
	OSCN Found Document:BARK v. LAKE COUNTRY CHEVROLET CADILLAC, LLC

	
				

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BARK v. LAKE COUNTRY CHEVROLET CADILLAC, LLC2014 OK CIV APP 24321 P.3d 1007Case Number: 111604Decided: 02/05/2014Mandate Issued: 03/07/2014DIVISION ITHE COURT OF CIVIL APPEALS OF THE STATE OF OKLAHOMA, DIVISION ICite as: 2014 OK CIV APP 24, 321 P.3d 1007
WALKER BARK and DEBRA YEAHQUO, 
Plaintiffs/Appellees,v.LAKE COUNTRY CHEVROLET CADILLAC, LLC d/b/a LAKE 
COUNTRY CHEVROLET CADILLAC, GREGG WOODS, BRITTANY EPPERSON, CHRIS LEONARD, CLARK 
BLAKE and JOHN DOE, Defendants/Appellants.

APPEAL FROM THE DISTRICT COURT OF MUSKOGEE COUNTY, OKLAHOMA
HONORABLE NORMAN D. THYGESEN, JUDGE

REVERSED AND REMANDED FOR FURTHER PROCEEDINGS

Barry G. Reynolds, Shannon P. Wheeler, Titus Hillis Reynolds Love Dickman 
& McCalmon, Tulsa, Oklahoma, for Appellants,Chadwick Smith, Tahlequah, 
Oklahoma, for Appellees.


Larry Joplin, Presiding Judge:
¶1 Defendants/Appellants Lake Country Chevrolet Cadillac, LLC d/b/a Lake 
Country Chevrolet Cadillac, Gregg Woods, Brittany Epperson, Chris Leonard, and 
Clark Blake (individually, by name, or, collectively, Defendants), seek review 
of the trial court's order denying their motion to compel arbitration on the 
contract and tort claims of Plaintiffs Walker Bark and Debra Yeahquo arising out 
of contracts for the sale of automobiles by Defendants. In this appeal, 
Defendants assert that the contracts and federal substantive law expressly 
require the arbitrator to resolve the question of Plaintiff Bark's capacity to 
make a contract and agree to arbitration, and the trial court erred in holding 
otherwise.
¶2 Plaintiffs brought suit to rescind two agreements for the purchase of 
automobiles from Defendant Lake Country Chevrolet Cadillac, and to recover 
actual and punitive damages for alleged fraud. Defendants filed a motion to 
compel arbitration, and argued that, inasmuch as the purchase agreements 
contained provisions requiring the resolution of disputes by arbitration, 
Plaintiffs' claims must be submitted to arbitration for resolution.1
¶3 Plaintiffs responded. To their response, Plaintiffs attached evidentiary 
materials argued to show that Plaintiff Bark suffered from a service-related 
disability and cognitive impairment. Plaintiffs asserted that, as a result of 
Plaintiff Bark's diminished capacity and Defendants' fraud, misrepresentations 
and concealments, Plaintiff Bark could not and did not knowingly agree to any 
terms of the agreements, and that, absent a meeting of the minds on all material 
terms, there were no valid contracts and no valid agreements to arbitrate. So, 
said Plaintiffs, given the issues of fraud surrounding the execution of the 
agreements, and the validity of Plaintiff's assent to waive his right to jury 
trial and resolve disputes by arbitration, the motion to compel arbitration 
should be denied. Alternatively, Plaintiffs requested an evidentiary hearing on 
the issues of Bark's cognitive impairment, his understanding and validity of his 
assent to the purchase agreements.
 
¶4 Defendants replied. Defendants first asserted that, beyond the bare 
allegations, Plaintiffs failed to allege or demonstrate a factual basis for the 
allegation of Plaintiff Bark's diminished capacity. Defendants secondly asserted 
that the question of whether the agreements as a whole were valid constituted a 
question for resolution by an arbitrator. Defendants lastly asserted that 
Plaintiffs had not alleged nor proven a claim for fraud in the execution with 
sufficient particularity as to justify denial of the motion to compel. 
Defendants argued the trial court possessed the discretion to hold a hearing to 
determine whether a valid agreement to arbitrate existed, and that the trial 
court should exercise its discretion in the present case.
¶5 Plaintiffs again responded. Plaintiffs argued the Federal Arbitration Act, 
9 U.S.C. §2, specifically recognized that an agreement to arbitrate could be 
avoided "upon grounds as exist at law or in equity for the revocation of any 
contract," and included an inquiry into the capacity of Plaintiff Bark to 
validly agree to the terms of the agreement. So, argued Plaintiffs, if the court 
determined Bark lacked the capacity to agree, or the transaction was affected by 
fraud, arbitration could not be ordered.
¶6 The parties appeared with counsel for hearing. Upon consideration of the 
parties' submissions and arguments, but without presentation of other evidence, 
the trial court denied Defendants' motion to compel, and Defendants appeal.2
¶7 Under the FAA, there are basically two types of challenges. One type 
challenges "the validity of the agreement to arbitrate," while the second 
challenges "the contract as a whole, either on a ground that directly affects 
the entire agreement (e.g., the agreement was fraudulently induced), or on the 
ground that the illegality of one of the contract's provisions renders the whole 
contract invalid." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 
444, 126 S.Ct. 1204, 1208, 163 L.Ed.2d 1038 (U.S. Fla. 2006).
 
