Community Bank of Mississippi v. Donna Stuckey
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IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2008-CA-01521-COA
COMMUNITY BANK OF MISSISSIPPI AND
RAYMON MCALPIN A/K/A RAYMOND
MCALPIN
APPELLANTS
v.
DONNA STUCKEY
APPELLEE
DATE OF JUDGMENT:
TRIAL JUDGE:
COURT FROM WHICH APPEALED:
ATTORNEYS FOR APPELLANTS:
ATTORNEY FOR APPELLEE:
NATURE OF THE CASE:
TRIAL COURT DISPOSITION:
DISPOSITION:
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
08/06/2008
HON. ROBERT G. EVANS
COVINGTON COUNTY CIRCUIT COURT
ALAN W. PERRY
J. CHASE BRYAN
AMANDA BARDIN ROBINSON
CLAY L. SLAY
DAVID SHOEMAKE
CIVIL – CONTRACT
MOTION TO COMPEL ARBITRATION
DENIED
REVERSED AND REMANDED – 12/01/2009
BEFORE LEE, P.J., GRIFFIS AND ROBERTS, JJ.
LEE, P.J., FOR THE COURT:
PROCEDURAL HISTORY
¶1.
Mike and Donna Stuckey offered certain personal property to Community Bank of
Mississippi as collateral for loans made in connection with their cattle business. After the
Stuckeys defaulted on the loans, Community Bank filed a replevin action in the Circuit Court
of Covington County against the Stuckeys to obtain the property. Donna filed a separate
answer and counter-complaint, alleging the following claims against Community Bank and
Raymond McAlpin, one of its employees: forgery; conversion; misrepresentation; breach of
fiduciary duties; tortious breach of good faith and fair dealing; tortious breach of warranty;
intentional/negligent infliction of emotional distress; damage to credit reputation; and grossly
negligent and/or intentional conduct. Mike also filed an answer and counter-complaint.
However, this appeal only relates to claims made by Donna.
¶2.
Community Bank answered Donna’s counter-complaint and requested that the trial
court compel arbitration against Donna. Community Bank also filed a motion to compel
arbitration and to stay the proceedings. Donna responded that she was not subject to
arbitration because she did not sign an arbitration agreement. Donna asserts that although
her name appears on approximately fifty-five documents containing arbitration agreements
signed over a two-year period, she only went to Community Bank one time to sign a deed
of trust. The deed of trust, which was dated May 12, 2003, conveyed an eleven-acre parcel
of property from Community Bank to the Stuckeys. She asserts that the signature on the
arbitration agreement attached to the deed of trust was a forgery.
¶3.
The trial court agreed with Donna and found that “there does not exist convincing
evidence that Donna Stuckey executed any of the subject arbitration agreements.” The trial
court further found that the cattle business was entered into between Mike and McAlpin, a
bank employee, and Donna had no interest in the business. Therefore, the trial court found
that Donna was not a third-party beneficiary to the agreement.
¶4.
Community Bank now appeals, asserting the following issues: (1) the trial court erred
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in finding that Donna did not sign the arbitration agreements; (2) in the alternative, even if
her signatures were found to be forged, Donna is bound to arbitrate because she was a thirdparty beneficiary of the loans; and (3) in the alternative, Donna is bound to arbitrate under
the doctrine of equitable estoppel.
FACTS
¶5.
The Stuckeys operated a cattle business named Stuckey Farms. According to Donna,
her husband, Mike, met McAlpin, a loan officer, while making a large deposit at Community
Bank in Raleigh, Mississippi. The two became friends, and McAlpin was made a partner in
Mike’s cattle business. McAlpin handled the banking transactions, negotiations for the
purchase and sale of cattle, and wrote checks for expenses out of Mike’s account. McAlpin
received one-half of the profits from the partnership. McAlpin made loans to Mike totaling
over $500,000. Donna asserts that McAlpin and other bank employees forged her and
Mike’s names on many of the loan documents. Also, she alleges that McAlpin directed Mike
to forge her name on numerous documents. Donna testified through her deposition that she
did not know her signature was forged until she received a document in the mail reflecting
that a loan had been paid off. Her name was signed on the document, but she testified it was
not her handwriting. She confronted McAlpin, who was with Mike on the farm, and he
stated that his secretary had signed Donna’s name to the document. She told him that he did
not have permission to have someone sign for her, and that he was not to allow anyone to
sign her name to any documents again. McAlpin’s signature does not appear on any of the
loan documents.
