Jay F. Swindle, Sr. v. William T. Harvey
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2008-CA-00560-COA
JAY F. SWINDLE, SR. AND COMMUNITY
BANK, ELLISVILLE, MISSISSIPPI
APPELLANTS
v.
WILLIAM T. HARVEY AND ELLEN TANNER
HARVEY
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEY FOR APPELLANTS:
ATTORNEY FOR APPELLEES:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
APPELLEES
03/18/2008
HON. ROBERT G. EVANS
COVINGTON COUNTY CIRCUIT COURT
TERRY L. CAVES
DAVID SHOEMAKE
CIVIL - CONTRACT
DENIED MOTION TO COMPEL
ARBITRATION AND STAY PROCEEDINGS
REVERSED AND REMANDED - 06/23/2009
BEFORE MYERS, P.J., IRVING AND ROBERTS, JJ.
ROBERTS, J., FOR THE COURT:
¶1.
Jay F. Swindle, Sr., and Community Bank, Ellisville, Mississippi (“the Bank”) appeal
the order of the Circuit Court of Covington County that denied their motion to compel
arbitration finding that the matter was not within the scope of the arbitration agreement.
After a thorough review of the record and applicable case law, we find that the circuit court
erred in denying the Bank’s motion to compel arbitration. Therefore, we reverse and remand
the case with directions to submit all disputes to binding arbitration.
FACTS AND PROCEDURAL HISTORY
¶2.
Ellen and Tony Harvey (“the Harveys”) owned a total of 39.52 acres. On 36.52 acres,
there were two poultry houses, and the Harveys’ home sat on the remaining three acres. The
properties adjoined. In 2001, the Harveys borrowed $355,000 from Community Bank to
finance their poultry operations. In 2003, Tyson, the producer for the Harveys, required the
Harveys to retrofit and upgrade their poultry houses. Therefore, in June 2003, the Harveys
borrowed an additional $120,000 in order to make Tyson’s required changes. The Harveys
intended for the $120,000 loan to be guaranteed by the United States Small Business
Administration. On July 18, 2003, the Harveys met with Dennis Upchurch, the senior vicepresident, and Carolyn Bryant, the loan assistant for Community Bank, to execute the
$120,000 loan agreement. Although, the 2003 and 2001 loan documents had the same
property description, the house and three acres were inadvertently omitted in the property
description on the deed of trust for both loans. The omission from the 2003 loan was the
catalyst for the present litigation.
¶3.
Unfortunately, the Harveys were unable to remain in the poultry business, and
ultimately, they filed for bankruptcy in September 2005. Subsequent to the execution and
filing of the bankruptcy order, Community Bank began foreclosure proceedings on the house
and poultry farm. On November 28, 2005, the Harveys signed an agreed order abandoning
their home and poultry farm. The Bank foreclosed its deed of trust and received a substitute
trustee’s deed on April 7, 2006.
¶4.
Following the foreclosure on May 2, 2006, the Bank received a letter from the
Harveys’ attorney informing the Bank that it did not have a lien on the house and three acres.
2
The Bank laments that after receiving the letter, it examined the documents, and for the first
time, it realized that the house and three acres were not listed in the description stated on the
deed of trust. However, the bank avers that it and the Harveys intended for all of the
Harveys’ property to be pledged as security for the 2003 loan, including the house and three
acres.
¶5.
Although the deed of trust for the loan did not contain a reference to or description of
the house and three acres, other related documents did. Undisputed by the Harveys, the Bank
asserts that the following loan-related documents represent that the Harveys intended for the
house and three acres to be pledged as security for the loan:
1.
2.
Farm Bureau Insurance Company notices;
3.
Letters from Community Bank to the Harveys informing them that their
insurance had expired on the house, and the Bank was adding insurance to the
loan;
4.
Agreement to provide insurance;
5.
Financial Statement;
6.
Statement of Personal History; and
7.
¶6.
Promissory Note dated July 18, 2003;
Commercial Security Agreement.
The Bank submits that the loan-related documents for the 2003 loan included an
arbitration agreement which provided that any disputes between the parties were to go to
arbitration. Furthermore, the Bank declares that Upchurch and Bryant presented all of the
loan documents to the Harveys, and that Upchurch and Bryant specifically explained the
arbitration disclosure and the arbitration agreement. The Harveys admit that they did not
3
read the loan documents, either at the bank or later at home.
