Marlene HARRIS, Plaintiff/Appellee, v. DAVID STANLEY CHEVROLET, INC., Defendant/Appellant, and Hartford Insurance Company and Safe-Guard Products International, L.L.C., Defendants

Oklahoma Supreme Court2012-02-07No. No. 109,146

273 P.3d 8772012 OK 9

Summary · law.co

Holding. The trial court did not abuse its discretion in denying the motion to compel arbitration and ruling that the arbitration clause in the vehicle purchase agreement did not apply to a dispute over a GAP insurance policy purchased separately three days later. The Court of Civil Appeals' opinion was vacated and the trial court's ruling was affirmed.

Marlene Harris purchased a vehicle from David Stanley Chevrolet in August 2005 with an arbitration clause in the purchase agreement. Three days later, she bought a separate GAP insurance policy through Safe-Guard Products International. When the vehicle was totaled in 2009, Safe-Guard refused to pay the full difference between insurance proceeds and the remaining loan balance. Harris filed suit, and David Stanley moved to compel arbitration under the vehicle purchase agreement's arbitration clause. The trial court denied this motion without holding a hearing, finding that the arbitration clause did not apply to a dispute about a separate insurance contract executed days after the vehicle purchase.

The Court of Civil Appeals reversed, reasoning that Oklahoma policy favors arbitration and that disputed factual questions existed about whether the arbitration clause covered the GAP insurance claim. The Supreme Court of Oklahoma reviewed the case and found that the Court of Civil Appeals had misapplied the standard of review. The Supreme Court held that the trial court properly exercised its discretion in determining as a matter of law that the arbitration clause—which referred only to disputes "arising as a result of this sale or transaction"—did not extend to a separate insurance contract signed three days later with a different party.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether an arbitration clause in a vehicle purchase agreement extends to disputes arising from a separate insurance contract executed three days later
Standard of review for a trial court's decision to deny a motion to compel arbitration without an evidentiary hearing
Contract interpretation principles applied when determining whether parties agreed to arbitrate a particular dispute

Procedural posture

The Supreme Court of Oklahoma reviewed by certiorari the Court of Civil Appeals' reversal of the trial court's denial of the motion to compel arbitration.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

COMBS, J.

¶ 1 Marlene Harris (Harris) requests review of the opinion of the Oklahoma Court of Civil Appeals which overruled the trial courts Motion to Compel Arbitration, Stay of Proceeding and Request for Evidentiary Hearing and Supporting Brief. We find the Court of Civil Appeals misinterpreted the standard of review and thus erred in reversing and remanding this matter for further proceedings.

FACTUAL AND PROCEDURAL HISTORY

¶ 2 On August 20, 2005, Harris purchased a 2005 Chevrolet Monte Carlo from David Stanley Chevrolet, Inc. (David Stanley). The purchase agreement contained an arbitration provision that applied to any controversy, claim or dispute between the Purchaser and the Dealer arising out of, or related to this sale or transaction, including but not limited to, any and all issues or disputes arising as a result of this sale or transaction whether said issues arise prior to, during or subsequent to the sale or attempted sale of a vehicle. On August 23, 2005, Harris entered into a GAP Insurance contract with Safe-Guard Prod-uets International, LL.C. (Safe-Guard) sold to her by an employee of David Stanley acting as an agent for Safe-Guard. On August 26, 2009, the vehicle suffered a total loss. Safe-Guard refused to pay the total difference between the insurance proceeds and the amount owed on the car.

¶ 3 Harris maintained that the purchase of the vehicle and the purchase of the policy were separate transactions. Harris argued, since they were separate transactions, the arbitration clause of the purchase contract was inapplicable to the underpayment of coverage (GAP coverage). Harris argued no claim was brought against Safe-Guard which was related to the sale or financing of the vehicle, conceding the arbitration clause would apply to claims related to the sale or financing issues. Harris argues the vehicle valuation utilized by Hartford, and the underpayment of the claim by Safe-Guard, was inapplicable to the arbitration clause of the purchase contract. After reviewing the motions of the parties, the trial court denied David Stanleys Motion to Compel arbitration without an evidentiary hearing.