¶6.
Donna also asserts that McAlpin made misrepresentations to convince them to
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purchase an eleven-acre parcel of property in Smith County from the bank for residential
development. Donna admits to signing the deed of trust in connection with the purchase of
this property, but she denies signing any documents that contain arbitration clauses. The
Stuckeys purchased the land and constructed one home on the property, but they were unable
to sell it. Donna asserts that McAlpin represented to her and Mike that the land was prime
property for residential development and that the property was worth more than the bank’s
asking price. When Mike began to develop the land, he and Donna were sued by the Board
of Supervisors of Smith County for damaging a public road while performing dirt work.
Donna asserts that McAlpin was present when the dirt work was being performed and failed
to tell Mike that the road into the property was a public road. She also asserts that McAlpin
failed to tell Mike that the local water company would not provide water to the property.
Donna asserts that she and Mike sustained losses for the purchase price of the property, the
cost of the dirt work to prepare the lots, and the construction of one completed home.
¶7.
Community Bank argues that it was error for the trial court to find that Donna had
signed the May 12, 2003, loan documents but not the arbitration agreement in connection
with that loan. It asserts that the documents were in one package, and it is not likely that
Donna signed one document without signing the others. Community Bank retained a
handwriting expert, Grant Sperry, to review the alleged forged signatures. Sperry found that
many of the signatures were forged by Mike. However, Sperry found that the signatures on
several of the loan documents, including several arbitration agreements, were signed by
Donna. He found that the arbitration agreement in connection with the May 12, 2003, deed
of trust was signed by Donna. Donna’s handwriting expert, however, found that the
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signature on the same arbitration agreement was a forgery.
STANDARD OF REVIEW
¶8.
The standard of review for a denial of a motion to compel arbitration is de novo.
United Credit Corp. v. Hubbard, 905 So. 2d 1176, 1177 (¶7) (Miss. 2004).
I. SIGNATURES ON LOAN DOCUMENTS
¶9.
Conflicting testimony was presented regarding who had signed the arbitration
agreements. Community Bank argues that the testimony showed that Donna had signed at
least one arbitration agreement, which was sufficient to make the arbitration agreement
enforceable. However, for purposes relating to the enforcement of arbitration, we find it is
unnecessary to determine which documents Donna did or did not sign. As will be discussed
in issue two, we find that Donna is subject to arbitration as a third-party beneficiary.
II. THIRD-PARTY BENEFICIARY
¶10.
Community Bank argues that regardless of whether Donna signed any of the
arbitration agreements, she is still bound to arbitrate as a third-party beneficiary. Community
Bank asserts that Donna cannot take the benefit of the agreement without subjecting herself
to the arbitration agreements as a third-party beneficiary.
¶11.
The supreme court has recognized that “arbitration agreements can be enforced
against non-signatories if such non-signatory is a third-party beneficiary.”
Adams v.
Greenpoint Credit, LLC, 943 So. 2d 703, 708 (¶15) (Miss. 2006) (citing Smith Barney, Inc.
v. Henry, 775 So. 2d 722, 727 (¶¶18-20) (Miss. 2001)). The supreme court set forth factors
to consider to determine whether someone is a third-party beneficiary:
In order for the third[-]person beneficiary to have a cause of action, the
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contracts between the original parties must have been entered for his benefit,
or at least such benefit must be the direct result of the performance within the
contemplation of the parties as shown by its terms. There must have been a
legal obligation or duty on the part of the promisee to such third[-]person
beneficiary. The obligation must have been a legal duty which connects the
beneficiary with the contract. In other words, the right of the third[-]party
beneficiary to maintain an action on the contract must spring from the terms
of the contract itself. 17A C.J.S. Contracts 519(4) (1963).
Adams, 943 So. 2d at 708-09 (¶15) (quoting Burns v. Washington Sav., 251 Miss. 789, 796,
171 So. 2d 322, 325 (1965)).
¶12.
Donna argues that if she is found to be a third-party beneficiary, arbitration is limited
to the deed of trust because that is the only document she admits to having signed.