¶7.
The Harveys filed suit against the Bank on April 5, 2007, requesting damages and
claiming that they never intended to pledge their house and three acres as security for the
loan. In reliance upon the Harveys’ loan agreement, the Bank made a motion to compel
arbitration, but the circuit court denied its motion finding that the dispute was not within the
scope of the arbitration clause. Even though the arbitration clause required an arbitrator to
decide if an issue was arbitrable, the circuit court ruled that arbitration was not the
appropriate forum to determine if the issues in the case were subject to arbitration. The
circuit court further determined that the arbitration clause was either unconscionable or “at
least had the color of unconscionability and appear[ed] unfair.” The circuit court also found
that because the Harveys were under financial stress at the time they made the loan, “it
tend[ed] to show a lack of voluntariness” on their part, and that “by reason of said lack of
voluntariness, the arbitration clause was procedurally unconscionable.” Aggrieved by the
circuit court’s ruling, the Bank filed a timely appeal to this Court.
¶8.
On appeal, the Bank argues that there is a valid arbitration agreement, and the parties
agreed to arbitrate any dispute related to the 2003 loan agreement. We list verbatim the
issues raised by the Bank:
I.
The trial court erred in finding that the arbitration agreement is not a
binding contract.
II.
The trial court committed reversible error by finding that arbitration is
not the appropriate forum to determine the issue of arbitrability.
III.
The trial court committed reversible error in finding that the arbitration
agreement was procedurally and substantively unconscionable.
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IV.
The trial court committed reversible error in finding that the Harveys
were under economic duress when they signed the loan documents.
V.
The trial court committed reversible error in finding that the claims
alleged in the complaint are outside the scope of the arbitration
agreement.
Issues I, II, and V relate to the scope and validity of the arbitration agreement, so they will
be addressed collectively. Issues III and IV will be addressed together, as they address the
Harveys’ assertion that they were under duress at the time the loan was executed, thereby
making the arbitration agreement procedurally unconscionable.
STANDARD OF REVIEW
¶9.
“The grant or denial of a motion to compel arbitration is reviewed de novo.” East
Ford, Inc. v. Taylor, 826 So. 2d 709, 713 (¶9) (Miss. 2002) (citing Webb v. Investacorp, Inc.,
89 F.3d 252, 256 (5th Cir. 1996)). “The Federal Arbitration Act states in part that ‘an
agreement in writing to submit to arbitration an existing controversy arising out of [a contract
evidencing a transaction involving commerce] shall be valid, irrevocable, and enforceable,
save upon such grounds as exist at law or in equity for the revocation of any contract.’” 9
U.S.C. § 2 (2006). See Grenada Living Ctr. v. Coleman, 961 So. 2d 33, 36 (¶8) (Miss.
2007). “Courts have long recognized the existence of ‘a liberal federal policy favoring
arbitration agreements.’” McKenzie Check Advance of Miss., LLC v. Hardy, 866 So. 2d 446,
450 (¶7) (Miss. 2004) (citation omitted). “In determining the validity of a motion to compel
arbitration under the Federal Arbitration Act, courts generally conduct a two-pronged
inquiry. The first prong has two considerations: (1) whether there is a valid arbitration
agreement and (2) whether the parties' dispute is within the scope of the arbitration
5
agreement.” Taylor, 826 So. 2d at 713 (¶9). “Under the second prong, the United States
Supreme Court has stated the question is ‘whether legal constraints external to the parties'
agreement foreclosed arbitration of those claims.’”
Id. at (¶10) (citation omitted).
Also,“[u]nder the second prong, applicable contract defenses available under state contract
law such as fraud, duress, and unconscionability may be asserted to invalidate the arbitration
agreement without offending the Federal Arbitration Act.” Id. (citation omitted).
I. WHETHER THE TRIAL COURT ERRED IN FINDING THAT THE
ARBITRATION AGREEMENT WAS NOT BINDING, AND WHETHER
ARBITRATION IS THE PROPER FORUM TO DETERMINE THE SCOPE
OF THE ARBITRATION CLAUSE.
¶10.
