No. 05-706
IN THE SUPREME COURT OF THE STATE OF MONTANA
2007 MT 45
WELLS FARGO BANK,
Plaintiff and Respondent,
v.
JOHN ROBERT TALMAGE, d/b/a
TALMAGE AUTO CENTER,
Defendant and Appellant.
APPEAL FROM: The District Court of the Eleventh Judicial District,
In and For the County of Flathead, Cause No. DV 04-238A,
Honorable Ted O. Lympus, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
William L. Managhan and Santana Kortum-Managhan,
Managhan & Kortum-Managhan Law Firm PLLC, Kalispell, Montana
For Respondent:
Thane P. Johnson, Werner, Epstein & Johnson, PLLC,
Cut Bank, Montana
Submitted on Briefs: January 17, 2007
Decided: February 21, 2007
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 Plaintiff Wells Fargo Bank (Wells Fargo) sued John Talmage, alleging he owed
$112,250.84 on an overdue credit card account, including cash advances and other credit.
Talmage, acting pro se, filed a motion to dismiss, alleging the action was subject to an
arbitration award. The District Court denied the motion to dismiss after concluding that
the arbitration agreement only applied to disputes over $250,000. Wells Fargo then
moved for summary judgment. After a hearing at which Talmage failed to appear, the
court granted summary judgment to Wells Fargo on the issue of liability. After a
subsequent hearing to determine damages, the court entered judgment for Wells Fargo in
the amount of $137,437.25. Talmage appeals the grant of summary judgment and the
court’s denial of his motion to dismiss. We affirm.
¶2 We restate the issues as follows:
¶3 I. Did the District Court correctly deny Talmage’s motion to dismiss when the
arbitration award was issued by an arbitrator other than the one specified in the
arbitration agreement and the arbitration agreement did not, by its terms, apply to
disputes of less than $250,000?
¶4 II. Did the District Court err in granting summary judgment to Wells Fargo?
BACKGROUND
¶5 On April 9, 2004, Wells Fargo filed a complaint alleging that Talmage owed
$112,250.84 pursuant to a credit card agreement with Wells Fargo. Talmage filed a
motion to dismiss, claiming that the controversy was subject to mandatory arbitration
under the card agreement. Wells Fargo responded that the arbitration provision only
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applied to disputes involving $250,000 or more. The District Court agreed with Wells
Fargo and denied the motion to dismiss.
¶6 Talmage then filed an amended motion to dismiss arguing that the matter was
subject to a binding arbitration award. The arbitration award had been issued by the
National Arbitration Counsel (NAC), an arbitration group based in Florida. Wells Fargo
did not move to vacate the award within ninety days, and in fact did not challenge the
award until it responded to Talmage in this suit.
¶7 The arbitration agreement at issue does not list NAC as a potential arbitrator.
Instead the agreement requires use of the American Arbitration Association (AAA).
Further, the agreement provides that the “Comprehensive Dispute Resolution Program,”
of which the arbitration agreement is a part, “applies only to disputes involving
$250,000.00 or more in value . . . .” Additionally, if arbitration is necessary, it is
“governed by the Federal Arbitration Act” (FAA).
¶8 On January 20, 2005, Wells Fargo moved the District Court for a default judgment
against Talmage, or, in the alternative, summary judgment, claiming that Talmage had
failed to answer the complaint so that the allegations contained therein were deemed
admitted. The District Court then issued an order denying Wells Fargo’s request for
default judgment, reasoning that default was not proper because Talmage had “appeared
in this matter [and] set forth defenses and possible counterclaims.” The court also set a
time for oral argument regarding the motion for summary judgment, and sent the parties
notice of the date, July 6, 2005, on which oral argument was to take place.
