Title: Green Tree Financial Corp. v. Lewis
Citation: 813 So. 2d 820
Docket Number: 1000731
State: Alabama
Issuer: Alabama Supreme Court
Date: September 14, 2001

813 So. 2d 820 (2001)
GREEN TREE FINANCIAL CORPORATION, n/k/a Conseco Financial Corporation[1]
v.
Jimmy LEWIS and Bertha Lewis.
1000731.

Supreme Court of Alabama.
September 14, 2001.
*821 F. Chadwick Morriss and R. Austin Huffaker, Jr., of Rushton, Stakely, Johnston &amp; Garrett, P.A., Montgomery, for appellant.
Garve Ivey, Jr., of Ivey &amp; Ragsdale, Jasper, for appellees.
LYONS, Justice.
Ed Lewis, his wife Bertha Lewis, and their son Jimmy Lewis purchased a manufactured home from Blue Ribbon Homes, Inc. However, for the purchasers only Ed and Bertha Lewis executed the "Retail Installment Contract and Agreement" required in connection with the purchase of the manufactured home. A representative of Blue Ribbon also executed the installment contract. Blue Ribbon assigned the installment contract to Green Tree Financial Corporation, now known as Conseco Financial Corporation (hereinafter "Green Tree").
Seven years after the purchase, Jimmy Lewis and Bertha Lewis commenced an action in the Hale Circuit Court against Green Tree, Blue Ribbon, and Thomas Deas, an employee of Blue Ribbon, alleging fraudulent inducement, theft by deception, and breach of fiduciary duties.[2] Relying upon an arbitration provision in the installment contract, Green Tree moved to compel arbitration of the Lewises' claims. The Lewises moved to be allowed to conduct discovery on the question whether the arbitration provision was enforceable; the court granted their motion. Thereafter, the Lewises submitted deposition testimony of a representative of Blue Ribbon, deposition testimony of a representative of Green Tree, and the Commercial Rules of the American Arbitration Association; these were the only materials they offered in opposition to the motion to compel arbitration. In support of its motion to compel arbitration, Green Tree submitted briefs *822 and the affidavit of one of its representatives. After conducting a hearing, the trial court denied the motion to compel arbitration. Green Tree appeals.
The arbitration provision in the installment contract reads as follows:
Two issues are before the Court on this appeal: 1) whether Green Tree, as the party seeking to compel arbitration, carried its burden of showing that the transaction that was the basis for the contract containing the arbitration provision had the requisite substantial effect on interstate commerce and 2) whether a state-law defense to the enforceability of contracts defeats the arbitration provision in the installment contract.
The arbitration provision states that it is "made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. § 1." The terms of the installment contract specifically authorized the assignment by Blue Ribbon to Green Tree. Green Tree was identified as the "assignee," and the Lewises expressly agreed that *823 they would make their payments to Green Tree.
Green Tree established through the affidavit of its representative, Kenneth Holt, that it was a Delaware corporation maintaining its principal place of business in Minnesota and that its purchase of the installment contract was accomplished by remitting payment to Blue Ribbon by a check drawn on a Minnesota banking institution. The Lewises made payments to Green Tree by mail, to an address in Louisville, Kentucky. The manufactured home is described in the contract as a 1994 "Southern Homes" model. The deposition of the representative of Blue Ribbon offered by the Lewises establishes that Southern Energy's manufacturing facility and its home office are located in Alabama. The briefs do not make it clear whether the home made the basis of this action was manufactured by Southern Energy in Alabama.[3]
The Lewises contend that the sale took place entirely in Alabama and was between Alabama consumers and an Alabama dealer and, therefore, they argue that as of the time of the sale nothing had occurred that would trigger the application of the Federal Arbitration Act ("FAA"). Furthermore, the Lewises maintain that those aspects of the transaction relating to the interstate activities of Green Tree, as assignee of the installment contract, are immaterial as they relate to matters between Green Tree and Blue Ribbon. The Lewises ask us to ignore the fact that they made payments to Green Tree at an address in Kentucky they argue that the mailing of payments is immaterial to the "transaction" at issue, that is, that the transaction consisted of the events transpiring at the point of sale.
