In the
Court of Appeals
Second Appellate District of Texas
at Fort Worth
___________________________
No. 02-20-00191-CV
___________________________
NICHOLS FORD, LTD. D/B/A AUTONATION FORD SOUTH FORT WORTH,
AND TRUIST BANK F/K/A SUNTRUST BANK, Appellants
V.
MARK GARZA AND STEPHANIE GARZA, Appellees
On Appeal from the 96th District Court
Tarrant County, Texas
Trial Court No. 096-315652-20
Before Kerr, Bassel, and Womack, JJ.
Memorandum Opinion by Justice Kerr
MEMORANDUM OPINION
I. Introduction
In this accelerated interlocutory appeal, see Tex. Civ. Prac. & Rem. Code Ann.
§ 51.016, Appellants Nichols Ford, Ltd. d/b/a AutoNation Ford South Fort Worth
and Truist Bank f/k/a SunTrust Bank appeal the trial court’s denial of their motions
to compel arbitration. We reverse and remand.
II. Background
Appellees Mark and Stephanie Garza signed or initialed each page of a “Motor
Vehicle Retail Installment Sales Contract–Simple Finance Charge (With Arbitration
Provision)” while financing their purchase of a new 2019 Ford F-250 pickup truck
from AutoNation. See 7 Tex. Admin. Code § 84.807(44) (Office of Consumer Credit
Comm’r, Motor Vehicle Installment Sales) (allowing an arbitration provision to be
included in a motor vehicle installment sales contract). The arbitration provision
referenced in the six-page contract’s title was set out on the last page of the contract
and states, in pertinent part,
ARBITRATION PROVISION
PLEASE REVIEW – IMPORTANT – AFFECTS YOUR LEGAL
RIGHTS
1. EITHER YOU OR WE MAY CHOOSE TO HAVE ANY
DISPUTE BETWEEN US DECIDED BY ARBITRATION AND
NOT IN COURT OR BY JURY TRIAL.
2. IF A DISPUTE IS ARBITRATED, YOU WILL GIVE UP YOUR
RIGHT TO PARTICIPATE AS A CLASS REPRESENTATIVE
OR CLASS MEMBER ON ANY CLASS CLAIM YOU MAY
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HAVE AGAINST US INCLUDING ANY RIGHT TO CLASS
ARBITRATION OR ANY CONSOLIDATION OF
INDIVIDUAL ARBITRATIONS.
3. DISCOVERY AND RIGHTS TO APPEAL IN ARBITRATION
ARE GENERALLY MORE LIMITED THAN IN A LAWSUIT,
AND OTHER RIGHTS THAT YOU AND WE WOULD HAVE
IN COURT MAY NOT BE AVAILABLE IN ARBITRATION.
Any claim or dispute, whether in contract, tort, statute or otherwise
(including the interpretation and scope of this Arbitration Provision, and
the arbitrability of the claim or dispute), between you and us or our
employees, agents, successors or assigns, which arises out of or relates to
your credit application, purchase or condition of this vehicle, this
contract or any resulting transaction or relationship (including any such
relationship with third parties who do not sign this contract) shall, at
your or our election, be resolved by neutral, binding arbitration and not
by a court action.
. . . Any arbitration under this Arbitration Provision shall be governed by
the Federal Arbitration Act (9 U.S.C. § 1 et seq.) [(FAA)] and not by any
state law concerning arbitration. . . .
You and we retain the right to seek remedies in small claims court for
disputes or claims within that court’s jurisdiction, unless such action is
transferred, removed or appealed to a different court. . . . If any part of
this Arbitration Provision, other than waivers of class action rights, is
deemed or found to be unenforceable for any reason, the remainder
shall remain enforceable. . . .
On the contract’s preceding page, the Garzas also signed a statement
acknowledging that they had received a completed copy of the contract. That
provision stated,
YOU AGREE TO THE TERMS OF THIS CONTRACT AND
ACKNOWLEDGE RECEIPT OF A COMPLETED COPY OF
IT. YOU CONFIRM THAT BEFORE YOU SIGNED THIS
CONTRACT, WE GAVE IT TO YOU, AND YOU WERE FREE
TO TAKE IT AND REVIEW IT. YOU ACKNOWLEDGE THAT
YOU HAVE READ ALL PAGES OF THIS CONTRACT,
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INCLUDING THE ARBITRATION PROVISION ON PAGE 6,
BEFORE SIGNING BELOW.