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¶9 Talmage, however, failed to appear at the oral argument on July 6. The court,
noting his absence, granted Wells Fargo’s motion for summary judgment. In its written
order, the court concluded that Talmage had “failed [to] deny the allegations in the
complaint under rule 8(d)” M. R. Civ. P, and set a hearing to determine damages for
August 2, 2005. Talmage later, in his “motion to reconsider,” stated that he was confused
by a portion of the scheduling notice that read “[t]he parties are encouraged to seriously
consider waiving oral argument.” Due to this language, Talmage apparently assumed
that oral argument would be waived.
¶10 On August 2, 2005, the court heard evidence from a Wells Fargo representative
concerning the nature and extent of damages owed. Talmage was not present at the
hearing. The court, during the hearing, referred to its previous summary judgment ruling
as “the default of the Defendant.” The court subsequently entered judgment in favor of
Wells Fargo for $137,437.25, plus interest and attorney fees of $1500.
¶11 Talmage appeals from the grant of summary judgment as well as from the denial
of his motion to dismiss.
STANDARD OF REVIEW
¶12 We review a district court’s conclusions of law, including whether an arbitration
award is valid, de novo. See Martz v. Beneficial Montana, Inc., 2006 MT 94, ¶ 10, 332
Mont. 93, ¶ 10, 135 P.3d 790, ¶ 10.
¶13 We also review a district court’s grant of summary judgment de novo, applying the
same M. R. Civ. P. 56 criteria as the district court. Bradley v. Crow Tribe of Indians,
2005 MT 309, ¶ 12, 329 Mont. 448, ¶ 12, 124 P.3d 1143, ¶ 12 (citations omitted).
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Summary judgment should only be granted when there is no genuine issue as to any
material fact and the moving party is entitled to judgment as a matter of law. Bradley,
¶ 13 (citations omitted). Where the moving party is able to demonstrate that no genuine
issue as to any material fact remains in dispute, the burden shifts to the party opposing
the motion to present material and substantial evidence, rather than merely conclusory or
speculative statements, that a genuine issue of material fact is in dispute. Bradley, ¶ 14.
DISCUSSION
¶14 I. Did the District Court correctly deny Talmage’s motion to dismiss when
the arbitration award was issued by an arbitrator other than the one specified in the
arbitration agreement and the arbitration agreement did not, by its terms, apply to
disputes of less than $250,000?
¶15 Talmage, focusing primarily upon Montana’s Uniform Arbitration Act, §§ 27-5-
111 through -324, MCA, claims that Wells Fargo has waived the right to challenge the
arbitration award issued by NAC because it failed to challenge the award within ninety
days. See §§ 27-5-311 and -312, MCA. Under Montana law, the ninety-day time
limitation to challenge an award affixes even if a party claims the award is invalid
because the wrong arbitrator was used. See § 27-5-312, MCA. As Wells Fargo has
waited much longer than that, Talmage insists Wells Fargo is barred from challenging the
NAC award and the District Court must confirm the award. However, Talmage did not
file a motion to confirm the award. We therefore only address the court’s denial of
Talmage’s motion to dismiss.
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¶16 We disagree with Talmage’s theory that the case should be dismissed due to Wells
Fargo’s failure to object to the NAC arbitration award within ninety days, primarily
because the arbitration agreement at issue, by its terms, is not governed by Montana’s
arbitration statutes but by the FAA (9 U.S.C. §§ 1-16). While the provisions of the FAA
are similar to Montana’s Act, including a three-month time limitation to vacate an award,
the FAA, unlike Montana law, does not recognize a motion to vacate an award for the
reason that “there was no arbitration agreement.” See § 27-5-312, MCA, and 9 U.S.C.
§§ 10-12.
¶17 Under the FAA, where parties have not agreed to arbitrate, or where the arbitration
does not follow the format provided for in the arbitration agreement, the arbitration award
is invalid ab initio. See MCI Telecommunications Corp. v. Exalon Industries, Inc., 138
F.3d 426, 430 (1st Cir. 1998), and Bank of America v. Dahlquist, 2007 MT 32, ¶¶ 12-13,
____ Mont. ____, ¶¶ 12-13, _____ P.3d _____, ¶¶ 12-13. One condition that must be
followed for an arbitration proceeding to be valid under the FAA is employment of the
agreed upon arbitrator. See 9 U.S.C. § 5 and R. J. O’Brien & Assoc., Inc. v. Pipkin, 64
F.3d 257, 263 (7th Cir. 1995) (“[I]n order to enforce an arbitration award, the arbitrator
must be chosen in conformance with the procedure specified in the parties’ agreement to
arbitrate.”).
