Court Opinion

ID: 865102
Source: CourtListenerOpinion
Date Created: 2013-04-27 00:25:14.551904+00
Date Added: 2024-06-11T13:11:45.561985
License: Public Domain

IN THE SUPREME COURT OF MISSISSIPPI

                                NO. 2004-CT-02415-SCT

EDDIE ADAMS AND BETH BROWN

v.

GREENPOINT CREDIT, LLC AND SECURITY
BANK OF AMORY

                             ON WRIT OF CERTIORARI

DATE OF JUDGMENT:                          11/01/2004
TRIAL JUDGE:                               HON. SHARION R. AYCOCK
COURT FROM WHICH APPEALED:                 MONROE COUNTY CIRCUIT COURT
ATTORNEY FOR APPELLANTS:                   W. HOWARD GUNN
ATTORNEYS FOR APPELLEES:                   MICHAEL STEPHEN MACINNIS
                                           C. MICHAEL MALSKI
                                           JON JERDONE MIMS
                                           JEFFREY DALE RAWLINGS
NATURE OF THE CASE:                        CIVIL - CONTRACT
DISPOSITION:                               THE JUDGMENT OF THE COURT OF
                                           APPEALS IS AFFIRMED IN PART AND
                                           VACATED IN PART, AND THE
                                           JUDGMENT OF THE CIRCUIT COURT IS
                                           AFFIRMED IN PART AND REVERSED
                                           AND REMANDED IN PART - 12/07/2006
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

       EN BANC.

       RANDOLPH, JUSTICE, FOR THE COURT:

¶1.    This Court granted the petition for writ of certiorari filed by GreenPoint Credit, LLC

(“GreenPoint”) to address the issue of whether Beth Brown, like her father, Eddie B. Adams,

should be compelled to submit to arbitration. The Mississippi Court of Appeals ruled that
Adams was compelled to submit to arbitration, but that Brown’s claims were not subject to

arbitration.

                                          FACTS

¶2.    On August 5, 1998, Eddie B. Adams and his wife, Linda G. Adams, purchased a used

mobile home. On the same date, they entered into a “Retail Installment Contract, Security

Agreement, Waiver of Trial by Jury and Agreement to Arbitration or Reference or Trial by

Judge Alone (Contract)” with creditor BankAmerica Housing Services. 1 The applicable

provisions are:

       a. Dispute Resolution. Any controversy or claim between or among you or me
       or our assignees arising out of or relating to this Contract or any agreements
       or instruments relating to or delivered in connection with this Contract,
       including any claim based on or arising from an alleged tort, shall, if
       requested by either you or me, be determined by arbitration, reference, or trial
       by judge as provided below. A controversy involving only a single claimant,
       or claimants who are related or asserting claims arising from a single
       transaction, shall be determined by arbitration as described below. Any other
       controversy shall be determined by judicial reference of the controversy to a
       referee appointed by the court or, if the court where the controversy is venued
       lacks the power to appoint a referee, by trial by a judge without a jury, as
       described below. YOU AND I AGREE AND UNDERSTAND THAT WE
       ARE GIVING UP THE RIGHT TO TRIAL BY JURY, AND THERE SHALL
       BE NO JURY WHETHER THE CONTROVERSY OR CLAIM IS DECIDED
       BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A
       JUDGE.

       b. Arbitration. Since this Contract touches and concerns interstate commerce,
       an arbitration under this Contract shall be conducted in accordance with the
       United States Arbitration Act (Title 9, United States Code), notwithstanding
       any choice of law provision in this Contract. The Commercial Rules of the
       American Arbitration Association (“AAA”) also shall apply. The arbitrator(s)
       shall follow the law and shall give effect to statutes of limitation in
       determining any claim. Any controversy concerning whether an issue is
       arbitrable shall be determined by the arbitrator(s). The award of the

       1
           The contract was assigned to GreenPoint.

                                              2
      arbitrator(s) shall be in writing and include a statement of reasons for the
      award. The award shall be final. Judgment upon the award may be entered in
      any court having jurisdiction, and no challenge to entry of judgment upon the
      award shall be entertained except as provided by Section 10 of the United
      States Arbitration Act or upon a finding of manifest injustice.

(Emphasis added).