The Harveys and Community Bank are certainly not the first parties to litigate because
of mistakes relating to a deed of trust. In prior cases where property was mistakenly added
or omitted in a deed of trust, the supreme court has stated that “it is not what description the
parties intended to write but what property the parties intended to have embraced in the
description they used [that controls].” Webb v. Brown, 404 So. 2d 1029, 1032 (Miss. 1981)
(citation omitted). In Whitefoot v. Bancorpsouth Bank, 856 So. 2d 639, 643 (¶14) (Miss. Ct.
App. 2003), the bank omitted a borrower’s house from the deed of trust, and the borrowers
claimed that the bank had, therefore, waived its right to have a security interest in the house.
However, this Court in Whitefoot determined that, notwithstanding the erroneous description,
the parties’ intentions to include the house was clear beyond a reasonable doubt. Id. at (¶15).
A review of the record substantiates that the instant case is analogous to the Whitefoot case,
and the parties’ intentions to include the house and three acres is clear beyond a reasonable
doubt.
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¶11.
In its brief to this Court, the Bank asks several rhetorical questions relating to the
Harveys’ intentions concerning the loans they made with the Bank and the written
bankruptcy documents. They are:
Why did the Harveys list the Bank as loss-payee on their homeowners
insurance policy? Why did they abandon their homestead at the bankruptcy
hearing when they represented to the Trustee under oath that they claimed no
interest in the home? Why didn’t they object when the Bank force-placed
insurance on their home because they failed to continue to maintain hazard
insurance on their home? Why did the Harveys vacate the home if they
believed they still owned it and the Bank did not have a lien on the home?
Why didn’t they enjoin the foreclosure sale if they believed the Bank did not
have a lien on the home?
The Harveys argue that the Bank is simply attempting to draw attention away from the fact
that it did not have a valid security interest on the deed of trust entitling it to foreclosure and
possession of the house and three acres, and they counter with their own questions. They
ask: “Why did the Bank force-place insurance on the property which was not part of the deed
of trust?” and “Why did the Bank go to such lengths to convince the Harveys that they had
conveyed the three (3) acres via the Deed of Trust?”
¶12.
An obvious explanation to all the questions presented is that both parties intended for
the Harveys’ loan to be secured by an interest in both the house and three acres as well as the
additional 36.52 acres and poultry farm. It goes against all reason to think that the Harveys
would list the Bank as the loss-payee on their policy or that the Bank would force-place
hazard insurance on the property, if the parties did not intend for the bank to have a security
interest in the insured property. The Harveys’ failure to dispute the force-placement of
hazard insurance bolsters the Bank’s assertion that both parties believed it held a security
interest in the house and three acres. Even more compelling is the fact that the Harveys
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willingly abandoned their home after signing an agreed relinquishment of security. The
Harveys contend that the omission of the property description in the deed of trust creates an
ambiguity that should be construed against the Bank, since the Bank drafted the documents.
We now address that contention.
A. Was the error in the deed of trust an ambiguity or mutual mistake,
and how should the documents be construed?
¶13.
Arguing that the omission created an ambiguous contract, the Harveys contend that
the Bank should be responsible because it was in the better position to understand or read the
legal “metes and bounds” description in the deed of trust. However, the omission is better
described as a mutual mistake between the parties, rather than an ambiguity. “Prudent
business men make many mistakes, and these mistakes are found under many forms and
under a variety of circumstances.” Brimm v. McGee, 119 Miss. 52, 58, 80 So. 379, 381
(1918) (citation omitted). However, a mistake is not necessarily the controlling factor. The
supreme court has ruled that when mistakes in property descriptions occur, reformation of
the document should be allowed to reflect the parties’ intentions. See id. at 59, 80 So. at 381.
Additionally, when evaluating the intention of the parties, the individual documents entered
into contemporaneously should be considered integral and interrelated parts of a single global
transaction, and as such, all should be construed together. Sullivan v. Mounger, 882 So. 2d
129, 135 (¶32) (Miss. 2004).
¶14.
