Court Opinion

ID: 4154164
Source: CourtListenerOpinion
Date Created: 2017-03-21 12:09:06.596668+00
Date Added: 2024-06-11T14:34:26.865849
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                    No. COA16-429

                                 Filed: 21 March 2017

Forsyth County, No. 15 CVS 3771

MICAH TERRELL, Plaintiff,

              v.

KERNERSVILLE CHRYSLER DODGE, LLC, Defendant.

        Appeal by defendant from order entered 17 December 2015 by Judge David L.

Hall in Superior Court, Forsyth County. Heard in the Court of Appeals 6 October

2016.

        Public Justice, P.C., by Leah M. Nicholls, pro hac vice, and Norris Law Firm,
        PLLC, by J. Matthew Norris, for plaintiff-appellee.

        Jeffrey F. Hutchins for defendant-appellant.

        STROUD, Judge.

        Defendant Kernersville Chrysler Dodge, LLC (“defendant”) appeals from the

trial court’s order denying defendant’s motion to compel arbitration. Because the

trial court failed to include any findings of fact in its order denying defendant’s

motion, we must reverse its order and remand for the trial court to make findings

and conclusions on the motion.

                                         Facts
                  TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                   Opinion of the Court

       Plaintiff’s complaint set forth the following allegations. On 23 April 2015,

plaintiff contacted defendant about a vehicle defendant had advertised for sale (“the

vehicle”).   Plaintiff placed a $500.00 hold on the vehicle over the phone, and

defendant’s employee, Larissa Santos, provided plaintiff with information and

photographs of the vehicle. Plaintiff also gave Ms. Santos several questions to ask

the service department about the vehicle’s condition. Ms. Santos contacted plaintiff

the following day and let him know that his questions had been given to the service

department and that the vehicle was currently being serviced. Ms. Santos gave

plaintiff a price quote for the vehicle, and on 25 April 2015, plaintiff drove down from

Charlottesville, Virginia, for a test drive and, if he decided to buy it, to complete his

purchase of the vehicle.

       After arriving, plaintiff met salesperson Brandon Widener and took the car for

a test drive. During the test drive, plaintiff noticed a noise coming from the engine

compartment and brought it to Mr. Widener’s attention, who took the vehicle to one

of defendant’s mechanics for an inspection. After approximately two hours, plaintiff

was told that the “ ‘tensioner pulley’ ” was causing the noise and that the part had

been replaced. Plaintiff alleged that defendant “assured [p]laintiff that the Vehicle

had undergone a thorough inspection prior to sale, that it was a safe Vehicle, and

that there were no major structural or mechanical problems.” Relying on those

representations, plaintiff purchased the vehicle and drove it home.

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                  TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                   Opinion of the Court

      On the way home, plaintiff noticed “some slight issues with the steering and

the u-joint/ball joint/axle area.” Shortly after getting back home, plaintiff contacted

defendant about these issues and let Ms. Santos know that he planned to have the

issues looked at by a repair shop in Charlottesville. Plaintiff dropped the vehicle off

on 30 April 2015, and two days later, the repair shop told plaintiff that the vehicle

“had significant ‘frame rot’, caused by rust and decay over the entire underside frame

and engine mount.” Because of this issue, the vehicle would not pass a Virginia State

Inspection and was unsafe to drive.

      Plaintiff filed his complaint on 25 June 2015, alleging defendant engaged in

unfair and deceptive trade practices, fraud, and breach of an express warranty.

Defendant initially filed a pro se answer denying the material allegations in plaintiff’s

complaint, which was stricken by the trial court on 1 September 2015. Defendant

then filed a new answer on 17 September 2015, followed by a motion to compel

arbitration on 13 November 2015. Defendant attached to the motion copies of the

documents it alleged were the governing arbitration agreement and the retail

purchase agreement. The copy of the retail purchase agreement -- as attached by

defendant – appears to be signed and dated by plaintiff. The form has two signature

lines for “purchaser” at the bottom left side and the signature appears on one of the

lines. There are two additional blank lines at the bottom of the form on the right.