Green Tree contends that the sentence in the arbitration provision stating that "[t]his arbitration contract is made pursuant to a transaction in interstate commerce, and shall be governed by the Federal Arbitration Act at 9 U.S.C. § 1," supports its contention that the Lewises' claims should be arbitrated. However, that statement would not support an order applying the FAA absent a showing that the transaction out of which the arbitration agreement arose had the requisite substantial effect on interstate commerce. This is so because, without such a showing, that statement in the arbitration agreement would violate the public policy of Alabama as set forth in § 8-4-41(3), Ala. Code 1975, where the Legislature has declared that arbitration agreements are not subject to specific performance. See Rogers Foundation Repair, Inc. v. Powell, 748 So. 2d 869, 872 (Ala.1999).
Green Tree relies upon Sisters of the Visitation v. Cochran Plastering Co., 775 So. 2d 759 (Ala.2000), as applied in American General Finance, Inc. v. Branch, 793 So. 2d 738 (Ala.2000), to support its conclusion that "the relationships that existed in this case are sufficient to invoke application of the FAA." In Branch, the plaintiff sued his lender, with which he had entered into a loan agreement containing an arbitration clause. In that context, this Court properly analyzed the relationship between *824 the plaintiff and the lender and concluded that the transaction between them had had the requisite substantial effect on interstate commerce. Here, the relationship between the Lewises and Green Tree arises entirely as a result of the assignment by Blue Ribbon to Green Tree. However, as previously noted, the assignment of the installment contract to Green Tree was specifically authorized by the terms of the contract and Green Tree was identified as the "assignee." The Lewises expressly agreed that they would make their payments to Green Tree.
We cannot employ an unrealistically narrow construction of the "transaction" concept so as to limit our scrutiny to the events transpiring at the time of the sale. The arbitration provision not only embraces the installment contract itself, but also expressly covers all "relationships which result from this Contract." As a result, the facts supporting the conclusion that the sales transaction in this case had a substantial effect upon interstate commerce, even those facts arising from the assignment by Blue Ribbon to Green Tree, are quite relevant.
After noting the presence of certain factssuch as the fact that the lender's parent corporation was a foreign corporation with headquarters outside Alabama; the fact that the loan proceeds had moved from outside Alabama to Alabama; and the fact that ultimately payments made by customers to the lender in Alabama moved out of the statethis Court concluded in Branch that "the corporate relationships involved here generate precisely the complex interstate commercial activity that we expressly noted was absent in Sisters." 793 So. 2d  at 747. The facts presented in this present case are even more compelling, because Green Tree itself is a foreign corporation with its principal place of business outside Alabama and the payments the Lewises made to Green Tree were made directly to a point outside Alabama. This Court observed in Sisters of the Visitation:
775 So. 2d  at 760 (emphasis added). For this reason, it is inconsequential that the parties, when they entered the sales transaction, did not anticipate the extent to which subsequent events surrounding the expressly contemplated assignment might involve interstate commerce. Likewise, the fact that the installment contract refers to Green Tree and states an address in Montgomery, Alabama, does not support the Lewises' opposition to arbitration.
Green Tree had the burden of establishing that the sales transaction had a substantial effect on interstate commerce. Tefco Fin. Co. v. Green, 793 So. 2d 755 (Ala.2001). On the record before us, we hold that Green Tree has carried its burden.[4]
The Lewises argue that the arbitration provision "is subject to state Law contract defenses and is unenforceable under *825 the facts and law of this case." The closest they come to identifying any specific contract defense appears in this statement in their brief: "The elements of Branch are surely present here." We assume from this cryptic statement that the Lewises contend that the defense of unconscionability applies in this case and makes the arbitration provision unenforceable. This contention fails, for several reasons.
The arbitration provision in Branch limited the kind of damages the plaintiff could recover. No such limitation appears in the arbitration provision now before the Court. The Lewises have made no showing that they lacked a meaningful choice in obtaining financing; the plaintiff in Branch did make such a showing. Nothing in the record details the lending practices of lenders other than Green Tree in 1993, when the Lewises entered into the sales transaction. Nothing in the record suggests that the Lewises attempted to "shop around" for a financing arrangement that would not call for arbitration of disputes.