During the transaction, the Garzas also signed a separate, stand-alone
document entitled “ARBITRATION AGREEMENT.” That agreement states that
they and the dealership agreed that neutral and binding arbitration under the FAA
would be the sole method of resolving any claim, dispute, or controversy that either
party had arising from the “purchaser/dealership” dealings (with the sole exception—
as set out in the previous agreement—for small claims court) and set out a
nonexclusive list of claims to which it would apply:
(1) Claims in contract, tort, regulatory, statutory, equitable, or otherwise;
(2) Claims relating to any representations, promises, undertakings,
warranties, covenants or service; (3) Claims regarding the interpretation,
scope, or validity of this Agreement, or arbitrability of any issue;
(4) Claims between you and the Dealership; and (5) Claims arising out of
or relating to your application for credit, this Agreement and/or any and
all documents executed, presented or negotiated during
Purchaser/Dealership Dealings, or any resulting transaction, service, or
relationship, including that with the Dealership, or any relationship with
third parties who do not sign this Agreement that arises out of the
Purchaser/Dealership Dealings.
In the middle of the page, in bold and capital letters, the agreement stated,
BY ENTERING INTO THIS AGREEMENT, YOU GIVE UP
YOUR RIGHT TO HAVE DISPUTES DECIDED IN COURT
(OTHER THAN SMALL CLAIMS COURT) OR BY A JURY.
YOU UNDERSTAND THAT DISCOVERY AND RIGHTS TO
APPEAL IN ARBITRATION ARE GENERALLY MORE
LIMITED THAN IN A COURT ACTION, AND OTHER
RIGHTS THAT YOU MAY HAVE IN COURT MAY NOT BE
AVAILABLE IN ARBITRATION. YOU ALSO GIVE UP YOUR
RIGHT TO PARTICIPATE IN AN ACTION AGAINST THE
DEALERSHIP ON A CLASS, REPRESENTATIVE OR OTHER
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SIMILAR BASIS (COLLECTIVELY, “CLASS ACTION”),
INCLUDING ANY RIGHT TO CLASS ARBITRATION OR
CONSOLIDATION OF INDIVIDUAL ARBITRATIONS.
AutoNation assigned the purchase contract to SunTrust Bank. When the
Garzas subsequently sued AutoNation and SunTrust, alleging breach of contract and
violations of the Deceptive Trade Practices Act, AutoNation and SunTrust both
sought to compel arbitration pursuant to the above provisions.
The Garzas resisted being sent to arbitration, contending that the arbitration
provisions were unenforceable due to procedural unconscionability in that they had
been actively manipulated into signing the contract without first reading and reviewing
it.
In his affidavit attached to the Garzas’ response, Mark described the two-hour
period that he, Stephanie, and their two children (ages 11 and 13) spent at the
dealership on October 17, 2018. Mark stated that they had arrived around 5 p.m. and
that as AutoNation’s finance and insurance manager prepared the sales documents on
his computer, he and his wife could see only the back of the computer and not the
display. As the manager completed each page, he directed the Garzas to initial or sign
the bottom on a small iPad, and he scrolled down each page to direct and guide them.
See Tex. Bus. & Com. Code Ann. § 322.007(d) (“If a law requires a signature, an
electronic signature satisfies the law.”); Tex. Transp. Code Ann. § 501.174(b) (same).
Mark averred that this had been the first time he had signed a contract electronically
and that “there was a distinct sense that [they] were being rushed through the
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process” because the manager moved and spoke very quickly, even assuring the
Garzas at one point that it would be done soon enough to get their children home for
dinner. Mark stated that the manager never offered to let them read the contract
documents before they signed them and that the documents were never printed off in
advance for the Garzas to review first.
Mark contended that the iPad had not fully revealed each page’s contents
except for the portion near their initials or signatures and that by the time they saw
the full contract, they had already signed everything electronically. He stated that the
manager had given them general explanations of the pages’ contents but had not
called their attention to the arbitration provisions or to the provision acknowledging
their receipt and review of the contract before signing it. Mark averred that the
portion of page 6 in bold and capital letters and the bolded paragraph in the middle of
the stand-alone arbitration agreement had not been visible on the iPad. He stated that
in past transactions,1 he had always been provided a fully prepared contract before
signing and that
[h]ad the contract documents actually been made available to [the
Garzas] in advance, [he] probably would have glanced through the
contract documents without reading them in detail. However, [he] would
have noticed conspicuous statements like the ones at the top of page 6 at
the beginning of the arbitration provision and in the middle of the page
of the separate arbitration agreement. Those statements [he] would have
read.