¶3.   On January 31, 2001, GreenPoint drafted $232.69 from the joint checking account of

Eddie Adams and Beth Brown, at Security Bank of Amory (“Security Bank”). The check

was “Signed: Linda G. Adams” by “Authorized Representative Greenpoint Credit.” 2 On

February 15, 2001, Adams and Brown discovered that GreenPoint had presented the draft

to Security Bank. Adams’s affidavit states that he then:

      went to the Bank and told a bank officer or employee that the draft was
      unauthorized, that my wife was dead and not on this account and, hence, could
      not [have] authorized a draft on it. We again notified the Bank of the
      unauthorized draft and complained about the checks being returned for
      insufficient funds on our account when we received notification of the checks
      being returned for insufficient funds on or about March 15, 2001.

(Emphasis added). Adams and Brown subsequently sued GreenPoint and Security Bank 3 in

the Circuit Court of Monroe County alleging that:

      [a]s a proximate result of the concurrent and combined aforesaid acts of
      Defendants, Plaintiffs’ account was unlawfully subjected to the aforesaid draft
      issued by GreenPoint ... As a further proximate result of the aforesaid illegal
      and wrongful draft upon Plaintiffs’ aforesaid account, checks which were
      lawfully written by Plaintiffs on said account were returned for non-sufficient
      funds, and as a result of same an arrest warrant was issued for Plaintiffs,
      subjecting Plaintiffs to humiliation, embarrassment, defamation, mental stress,
      and other damages.

      2
          Linda G. Adams was deceased at the time the draft was presented.
      3
          Security Bank is not a party to this appeal.

                                                3
Adams and Brown asserted claims of fraud, negligence, intentional and/or negligent

infliction of mental and emotional distress, breach of contract, and defamation.

¶4.    GreenPoint filed a motion to dismiss and to compel arbitration arguing that

“[p]ursuant to the terms of the Agreement and applicable law, the claims brought in this

action are subject to binding arbitration and Plaintiffs may not proceed with this action.” In

response, Adams and Brown argued that the arbitration clause was unconscionable,

inapplicable to their claims, and otherwise unenforceable.

¶5.    Subsequently, GreenPoint filed a motion to stay discovery arguing that:

       [a]ny action taken by GreenPoint inconsistent with enforcement of the
       arbitration clause, including participating in discovery, may adversely affect
       GreenPoint’s rights to enforce the arbitration clause. See Cox v. Howard,
       Weil, Labouisse, Friedrichs, Inc., 619 So. 2d 908 (Miss. 1993), and Miss.
       Code Ann. Section 11-15-103. Discovery in this action should be stayed until
       GreenPoint’s arbitration motion has been decided.

Adams and Brown responded by filing a motion to compel “GreenPoint Credit to respond

to the discovery as tendered to it.”

¶6.    The circuit court heard GreenPoint’s motion to dismiss and to compel arbitration. In

its subsequent order, the court granted the motion to dismiss and to compel arbitration as to

the claims asserted against GreenPoint, finding that “[p]ursuant to the terms of the

Agreement and applicable law, Eddie Adams and Beth Brown are bound to submit their

claims to arbitration ... as required by the Agreement.” Thereafter, Adams and Brown filed

their notice of appeal.

¶7.    On appeal, the Mississippi Court of Appeals was presented with two issues: (1)

whether Adams’s claims were subject to arbitration and (2) whether Brown’s claims were

                                              4
subject to arbitration under the terms of the contract previously executed by her parents. See

Adams v. GreenPoint Credit, LLC, 2006 Miss. App. LEXIS 64, at *6-8 (Miss. Ct. App.

2006). The Court of Appeals affirmed in part and reversed and remanded in part, finding that

Adams was properly compelled to submit to arbitration, while Brown was not. See id. at

*11-12. As to Adams, the Court of Appeals found that:

       the arbitration agreement states that ‘any controversy or claim between or
       among you and me or our assignees arising out of or relating to this Contract
       or any agreements or instruments relating to or delivered in connection with
       this Contract, including any claim based on or arising from an alleged tort’ is
       subject to arbitration.

Id. at *7-8. As “[t]he torts alleged by Adams arise from the allegedly unauthorized draft of

a payment due under a contract that called for arbitration[,]” id. at *8, the Court of Appeals

concluded that the circuit court was correct in finding that Adams’s claims were subject to

arbitration. Regarding Brown, however, the Court of Appeals relied upon Smith Barney,

Inc. v. Henry, 775 So. 2d 722, 727 (Miss. 2001), for the proposition that “arbitration

agreements are enforceable to non-signatories to the contract when the non-signatory party

is a third-party beneficiary.” Adams, 2006 Miss. App. LEXIS 64, at *9 (emphasis added).