In Doleac v. Real Estate Professionals, LLC, 911 So. 2d 496, 504 (¶26) (Miss. 2005),
the supreme court held that “under general principles of contract law, separate agreements
executed contemporaneously by the same parties, for the same purposes, and as part of the
8
same transaction, are to be construed together.” The Harveys have presented no evidence
that the disputed deed of trust was not interrelated to the promissory note, the commercial
security agreement, or any of the insurance documents, nor have they shown that the deed
of trust was not contemporaneously executed by them and the Bank for the purpose of
executing the loan. Accordingly, under the principles set forth by the supreme court in
Doleac and Sullivan, the documents are to be construed as one instrument. Therefore, the
arbitration agreement, contained in the loan-related documents, should be considered
incorporated into the deed of trust. The Harveys rely on Union Planters Bank v. Rogers, 912
So. 2d 116, 120 (¶10) (Miss. 2005) for support of their argument, that an ambiguous contract
should be construed against the drafter, but Rogers is factually distinct from the instant case.
¶15. In Rogers, the plaintiff sued the bank for conversion after it paid forged checks drawn
on her account. Id. at 118 (¶5). One of the issues before the Rogers court was whether the
lower court erred when it denied the bank’s motion to compel arbitration. Id. The supreme
court held that the lower court had not erred because the bank’s arbitration agreement was
ambiguous. Id. at 120 (¶¶10-11).
¶16.
In Rogers, the plaintiff had four accounts with various banks prior to the merger of
those banks with Union Planters. Id. at 117 (¶2). After the merger, Union Planters sent out
mail-outs which informed customers that by signing a signature card and continuing to use
the accounts, the customers agreed to the terms of an arbitration agreement. Id. at 118 (¶6).
However, the plaintiff in Rogers never signed “a new signature card after Union Planters
bought out the various banks.” Id. at 120 (¶11). And, the four signature cards, which the
plaintiff signed prior to the merger, did not contain an arbitration agreement. Id. at 120 (¶9).
9
The supreme court stated that “[i]ntent should first be sought in an objective reading of the
words employed in the contract.” Id. at (¶10). The Rogers court found that the general
provisions of the Union Planter’s mail-outs conflicted with the specific provisions of the
arbitration clause, thereby causing ambiguity. Id. “[T]he general provisions of the mail-outs
. . . require[d] [the] ‘use’ of the account only, whereas, the specific provisions of the
arbitration clause require[d] [the] ‘use’ of the account and the execution of a signature card.”
Id. The court held that since the plaintiff had “not execute[d] a new signature card after
Union Planters bought out the various banks, the arbitration clause [did] not apply to her.”
Id. at (¶11).
¶17.
This case does not involve a subsequent merger with new terms imposed upon the
Harveys; rather, it deals with a contractual agreement entered into by them and the Bank at
a set point in time. An objective reading of the plain language of the arbitration agreement
included in the Harveys’ contract verifies that both the Harveys and the Bank contracted to
have any disputes resolved by arbitration.
The pertinent language of the arbitration
agreement states, “any controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator . . . .” The fact that the Bank failed to correctly describe its
collateral on one of the loan-related documents does not defeat the Harveys’ acquiescence
to the arbitration agreement. As stated, case law provides that all of the documents related
to the Harveys’ loan agreement should be construed together, and the execution of the
promissory note and insurance-related document coincides with the execution of the deed of
trust.
B. Is arbitration the proper forum to determine the scope of the
10
arbitration agreement?
¶18.
Next, we address whether arbitration is the proper forum to interpret the contract’s
arbitration agreement that is incorporated into the deed of trust. As stated, the deed of trust
contained no arbitration agreement. Therefore, since the house and three acres were omitted
from the deed of trust, the Harveys argue that the matter is outside the scope of the arbitration
agreement included in the other loan documents. The circuit court agreed with the Harveys
and found that the acts alleged in the Harveys’ complaint fell outside the arbitration
agreement and fit squarely within the principles of Rogers-Dabbs Chevrolet-Hummer, Inc.
v. Blakeney, 950 So. 2d 170 (Miss. 2007). Also, in the instant case, the circuit court stated
“that arbitration was and is not the appropriate forum to determine if the issues in [this] case
are arbitrable.” However, a careful reading of Blakeney shows that the facts of that case are
distinguishable from the instant case.
¶19.
In Blakeney, the plaintiff asserted that after purchasing a Hummer automobile from
Rogers-Dabbs, he never received title to his vehicle and that one or more of Rogers-Dabb’s
employees had misappropriated his name and personal information to forge vehicle titles and
bills of sale in order to sell stolen vehicles. Id. at 172 (¶¶4-5). The Blakeney court
recognized that the plaintiff had agreed to arbitrate disputes arising out of the contract for the
purchase of his vehicle, but the court opined that “no reasonable person would agree to
submit to arbitration any claims concerning a [vehicle] to which he would never receive a
title; [or] a scheme of using his name to forge vehicle titles and bills of sale to sell stolen
vehicles . . . .” Id. at 177 (¶17).
