MOTORMAX FINANCIAL SERVICES CORPORATION v. ARNOLD KNIGHT
No. ED102257
In the Missouri Court of Appeals, Eastern District
Filed: August 18, 2015
Honorable Christopher E. McGraugh
MOTORMAX FINANCIAL SERVICES ) CORPORATION, ) No. ED102257 ) Plaintiff/Appellant, ) ) Appeal from the Circuit Court of the vs. ) City of St. Louis ) ARNOLD KNIGHT, ) Honorable Christopher E. McGraugh ) Defendant/Respondent. ) Filed: August 18, 2015
Motormax Financial Services Corporation (Motormax) appeals the denial of its motion to compel arbitration of a counterclaim asserted against it by Arnold Knight after Motormax repossessed his vehicle and filed a collection action against him. In two points, Motormax claims the trial court erred in denying its motion based on its finding that the arbitration agreement was unenforceable and that Motormax waived its right to arbitration. We affirm.
Factual Background
On June 28, 2012, Arnold Knight entered into a contract with Motormax to finance a title
loan that was secured by his Ford F-150 truck. The annual percentage rate on the loan was
93.5%. During the loan closing, which was videotaped and conducted by a Motormax
representative, Mr. Knight was asked to sign an arbitration agreement (Agreement). The Agreement provided that any claims or disputes between the parties “shall be settled by binding
arbitration.” The Agreement also gave Motormax the right to repossess Mr. Knight’s vehicle if
he failed to comply with the provisions of the contract and pursue its claims in court without
waiving arbitration. In April 2013, Motormax repossessed Mr. Knight’s vehicle after he
allegedly defaulted on the contract. In September 2013, Motormax filed a collection action in
the trial court against Mr. Knight seeking $1,820.85 (the alleged balance due on the contract),
plus interest, costs, and attorney’s fees. In February 2014, Mr. Knight filed an answer and a
class action counterclaim, alleging that Motormax had violated the notice requirements of
In April 2014, Motormax filed a motion to compel arbitration of the counterclaim, which the trial court denied on October 10, 2014. Less than a month later, Motormax dismissed its collection action against Mr. Knight without prejudice. Motormax now appeals the trial court’s denial of its motion to compel arbitration.
Motion to Dismiss
Before addressing the merits of the appeal, we consider Mr. Knight’s contention that we
lack jurisdiction to consider this appeal because it was not timely filed. In his motion to dismiss
the appeal, taken with the case, Mr. Knight asserts that the appeal is untimely because Motormax
did not file its notice of appeal within ten days after the trial court entered its “Order and
Judgment” denying the motion to compel arbitration. Specifically, he claims the judgment was
final and appealable on October 10, 2014, the day it was entered, pursuant to
Motormax counters that the ten-day time period for filing its appeal did not begin to run until the trial court’s judgment became final thirty days later on November 9, 2014. We agree.
An appeal from the denial of a motion to compel arbitration is expressly authorized under
Section
In exercising its supervisory authority over the courts, the Missouri Supreme Court has adopted rules relating to the procedural aspects of appealability. One of these rules is Rule 74.01(a), which defines what constitutes a “judgment,” and which states:
“Judgment” as used in these rules includes a decree and any order from which an appeal lies. A judgment is rendered when entered. A judgment is entered when a writing signed by the judge and denominated ‘judgment’ or ‘decree’ is filed.
The Missouri Supreme Court’s decision in Spiece v. Garland, 197 S.W.3d 594 (Mo. banc 2006) offers guidance regarding the applicability of Rule 74.01(a) to appealable orders. In
Spiece, the Court addressed the appealability of orders and judgments listed under
We find the Spiece Court’s reasoning instructive. That is, while
1) A judgment becomes final at the expiration of thirty days after its entry if no timely authorized after-trial motion is filed.3
be timely, Motormax had to file its notice of appeal within ten days after that date, or by November 19, 2014. Rule 81.04(a). The record shows that Motormax filed its notice of appeal on November 17, 2014, which was within the ten-day time period. The appeal was therefore timely and this Court has jurisdiction.4 Mr. Knight’s motion to dismiss is denied.