Community Bank argues that Donna is a third-party beneficiary to the deed of trust and the
cattle loans. In support of its argument that Donna is a third-party beneficiary to the cattle
loans, Community Bank cites to Donna’s answer and counterclaim, in which Donna states
that she was an owner of an interest in Stuckey Farms, and that she suffered personal
detriment and damage when McAlpin took profits from the sale of cattle without her
knowledge or permission.
¶13.
On the issue of whether Donna was a third-party beneficiary, the trial court found as
follows:
That the business enterprise entered into by Raymond McAlpin and Mike
Stuckey was for cattle in which Donna Stuckey had no interest, and she is not,
therefore, a third-party beneficiary of said enterprise; and that the claims stated
in Donna Stuckey’s counter-claim are outside the scope of the arbitration
agreement.
¶14.
We cannot agree with the trial court that Donna had no interest in the cattle operation.
Donna repeatedly states throughout the pleadings that she is a co-owner of and interest holder
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in Stuckey Farms.
In her counter-complaint, Donna specifically alleges: “Raymond
McAlpin, [sic] took profits from the sale of cattle by Stuckey Farms to the detriment and
damage of Donna Stuckey, all without the knowledge or permission of Donna Stuckey.” In
her deposition she states that her name is on the business checking account, and she writes
payroll checks. The cattle company that McAlpin was made a partner in was referred to as
either “M&R” (Mike and Raymond) or “MDR” (Mike, Donna, and Raymond). The cattle
were branded either M&R or MDR.
¶15.
Since Donna was a co-owner in the cattle operation and claims that she suffered
because of the relationship with McAlpin, we find that Donna is a third-party beneficiary to
the loan agreements. We further find that Donna is a third-party beneficiary to the deed of
trust. Donna was a co-owner of the eleven-acre parcel purchased through the deed of trust
and now claims detriment because of misrepresentations made by McAlpin in association
with the development of the land. Therefore, we find that the trial court erred in denying
Community Bank’s motion to compel arbitration.
III. EQUITABLE ESTOPPEL
¶16.
We find that Donna is equitably estopped from bringing an action based on the loan
documents.
¶17.
The supreme court has found that:
In the arbitration context, the doctrine of estoppel recognizes that a party may
be estopped from asserting that the lack of his signature on a written contract
precludes enforcement of the contract’s arbitration clause when he has
consistently maintained that other provisions of the same contract should be
enforced to benefit him. To allow a plaintiff to claim the benefit of the
contract and simultaneously avoid its burdens would both disregard equity and
contravene the purposes underlying enactment of the Arbitration Act.
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Terminix Intern., Inc. v. Rice, 904 So. 2d 1051, 1058 (¶28) (Miss. 2004) (quoting Washington
Mut. Fin. Group, LLC v. Bailey, 364 F.3d 260, 268 (5th Cir. 2004)).
¶18.
As discussed above, we find that Donna is a third-party beneficiary to the loan
agreements. Therefore, Donna is estopped from filing suit based on breaches of duties
associated with the loan documents and at the same time claiming that she is not bound by
the provisions in the documents.
¶19.
Therefore, we find that the trial court erred in denying Community Bank’s motion to
compel arbitration. We reverse the judgment of the trial court and remand this case with
instructions to the trial court to enforce the arbitration agreement.
¶20. 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 APPELLEE.
MYERS, P.J., GRIFFIS, ISHEE, ROBERTS, CARLTON AND MAXWELL, JJ.,
CONCUR. IRVING, J., CONCURS IN RESULT ONLY. KING, C.J., DISSENTS
WITH SEPARATE WRITTEN OPINION JOINED BY BARNES, J.
KING, C.J., DISSENTING:
¶21.
I dissent from the majority opinion herein.
¶22.
On June 26, 2006, the Community Bank of Mississippi filed a “Complaint In
Replevin” against Mike Stuckey and his wife, Donna Stuckey. The complaint alleged that
Mike had executed promissory notes and security agreements associated with loan numbers
6870740, 6819303, 6933785, 6842712, 6789412, and 6858317. The complaint alleged that
Donna had executed a promissory note and security agreement associated with loan 6803148.
The following were identified as security for loan number 6803148: a “Massey Ferguson 383
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Tractor S/N EO-2047, with Massey Ferguson 236 front-End Loader S/N 116798; [a]ll cattle,
and the increase thereof, branded or unbranded. Such cattle, if owned and subsequently
acquired, may be branded or unbranded, and the increase and products there of are expressly
covered.”