¶8 Challenges to the validity of the agreement to arbitrate fall within the 
FAA, §2. Under §2 of 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.'" Harris v. David Stanley 
Chevrolet, Inc., 2012 OK 9, 
¶8, 273 P.3d 877, 878. 
(Citations omitted.) Pursuant to §2, "'the first task of a court asked to compel 
arbitration of a dispute is to determine whether the parties agreed to arbitrate 
that dispute,' through the use of 'general state-law principles of contract 
interpretation.'" Harris, 2012 OK 9, ¶8, 273 P.3d at 878. 
(Citations omitted.) So, if the court determines (1) the parties have agreed to 
arbitrate, and (2) the dispute falls within the scope of the arbitration 
agreement, §2 requires all other questions of the contract's "validity as a 
whole" to be submitted to the arbitrator:


Where a contract affecting interstate commerce contains an arbitration 
    provision and does not provide otherwise, the FAA requires the question of 
    the contract's validity as a whole to be submitted to arbitration. Under [§2 
    of] the FAA, issues relating only to the validity of the arbitration 
    provision are generally subject to a judicial 
determination.
Rogers v. Dell Computer Corp., 2005 OK 51, ¶13, 138 P.3d 826, 829-830. (Citations 
omitted.) (Footnote omitted.)
¶9 However, "[t]he issue of the contract's validity is different from the 
issue whether any agreement between the alleged obligor and obligee was ever 
concluded." Buckeye Check Cashing, Inc., 546 U.S. at 444, 126 S.Ct. at 
1208, fn. 1. This is so because arbitration cannot be compelled absent an 
agreement of the parties. See, e.g., Oncology & Hematology P.C. v. US 
Oncology, Inc., 2007 OK 12, 
¶22, 160 P.3d 936, 944-945.3 Consequently, 
if a valid contract containing an agreement to arbitrate was never formed 
between the parties, arbitration cannot be compelled, and under §4 of the FAA,4 it is for the 
court to decide whether a contract was ever formed:


[I]t is for courts to decide whether the alleged obligor ever signed the 
    contract, Chastain v. Robinson-Humphrey Co., 957 F.2d 851 (C.A.11 
    1992), whether the signor lacked authority to commit the alleged principal, 
    Sandvik AB v. Advent Int'l Corp., 220 F.3d 99 (C.A.3 2000); Sphere 
    Drake Ins. Ltd. v. All American Ins. Co., 256 F.3d 587 (C.A.7 2001), and 
    whether the signor lacked the mental capacity to assent, Spahr v. 
    Secco, 330 F.3d 1266 (C.A.10 2003).
Buckeye Check Cashing, Inc., 546 U.S. at 444, 126 S.Ct. at 1208, fn. 
1.
¶10 So, if the court determines (1) the parties have validly agreed to 
arbitrate disputes, and (2) the particular dispute falls within the scope of the 
agreement to arbitrate, §2 of the FAA requires arbitration and questions 
concerning the contract's "validity as a whole" are submitted to the arbitrator. 
Rogers, 2005 OK 51, ¶13, 
138 P.3d at 829-830; Prima Paint Corp. v. Flood & Conklin Mfg.Co., 
388 U.S. 395, 404, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967). If, however, there 
exists a question of whether a valid contract containing an agreement to 
arbitrate was ever formed between the parties, §4 requires the court to 
determine whether a valid contract was formed before the question of an 
agreement to arbitrate may be considered. Buckeye Check Cashing, Inc., 
546 U.S. at 444, 126 S.Ct. at 1208, fn. 1. As the Tenth Circuit Court of Appeals 
observed in Spahr v. Secco, supra:


