Opinion ID: 1705657
Heading Depth: 2
Heading Rank: 1

Heading: Whether the Lenders Waived Their Right to Arbitrate

Text: 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. 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. 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 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 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 substantially invoked the litigation process by instituting the separate eviction proceeding; therefore, we conclude that the lenders did not waive their right to arbitration.