The top line is labeled as “salesperson” and is filled in with the typewritten name

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                     TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                        Opinion of the Court

“Brandon P. Widener.” The bottom line is labeled “accepted by authorized dealership

representative” and the handwritten initials “RCM” appear above this line. We also

note that it is not clear if the retail purchase agreement as it appears in our record

has only one page or if the “Governing Arbitration Agreement” is a separate form,

although the arbitration agreement may be on the reverse side of the retail purchase

agreement.1      One section of the retail purchase agreement, entitled “OTHER

MATERIAL UNDERSTANDINGS AND INCORPORATED DOCUMENTS” has a

provision which states as follows:

               4. I understand that any dispute arising from, or relating
               to this transaction, shall be settled by neutral arbitration
               pursuant     to    the    GOVERNING         ARBITRATION
               AGREEMENT signed by my hand and incorporated into
               this Agreement.

                       (CONTINUED ON THE REVERSE SIDE OF
                       THIS AGREEMENT)

               I HAVE BEEN GIVEN AMPLE OPPORTUNITY TO
               EXAMINE THIS ENTIRE RETAIL PURCHASE
               AGREEMENT, FRONT AND BACK, AND I HEREBY
               ACCEPT THE TERMS AND CONDITIONS INCLUDING
               THOSE LISTED ON THE REVERSE SIDE OF THIS
               AGREEMENT.

       The retail purchase agreement also has the following provision just above the

signature lines:

       1  We are unable to determine if the arbitration agreement is on the reverse side of the retail
purchase agreement because only one of the three copies in our record presents the document in this
manner. But based upon the provisions of paragraph 4 of the retail purchase agreement, it appears
that the arbitration agreement was probably on the reverse side.

                                                -4-
                 TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                 Opinion of the Court

             I HEREBY ACKNOWLEDGE THIS AGREEMENT IS
             COMPLETE AND ACCURATELY REFLECTS ANY AND
             ALL RELATED DOCUMENTS SIGNED BY MY HAND
             AND REFERENCED AS INCORPORATED INTO THIS
             AGREEMENT BETWEEN THE DEALERSHIP AND
             MYSELF.

             I ACKNOWLEDGE RECEIPT OF A COPY OF THIS
             AGREEMENT WITH THE UNDERSTANDING THIS
             AGREEMENT IS NOT BINDING UPON THE
             DEALERSHIP OR PURCHASER(S) UNTIL SIGNED BY
             AN AUTHORIZED DEALERSHIP REPRESENTATIVE.

The arbitration agreement states at the beginning as follows:

             This Governing Arbitration Agreement shall be
             incorporated into the vehicle purchase/lease contract
             executed as of the date recorded below and is between the
             “Purchaser(s)” and the “Retailing Dealership” listed below
             herein referred to as the “Parties.”

      The copy of the arbitration agreement attached to the defendant’s motion has

two signature lines for “purchaser” at the bottom left and the top line was signed by

plaintiff. The form has two signature lines at the bottom right side. The top line is

labeled   “RETAILING     DEALERSHIP”        and    is   filled   in   with   typewritten

“KERNERSVILLE CHRYSLER DODGE JEEP.” The bottom signature line is labeled

“DEALERSHIP REPRESENTATIVE” and is blank.

      At a hearing on the motion to compel arbitration on 7 December 2015,

defendant presented evidence in support of the motion and counsel for both parties

made arguments.     Defendant called Ronald Craig McCullough to testify at the

hearing, who explained that he was one of defendant’s finance managers at the time

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                 TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                 Opinion of the Court

of the sale of the vehicle to plaintiff. Mr. McCullough testified that his initials,

“RCM,” were on the retail purchase agreement. However, another copy of the retail

purchase agreement in the addendum to the record, apparently Plaintiff’s copy of the

retail purchase agreement, shows no signature on the purchaser line for plaintiff and

does not have the initials “RCM.” Mr. McCullough also testified that he did not sign

the governing arbitration agreement. Plaintiff argued that without a signature from

the dealership on the arbitration agreement, “it creates a one-sided obligation to

arbitrate disputes[,]” and plaintiff “could not compel the defendant to arbitrate a

dispute that it had against him if the defendant did not have a signature agreeing to

arbitrate.”