¶18 Wells Fargo did not agree to arbitrate disputes of less than $250,000. Because the
amount here in dispute is, in fact, less than $250,000, the NAC arbitration award is
invalid ab initio under MCI. Also, as Wells Fargo had not agreed to arbitrate the dispute
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before NAC, and since the agreement specifically calls for AAA to be used, the NAC
award is unenforceable, under R. J. O’Brien.
¶19 Talmage contends that even under the FAA, the three-month time limitation bars
Wells Fargo from challenging the award. Talmage cites to Sander v. Weyerhaeuser Co.,
966 F.2d 501, 503 (9th Cir. 1992), for the proposition that the FAA’s three-month
limitation “is meaningless if a party to the arbitration proceedings may bring an
independent direct action asserting such claims outside of the statutory time period.”
(Citations omitted.) However, this proposition is inapplicable to the situation here,
because the party in Sander consented to and participated in arbitration, and then, two
years later, challenged the award, a valuation of stock, alleging a violation of securities
laws. The Ninth Circuit refused to allow an arbitration participant to challenge the
resulting award via “collateral attack.” Sander, 966 F.2d at 502-03. Here, Wells Fargo,
unlike the party in Sander, was not “a party to the arbitration proceeding” nor did it
consent to arbitration with NAC.
¶20 II. Did the District Court err in granting summary judgment to Wells Fargo?
¶21 Talmage claims that summary judgment was improperly entered against him for
failing to attend oral argument. Talmage asserts, correctly, that “[s]ummary judgment
may not be entered against a party only because they did not respond to the motion, or
did not show up at the hearing.” Bradley, ¶ 26. Because the matter was “fully briefed,”
Talmage asserts that the District Court should have considered the arguments raised in
the briefs rather than granting summary judgment “by default.”
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¶22 The record in this case indicates that the District Court did, in fact, enter summary
judgment against Talmage by default for failing to attend the hearing. The court, upon
learning that Talmage was not present at the hearing, promptly entered judgment against
him and for Wells Fargo. In the subsequent written judgment, the court bases its decision
on Talmage’s failure “to deny the allegations in the Complaint,” despite the fact that the
court had previously denied Wells Fargo’s request for default judgment. Finally, at the
damages hearing, the court referred to its previous summary judgment ruling as “the
default of the Defendant.”
¶23 The only “genuine issue” that Talmage purports to raise in opposition to summary
judgment is his claim that the dispute is subject to a binding arbitration award. Whether
the dispute is subject to an arbitration award, however, is a question of law, not fact.
Further, as a legal issue, Talmage’s claim has no merit because, as we concluded above,
the award was invalid ab initio. Consequently, summary judgment was appropriate
because there is no genuine issue as to any material fact and Wells Fargo is entitled to
judgment as a matter of law. We will not reverse a district court when it reaches the right
result, even if it reached that result for the wrong reason. Palmer v. Bahm, 2006 MT 29,
¶ 20, 331 Mont. 105, ¶ 20, 128 P.3d 1031, ¶ 20 (citations omitted). Accordingly, we hold
that the District Court did not err in granting summary judgment for Wells Fargo.
CONCLUSION
¶24 Under the FAA, the arbitration award was invalid ab initio because the arbitration
agreement does not apply to disputes of less than $250,000 and NAC was not the agreed
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upon arbitrator. The District Court’s denial of Talmage’s motion to dismiss and
subsequent grant of summary judgment for Wells Fargo is therefore affirmed.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JOHN WARNER
/S/ JIM RICE
/S/ BRIAN MORRIS
Justice James C. Nelson did not participate.
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