¶ 4 The Court of Civil Appeals reversed the trial court finding Oklahoma policy favors the use of arbitration to resolve disputes. The Court of Civil Appeals also held, under Rule 4(c) of the Rules for District Courts, 12 O.S. Supp.2010, Ch. 2, App., a hearing would be preferred as they accepted David Stanleys argument that controverted facts existed as to whether the arbitration agreement extended to the GAP policy.

STANDARD OF REVIEW

¶ 5 The trial courts decision to grant an evidentiary hearing on a motion to compel arbitration is within the discretion of the trial court. In Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 17 138 P.3d 826, 830, we stated with regard to a request for a hearing on a motion to arbitrate:

Either party may request a hearing. The decision to grant a hearing will be in the discretion of the district court. However, if the existence of an agreement to arbitrate is controverted, then the better procedure is for the district court to conduct an evidentiary hearing before entering an order. (citations omitted)

The trial courts ruling thereon will not be disturbed on appeal absent an abuse of discretion. Oklahoma Oncology & Hematology P.C. v. U.S. Oncology, Inc., 2007 OK 12, ¶ 19, 160 P.3d 936, 944.

OKLAHOMA PRINCIPLES OF ARBITRATION

¶ 6 Arbitration is designed to preclude court intervention into the merits of disputes when arbitration has been provided for contractually. Voss v. City of Oklahoma City, 1980 OK 148, ¶ 5, 618 P.2d 925, 928. A person seeking to compel arbitration must present a statement of law and facts showing an enforceable agreement to arbitrate the issues present in the petition. Rogers v. Dell Computer Corp., 2005 OK 51, ¶ 16, 138 P.3d 826, 830. A court should permit arbitration unless the court can say with positive assurance the dispute is not covered by the arbitration clause. City of Muskogee v. Martin, 1990 OK 70, ¶ 8, 796 P.2d 337, 340.

¶ 7 In the present matter, it must be shown that the arbitration clause applies to the issue of underpayment of insurance coverage in the policy. If this cannot be shown, the Court will not impose arbitration upon the parties. See, Oklahoma Oncology and Hematology P.C. v. U.S. Oncology, Inc., 2007 OK 12, ¶ 22, 160 P.3d 936, 944, citing Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989), which held that arbitration is a matter of consent, not coercion. Additionally, [alrbi-tration is not a forum to rewrite the contract terms for the benefit of another party. Oklahoma Oncology and Hematology P.C. v. U.S. Oncology, Inc., 2007 OK 12, ¶ 30, 160 P.3d 936, 942.

¶ 8 The arbitration clause at issue herein provided that it would be arbitrated in accordance with the Federal Arbitration Act (FAA) Under the FAA, an arbitration provision in a contract shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or in equity for the revocation of any contract. 9 U.S.C., § 2. The United State Supreme Court has held the first task of a court asked to compel arbitration of a dispute is to determine whether the parties agreed to arbitrate that dispute. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985), through the use of general state-law principles of contract interpretation. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 475, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989).

¶ 9 The trial court, viewing the purchase agreement and the insurance contract executed three days after the purchase of the car, determined there was no continuity of contract. The contract for the sale of the vehicle refers to this sale or transaction, including but not limited to any and all issues or disputes arising as a result of this sale or transaction. There is nothing in this language indicating the future purchase of GAP insurance. It is uncontroverted that the two contracts involve two separate subjects, executed on different dates, and the arbitration clause in the purchase agreement does not mention or reference GAP insurance or any relationship between the two contracts. The trial court did not abuse its discretion in denying the evidentiary hearing and ruling that the arbitration clause did not apply as a matter of law.

¶ 10 CONCUR: TAYLOR, C.J., COLBERT, V.C.J., KAUGER, WATT, REIF, COMBS, GURICH, JJ.

¶ 11 DISSENT: WINCHESTER, EDMONDSON, JJ.

CERTIORARI PREVIOUSLY GRANTED; COURT OF CIVIL APPEALS OPINION VACATED; RULING OF THE TRIAL COURT AFFIRMED.

. GAP insurance is generally described as that type of coverage which will pay or waive the difference between the unpaid net balance of the debt less the actual cash value of the vehicle in the event of a total loss.

. Neither party suggests that strict adherence to the FAA is necessary. In fact, David Stanley noted that the FAA and the Oklahoma Uniform Arbitration Act (OUAA) stand for the same principles at issue.