Honrubia Properties, Ltd v. Gilliland, No. 13-07-249-CV (Tex. App. 10/11/2007)
| Decision Date | 11 October 2007 |
| Docket Number | No. 13-07-210-CV,No. 13-07-249-CV,13-07-249-CV,13-07-210-CV |
| Parties | HONRUBIA PROPERTIES, LTD., ET AL., Appellants, v. TODD GILLILAND, Appellee. IN RE: HONRUBIA PROPERTIES, LTD., ET AL., |
| Court | Texas Court of Appeals |
Before Justices YAÑEZ, BENAVIDES, and VELA
Relators, Honrubia Properties, Ltd., Honrubia Properties, GP, LLC, Vincent F. Honrubia, M.D., Jenrob Investments, L.P., Robjen Investments, LLC, Roberto Yarto, and South Padre Bay Development, LLC, (collectively "Honrubia") seek review of the trial court's denial of their motion to compel arbitration through an interlocutory appeal and a petition for writ of mandamus. For the reasons discussed below, we conditionally grant the petition for mandamus, Cause No. 13-07-249-CV, and, granting full relief under our mandamus jurisdiction, we dismiss as moot the interlocutory appeal, Cause No. 13-07-210-CV. See Am. Std. v. Brownsville Indep. Sch. Dist., 196 S.W.3d 774, 781 (Tex. 2006).
The underlying dispute is an action between partners to a limited partnership agreement. During the summer of 2004, relators, Vincent Honrubia, M.D., and Robert Yarto, and real party in interest, Todd Gilliland, entered a partnership to purchase land on South Padre Island and to build and sell condominiums on that land. Gilliland subsequently brought suit against relators claiming breach of the partnership agreement and fraud. Relators claim that the dispute at issue falls within the scope of an arbitration clause contained in the partnership agreement, and the trial court abused its discretion in failing to order the parties to arbitrate.
Gilliland contends that Honrubia has "no pleadings in support of its motion to compel arbitration." According to Gilliland, Honrubia agreed to amend its pleadings in response to special exceptions1 but failed to do so, and Honrubia's pleadings fail to indicate that Honrubia is seeking arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1-16 (West 2000 & Supp. 2006).
After reviewing the record, we cannot agree with Gilliland's argument. Honrubia's original answer in the lawsuit included, inter alia, a motion to compel arbitration. After Gilliland filed special exceptions, Honrubia filed two supplemental motions to compel arbitration. Honrubia's pleadings clearly address and include its motion to compel arbitration.
Moreover, a review of Honrubia's pleadings indicate that Honrubia is seeking arbitration under either the FAA or state law. Honrubia's pleadings include a copy of the contract at issue, which references arbitration under the "Federal Arbitration Rules." Honrubia's supplemental motion and brief in support of its motion to compel arbitration references "[f]ederal and state law," and states that "Texas courts have the power to compel arbitration under the Federal Arbitration Act. . . ." Honrubia's motion further discusses when arbitration clauses "are to be enforced under the FAA." We conclude that Honrubia's pleadings give fair notice that it is seeking arbitration under the FAA.
Gilliland contends that the affirmative defense of arbitration under the FAA was neither pleaded nor tried by consent; therefore, the affirmative defense was waived. We have previously found that Honrubia had pleadings in support of its claim for arbitration under the FAA; accordingly, we will not further address this argument herein. See Tex. R. App. P. 47.1.
The parties dispute whether this matter is governed by the FAA or the Texas General Arbitration Act ("TGAA"). See 9 U.S.C. §§ 1-16; Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001-.098 (Vernon 2005); In re Educ. Mgmt. Corp., 14 S.W.3d 418, 422 (Tex. App.-Houston [14th Dist.] 2000, orig. proceeding) ( that question of whether transaction affects interstate commerce, and thus whether federal act governs, is one of fact where arbitration agreement is silent as to application of federal or Texas act). The agreement provides:
Arbitration proceedings to resolve Disputes will be conducted under the auspices and the commercial arbitration rules of the AAA pursuant to the Federal Arbitration Rules of the AAA at Dallas, Dallas County, Texas. Whether such Dispute will be subject to arbitration will likewise be determined in such arbitration as will the determination as to whether all procedural conditions precedent to arbitration have been satisfied. If Title 9 of the United States Code is inapplicable to the Dispute for any reason, such arbitration must be conducted pursuant to the Texas General Arbitration Act (i.e. Chapter 171 of the Texas Civil Practice & Remedies Code) and in accordance with this Article XXII and the commercial arbitration rules of the AAA.