Discussion
We now turn to the merits of Motormax’s arguments challenging the denial of its motion to compel arbitration. We review the denial of a motion to compel arbitration de novo. Dunn Indus., 112 S.W.3d at 427. We will affirm the trial court’s judgment if it is “cognizable under any theory, regardless of whether the reasons advanced by the trial court are wrong or not sufficient.” Gemini Capital Group, LLC, v. Tripp, 445 S.W.3d 583, 587 (Mo. App. S.D. 2013). Our primary focus is on whether the trial court reached the correct result, rather than the route taken to reach it. Frye v. Speedway Chevrolet Cadillac, 321 S.W.3d 429, 435 (Mo. App. W.D. 2010).
In its first point, Motormax argues that the trial court erred in denying its motion to compel arbitration based on its finding that the Agreement was not enforceable for lack of mutual consideration. Motormax also complains that the trial court misapplied the law by failing to analyze whether the Agreement was procedurally and substantively unconscionable.5
response, Mr. Knight asserts that the trial court properly denied Motormax’s motion because the Agreement was unconscionable and unenforceable.6
“Missouri contract law applies to determine whether the parties have entered a valid
agreement to arbitrate.” Baker v. Bristol Care, Inc., 450 S.W.3d 770, 774 (Mo. banc 2014).
(citation and quotations omitted). The party seeking to compel arbitration bears the burden of
proving the existence of a valid and enforceable arbitration agreement. Clemmons v. Kansas
City Chiefs Football Club, 397 S.W. 3d 503, 506 (Mo. App. W.D. 2013).
In order to be valid and enforceable, a contract must have adequate consideration. See Baker, 450 S.W.3d at 774. Consideration consists either of a promise to do or refrain from doing something, or the transfer or giving up of something of value to the other party. Frye, 321 S.W.3d at 438. A contract that contains mutual promises that impose a legal duty or liability on each party constitutes a bilateral contract supported by sufficient consideration. Id. However, a contract lacks valid consideration if it purports to contain mutual promises, yet allows one of the parties to retain the unilateral right to modify or alter the agreement as to permit the party to unilaterally divest itself of an obligation it otherwise promised to perform. Baker, 450 S.W.3d at 775.
Mutual promises to arbitrate must be binding, not illusory. Id. at 776. A promise to arbitrate is illusory when the agreement promises mutuality of arbitration, but effectively allows one party to proceed in court on its claims while the other party is required to resolve its claims by arbitration and is prohibited from taking any action in court. Id. at 776-77. Missouri courts
have consistently invalidated arbitration agreements that contain anti-waiver provisions permitting one party to unilaterally divest itself of its obligation to arbitrate in favor of pursuing claims in court and by other remedies. See, e.g., Baker, 450 S.W.3d at 775; Jimenez v. Cintas Corp., ED101015, 2015 WL 160451, at *8 (Mo. App. E.D. January 13, 2015).
Here, the trial court found that the Agreement was unenforceable because it lacked mutuality and was not supported by adequate consideration. In reaching this conclusion, the court found that while the Agreement allowed Motormax to pursue its claims in court and exercise “self-help” repossession, Mr. Knight was required to resolve his claims solely through arbitration.
This case is similar to Greene v. Alliance Automotive, Inc., 435 S.W.3d 646 (Mo. App. W.D. 2014). In that case, after the car buyer allegedly defaulted on the contract, the dealership repossessed her vehicle. Id. at 653. When the car buyer filed suit to contest the repossession of her vehicle, the dealership moved to compel arbitration. Id. The trial court denied the motion and the dealership appealed. Id. at 648. The Western District determined that the arbitration agreement lacked consideration and was, therefore, unenforceable. Id. at 654. In so finding, the Court noted that the arbitration agreement contained an anti-waiver provision and allowed the dealership to exercise self-help repossession without waiving arbitration of other disputes. Id. Because of this, the Court determined that the agreement “allows [the dealership] to unilaterally divest itself of the promise to arbitrate.” Id. As a result, the promise to arbitrate was not mutual and, therefore, a bilateral contract based on mutual promises did not exist. Id.
