Hardin Const. Group, Inc. v. Strictly Painting, Inc.

• Decision Date: 30 April 1997
• Docket Number: No. 04-97-00121-CV,04-97-00121-CV
• Citation: 945 S.W.2d 308
• Parties: HARDIN CONSTRUCTION GROUP, INC. and San Antonio 2000, Ltd., Appellants, v. STRICTLY PAINTING, INC., Appellee. HARDIN CONSTRUCTION GROUP, INC. and San Antonio 2000, Ltd., Relators, v. The Honorable David PEEPLES, Respondent.
• Court: Texas Court of Appeals

Page 308

945 S.W.2d 308

HARDIN CONSTRUCTION GROUP, INC. and San Antonio 2000, Ltd., Appellants, v. STRICTLY PAINTING, INC., Appellee.

HARDIN CONSTRUCTION GROUP, INC. and San Antonio 2000, Ltd., Relators, v. The Honorable David PEEPLES, Respondent.

No. 04-97-00121-CV.

Court of Appeals of Texas San Antonio.

April 30, 1997.

Rehearing Overruled May 22, 1997.

Thomas H. Asselin, L. Bruce Stout, Peterson, Dillard, Young, Asselin & Powell, L.L.P., Atlanta, GA, Peter L. Kilpatrick, Jeffers & Banack Incorporated, Thomas H. Crofts, Jr., Crofts, Callaway & Jefferson, P.C., San Antonio, for appellants.

Fred Shannon, Mitchell L. Widenbach, Charles Estee, Shannon, Weidenbach & Estee, Inc., San Antonio, for appellee.

Before GREEN, DUNCAN and ANGELINI, JJ.

GREEN, Justice.

Appellants/Relators, Hardin Construction Group, Inc. and San Antonio 2000, Ltd.

("Hardin"), seek relief from the trial court's denial of Hardin's motion to compel arbitration with Strictly Painting, Inc. ("Strictly"). Pursuant to the Texas Arbitration Act, Hardin has filed an interlocutory appeal of the trial court's order denying the motion. Hardin has also filed a motion for leave to file a petition for writ of mandamus under the Federal Arbitration Act. We previously granted the motion for leave to file the petition for writ of mandamus and consolidated the two proceedings.

We conclude the Federal Arbitration Act applies; therefore, we dismiss Hardin's interlocutory appeal. In addition, we conditionally grant the writ of mandamus because we conclude that Judge Peeples abused his discretion in his resolution of the factual issue regarding the existence of an agreement to arbitrate.

FACTS

Hardin is a Georgia corporation and was the general contractor on a Hyatt Regency project in San Antonio, Texas. Hardin accepted a bid from Strictly for a painting subcontract. Strictly also is a Georgia corporation.

On November 2, 1995, shortly after Hardin accepted Strictly's bid, Hardin forwarded a form of subcontract to Strictly for execution. The subcontract form was identical to the subcontract executed by Strictly in connection with three previous Hardin projects that were in excess of $100,000.00, with the exception of the performance bond requirement. Each of the subcontracts included an arbitration provision. A similar arbitration provision was also included in Hardin's short form subcontract that Strictly had executed in connection with numerous smaller Hardin projects.

On November 20, 1995, Strictly submitted its first monthly request for payment. Although Hardin paid the request, Hardin forwarded a letter to Strictly dated December 7, 1995, stating that it was not obligated to make any payments until the signed Subcontract and Bonds were returned to Hardin.

On December 12, 1995, Strictly returned the unexecuted subcontract to Hardin with a letter implicitly agreeing to all of its terms except that Strictly wanted to eliminate the bond requirement. Strictly stated that since the bid documents did not indicate or request bonds, no bonds were quoted. Strictly concluded:

In good faith Strictly Painting mobilized and began work on this project prior to receiving this contract. We will continue to work with the intention that this would not be a stumbling block. Please make these changes and forward the contract so that I may sign and return within 2 days.

Between December 12, 1995, and December 17, 1995, a series of field orders were executed by the parties regarding additional work to be performed by Strictly on the project. On December 19, 1995, Strictly submitted its second monthly request for payment, which Hardin paid. Between December 20, 1995, and January 16, 1996, another series of field orders were executed regarding additional work. Then, by letter dated January 18, 1996, Hardin demanded that Strictly immediately execute the subcontract and fulfill the bond requirement. Hardin stated that it would reimburse the cost of the bond.

The parties were never able to subsequently resolve the bond issue, ¹ and Strictly never executed the subcontract. Nevertheless, Strictly continued to perform and substantially completed its work on the project.

Ultimately, Strictly sued Hardin alleging breach of contract/estoppel, fraud, quantum meruit and lien claims. Strictly alleged that Hardin "wrongfully refused to make progress payments and to date has wrongfully withheld approximately $557,872.50." Hardin answered and filed a motion to stay the trial proceeding and to compel arbitration. Strictly responded by denying that it entered into an agreement to arbitrate. After an

evidentiary hearing, Judge Peeples denied Hardin's motion to compel.

