CHARLESTON — The West Virginia Supreme Court of Appeals ruled that a retail installment sales contract superseded an arbitration agreement in a merger clause in a credit application.
"Upon careful review of the briefs, the appendix record, the arguments of the parties, and the applicable legal authority, we conclude that the credit application and Retail Installment Sales Contract did not constitute contemporaneously-executed documents which were part of a singular transaction," the April 10 opinion states.
Justice Margaret Workman authored the majority opinion. Justice John Hutchison concurred and authored a separate opinion. Chief Justice Tim Armstead and Justice Evan Jenkins dissented and authored a separate opinion.
Workman
Freddie Reynolds and Shelby Reynolds purchased a new 2014 Chevrolet Silverado truck from Crossroads Chevrolet on Nov. 14, 2014, and during that, they executed a credit application that permitted Crossroads to investigate and "shop" their credit around to potential financing companies for the purchase of the vehicle.
The couple negotiated and reached an agreement for the purchase of the vehicle and subsequently executed a retail installment sales contract for the purchase of the vehicle. Ultimately, the couple defaulted on their loan and TD Auto Finance LLC began collection efforts by Focus Receivables Management LLC and Northstar Location Services.
The Reynolds later filed a lawsuit against all three companies, alleging they were harassed even after they advised the companies they were represented by counsel. They claimed the companies violated the West Virginia Consumer Credit and Protection Act.
In the lawsuit, the companies moved to compel arbitration on the basis that there was an arbitration provision in the credit application, but the circuit court denied that motion, finding that it constituted an entirely separate transaction from the retail installment sales contract.
"Accordingly, it found that the credit application and RISC were not part of the same transaction and therefore were not required to be construed together," Workman wrote. "Further, the circuit court found that petitioners’ failure to have an arbitration agreement signed at the same time as the RISC, included in the RISC, or at a minimum, incorporated by reference into the RISC, was fatal to its claim for arbitration."
The companies then appealed to the Supreme Court.
The court found that the arbitration provision in the credit application did not survive the merger class of the retail installment sales contract and nullified the obligation to arbitrate their claims.
Hutchison wrote in his concurring opinion because he wanted to emphasize that the case was a basic, run-of-the-mill state-law contract interpretation case and is not even about arbitration.
"When Crossroads Chevrolet offered a pickup truck for sale according to the terms in the RISC, Crossroads Chevrolet’s offer did not contain an arbitration provision," Hutchison wrote. "When Mr. and Mrs. Reynolds accepted the offer, they did not assent to arbitrate any disputes with Crossroads Chevrolet. Accordingly, under basic, run-of-the-mill rules of contract interpretation, the Reynoldses are not bound to arbitrate their dispute with TD Auto Finance regarding the RISC."
In their dissenting opinion, Jenkins wrote that by affirming the court's order refusing to enforce an arbitration agreement, the majority misconstrued the plain facts and ignored the applicable burden of proof. He wrote that the majority wrongly decided the case and he respectfully dissented.
"TD Auto Finance plainly made its prima facie case by producing the arbitration contract agreed to by the Reynoldses, which broadly applied to any dispute that 'relates to' the credit application, including 'any installment sale contract,'" Jenkins wrote. "Even the majority opinion concludes that, '[u]nder the credit application, there is a clear agreement to arbitrate with TD Auto Finance...' Once TD Auto Finance met its prima facie case, the burden shifted to the Reynoldses to establish that the arbitration contract was not enforceable."
Jenkins wrote that because they failed to meet this burden, the arbitration agreement should have been enforced.
West Virginia Supreme Court of Appeals case number: 18-0605