      At the hearing, there was factual dispute over if and how an authorized

representative for the dealership had signed the retail purchase agreement. The

retail purchase agreement form was apparently a triplicate form with a white top

page, a yellow middle page, and a pink last page. Plaintiff had received the yellow

middle page, which is the version in the addendum to the record that has no

signatures. The copy as attached to the motion by defendant had both plaintiff’s

signature and the initials “RCM” for the dealership. According to Mr. McCullough,

the dealership normally scanned forms to be stored in a digital format and after a

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                    TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                       Opinion of the Court

period of time,      the original documents are shredded.2               But the copies of the

“Governing Arbitration Agreement” are all the same, and unsigned by a dealership

representative.

       It appears from the transcript that the trial court ultimately agreed with

plaintiff and stated at the hearing that “the contract should be construed against the

drafter and it is just not sufficient for this Court to find a binding, a mutual binding,

arbitration agreement.” On 17 December 2015, the court entered its order simply

denying defendant’s motion to compel arbitration, without any findings of fact or any

explanation of the basis for the ruling. Defendant timely appealed to this Court.

                                           Discussion

       We first note that while an order denying a motion to compel arbitration is

interlocutory, it is nevertheless immediately appealable, “because the right to

arbitrate a claim is a substantial right which may be lost if review is delayed.”

T.M.C.S., Inc. v. Marco Contractors, Inc., __ N.C. App. __, __, 780 S.E.2d 588, 592

(2015) (citations, quotation marks, and brackets omitted).

       Defendant argues that the trial court erred by failing to find that a valid

agreement to arbitrate was entered into by the parties and by not granting its motion

to compel arbitration. Noting that this State “has a strong public policy favoring

       2 There was some discussion at the hearing by counsel regarding the dealership’s document
retention policies and an inspection of the defendant’s records by a DMV inspector, but there was no
testimony or evidence offered on these matters.

                                               -7-
                 TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                  Opinion of the Court

arbitration[,]” defendant contends that the parties had a valid agreement to arbitrate,

claiming both parties signed “the contract which incorporated the arbitration

agreement into the agreement. The plaintiff also signed the arbitration agreement.

No evidence was ever presented by either party that the plaintiff failed to provide a

copy of the arbitration agreement. No [e]vidence was ever presented by either party

that the plaintiff did not sign the arbitration agreement or the contract.”

      A trial court reviewing a motion to compel arbitration must conduct “a two-

step analysis . . . to ascertain both (1) whether the parties had a valid agreement to

arbitrate, and also (2) whether the specific dispute falls within the substantive scope

of that agreement.” Slaughter v. Swicegood, 162 N.C. App. 457, 461, 591 S.E.2d 577,

580 (2004) (citations and quotation marks omitted). See also T.M.C.S., Inc., __ N.C.

App. at __, 780 S.E.2d at 593 (“When, as here, one party claims a dispute is covered

by an agreement to arbitrate and the other party denies the existence of an

arbitration agreement, the trial court must determine whether an arbitration

agreement actually exists.” (Citation and quotation marks omitted)).

             The trial court’s findings regarding the existence of an
             arbitration agreement are conclusive on appeal where
             supported by competent evidence, even where the evidence
             might have supported findings to the contrary.
             Accordingly, upon appellate review, we must determine
             whether there is evidence in the record supporting the trial
             court’s findings of fact and if so, whether these findings of
             fact in turn support the conclusion that there was no
             agreement to arbitrate.

                                         -8-
                  TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                   Opinion of the Court

Sciolino v. TD Waterhouse Inv’r Servs., Inc., 149 N.C. App. 642, 645, 562 S.E.2d 64,

66 (2002) (citations omitted).

      In this case, the hearing transcript indicates that the trial court found

plaintiff’s counsel’s argument regarding lack of mutuality and the ability of plaintiff

to enforce the arbitration agreement against defendant to be most persuasive. The

court noted that “basic contract law is that the contract should be construed against

the drafter. Here the drafter is the dealership. Given the totality of the submissions

before me, I am unable to conclude that there is a binding arbitration agreement.”

The trial judge pointed out to defendant’s trial counsel that the arbitration agreement

“is not signed by your client.” The court then concluded:

                    All right. I am denying the motion to compel
             arbitration because I do not find -- I find that there is no
             binding arbitration agreement between the parties.
                    ....
                    . . . . Again, the contract should be construed against
             the drafter and it is just not sufficient for this Court to find
             a binding, a mutual binding, arbitration agreement. I wish
             the parties well in resolving the matter.