FEDERAL OR STATE ARBITRATION ACT

The Federal Arbitration Act applies to contracts relating to interstate commerce. Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269-70 & n. 6 (Tex.1992); Belmont Constructors, Inc. v. Lyondell Petrochemical Co., 896 S.W.2d 352, 356 (Tex.App.--Houston [1st Dist.] 1995, orig. proceeding). The following uncontroverted facts support the conclusion that the contract at issue relates to interstate commerce:

1. Both Hardin and Strictly are Georgia corporations based in Atlanta, Georgia.

2. The project was located in Texas.

3. Strictly retained the services of Texas subcontractors and a subcontractor based in Alabama.

4. Employees were hired in Georgia to perform work on the project in Texas.

5. Supplies were purchased by Strictly in Texas.

Therefore, we conclude that the contract at issue relates to interstate commerce, the Federal Act applies to this dispute, and Hardin may seek relief through the remedy of a writ of mandamus. Accordingly, we dismiss Hardin's interlocutory appeal and proceed to consider its mandamus petition. ²

STANDARD OF REVIEW

Hardin couches its complaint regarding Judge Peeple's denial of its motion to compel arbitration in terms of an abuse of discretion standard. Strictly responds that the trial court's order is reviewed under a "no evidence" standard. Therefore, we must first consider the proper standard of review applicable in reviewing a trial court's determination regarding the existence of an arbitration agreement in a mandamus proceeding.

For its contention that the trial court's order should be reviewed under a "no evidence" standard, Strictly cites Hearthshire Braeswood Plaza Ltd. Partnership v. Bill Kelly Co., 849 S.W.2d 380, 384 (Tex.App.--Houston [14th Dist.] 1993, writ denied), and Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex.App.--San Antonio 1996, no writ). This court's decision in Pony Express did not address the applicable standard for reviewing a trial court's finding regarding the existence of an arbitration agreement, and, therefore, Pony Express does not resolve the issue. In addition, in adopting a "no evidence" standard in Hearthshire Braeswood Plaza Ltd. Partnership, the Houston court relied on an earlier decision in which the parties agreed upon the applicable standard without further discussion of the propriety of the standard. 849 S.W.2d at 384 (citing Gulf Interstate Engineering Co. v. Pecos Pipeline and Producing Co., 680 S.W.2d 879, 881 (Tex.App.--Houston [1st Dist.] 1984, writ dism'd)); see also Wetzel v. Sullivan, King & Sabom, P.C., 745 S.W.2d 78, 79 (Tex.App.--Houston [1st Dist.] 1988, no writ)(citing Gulf Interstate Engineering Co. as authority for rejecting "abuse of discretion" standard and adopting "no evidence" standard).

The Texas Supreme Court has not commented on the appropriate standard of review; however, the Court has stated that if material facts necessary to determine an issue to be summarily decided by the trial court are controverted, the trial court must conduct an evidentiary hearing to determine the disputed material facts. Jack B. Anglin Co., 842 S.W.2d at 269. This evidentiary hearing requirement is similar to the federal statute which allows a party to demand a jury trial with regard to the issue of whether an agreement to arbitrate exists. 9 U.S.C.A. § 4 (West 1970); see also Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., Ltd., 636 F.2d 51, 54-55 (3rd Cir.1980)(discussing jury requirement); Century Steel Erectors, Inc. v. Aetna Casualty & Surety Co., 757 F.Supp. 659, 661 (W.D.Pa.1990)(jury to determine existence of agreement if issue of fact exists).

Under the federal law, a district court's finding regarding the existence of an agreement to arbitrate is reviewed like "any other district court decision finding an agreement between parties, i.e., accepting findings of fact that are not 'clearly erroneous' but deciding questions of law de novo." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct. 1920, 1926, 131 L.Ed.2d 985 (1995); see also Walker v. J.C. Bradford & Co., 938 F.2d 575, 576-77 (5th Cir.1991)(factual foundation underlying question of waiver of arbitration reviewed under clearly erroneous standard); Nordin v. Nutri/System, Inc., 897 F.2d 339, 344 (8th Cir.1990)(factual findings as to arbitrability are reviewed under clearly erroneous standard). "As one federal appellate court noted, in many respects, findings made by district courts when disposing of motions to stay pending arbitration are treated the same as other findings made after a bench trial ....[w]hen reviewing the district court's factual findings, we apply the same clearly erroneous standard that is applied when reviewing the court's findings after a bench trial." Marshall v. Green Giant Co., 942 F.2d 539, 548 (8th Cir.1991). A finding is clearly erroneous when there is evidence to support it, but the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Price v. Drexel Burnham Lambert, Inc., 791 F.2d 1156, 1159 (5th Cir.1986).

In Walker v. Packer, the Texas Supreme Court recognized that the abuse of discretion standard contains both a factual and...