¶20.
The instant case is different as nothing in the record indicates that a fraudulent scheme
11
was contrived by the Bank so it could finagle the Harveys’ property away from them.
Although this Court is sympathetic to the Harveys’ financial plight, there is no indication that
the Bank had anything to do with the circumstances which resulted in their financial demise.
Relying on a fairly recent supreme court decision, we will discern whether the Harveys and
the Bank agreed to have an arbitrator interpret the arbitration agreement.
¶21.
The supreme court in Greater Canton Ford Mercury, Inc. v. Ables, 948 So. 2d 417
(Miss. 2007) addressed whether the proper interpreter of an arbitration agreement is an
arbitrator. The Ables court opined:
The presumption in favor of arbitration does not apply to the question of
[whom] should decide arbitrability, because the purpose of [the Federal
Arbitration Act] was to make arbitration agreements as enforceable as other
contracts, not more so[.]1 Whether a party is bound by an arbitration
agreement is generally considered an issue for the courts, not the arbitrator,
“[u]nless the parties clearly and unmistakably provide otherwise.” In other
words, when the parties have explicitly agreed that the question of arbitrability
is to be decided by an arbitrator rather than the court, that agreement must be
interpreted by an arbitrator.
Id. at 422 (¶12) (internal citations omitted) (emphasis added). The argument presented by
the plaintiffs in Ables was similar to the argument in the instant appeal.
¶22.
In Ables, the plaintiffs did not dispute the validity of the arbitration agreement, but
they disagreed about the scope of the arbitration agreement. Id. at 421 (¶11). The supreme
court in Ables determined that “the question becomes whether the agreement clearly and
unmistakably states that interpretation of the agreement will be arbitrated.” Id. at 422 (¶14).
1
The “Federal Arbitration Act dictates that arbitration agreements ‘shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.’” Blakeney, 950 So. 2d at 173 (¶12) (citations omitted). “[T]he
Act establish[es] a strong federal policy favoring arbitration.” Id.
12
Accordingly, we must ask if the Harveys signed an agreement that “clearly and
unmistakably” mandated that arbitration would interpret the scope of arbitration. We find
that they did.
¶23.
The arbitration agreement that the Harveys signed clearly states: “Any claims shall,
at the request of the customer, [or] bank, . . . whether made before or after institution of legal
proceedings, be determined by binding arbitration. . . . The arbitrator shall give effect to
applicable law, [and] [a]ny controversy concerning whether an issue is arbitrable shall be
determined by the arbitrator.” The agreement signed by the Harveys is comparable to the
one signed by the plaintiffs in Ables. In Ables, the relevant language in the arbitration
agreement stated: “Either you or [the] Creditor . . . may choose at any time . . . to have any
[c]laim related to this contract decided by arbitration. Such claims include . . . claims
regarding the interpretation, scope or validity of this clause or arbitrability of any issue . . .
.” Ables, 948 So. 2d at 422 (¶14).
¶24.
The Ables court recognized the following concerning arbitration agreements:
The United States Supreme Court has mandated that general contract
principles will apply. Consequently, the general practice of allowing courts
to determine the issue of arbitrability is superceded by the contractual terms
of an arbitration provision which provide that arbitrability will be decided by
an arbitrator. The terms of the arbitration provision must be honored in a
dispute over arbitrability. Therefore, arbitration of the issue of arbitrability
is the mandatory result if those are the terms to which the parties have validly
agreed. That premise is entirely consistent with the view of this Court. It is
well established that parties may agree on the scope of arbitration in any way
they desire. Contracts are solemn obligations, and the court must give them
effect as written.
Id. at 422 (¶13) (internal citation omitted) (emphasis added). The Harveys willingly entered
into a contract that provided for any dispute resolution related to the contract to be handled
13
through arbitration – even the interpretation of the agreement or the scope of arbitrability.
Furthermore, the Harveys’ failure to read the contract does not relieve them from the
contractual obligation to arbitrate, which they willingly entered into.
¶25.