The Lewises claim to be illiterate.[5] However, their illiteracy would not be a defense to enforcement of the contract. In Mitchell Nissan, Inc. v. Foster, 775 So. 2d 138 (Ala.2000), this Court acknowledged a long-established rule in Alabama:
775 So. 2d  at 140 (quoting Beck &amp; Pauli Lithographing Co. v. Houppert, 104 Ala. 503, 506, 16 So. 522, 522 (1894) (emphasis added in Foster)).
The Lewises invite a remand for the trial court to make specific findings, citing Cavalier Manufacturing, Inc. v. Jackson, [Ms. 1000391, April 13, 2001] ___ So.2d ___ (Ala.2001). The remand was warranted in Jackson, so that the trial court could make express findings as to the validity of an arbitration provision prohibiting the arbitrator from awarding punitive damages. As previously noted, the arbitration provision in this present case contains no such restriction. Consequently, based upon the facts of this case and the terms of the arbitration provision before us, we see no reason to remand for specific findings.
We reverse the order denying Green Tree's motion to compel arbitration. We remand this case for the trial court to enter an order consistent with this opinion.
REVERSED AND REMANDED.
HOUSTON, SEE, BROWN, HARWOOD, WOODALL, and STUART, JJ., concur.
MOORE, C.J., and JOHNSTONE, J., dissent.
JOHNSTONE, Justice (dissenting).
I respectfully dissent.
A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 546-50, 55 S. Ct. 837, 79 L. Ed. 1570 (1935) (internal citations omitted and emphasis added).
In the case now before us, the interstate commerce, if any, was separate from the transaction entered by the plaintiffs, the Lewises, themselves. The interstate commerce, if any, was between only Blue Ribbon and Green Tree.
The movement of the money from an Alabama buyer's payment of the purchase price for an Alabama purchase to a location outside Alabama is not interstate commerce according to any of our precedents or United States Supreme Court precedents and certainly not according to the intent of the framers of the Commerce Clause of the United States Constitution. See my special writing in Sisters of the Visitation v. Cochran Plastering Co., 775 So. 2d 759 (Ala.2000). The plaintiffs before us did not receive an interstate loan or interstate credit life, disability, and property insurance as the plaintiffs did in American General Finance, Inc. v. Branch, 793 So. 2d 738 (Ala.2000), cited by *827 the main opinion. The plaintiffs before us contracted only to pay their Alabama seller, Blue Ribbon. The assignment by Blue Ribbon to Green Tree was not the plaintiffs' transaction. These distinctions are legitimate and legally significant because of the importance of maintaining the constitutional limits on the intrusive powers of the federal government and the importance of the public policy of Alabama, expressed by our legislature in § 8-1-41(3), Ala.Code 1975, against the specific enforcement of pre-dispute arbitration agreements.
[1]  Conseco stated in a motion filed in the circuit court that its correct name is "Conseco Finance Corporation."
[2]  Ed Lewis is now deceased. The manufacturer of the mobile home also is not a party to this action.
[3]  This Court has previously held that the sale of a manufactured home made in Alabama and sold by an Alabama dealer to an Alabama resident is a transaction that can substantially affect interstate commerce. See Southern Energy Homes, Inc. v. McCray, 788 So. 2d 882 (Ala.2000). However, in McCray, we had before us substantial facts concerning Southern Energy indicating, among other things, that Southern Energy was a Delaware corporation and that many component parts used in the manufacture of the mobile home had moved in interstate commerce. 788 So. 2d  at 883 n. 1. No factual details of this nature appear in the record before us in this present case.
[4]  The Lewises point to the testimony of Green Tree's representative, Holt, in which he stated, "I don't know if they [these transactions] have or haven't affected interstate commerce." Because of the other evidence before us, we do not deem the testimony regarding Holt's knowledge to be dispositive.
[5]  Jimmy Lewis testified that his parents could not read or write and that they did not ask anyone to read the installment contract to them because, he says, they trusted Blue Ribbon. He said that he signed documents in connection with the manufactured home purchase, but, he said, he did not know what those documents were. He testified that he had attended school only through the sixth grade, that he cannot read or write, and that he did not know what he or his parents signed because, he says, he trusted Blue Ribbon.