As noted, Prima Paint submits to arbitrators the resolution of a 
    claim of fraud in the inducement of the entire contract, as contrasted with 
    a claim of fraud in the inducement of the arbitration agreement itself. 
    Because the latter claim involves the "making" of an agreement to arbitrate 
    under §4 [of the FAA], it is for the court to resolve. 388 U.S. at 403-04, 
    87 S.Ct. 1801. Courts may apply this rule with ease when a party challenges 
    a contract on the basis that it was induced by fraud because it is 
    conceivable either that (1) he or she was fraudulently induced to agree to a 
    contract containing an arbitration agreement; or (2) he or she was 
    fraudulently induced to agree to the arbitration provision in particular. We 
    cannot say the same when a party raises a mental capacity challenge, as it 
    would be odd indeed if a party claimed that its mental incapacity 
    specifically affected the agreement to arbitrate. We conclude, therefore, 
    that the analytical formula developed in Prima Paint cannot be 
    applied with precision when a party contends that an entire contract 
    containing an arbitration provision is unenforceable because he or she 
    lacked the mental capacity to enter into the contract. Unlike a claim of 
    fraud in the inducement, which can be directed at individual provisions in a 
    contract, a mental capacity challenge can logically be directed only at the 
    entire contract.
In the present case, although Spahr signed the Cash Account Agreement, 
    which contains a promise to arbitrate "any controversy arising out of or 
    relating to" the agreement, he contended below and continues to argue here 
    that the overall agreement is unenforceable because he was mentally 
    incompetent when he entered into the contract. We hold that Spahr's mental 
    incapacity defense naturally goes to both the entire contract and the 
    specific agreement to arbitrate in the contract. Therefore, Spahr's claim 
    that he lacked the mental capacity to enter into an enforceable contract 
    placed the "making" of an agreement to arbitrate at issue under §4 of the 
    FAA. In determining that the June 5, 1995, Cash Account Agreement was 
    unenforceable, the district court acted within its authority under 
  §4.
Spahr, 330 F.3d at 1272-1273. (Footnotes omitted.)
¶11 In the present case, there can be little doubt that the sales of 
automobiles is a matter affecting interstate commerce, so that, if the parties 
validly agreed to arbitrate disputes, §2 of the FAA would normally require 
arbitration and questions concerning the "validity" of the contract "as a whole" 
to be submitted to an arbitrator. However, because Plaintiff placed his capacity 
to "make" a contract at issue, §4 of the FAA required the court to determine 
whether, in light of the Plaintiff's alleged lack of capacity, a valid contract 
between Plaintiff and Defendant was ever concluded, because, without the 
formation of a valid contract including an agreement to arbitrate, arbitration 
could not be compelled.
¶12 Generally, the question of whether there exists a valid, enforceable 
agreement to arbitrate constitutes one of law to be reviewed by a de novo 
standard, without deference to the lower court. Oncology & Hematology 
P.C., 2007 OK 12, ¶19, 160 
P.3d at 944; Rogers, 2005 OK 
51, ¶18, 138 P.3d at 831. However, "an application to compel arbitration may 
present questions of fact and law as to the existence or the enforceability of 
an arbitration agreement," and "[w]here the facts are controverted, mixed 
questions of fact and law . . . require [the application of] deferential review 
standards." Bruner v. Timberlane Manor Ltd. Partnership, 2006 OK 90, ¶8, 155 P.3d 16, 20. The "'deferential 
standard of review applies to resolutions of disputed facts when supported by 
reasonable evidence." Feightner v. Bank of Okla., 2003 OK 20, ¶3, 65 P.3d 624, 627.
¶13 In Sphere Drake Ins. Ltd. v. All American Ins. Co., the Seventh 
Circuit Court of Appeals affirmed the district court's denial of a motion to 
compel arbitration after the court determined that an agent lacked authority to 
bind the principal to arbitrate, holding the "courts, rather than arbitrators, 
usually determine whether the parties have agreed to arbitrate." 256 F.3d at 
589. In Sandvik AB v. Advent Int'l Corp., the Third Circuit Court of 
Appeals similarly affirmed the district court's denial of a motion to compel 
upon a determination the agent lacked authority to bind the principal to 
arbitration. 220 F.3d at 101.
¶14 In Chastain v. Robinson-Humphrey Co., the Eleventh Circuit Court 
of Appeals affirmed the district court's denial of the motion to compel 
immediate arbitration pending a determination, not by an arbitrator, but by the 
district court after an evidentiary hearing, of whether the plaintiff ever 
actually signed the agreement requiring arbitration. 957 F.2d at 854-856. And, 
in Spahr, the district court conducted an evidentiary hearing spanning 
two days on the issue of the plaintiff's "mental capacity to understand the 
nature and effect of" the contract which included an arbitration provision 
before denying the motion to compel arbitration, an order which the Tenth 
Circuit Court of Appeals affirmed. 330 F.3d at 1268-69.
¶15 In the present case, Plaintiffs alleged in their petition, and presented 
some evidence on motion to compel argued to demonstrate circumstances calling 
into question Plaintiff Bark's ability to comprehend the nature of his rights 
and obligations generally, and under the purchase agreement specifically. 
However, the trial court conducted no substantial evidentiary hearing, and, in 
its order denying the motion to compel, the trial court set out no findings of 
fact or conclusions of law explaining the basis for its ruling.
¶16 Under these circumstances, and without an evidentiary hearing on the 
issue of Plaintiff's capacity to validly and knowingly assent to the provisions 
of the purchase agreements, including the agreement to arbitrate disputes, we 
are unable to determine, in the exercise of our de novo standard of 
review, whether a contract requiring arbitration was ever concluded. The parties 
must be afforded an opportunity to develop a factual basis for a determination 
of whether there exists a valid contract requiring arbitration, for without such 
a valid agreement between the parties, arbitration cannot be required.
¶17 We hold the trial court was authorized to inquire into whether a valid 
contract, including an agreement to arbitrate, was ever reached between the 
Plaintiffs and Defendants. However, neither Plaintiffs nor Defendants presented 
any reasonable evidence to permit an informed decision on the issue of any 
impediment to formation of a contract posed by Plaintiff Bark's alleged mental 
impairment.
¶18 We therefore hold the order of the trial court should be reversed, and 
the cause remanded for the purpose of conducting an evidentiary hearing on the 
issue of Plaintiff's capacity to make a contract and assent to arbitration. The 
order of the trial court is therefore REVERSED, and the cause REMANDED FOR 
FURTHER PROCEEDINGS.
HETHERINGTON, V.C.J., and BUETTNER, J., concur.
 