In the Garzas’ live pleading at the time of the hearing, the Garzas stated that
1
Mark had “past experience in owning and driving Ford F250 trucks.”
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The hearing on AutoNation’s and SunTrust’s motions to compel arbitration
consisted solely of the arguments of counsel before a visiting judge. AutoNation’s
counsel argued that the Garzas neither denied signing the agreements nor denied that
their claims fell within the agreements’ scope and that in his affidavit, Mark did not
say that they had asked for the contracts to be printed out so that they could read
them before signing.2 The Garzas’ counsel acknowledged that the Garzas were literate
and understood English but asserted that they had been “gently manipulated into
signing each page of the contract without ever seeing it.” He complained, “This
advance in technology now creates an opportunity for merchants -- car dealers in
particular -- to have a contract completely done and signed before the consumer, who
is generally unsophisticated in these things, is even given an opportunity to look at it.”
AutoNation’s counsel countered that merely using technology, without more, was not
proof of fraud or imposition.
The trial court denied arbitration after “considering the Motion, the Response,
the evidence presented, and the arguments of counsel,” and the written order
provides no explanation for the ruling.
III. Discussion
AutoNation and SunTrust argue that (1) the trial court erred by refusing to
compel arbitration when it is undisputed that the Garzas signed the arbitration
SunTrust’s counsel stated that she had nothing substantive to add to
2
AutoNation’s argument.
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agreements and that their claims fall within the agreements’ broad scope and (2) the
Garzas failed to meet their burden of proving procedural unconscionability or
unlawful jury waiver. The Garzas respond that the trial court did not abuse its
discretion “when it made the factual determination that procedural unconscionability
occurred below that prevents enforcement of the arbitration provisions.”
A. Standard of review
Arbitration is strongly favored. Royston, Rayzor, Vickery, & Williams, LLP v.
Lopez, 467 S.W.3d 494, 499 (Tex. 2015). When reviewing the denial of a motion to
compel arbitration, we defer to the trial court’s factual findings that are supported by
the evidence but review de novo the trial court’s legal determinations. Rachal v. Reitz,
403 S.W.3d 840, 843 (Tex. 2013); Forest Oil Corp. v. McAllen, 268 S.W.3d 51,
55 n.9 (Tex. 2008); see also Wagner v. Apache Corp., Nos. 19-0243, 19-0244,
2021 WL 1323413, at *3 (Tex. Apr. 9, 2021); Friedman & Feiger, LLP v. Massey,
Nos. 02-18-00401-CV, 02-18-00402-CV, 2019 WL 3269325, at *3 (Tex. App.—Fort
Worth July 18, 2019, pet. denied) (mem. op. on reh’g).
When the trial court does not enter findings of fact or conclusions of law to
explain the denial of a motion to compel arbitration, we must uphold its decision on
any appropriate legal theory urged below, but we are limited to considering the
grounds presented to the trial court by the party opposing arbitration. APC Home
Health Servs., Inc. v. Martinez, 600 S.W.3d 381, 389 (Tex. App.—El Paso 2019, no pet.).
If a valid arbitration agreement is presented, if the claims at issue fall within its scope,
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and if the opponent to arbitration fails to prove any defense to enforcement, then the
trial court has no discretion but to compel arbitration and abuses its discretion by
failing to do so. Massey, 2019 WL 3269325, at *9.
B. Procedural Unconscionability
In the trial court, the Garzas raised procedural unconscionability as their
defense to the arbitration provisions’ validity and complained that AutoNation’s
active manipulation, fraud, or imposition of undue advantage caused them to sign the
contract without reading it first. They also argued that because they had alleged fraud
or imposition, AutoNation had the burden to show that they had executed the jury
waiver knowingly and voluntarily.