As stated by the supreme court:
Under Mississippi law . . . parties to a contract have an inherent duty to read
the terms of a contract prior to signing; that is, a party may neither neglect to
become familiar with the terms and conditions and then later complain of lack
of knowledge, nor avoid a written contract merely because he or she failed to
read it or have someone else read and explain it.
Bailey v. Estate of Kemp, 955 So. 2d 777, 783 (¶22) (Miss. 2007) (citation omitted). It bears
repeating that the “cardinal rule of construction of a contract is to ascertain the mutual
intentions of the parties.” Davis v. Endevco, Inc., 928 So. 2d 930, 933 (Miss. Ct. App. 2006)
(¶12) (citation omitted). We now highlight the actions that illustrate the Harveys’ obvious
intention to include the house and three acres as security for the loan.
¶26.
When procuring the loan, the Harveys agreed to maintain hazard insurance on their
home and poultry houses. Even though notified by the Bank, the Harveys did not complain
when the Bank force-placed hazard insurance on the property after the Harveys allowed the
insurance to lapse. The Harveys do not dispute that the arbitration agreement and arbitration
disclosure statement were presented to them at the time they signed the loan documents.
Following their financial demise, the Harveys represented to the Bank, their attorney, the
bankruptcy trustee, and the bankruptcy judge that the Bank had a security interest in their
home and poultry farm. Finally, the Harveys voluntarily relinquished and abandoned their
home and poultry farm to the Bank after the property went into foreclosure. Indeed, the
record strongly indicates that the Harveys and the Bank intended that the entire 39.52 acres,
14
home, and poultry houses were to be pledged as security and that the omission of the home
and three acres created a mutual mistake rather than an ambiguity. Accordingly, the deed of
trust should be considered together with the other loan documents and, therefore, governed
by the arbitration agreement.
II. WHETHER THE HARVEYS WERE UNDER FINANCIAL DURESS AT
THE TIME THEY ENTERED INTO THE CONTRACT AND WHETHER
FINANCIAL
DURESS
PRODUCES
PROCEDURAL
UNCONSCIONABILITY.
A. Financial Duress
¶27.
The Harveys assert that they were in a “do-or-die” situation when they borrowed the
money to retrofit the poultry houses. Although, the circuit court acknowledged that the Bank
was not the proximate cause of the Harveys’ belief that they must “sign the[] documents or
lose the farm,” it rationalized that because the Harveys were already in such debt to the Bank,
transferring their business to another lender was not a viable option. The circuit court found
that these factors tended to show a lack of voluntariness on the Harveys’ part, and because
of said lack of voluntariness, the arbitration clause was procedurally unconscionable. We
disagree.
¶28.
The supreme court has addressed the invalidation of contracts based upon financial
duress and has stated:
[T]o invalidate a contract on grounds of economic duress, the [complaining
party] must establish: (1) that the [dominant party] threatened to do something
which [it] had no legal right to do; and (2) that the wrongful threat overrode
[his or her] volition . . . and caused [him or her] to enter an agreement against
[his or her] free will.
Bailey, 955 So. 2d at 783 (¶23) (citation omitted). The Harveys do not allege that the Bank
15
threatened to deny the loan if they refused to agree to the arbitration agreement, but even if
it had, that would not be sufficient to find that the Bank placed the Harveys under duress.
The Fifth Circuit Court of Appeals has held that a failure to make a loan does not equal
duress, nor does the threat to break a contract, in and of itself, constitute duress. See
McCallum Highlands, Ltd v. Washington Capital Dus, Inc., 66 F.3d 89, 92 (5th Cir. 1995)
(citation omitted). In the same vein, the supreme court has held that “[i]n the absence of a
contractual obligation . . . threat[ening] not to co-sign [a loan] . . . [is] not ‘wrong[].’” Kelso
v. McGowen, 604 So. 2d 726, 732 (Miss. 1992). In other words, “[i]t is never duress to
threaten to do that which a party has a legal right to do.” Id. The Bank contends, and it is
not disputed by the Harveys, that Ms. Harvey testified that she and her husband could have
gone to another bank to obtain financing for the upgrades to their chicken houses. Whether
they could or not, the record is devoid of facts which would support a finding that the Bank
placed the Harveys under financial duress. It appears from the briefs of the parties that any
duress the Harveys were under resulted from the changes required by Tyson or other
circumstances, not the Bank’s actions. We are sympathetic to the fact that the Harveys may
have been placed between a rock and a hard place, but the Bank did not act outside its legal
boundaries. The Harveys have failed to prove the first element set forth in Bailey: that the
Bank “threatened to do something which [it] had no legal right to do.” Bailey, 955 So. 2d
at 783 (¶23). Therefore, we find it unnecessary to address the second element set forth in
Bailey, which is whether the Bank’s actions overrode the Harveys’ free will or volition and
caused them to enter into an agreement against their will. Id. Accordingly, we disagree with
the circuit court’s determination that the Bank presented the Harveys with a “heads-I-win-
16
tails-you-lose” situation, nor do we agree that the Harveys were compelled to sign a
procedurally unconscionable arbitration agreement.
