Johnson ex rel. Johnson v. JF Enterprises, LLC

RICHARD B. TEITELMAN, Chief Justice.

I respectfully dissent. The principal opinion holds that the installment contract merger clause is consistent with the arbitration agreement because the merger clause is a financing document while the arbitration agreement is a dispute resolution document. The merger clause specifically provides that the installment contract is the entire agreement regarding matters that arise from the loan obtained by Anita Johnson. However, the arbitration agreement, which is not referenced in the merger clause, also provides that it applies to all aspects of the transaction. Therefore, I would hold that this inconsistency creates an ambiguity that should be construed against JF Enterprises and Franklin as the drafters of the contracts.

To purchase her vehicle, Ms. Johnson was required to review and sign “a pile of documents” that included the installment contract and the one-page arbitration agreement. Ms. Johnson does not recall seeing the arbitration agreement.

The installment contract merger clause provides that:

Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt in-*770eluding promises to extend or renew such debt are not enforceable. To protect you (borrower(s)) and us (creditor) from misunderstanding or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.”

The first sentence of the merger clause provides that oral agreements to “loan money, extend credit, or to forbear from enforcing repayment of a debt including promises to extend or renew such debt are not enforceable.” The obvious purpose of this provision is to protect the dealership from ill-advised statements by its salespersons regarding a consumer’s obligation to repay a loan.

In contrast to the clarity of the first sentence of the merger clause, the second sentence is subject to reasonable, alternative interpretations. The first clause of the second sentence re-assures the consumer that to prevent “misunderstanding ... any agreement we reach covering such matters are contained in this writing....” This language clearly provides that all loan obligations — “such matters” — are established by the installment contract. However, in the second clause, the consumer is informed that the “complete and exclusive statement of the agreement between us” consists of “this writing.” A reasonable consumer, reviewing this “pile of documents” at the sales desk without legal counsel, could conclude that the installment contract conclusively establishes the parties’ loan obligations. In that case, the arbitration clause is inconsistent with the merger clause because the arbitration clause also purports to apply to loan issues. However, that same consumer also could conclude that the second clause does not refer simply to “such matters” as financing and, instead, refers broadly to the “exclusive statement of the agreement between us....” In that case, the arbitration clause is also inconsistent with the merger clause. In either case, the inconsistency should be construed against the drafter. It also should be noted that Ms. Johnson is challenging only the applicability of the arbitration clause.

While the determination of whether a contract is ambiguous is ultimately a question of law, it is also true that this legal question does not arise in a vacuum. It arises from a real world transaction — in this case, a consumer signing a series of complex legal documents with provisions that are arguably inconsistent. The inconsistency is demonstrated not only by the foregoing analysis but also by the fact that the respected trial judge in this case also reached the same conclusion following extensive arguments by counsel for both sides. How is a consumer, such as Ms. Johnson, expected to reconcile these various provisions, instantaneously and without legal counsel, while sitting in the salesperson’s office when judges and lawyers cannot do so after extensive research and contemplation? Courts should consider this reality when resolving these types of cases. I would affirm the trial court’s judgment.