Opinion ID: 2542875
Heading Depth: 1
Heading Rank: 4

Heading: analysis

Text: ¶ 13 Mr. Ellsworth appeals the judgment and order of the district court on two grounds. First, he argues that the district court erred by granting summary judgment in favor of Lowell. Second, he argues that the district court was required, under Utah law, to stay the judicial proceeding pending the outcome of the arbitration instead of dismissing his suit. We agree with Mr. Ellsworth that the district court's grant of summary judgment in favor of Lowell was improper and erroneous. Moreover, under the facts of this case, we do not believe that direct and specific evidence of an assent to arbitrate by Mr. Ellsworth exists. Accordingly, we hold, as a matter of law, that Mr. Ellsworth is not bound by the arbitration clause. We reverse and remand to the district court with instructions to enter declaratory relief and grant an injunction in favor of Mr. Ellsworth. Because our holding disposes of Mr. Ellsworth's appeal, we do not address whether the district court should have stayed the proceedings. ¶ 14 Arbitration is a matter of contract law, Cade v. Zions First Nat'l Bank, 956 P.2d 1073, 1076 (Utah Ct.App.1998), and state-law principles of contract formation apply, id. at 1077 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). In order to require a party to submit to arbitration, there must be an agreement to arbitrate. Id. at 1076-77. While there is a presumption in favor of arbitration, that presumption applies only when arbitration is a bargained-for remedy of the parties. Id. at 1077. The minimum threshold for . . . enforcement[ of an arbitration agreement is] direct and specific evidence of an agreement between the parties. McCoy v. Blue Cross & Blue Shield of Utah, 2001 UT 31, ¶ 17, 20 P.3d 901. Direct and specific evidence requires non-inferential evidence. Id. Furthermore, it requires an agreement between the particular parties regarding arbitration of future disputes. Id. ¶ 15 The district court erred in granting summary judgment for Lowell because the facts offer no direct and specific evidence of an agreement to arbitrate. The district court relied on two things to support its decision that Mr. Ellsworth was bound by the agreement to arbitrate: first, the contract itself, and second, Mr. Ellsworth's participation in decision-making related to the contract.
¶ 16 First, the district court relied on the actual contract in making its decision. Specifically, the court relied on the fact that Mr. Ellsworth was identified as an Owner and his residence was designated as the Project. We do not think that the mere fact that Mr. Ellsworth's name appears on the cover page of the contract, without more, is sufficient to constitute assent to arbitrate with Lowell, especially when the contract was drafted by Lowell and unsigned by Mr. Ellsworth. ¶ 17 Moreover, the remainder of the contract makes the inclusion of Mr. Ellsworth's name ambiguous. Any ambiguity in a contract is to be construed against the drafter, in this case, Lowell. Nielsen v. O'Reilly, 848 P.2d 664, 666 (Utah 1992). One such ambiguity is the discrepancy between the listing of two owners on the cover pages of the contracts and the inclusion of only one space for the owner's signature. No one argues that Mr. Ellsworth requested that his name be on the document. To the contrary, Mr. Ellsworth forcefully asserts that he and Ms. Naylor made clear to Lowell that Mr. Ellsworth would not be responsible for the contract. Lowell drafted the contract, and it is unknown what circumstances led it to include Mr. Ellsworth as an owner on the cover page, while not providing him a space to clearly manifest his assent through a signature. Even assuming that Lowell is correct in saying that it was not aware of the ownership status of the Naylor/Ellsworth residence until after the present dispute arose, as the drafter of the contract, ambiguities will be construed against it. Id. Construing this discrepancy against Lowell means that only Ms. Naylor assented to arbitrate because only she manifested her assent to arbitrate by signing the contract. The fact that Mr. Ellsworth's name appears on the cover page may have been no more than drafter's error, and using the standard of direct and specific evidence, we cannot infer that there was an agreement to arbitrate between the particular disputants in this caseMr. Ellsworth and Lowell. ¶ 18 We hold that the fact that a person's name appears on a contract as a party to it, without more, is not direct and specific evidence that that particular person has assented to the agreement to arbitrate. In this case, it is therefore insufficient as a matter of law to show that Mr. Ellsworth assented to an agreement to arbitrate.