The Missouri Supreme Court recently expounded on the Greene decision in Eaton v. CMH Homes, Inc., SC94374, 2015 WL 3387910 (Mo. May 26, 2015). The Supreme Court noted that “the promise to arbitrate . . . was illusory” because “the contract promised mutuality of
arbitration then effectively permitted the dealer to proceed in court on all issues including
repossession while prohibiting the buyer from opposing replevin or taking any other action in
court.” Id. at *6. The Eaton Court differentiated Greene from cases where there was a valid
agreement
The arbitration agreement in the present case also fails for a lack of consideration. Motormax and Mr. Knight entered into the Agreement that contained the following relevant provisions:
1.Consumer and Lender agree that all claims, demands, disputes, or controversies of every kind or nature that may arise between them concerning any of the negotiations leading to the sale or financing of the Vehicle, representation made during or prior to any such transaction, terms and provisions of the sale, lease or financing agreements, arrangements for financing, disclosures, purchase of insurance, purchase of service contracts, the performance or condition of the Vehicle, credit inquiries or disclosure, trade-in, payoff of existing debt on tradein, pre-closing delivery, or any other aspects of the Vehicle and its sale or financing shall be settled by binding arbitration conducted pursuant to the provision of 9 U.S.C. Section 1, et seq., according to the Commercial Rules of the American Arbitration Association. Without limiting the generality of the foregoing, it is the intention of the Consumer and Lender to resolve between them
by binding arbitration all disputes of every kind and nature made pursuant to state, federal or local law concerning the Vehicle, its sale or financing of the Vehicle, the terms, meaning and enforceability of any of the documents signed or given in connection with the sale, lease, or financing of the Vehicle, or any terms, conditions, or representations made in connection with the financing . . . Consumer hereby waives their right to participate as a representative, claimant or member of any class action pertaining to any claim that is subject to arbitration, as any claim which could be asserted in a class-action proceeding shall be arbitrated.
2.Notwithstanding the foregoing, excepted from the Agreement are actions at law or in equity by Lender, Lender [sic] its assignees to collect any debt owed by the Consumer, to enforce the provisions of any security agreement securing such debt, or to exercise any right, including repossession, that may arise as a result of the failure of Consumer to comply with the provisions of any agreement evidencing such debt or any security agreement securing same or to recover possession of the vehicle if delivered to Consumer prior to consummation of the sale of same. If any action is brought by Lender or its assignees that is excepted from arbitration pursuant to this paragraph, any counterclaim or offset claim that is asserted by the Consumer must nonetheless be arbitrated. [Emphasis added.]
As in Greene, the Agreement contains a self-help provision, which allowed Motormax
“A contract that purports to exchange mutual promises will be construed to lack legal consideration if one party retains the unilateral right to modify or alter the contract as to permit the party to unilaterally divest itself of an obligation to perform the promise initially made.” Greene, 435 S.W.3d at 653-54 (citation and quotation omitted). Here, there was no binding mutual promise to arbitrate because Motormax could pursue its claims against Mr. Knight in
court in addition to exercising its self-help remedy of repossession without waiving arbitration. Simply put, the Agreement effectively allowed Motormax to unilaterally divest itself of the obligation to arbitrate. In this regard, the promise to arbitrate was illusory. See Eaton, at *13 (citing Greene, 435 S.W.3d at 654; Baker, 450 S.W.3d at 776-77). Therefore, the Agreement lacks consideration and is unenforceable.
Given the foregoing, Motormax has failed to sustain its burden to prove the Agreement was valid and enforceable. The trial court did not err in denying the motion to compel arbitration. Because we find the arbitration agreement void, we need not address whether the Agreement is unconscionable or the issue of waiver. Point denied.
Conclusion
The trial court’s judgment is affirmed.
Philip M. Hess, Judge
Sherri B. Sullivan, P.J. and Mary K. Hoff, J. concur.