Based on the plain language of the agreement, the parties intended to arbitrate under the FAA given the contract's reference to the "Federal Arbitration Rules" and "Title 9 of the United States Code," and only agreed to arbitrate under the TGAA if the FAA were "inapplicable to the Dispute for any reason." We conclude that the agreement includes an express agreement to arbitrate under the FAA.
Even if the express terms of the contract did not control our disposition of this issue, we would nevertheless still conclude that the contract involves commerce. The FAA "applies to all suits in state or federal court when the dispute concerns `a contract evidencing a transaction involving commerce.'"Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269-70 (Tex. 1992) (orig. proceeding) (quoting 9 U.S.C.S. § 2 (2000)); In re Profanchik, 31 S.W.3d 381, 384 (Tex. App.-Corpus Christi 2000, orig. proceeding). The United States Supreme Court has held that the word "involving" in the FAA is broad and the functional equivalent of "affecting," signaling Congress's intent to exercise its Commerce Clause powers to the fullest.Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 268 (1995); L&L Kempwood Assocs., L.L.P., v. Omega Builders, Inc., 9 S.W.3d 125, 127 (Tex. 1999) (orig. proceeding) (per curiam). In the instant case, one of the condominium units that was constructed by the partnership was sold to an out-of-state purchaser. Accordingly, the contract evidenced interstate commerce.Serv. Corp. Int'l v. Lopez, 162 S.W.3d 801, 807-08 (Tex. App.-Corpus Christi 2005, no pet.);Stewart Title Guar. Co. v. Mack, 945 S.W.2d 330, 333 (Tex. App.-Houston [1st Dist.] 1997, orig. proceeding); see also Anglin, 842 S.W.2d at 270. We conclude that the transaction at issue is governed by the FAA.
A writ of mandamus will issue to correct a clear abuse of discretion when there is no adequate remedy by appeal. See Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992). A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law or if it clearly fails to correctly analyze or apply the law. In re Ford Motor Co., 165 S.W.3d 315, 317 (Tex. 2005). The relator has the burden to establish that the trial court abused its discretion. See id. If a trial court erroneously denies a party's motion to compel arbitration under the FAA, the movant has no adequate remedy at law and is entitled to a writ of mandamus. In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005); Serv. Corp. Int'l, 162 S.W.3d at 808.
A party seeking to compel arbitration by a writ of mandamus must establish the existence of a valid agreement to arbitrate under the FAA and show that the claims in dispute are within the scope of the agreement. In re Bank One, N.A., 216 S.W.3d 825, 826 (Tex. 2007) (per curiam); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). In determining the validity of agreements to arbitrate which are subject to the FAA, we generally apply state-law principles governing the formation of contracts. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995)). Whether a valid arbitration agreement exists is a legal question subject to de novo review. Am. Std., 196 S.W.3d at 781. If the trial court finds there is a valid agreement to arbitrate, the burden shifts to the party opposing arbitration to prove his defenses. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).
Once a valid agreement to arbitrate has been established, the court must then determine whether the nonmovants' claims fall within the scope of the arbitration clause.In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001). To determine whether an existing arbitration agreement covers a party's claims, a court must "focus on the complaint's factual allegations rather than the legal causes of action asserted." Id. at 754. Federal policy embodied in the FAA favors agreements to arbitrate and courts must resolve any doubts about an arbitration agreement's scope in favor of arbitration. Id. at 753. If the arbitration agreement encompasses the claims and the party opposing arbitration has failed to prove its defenses, the trial court has no discretion but to compel arbitration and stay its own proceedings. Id. at 753-54; D.R. Horton, Inc. v. Brooks, 207 S.W.3d 862, 866-67 (Tex. App.-Houston [14th Dist.] 2006, no pet.); Feldman/Matz Interests, L.L.P. v. Settlement Capital Corp., 140 S.W.3d 879, 883 (Tex. App.-Houston [14th Dist. 2004, no pet.).
Under the contract, the parties agreed to utilize alternative dispute resolution procedures to resolve potential disputes between the partners. The contract provides:
[T]he Partners agree that if any dispute, claim, or controversy arises between...
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