The Court of Appeals found that:

       Greenpoint has failed to show that Brown is a third-party beneficiary to the
       contract Adams signed to finance his mobile home. The rights of a third-party
       beneficiary must ‘spring’ from the terms of the contract. Burns v.
       Washington Savings, 251 Miss. 789, 796, 171 So. 2d 322, 325 (1965). No
       right against the contract promisor or promisee is acquired by a mere
       incidental beneficiary. Hartford Accident & Indemnity Co. v. Hewes, 190
       Miss. 225, 199 So. 93, 95, 199 So. 772 (1940). There is no proof in the record
       that Brown owned the mobile home jointly with Adams, lived in the mobile
       home, or benefitted from the financing agreement in any way.

                                              5
       Brown did not sign an agreement to arbitrate and did not directly benefit from
       the financing agreement Adams and his wife signed. Therefore, Brown’s
       claims are not subject to arbitration.

Adams, 2006 Miss. App. LEXIS 64, at *9. The Court of Appeals then determined that

“allowing Brown to litigate her claims while Adams’ claims are subject to arbitration would

impair Greenpoint’s right to arbitrate.” Id. at *11. As such, the Court stayed Brown’s claims

“until the arbitration proceedings with respect to Adams’ claims are completed.” Id.

¶8.    After the Court of Appeals denied GreenPoint’s motion for rehearing, GreenPoint

filed a petition for writ of certiorari with this Court. In its petition, GreenPoint argued that:

       no discovery was conducted to inquire into Brown’s status as a third party
       beneficiary. Indeed, no such discovery could be conducted by GreenPoint
       without ironically jeopardizing its right to seek arbitration. Nevertheless,
       GreenPoint contends no such discovery is necessary because Brown directly
       seeks benefits from the contract through her claims for damages which arise
       directly from a payment dispute under the contract.

This Court granted GreenPoint’s petition for writ of certiorari.

                                           ISSUES

¶9.    This Court agrees with the conclusion of both the circuit court and the Court of

Appeals that Adams’s claims are subject to arbitration pursuant to the terms of the contract

he signed. The arbitration agreement stated:

       [a]ny controversy or claim between or among you or me or our assignees
       arising out of or relating to this Contract or any agreements or instruments
       relating to or delivered in connection with this Contract, including any claim
       based on or arising from an alleged tort, shall, if requested by either you or me,
       be determined by arbitration, reference, or trial by judge as provided below.

See Doleac v. Real Estate Professionals, LLC, 911 So. 2d 496, 504 (Miss. 2005) (applying

arbitration clause to tort claims arising under agreements).

                                               6
¶10.   Therefore, we are left with the issue:

       I. Was the trial court correct in ordering Brown to arbitration or was the Court
       of Appeals correct in finding that Brown, as a non-signatory to the contract,
       had a right to have her claims adjudicated in a court of law?

                                 STANDARD OF REVIEW

¶11.   “The grant or denial of a motion to compel arbitration is reviewed de novo.” East

Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (Miss. 2002) (citing Webb v. Investacorp, Inc.,

89 F.3d 252, 256 (5 th Cir. 1996)) (emphasis added).

                                          ANALYSIS

       I. Was the trial court correct in ordering Brown to arbitration or was the
       Court of Appeals correct in finding that Brown, as a non-signatory to the
       contract, had a right to have her claims adjudicated in a court of law?

¶12.   GreenPoint acknowledges that Beth Brown did not sign the contract. However, it

argues that:

       [t]he Agreement specifically provides that related claimants or claims arising
       from the same transaction are subject to arbitration. Beth Brown is alleged to
       be the daughter of Eddie Adams and their claims are identical and arise from
       the same transaction. Therefore, the claims of Beth Brown are also subject to
       arbitration.

In spite of the fact that GreenPoint complains it cannot conduct needed discovery without

“jeopardizing its right to seek arbitration[,]” it contrastingly asserts that:

       no such discovery is necessary because Brown directly seeks to benefit from
       the contract by joining in the claims of Adams for damages allegedly caused
       by a payment dispute under the contract. But for the contract with Greenpoint,
       Brown would have no dispute with Greenpoint over a payment and whether
       or not said payment was authorized to be deducted from a checking account
       co-owned by [Adams and Brown].

                                                7
(Emphasis added). Furthermore, GreenPoint unpersuasively argues that Brown implicitly

benefitted under the contract by joining the claims of Adams, and that Brown should be

required to prove a negative, i.e. “[she] has presented no evidence that she has not benefitted

from the Contract.”