FOOTNOTES

1 Both 
agreements contained a dispute resolution clause which provided:
Any controversy, claim or dispute between PURCHASER and DEALER arising out 
of, or related to this sale, any financing contract or agreement executed by the 
PURCHASER in conjunction with the sale of the vehicle described herein, or any 
alleged breach thereof, shall be submitted to binding arbitration, with the 
American Arbitration Association pursuant to the Federal Arbitration Act, Title 
9, U.S.C. §1, et seq. Arbitration shall be conducted in compliance with the 
rules of American Arbitration Association. Any evidence submitted by the parties 
shall be accepted by the arbitrator in conformity with the Federal Rules of 
Evidence. The award rendered by the arbitrators will be entered as a judgment in 
a court having jurisdiction over the parties. Both the PURCHASER and DEALER 
acknowledge and understand that they are waiving their right to a jury trial by 
entering into this agreement. It is agreed between the parties that the party 
filing the arbitration shall be responsible for the filing fee. The cost of the 
arbitrator's fee shall be equally divided between the parties. The prevailing 
party of any dispute submitted to arbitration shall be entitled to attorney fees 
and costs as allowed by Oklahoma statutes.

2
See, Okla.Sup.Ct.R. 1.60(i), 12 O.S., Ch. 15, App. 1 ("Orders of the 
district court that are interlocutory and may be appealed by right in compliance 
with the rules in this part are those that: . . . Are made under the provisions 
of 12 O.S. §1879"); 12 O.S. §1879(A)(1) ("An appeal may 
be taken from: An order denying a motion to compel arbitration; . . 
.").

3 "The 
courts will not require a party to submit a controversy to arbitration where it 
has not been so agreed."

4 Section 
4 provides in pertinent part:
The court shall hear the parties, and upon being satisfied that the making of 
the agreement for arbitration or the failure to comply therewith is not in 
issue, the court shall make an order directing the parties to proceed to 
arbitration in accordance with the terms of the agreement. . . . If the making 
of the arbitration agreement or the failure, neglect, or refusal to perform the 
same be in issue, the court shall proceed summarily to the trial thereof. . . 
.


Citationizer© Summary of Documents Citing This DocumentCite
Name
Level
None Found.Citationizer: Table of AuthorityCite
Name
Level
Oklahoma Supreme Court Cases CiteNameLevel 2003 OK 20, 65 P.3d 624, FEIGHTNER v. BANK OF OKLAHOMA, N.A.Discussed 2005 OK 51, 138 P.3d 826, ROGERS v. DELL COMPUTER CORPORATIONDiscussed at Length 2006 OK 90, 155 P.3d 16, BRUNER v. TIMBERLANE MANOR LIMITED PARTNERSHIPDiscussed 2007 OK 12, 160 P.3d 936, OKLAHOMA ONCOLOGY & HEMATOLOGY P.C. v. US ONCOLOGY, INC.Discussed at Length 2012 OK 9, 273 P.3d 877, HARRIS v. DAVID STANLEY CHEVROLET, INC.Discussed at LengthTitle 12. Civil Procedure CiteNameLevel 12 O.S. 1879, AppealsDiscussed