B. Procedural Unconscionability
¶29.
“Procedural unconscionability may be proved by showing ‘a lack of knowledge, lack
of voluntariness, inconspicuous print, the use of complex legalistic language, disparity in
sophistication or bargaining power of the parties and/or a lack of opportunity to study the
contract and inquire about the contract terms.’” Taylor, 826 So. 2d at 714 (¶13) (citation
omitted).
“Procedural unconscionability looks beyond the substantive terms which
specifically define a contract and focuses on the circumstances surrounding a contract's
formation.” Cmty. Care Ctr. of Vicksburg, LLC v. Mason, 966 So. 2d 220, 229 (¶24) (Miss.
Ct. App. 2007) (citation omitted). The Harveys have a twelfth grade education, and they are
competent to read and write. They have made no claims that they did not understand the
contract; they simply did not read it. The Bank did not do or threaten to do that which it was
not legally allowed to do. If any outside force placed the Harveys under financial duress, it
does not appear from the record that the Bank was the entity to do so, nor does it appear that
the Harveys lacked an opportunity to study the contract or inquire about the terms.
Accordingly, we find that the arbitration agreement is not unconscionable.
C. Lack of Consideration Given by the Bank
¶30.
The Harveys assert that the arbitration agreement fails because the Bank did not give
consideration for their waiver of their constitutional right to present any disputes to a court
of competent jurisdiction. Albeit a creative argument, it fails. The Harveys correctly stated
the elements of a valid contract, and they are: “(1) two or more contracting parties, (2)
17
consideration, (3) an agreement that is sufficiently definite, (4) parties with legal capacity to
make a contract, (5) mutual assent, and (6) no legal prohibition precluding contract
formation.” Rotenberry v. Hooker, 864 So. 2d 266, 270 (¶13) (Miss. 2003) (citation
omitted). The Harveys have presented no support for their position that the arbitration
agreement, which was included in the contract, was a contract in and of itself that required
additional consideration in order to be valid. Rather from the briefs presented to this Court,
it appears that it is a run-of-the-mill arbitration agreement that is included in numerous
contracts of recent years. Furthermore, undisputed by the Harveys, the Bank asserts that the
Harveys failed to raise this issue in the circuit court, and the Bank correctly states that “an
issue not raised before the lower court is deemed waived and is procedurally barred.” Gale
v. Thomas, 759 So. 2d 1150, 1159 (¶40) (Miss. 1999) (citation omitted). We find the
Harveys’ lack-of-consideration argument is without merit.
CONCLUSION
¶31.
Based upon the foregoing reasons, we find that the Harveys entered into a valid
arbitration agreement, and the arbitration agreement provided that even the interpretation of
the contract was to be arbitrated. There is no evidence in the record that there are any legal
constraints external to the Harveys’ agreement that would foreclose arbitration of the
Harveys’ claim. We further find that the Harveys expressly and voluntarily agreed to waive
their right to bring this matter before a court of competent jurisdiction.
¶32. THE JUDGMENT OF THE CIRCUIT COURT OF COVINGTON COUNTY
IS REVERSED, AND THIS CASE IS REMANDED FOR FURTHER PROCEEDINGS
CONSISTENT WITH THIS OPINION. ALL COSTS OF THIS APPEAL ARE
ASSESSED TO THE APPELLEES.
18
KING, C.J., LEE AND MYERS, P.JJ., IRVING, GRIFFIS, BARNES, ISHEE,
CARLTON AND MAXWELL, JJ., CONCUR.
19
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