¶23.
Donna responded to the complaint of Community Bank and filed a counterclaim
wherein she alleged that she did not sign any of the documents associated with loan number
6803148, and that her signature had been forged by Community Bank and its agent Raymond
McAlpin on those documents, as well as on the documents associated with loan numbers
6858317 and 6782779. Donna also alleged that Community Bank removed funds from her
bank account to pay on these forged loans.
¶24.
Community Bank responded to the counterclaim, it stated that Donna had agreed to
arbitrate all disputes with Community Bank and asked the trial court to force mandatory
arbitration pursuant to the FAA.
¶25.
In denying arbitration, the trial judge stated:
1. That there does not exist convincing evidence that [Donna] executed any
of the subject arbitration agreements;
2. That the business enterprise entered into by [McAlpin] and [Mike] was for
cattle in which [Donna] had no interest, and she is not, therefore, a third-party
beneficiary of said enterprise; and that the claims stated in [Donna’s] counterclaim are outside the scope of the arbitration agreement ([s]ee Rogers-Dabbs
Chevrolet-Hummer, Inc v. Blakeney, (S. Ct. Mis. 2005-IA-00125-SCT, Feb.
22, 2007)).
I believe that holding to be incorrect.
¶26.
This case involves a significant number of promissory notes, deeds of trust, and
arbitration agreements. Donna alleges that she signed only one deed of trust and one
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arbitration agreement. Donna argues that her signature was forged on all of the other deeds
of trust and arbitration agreements. In reversing the judgment of the trial court, the majority
holds that it is unnecessary to determine whether Donna’s signature was forged on all or any
of the loan documents. Instead, the majority holds that Donna was a third-party beneficiary
of all of the loans; therefore, it finds that Donna should be compelled to arbitrate.
¶27.
To the extent that the issues which are the focus of the case flow from that deed of
trust and arbitration agreement that Donna signed, she may be compelled to arbitrate. To the
extent that the issues in this case flow from the deeds of trust and arbitration agreements to
which Donna is not a party, she may not be compelled to arbitrate, unless it is shown that the
transactions were lawful as they relate to her, and that she was in fact a beneficiary of the
documents that she did not sign. The burden of proving the transactions to be lawful as they
relate to Donna and proving that Donna is a third-party beneficiary rested upon Community
Bank. I am not satisfied that Community Bank has met its burden.
¶28.
Indeed, reading the majority opinion, I do not see any real evidence discussed that
establishes that Donna was in fact a third-party beneficiary and, therefore, subject to
mandatory arbitration. The majority simply determines that as an one-half owner of Stuckey
Farms, Donna automatically received the benefit of all of the loans and was of necessity a
third-party beneficiary. While both the majority and Community Bank make this assertion,
there is no hard evidence to support this finding. Without more, I believe that the proof is
fatally flawed.
¶29.
But there is another aspect of the majority holding which is a matter of significant
concern to me. The FAA was intended to aid in the resolution of disputes arising out of
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lawful transactions. I am unaware of anything that even remotely suggests the FAA has any
application to an unlawful transaction. A transaction which is predicated upon a forged
signature is by definition an unlawful transaction. A forged signature is one done without
the person’s consent and without authority. There is nothing in the record before this Court
to infer or establish that McAlpin, or any other employee of Community Bank, was
authorized to affix Donna’s name to any contract. Nor does the record contain any evidence
to establish or even infer that Mike was authorized to affix Donna’s name to any contract.
It appears that Community Bank now seeks to absolve itself of any responsibility for the
actions of its employees in participation in an unlawful act, the forgery of Donna’s signature,
by claiming her to be a third-party beneficiary to the document. An unlawful transaction may
not be made lawful and legitimized by calling the person whose signature was forged a thirdparty beneficiary. While I am unaware of any cases where a party whose signature was
forged has been compelled to arbitrate, at a bare minimum, I believe that legitimization of
such an unlawful transaction would require an affirmative validation of the act by the victim.
The majority does not suggest validation of the unlawful transaction by Donna, nor have I
seen anything in the record that would seem to establish validation of the unlawful act by
Donna.
¶30.
For these reasons, I dissent and would affirm the judgment of the trial court.
BARNES, J., JOINS THIS OPINION.
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