¶ 19 Of course, no signature is required for a person to become party to a contract. Commercial Union Assocs. v. Clayton, 863 P.2d 29, 34 (Utah Ct.App.1993). Performance may bind a party to a contract that it has not signed. Id. Thus, the second piece of direct and specific evidence the court relied upon was substantial participation by Mr. Ellsworth in decision-making related to the contract along with his wife. [10] The district court accepted Lowell's argument that Mr. Ellsworth's substantial participation meant he was estopped from denying his duties under the Agreement and should be required to arbitrate pursuant thereto. The general rule of arbitration agreements is that one who has not manifested assent to an agreement to arbitrate cannot be required to submit to arbitration. Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d 411, 416 (4th Cir.2000). However, under certain circumstances, a nonsignatory to an arbitration agreement can enforce or be bound by an agreement between other parties. Id. at 416-17. [11] ¶ 20 We do not believe that the nonsignatory estoppel exception applies to Mr. Ellsworth. The rationale behind this exception is that a nonsignatory should be estopped from avoiding arbitration when the nonsignatory seeks to benefit from some portions of the contract but avoid the arbitration provisions. Id. at 418. In cases where estoppel has been implemented against a nonsignatory, the nonsignatory has sued a signatory on the contract to his benefit but sought to avoid the arbitration provision of the same contract. [12] See Bridas S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347, 361 (5th Cir.2003). A nonsignatory will also be estopped when it receives a direct benefit from the contract which contains the arbitration clause. Am. Bureau of Shipping v. Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir.1999). This variety of nonsignatory estoppel has been employed only when the nonsignatory sues the signatory on the agreement after receiving direct benefits but seeks to avoid arbitration. See Bridas, 345 F.3d at 362. Mr. Ellsworth does not fit under either of these categories. He is not attempting to sue Lowell on the contract; on the contrary, he seeks to avoid the obligations of the contract altogether. Also, he has not received any direct benefit from the contract. His occupancy of a repaired home of which he was not an owner is not a direct benefit, but an indirect one where the nonsignatory exploits the contractual relation of parties to an agreement, but does not exploit (and thereby assume) the agreement itself. MAG Portfolio Consult, GMBH v. Merlin Biomed Group LLC, 268 F.3d 58, 61 (2d Cir.2001). We hold that the nonsignatory estoppel exception does not apply to Mr. Ellsworth, a nonsignatory who is not suing on the contract and who has not received direct benefits from the contract. Even if his conduct indicates an assent to the contract, it in no way indicates that he assented to arbitration. This is true whether we consider the disputed or undisputed facts of the case. ¶ 21 Furthermore, Mr. Ellsworth is not bound to the arbitration agreement through the nonsignatory theory of agency. There is no evidence that Ms. Naylor had the authority to act as an agent for Mr. Ellsworth. [13] Mr. Evershed does not explicitly claim in his affidavit that he ever believed that Ms. Naylor had an agent's authority. Even if Lowell believed this, there is a lack of evidence of any conduct by Mr. Ellsworth or Ms. Naylor which might have led to that conclusion. Instead, Mr. Ellsworth claims that the couple made no representation to Lowell that Ms. Naylor had an agent's authority. `[T]he [spouse's] authority to act for [the other spouse] is not implied from the marital relation, nor from the mere fact that he occupied, or managed and controlled, [the other spouse's] property. . . .' Macris v. Sculptured Software, Inc., 2001 UT 43, ¶ 22, 24 P.3d 984 (quoting Capitol Elec. Co. v. Campbell, 117 Utah 454, 217 P.2d 392, 394 (1950)). Some additional fact or circumstance is needed to establish that a person acts as the agent of his or her spouse. Id. The record discloses no clear fact or circumstance that would have intimated to Lowell that Ms. Naylor acted as Mr. Ellsworth's agent sufficient to bind him to the arbitration agreement. ¶ 22 Finding no nonsignatory estoppel as relied on by the district court and, further, finding no evidence of an agency relationship between the spouses, we conclude that the district court erred in finding that Mr. Ellsworth participated in the contract in a manner that would manifest his assent to the arbitration agreement.