Procedural unconscionability refers to the circumstances surrounding an
arbitration provision’s adoption. Royston, Rayzor, 467 S.W.3d at 499; BBVA Compass
Inv. Sols., Inc. v. Brooks, 456 S.W.3d 711, 724 (Tex. App.—Fort Worth 2015, no pet.).
Situations that are procedurally unconscionable involve those in which one of the
parties is incapable of understanding the agreement without assistance and the other
party does not provide that assistance, such as when one of the parties is functionally
illiterate or does not speak English. Brooks, 456 S.W.3d at 724.
Absent fraud, misrepresentation, or deceit, one who signs a contract is deemed
to know and understand its contents and is bound by its terms. Royston, Rayzor,
467 S.W.3d at 500; In re Bank of Am., N.A., 278 S.W.3d 342, 344–45 (Tex. 2009) (orig.
proceeding). Further, absent fraud, unequal bargaining power does not establish
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grounds for invalidating an arbitration agreement, and the fact that a person does not
read what he signs does not—by itself—render the agreement unconscionable.
Martinez, 600 S.W.3d at 395. The Garzas had the burden to prove their defense.
Royston, Razor, 467 S.W.3d at 499–500.
AutoNation and SunTrust argue, and the record reflects, that there is no
evidence (1) that the Garzas were illiterate or had any difficulty speaking, reading, or
understanding English; (2) that the Garzas objected to the use of the iPad to sign the
contracts or that the iPad on which they signed the various documents was somehow
defective or unreadable; (3) that AutoNation’s manager misrepresented any contract
terms, refused to allow the Garzas to stop and read the iPad at any point, or refused
to allow them to scroll through the documents on the iPad at their leisure; or (4) that
there were any elements of fraud, imposition, trick, or artifice in the Garzas’ signing
the documents. 3 To the contrary, the Garzas agree that they are not functionally
illiterate and that they both read and understand English. They nonetheless assert that
the arbitration clause “is procedurally unconscionable and unenforceable because
3
AutoNation further contends that to hold in the Garzas’ favor as they
“attempt to portray the use of electronic documents and tablet devices to sign
contracts as procedural[ly] unconscionable . . . would severely undermine numerous
electronic consumer contracts that are both commonplace and essential to the
modern economy.” The Garzas respond that they are not claiming that the use of the
electronic method to sign documents was unconscionable but rather that AutoNation
“used the electronic method to facilitate its manipulation of [them] into signing the
contract without first seeing it and in doing so took undue or unfair advantage of
them.”
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[AutoNation] actively coaxed and manipulated them into signing the contract digitally
without first reading and reviewing it.” They argue, as they did in the trial court, that
the AutoNation manager’s approach “of having them sign the contract piecemeal, one
page at a time without most of each page being visible” manipulated them into signing
the entire contract without reading it first.
The Garzas have presented a modern-day cautionary tale about a consumer’s
continued need to carefully read a contract before signing it, including asking for a
print-out. If they felt rushed or pressured by the dealership manager, they could have
walked away from the sale—as car buyers historically have done. The Garzas did not
allege in their pleadings, in their response to the motions to compel, or in Mark’s
affidavit that they were affirmatively misled about the contract’s contents or that they
were prevented by anything beyond their own impatience from slowing down the
sales process so that they could read and review the entire contract.
Because the Garzas failed to prove their procedural-unconscionability defense,
the trial court had no discretion but to compel arbitration and thus abused its
discretion by failing to do so. See Massey, 2019 WL 3269325, at *9. And because the
Garzas failed to show fraud or the imposition of undue advantage, AutoNation and
SunTrust had no burden to show that the Garzas had executed the jury waiver
knowingly and voluntarily. See Bank of Am., N.A., 278 S.W.3d at 345 (holding that
when no evidence was produced of fraud or imposition, the conspicuous waiver of
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trial by jury was presumed to be knowingly and voluntarily executed). Accordingly, we
sustain AutoNation and SunTrust’s dispositive issue.
IV. Conclusion
Having sustained AutoNation and SunTrust’s dispositive issue, we reverse the
trial court’s order denying arbitration, release our July 16, 2020 stay of the trial court
proceedings,4 and remand this case for further proceedings not inconsistent with this
opinion.
/s/ Elizabeth Kerr
Elizabeth Kerr
Justice
Delivered: September 2, 2021
The appeal was also stayed during a subsequently resolved bankruptcy
4
proceeding.
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