¶13.   Brown responds that she “was not a party to the contract, a beneficiary of the contract,

and had no dealings whatsoever with Greenpoint.” In short, “[s]he was a total stranger to the

contract and its arbitration clause.” As such, she asserts that “[n]othing in the Federal

Arbitration Act authorizes a court to compel parties not covered by the agreement to arbitrate

their claims.” See EEOC v. Waffle House, Inc., 534 U.S. 279, 122 S. Ct. 754, 151 L. Ed.

2d 755 (2002); Fleetwood Enterprises, Inc. v. Gaskamp, 303 F.3d 570 (5 th Cir. 2002).

Adams and Brown insist that they never authorized GreenPoint “to draft such account. ...

Linda Adams, wife of Eddie Adams, was dead at the time Greenpoint alleged such

authorization was made and, hence, could not have authorized same.” Brown asserts that her

“constitutional right to a trial by jury ... cannot be taken away from her under the

circumstances of this case.” See Miss. Const. art. 3, Section 31.

¶14.   This Court has “readily acknowledged that there is a strong federal policy favoring

arbitration.” Pre-Paid Legal Services v. Battle, 873 So. 2d 79, 84 (Miss. 2004) (citations

omitted). See also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62, 115

S. Ct. 1212, 131 L. Ed. 2d 76 (1995) (quoting Volt Information Science, Inc. v. Board of

Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 476, 109 S. Ct. 1248, 103 L. Ed.

2d 488 (1989)) (“when a court interprets such provisions in an agreement covered by the

FAA, ‘due regard must be given to the federal policy favoring arbitration, and ambiguities

                                              8
as to the scope of the arbitration clause itself resolved in favor of arbitration.’”). Despite that

policy, however, “a party cannot be required to submit to arbitration any dispute which he

has not agreed so to submit.”         Pre-Paid Legal, 873 So. 2d at 83 (quoting AT&T

Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S. Ct.

1415, 1418, 89 L. Ed. 2d 648 (1986)). See also Waffle House, 534 U.S. at 279 (“[n]o one

asserts that the EEOC is a party to the contract, or that it agreed to arbitrate its claims. It

goes without saying that a contract cannot bind a non-party. Accordingly, the proarbitration

policy goals of the FAA do not require the agency to relinquish its statutory authority if it has

not agreed to do so.”) (emphasis added); Equifirst Corp. v. Jackson, 920 So. 2d 458, 461

(Miss. 2006). GreenPoint concedes that Brown did not sign the contract. Moreover, the

arbitration provision covers “you or me or our assignees ... .” Clearly, Eddie and Linda

Adams constitute the “you;” the “me” is GreenPoint; and no claim is being made that Brown

is an assignee. The plain language of the provision does not extend to Brown.

¶15.   However, arbitration agreements can be enforced against non-signatories if such non-

signatory is a third-party beneficiary. See Smith Barney, Inc. v. Henry, 775 So. 2d 722, 727

(Miss. 2001). In Burns, this Court stated:

       [t]he principle that one not a party or privy to a contract but who is the
       beneficiary thereof is entitled to maintain an action for its breach is not so far
       extended to give a third person who is only indirectly and incidentally
       benefitted by the contract the right to sue upon it. A mere incidental,
       collateral, or consequential benefit which may accrue to a third person by
       reason of the performance of the contract, or the mere fact that he has been
       injured by the breach thereof, is not sufficient to enable him to maintain an
       action on the contract. Where the contract is primarily for the benefit of the
       parties thereto, the mere fact that a third person would be incidentally
       benefitted does not give him a right to sue for its breach. 17 Am. Jur. 2d

                                                9
       Contracts § 307, at 732-33 (1964). Rest. of the Law Contracts § 133 (1932);
       Annot. 81 ALR 1287 (1932).

       In order for the third person beneficiary to have a cause of action, the contracts
       between the original parties must have been entered for his benefit, or at least
       such benefit must be the direct result of the performance within the
       contemplation of the parties as shown by its terms. There must have been a
       legal obligation or duty on the part of the promisee to such third person
       beneficiary. The obligation must have been a legal duty which connects the
       beneficiary with the contract. In other words, the right of the third party
       beneficiary to maintain an action on the contract must spring from the terms
       of the contract itself. 17A C.J.S. Contracts 519(4) (1963).