      The court then entered a written order on 17 December 2015. But the trial

court’s order simply stated, without any findings of fact:

                   THIS MATTER coming to be heard, and being
             heard, at the December 7, 2015, civil session of the Forsyth
             County Superior Court, on Defendant’s Motion to Compel
             Arbitration and the Court, having carefully considered the
             matters of record including pleadings, authorities and
             arguments of both counsel, finds that Defendant’s Motion
             to Compel Arbitration should be denied.

                                          -9-
                 TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                 Opinion of the Court

                 NOW, THEREFORE, it is ORDERED, ADJUDGED,
            and DECREED as follows:

                   1.    Defendant’s Motion to Compel Arbitration is
                   denied.

      This Court has addressed the sufficiency of written orders denying motions to

compel arbitration many times. In Cornelius v. Lipscomb, this Court reversed an

order denying a motion to compel and remanded for additional findings of fact:

                   As an initial matter, defendants argue that the order
            denying their motion to compel arbitration is facially
            defective because it “contains no findings whatsoever” and
            does not “identify any basis for the refusal to dismiss or
            stay this action and compel arbitration.” We agree.

                   This Court has repeatedly held that an order
            denying a motion to compel arbitration must include
            findings of fact as to whether the parties had a valid
            agreement to arbitrate and, if so, whether the specific
            dispute falls within the substantive scope of that
            agreement. When a trial court fails to include findings of
            fact in its order, this Court has repeatedly reversed and
            remanded to the trial court for a new order containing the
            requisite findings.

                  In this case, the trial court’s order denying
            defendants’ motion to compel arbitration stated in relevant
            part only:

                         Prior to ruling on the motions, the
                   Court considered all pleadings and other
                   materials contained in the file. The Court
                   considered the briefs submitted by the
                   parties with regard to the motions. Further,
                   the Court considered the materials and
                   testimony submitted at the hearing on the

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                 TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                  Opinion of the Court

                   motions. Finally, the Court considered the
                   arguments of counsel with regard to the
                   motions.

                          After consideration of all matters as
                   set forth above in this Order, it appears to
                   the Court that both Motions as to both
                   Defendants should be denied.

                   NOW, THEREFORE, IT IS ORDERED:

                   1. The Defendants Sunset Financial
                      Services, Inc. and Jeffrey Lipscomb’s
                      Joint Motion to Compel Arbitration and
                      to Stay Court Action is denied as to both
                      Defendants.

                    The order provides no findings and no explanation
             for the basis of the court’s decision to deny the motion to
             compel arbitration. We, therefore, must reverse the trial
             court’s order and remand for findings of fact regarding
             whether the parties had a valid agreement to arbitrate
             and, if so, whether the dispute between the parties falls
             within the substantive scope of that agreement.

Cornelius v. Lipscomb, 224 N.C. App. 14, 16-17, 734 S.E.2d 870, 871-72 (2012)

(citations and quotation marks omitted).

      Here, as in many of the cases stated as examples in Cornelius, the trial court’s

order contained absolutely no findings and simply concluded without explanation

that the motion would be denied. Although it seems from the hearing transcript that

the trial judge may have determined that defendant did not sign the retail purchase

agreement, the governing arbitration agreement, or both, the court did not include

any findings whatsoever in its written order. It is also possible that the trial court

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                  TERRELL V. KERNERSVILLE CHRYSLER DODGE, LLC

                                   Opinion of the Court

determined that plaintiff had not signed the retail purchase agreement, as one

version of that agreement in our record is unsigned by either party. Nor did the court

resolve the question of whether signatures only on the retail purchase agreement,

which explicitly incorporated by reference the Governing Arbitration Agreement

(which may have been on the reverse side of the form) would be sufficient to bind the

dealership. Our review on appeal of a trial court’s denial of a motion to compel

arbitration is limited to the trial court’s findings and conclusions of law. Accordingly,

we must remand for the trial court to enter an order that clearly states its findings

and conclusions supporting its decision to denying the motion to compel arbitration.

      REVERSED AND REMANDED.

      Judges McCULLOUGH and ZACHARY concur.

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