clause.  798 So. 2d 656.  The first
instrument, an installment contract, contained an arbitration
provision allowing the buyer to select the arbitrator, with
the seller's consent.  The remaining two instruments, both
arbitration agreements, required that any dispute resolution
comport with the rules and procedures of the American
Arbitration 
Association, 
including 
its 
procedures 
for
selecting a 
three-person arbitration panel.  
This 
Court 
upheld
the trial court's decision to enforce the terms of the
1051362
See also Edwards Motors, Inc. v. Hudgins, [Ms. 1051023,
4
Oct. 20, 2006] ___ So. 2d ___ (Ala. 2006) (enforcing an
arbitration agreement, which was a separate document from the
motor-vehicle installment-sales 
contract, credit application,
and promissory note also executed when a buyer purchased an
automobile); Ex parte Bill Heard Chevrolet, Inc., 927 So. 2d
792 
(Ala. 
2005) 
(enforcing an arbitration agreement, signed as
part of the purchase of an automobile, as a separate document
from the "Retail Purchase Contract" and "Bailment/Conditional
16
installment contract, holding that the parol evidence rule
bars 
"consideration 
of 
the 
free-standing 
arbitration
instruments," 798 So. 2d at 680, because they conflicted with
the installment contract, which  contained a merger clause.
In this case, the terms of the purchase contract and the
arbitration agreement present no such conflict. 
Finally, "the parties would not ordinarily be expected to
embody" the arbitration agreement in the purchase contract. 
Hartford Fire, 270 Ala. at 154, 117 So. 2d at 353 (quoting
Mitchill, 247 N.Y. at 381, 160 N.E. at 647).  Although
including an arbitration agreement within the purchase
contract would have been proper, the agreements are not so
related that one would expect them to be included in the same
document.  The arbitration agreement is not necessarily "one
the parties would naturally have included in" the purchase
contract.   Alabama Elec. Coop., 950 So. 2d at 289.  The
4
1051362
Delivery 
Agreement"); 
Dan 
Wachtel 
Ford, 
Lincoln, 
Mercury, 
Inc.
v. Modas, 891 So. 2d 287 (Ala. 2004) (enforcing a separate
arbitration agreement, which the purchaser of a sport-utility
vehicle signed in addition to a retail-installment contract
and other documents); and Harold Allen's Mobile Home Factory
Outlet, Inc. v. Early, 776 So. 2d 777 (Ala. 2000) (enforcing
an arbitration agreement that was signed separately from the
purchase contract covering the sale of a mobile home). 
17
arbitration agreement thus meets all three requirements for a
collateral agreement.
Because the arbitration agreement is a collateral
agreement, distinct from the purchase contract, the merger
clause in the purchase contract does not invalidate the
arbitration agreement.  The two contracts are separate: one
governs the sale of the vehicle, and the other governs the
resolution of disputes between the dealer and the buyer.
"They are two separate contracts and are to be considered as
such."  Southern Guaranty, 46 Ala. App. at 459, 243 So. 2d at
721.  Therefore, the merger clause in the purchase contract
does not render the arbitration agreement inapplicable.
III.
Finally, the Ritters argue that the arbitration agreement
does not apply to Mr. Ritter's loss-of-consortium claim
because he did not sign the agreement.  They argue that he is
1051362
18
not a party to the arbitration agreement and that, therefore,
he is not bound by its terms.  See Ex parte Dickinson, 711 So.
2d 984, 989 (Ala. 1998) ("'[A] party cannot be required to
submit to arbitration any dispute he has not agreed to
submit.'" (quoting Old Republic Ins. Co. v. Lanier, 644 So. 2d
1258, 1260 (Ala. 1994))).
To support their argument, the Ritters cite Dickinson, in
which a husband and wife purchased a car from a dealership.
As part of the sale, both Mr. and Mrs. Dickinson signed a
retail-installment contract.  However, only Mr. Dickinson
signed the retail buyer's order, which contained an
arbitration provision.  Four Justices of this Court joined in
the opinion holding that, although the arbitration provision
applied to Mr. Dickinson's claims, it did not cover Mrs.
Dickinson's claims because she did not sign the retail buyer's
order.  Dickinson, 711 So. 2d at 990 ("Because she was not a
signatory to a contract containing an arbitration clause, she
cannot be compelled to arbitrate.").  
Grady Buick compares the Ritters' claims to those brought
in  Georgia Power Co. v. Partin, 727 So. 2d 2 (Ala. 1998). In
Partin, this Court discussed for the first time "whether a
1051362
19
loss-of-consortium 
claim 
brought 
by 
a 
nonsignatory 
spouse 
must
be arbitrated along with the claims of an injured spouse." 727
So. 2d at 6.  The Court found that, although Mrs. Partin's
loss-of-consortium claim was separate from her husband's
claim, it "nevertheless springs from the same source" as Mr.
Partin's claim.  727 So. 2d at 6.  The operations contract, on
which Mr. Partin based his claims, contained an arbitration
agreement signed by Mr. Partin.  The Court bound Mrs. Partin
to that arbitration agreement as well, holding that, "because
Brenda Partin's claims are based upon the contract, her claims
are subject to the arbitration clause contained therein." 
727 So. 2d at 7.
Mr. Ritter's loss-of-consortium claim stems from Mrs.
Ritter's purchase of the BMW 745Li.  Like Mrs. Partin, Mr.
Ritter "alleges that [his] injury was caused by the same
breach of duties that [his wife] says resulted in [her]
injury."  727 So. 2d at 7.  Specifically, the complaint states
that, "[a]s a result of acts and failures to act set out
earlier herein, Plaintiff, Darryl Bernard Ritter, lost the
company, fellowship, cooperation and assistance of his wife
...."  The "acts and failures to act set out earlier" in the
1051362
20
complaint 
are 
those 
allegations 
made by Mrs. Ritter, 
including
misrepresentations, 
manufacturing 
and 
design 
defects,
negligent and/or wanton installation of the air-bag and
seatbelt systems, breach of contract, and breach of
warranties.  Therefore, just as Mrs. Ritter's claims are
subject to the arbitration agreement, so is Mr. Ritter's
claim.  He "'cannot have it both ways; [he] cannot rely on the
contract [between his wife and Grady Buick] when it works to
[his] advantage and then repudiate it when it works to [his]
disadvantage.'" Partin, 727 So. 2d at 7 (quoting A.L. Williams
& Assocs., Inc. v. McMahon, 697 F.Supp. 488, 494 (N.D.Ga.
1988)).  Therefore, the trial court correctly ordered Mr.
Ritter 
to 
arbitrate 
his 
loss-of-consortium 
claim 
against 
Grady
Buick.
Conclusion
The Ritters fail to show that the agreement to arbitrate
"is either invalid or inapplicable to the circumstances
presented."  Smith, 934 So. 2d at 378.  Therefore, we affirm
the trial court's 
order 
compelling 
arbitration 
of 
the Ritters'
claims.
AFFIRMED.
1051362
21
Cobb, C.J., and Woodall, Smith, and Parker, JJ., concur.