Burns, 251 Miss. at 796, 171 So. 2d at 325. This Court has cited the United States Supreme

Court for the proposition that, “‘we do not override the clear intent of the parties, or reach

a result inconsistent with the plain text of the contract, simply because the policy favoring

arbitration is implicated.’” See B.C. Rogers Poultry Inc. v. Wedgeworth, 911 So. 2d 483,

487 (Miss. 2005) (quoting Waffle House, 534 U.S. at 294). Nothing in the plain language

of the arbitration provision indicates a clear intent of the parties to make Brown a third-party

beneficiary. She did not sign the contract, was in no way alluded to in the contract, and,

based on the record before us, received no benefits from the contract. As a non-signatory,

non-third-party beneficiary, Brown is effectively a stranger to the contract. Furthermore, her

suit is not “to maintain an action for its breach[;]” Burns, 251 Miss. at 796, 171 So. 2d at

325, there is no evidence that the contract was “entered for [her] benefit[;]” id., there is no

evidence that any benefit flowed to her as a “direct result of the performance within the

contemplation of the parties as shown by its terms[;]” id., or that her suit “spring[s] from the

terms of the contract itself.” Id. As Brown is not a third-party beneficiary to whom the

benefits of the contract attach, she is not bound by the arbitration provision.

                                              10
¶16.   Neither does the record support binding Brown to the arbitration provision under the

doctrine of equitable estoppel, which is an extraordinary remedy to be used with caution. See

B.C. Rogers, 911 So. 2d at 491. In B.C. Rogers, this Court stated that “equitable estoppel

exists where there is a (1) belief or reliance on some representation; (2) a change of position

as a result thereof; and (3) detriment or prejudice caused by the change of position.” Id. at

492. That test is not satisfied, as GreenPoint has not asserted facts to support its application.

The record does not reflect that GreenPoint relied upon and detrimentally changed its

position as a result of representations made by Brown.

¶17.   Brown’s parents entered into a contract to purchase a used mobile home financed by

GreenPoint. Sometime thereafter, Brown and Adams opened a joint checking account at

Security Bank. GreenPoint allegedly presented an unauthorized draft on that account,

causing checks written by Adams and Brown to bounce. In short, GreenPoint is asserting

that the mere existence of a joint checking account with her signatory father should compel

a non-signatory, non-third-party beneficiary to the arbitration provision. Clearly, this is not

a situation where the “extraordinary remedy,” id. at 491, of equitable estoppel should be

considered, much less, invoked.

                                       CONCLUSION

¶18.   Based upon the aforementioned analysis, we conclude that the Court of Appeals

correctly found Adams subject to arbitration under the contract he signed with GreenPoint,

while Brown is not constrained by same. However, we also conclude that the Court of

Appeals erred in granting a stay in the circuit court proceedings of Brown against GreenPoint

and Security Bank. The circuit court, in finding both Adams and Brown compelled to

                                               11
arbitrate, properly stayed proceedings and “retained jurisdiction to confirm the arbitration

decision, if any.” However, this Court, like the Court of Appeals, finds that Brown’s action

against GreenPoint does not emanate from the subject contract. As such, Brown is not

precluded from pursuing her action against GreenPoint and Security Bank until Adams’s

arbitration is completed. See Matter of Talbott Big Foot, Inc., 887 F.2d 611, 614 (5 th Cir.

1989) (“the mandatory stay provision of the Act does not apply to those who are not

contractually bound by the arbitration agreement ... .”). Simultaneously, however, we

acknowledge that our courts experience crowded dockets and our trial judges diligently

pursue the resolution of the cases on their dockets. Therefore, on remand it lies within the

circuit judge’s discretion “to stay the claims between the nonarbitrating parties pending

outcome of the arbitration simply as a means of controlling its docket.” In re Hornbeck, 981

F.2d 752, 755 (5 th Cir. 1993). In exercising that discretion, the circuit judge should seek “to

secure the just, speedy, and inexpensive determination of every action.” Miss. R. Civ. P. 1.

Therefore, the judgment of the Court of Appeals is affirmed in part and vacated in part, and

the circuit court judgment is affirmed as to Adams, reversed as to Brown, and remanded with

instructions as to the stay.

¶19. THE JUDGMENT OF THE COURT OF APPEALS IS AFFIRMED IN PART
AND VACATED IN PART, AND THE JUDGMENT OF THE CIRCUIT COURT IS
AFFIRMED IN PART AND REVERSED AND REMANDED IN PART.

     SMITH, C.J., WALLER AND COBB, P.JJ., EASLEY, CARLSON AND
DICKINSON, JJ., CONCUR. DIAZ AND GRAVES, JJ., CONCUR IN PART AND
DISSENT IN PART WITHOUT SEPARATE WRITTEN OPINION.

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