In re Palm Harbor Homes, Inc.

Decision Date31 December 2003
Docket NumberNo. 01-02-00370-CV.,01-02-00370-CV.
Citation129 S.W.3d 636
PartiesIn re PALM HARBOR HOMES, INC. and Palm Harbor Homes I, L.P. d/b/a Palm Harbor Village, Relators.
CourtTexas Court of Appeals

Eric L. Lindstrom, Michael J. Craddock, Bush Craddock & Reneker, L.L.P., Dallas, TX, for Appellant.

Douglas Vance Colvin, Law Office of Wes Griggs, West Columbia, TX, for Appellee.

Panel consists of Justices KEYES, HEDGES,1 and EVANS2.

OPINION

FRANK G. EVANS, Justice.

This is an original proceeding for a writ of mandamus. Relators Palm Harbor Homes, Inc. ("Palm Harbor Homes") and Palm Harbor Homes 1, L.P. d/b/a Palm Harbor Village ("Palm Harbor Village"), initiated this original action in April 2002, seeking a writ of mandamus to compel the Hon. J. Ray Gayle, then Judge of the 239th District Court in Brazoria County, to rescind an order dated December 4, 2001, denying Relators' Plea in Abatement and Motion to Compel Arbitration, and to compel the Real Parties in Interest Raymond Ripple and wife Crystal Parnell Ripple (the "Ripples") to submit the dispute to binding arbitration before the American Arbitration Association. On February 6, 2003, after the retirement of J. Ray Gayle as Judge of the 239th District Court, this Court abated the proceeding to allow Relators to resubmit their motion to the Hon. Sherry Sebesta, who had succeeded Judge Gayle as Judge of the 239th District Court of Brazoria County. On March 6, 2003, at a hearing before Judge Sebesta, Relators presented their Second Motion to Compel Arbitration, which the court denied by order dated March 29, 2003. On April 1, 2003, Relators filed an amended petition in this Court on April 1, 2003, seeking a writ of mandamus to compel Judge Sebesta to rescind her order of March 28, 2003 and to compel arbitration.

The Principal Action

In the underlying action, the Ripples seek judgment for monetary damages and other relief, alleging breach of contract, breach of warranty, and statutory violations of the Residential Construction Liability Act in connection with a retail sales transaction in which the Ripples had purchased a mobile home from Palm Harbor Village (the "Retailer"), which had been manufactured by Palm Harbor Homes (the "Manufacturer"). In the course of that sales transaction, the Ripples and the Retailer signed several documents, including a document entitled "Arbitration Provision for Texas" ("hereinafter Palm Harbor No. 1"), which is dated October 1, 1998. Thereafter, the Ripples continued to meet with the Retailer to discuss the progress of the construction work and the purchase of the manufactured home. After the Manufacturer completed construction of the home in November 1998, the Ripples signed a second arbitration agreement ("Palm Harbor No. 2"), which is dated December 17, 1998. The terms of both documents (together referred to as the "Palm Harbor Agreement") will be outlined below.

In January 1999, the mobile home was constructed on the Ripples' property. After a series of complaints to the Retailer regarding the quality and construction of the home, the Ripples in November 2000 submitted claims to both the Retailer and the Manufacturer based on the provisions of the Residential Construction Liability Act. In May 2001, the Ripples initiated the underlying action, alleging damages for breaches of warranty and contract, including statutory liability under the Residential Construction Liability Act.

The Parties' Contentions

Relators contend the face of the record demonstrates a clear abuse of discretion by the trial court in denying their motion to compel arbitration. In essence, they argue that the record conclusively establishes the existence of a valid agreement to arbitrate under the Federal Arbitration Act, and that the Ripples did not offer proof in support of their affirmative defenses of lack of consideration and unconscionability.

The Ripples contend that: (1) the Relators failed to meet their threshold burden of establishing the existence of a valid arbitration agreement, and (2) the court did not abuse its discretion, under the circumstances surrounding the transaction, in ruling that the provision in the Palm Harbor Agreement, which purports to give the Manufacturer an absolute and unconditional right to unilaterally "opt-out" of the agreement to arbitrate, renders the entire agreement unconscionable and unenforceable.

Standard of Review

Mandamus is an extraordinary remedy that will issue only to correct a clear abuse of discretion or the violation of a legal duty when there is no adequate remedy at law. In re Masonite Corp., 997 S.W.2d 194, 197 (Tex.1999). In determining whether there has been a clear abuse of discretion justifying mandamus relief, the reviewing court must consider whether the trial court's ruling was one compelled by the facts and circumstances or was arbitrary, unreasonable, or reached without reference to any guiding rules or principles. Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 918 (Tex.1985); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985).

A trial court's failure to apply the Federal Arbitration Act to the facts of the dispute constitutes an abuse of discretion for which there is no adequate remedy at law. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992). Thus, the erroneous denial of a party's motion to compel arbitration under that Act leaves the movant with no adequate remedy at law, and under such circumstances the movant is entitled to a writ of mandamus. In re FirstMerit Bank N.A., 52 S.W.3d 749, 753 (Tex.2001); see also Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992); In re Conseco Fin. Servicing Corp., 19 S.W.3d 562, 568 (Tex.App.-Waco 2000, orig. proceeding); In re Monsanto Co., 998 S.W.2d 917, 921-22 (Tex.App.-Waco 1999, orig. proceeding).

Applying these standards to the record in this case, we must seek to determine whether the trial court's ruling constitutes a clear abuse of discretion, i.e. whether the court could have rendered only one proper decision on the facts and applicable law and failed to reach that decision. Southwest Tex. Pathology Assoc. v. Roosth, 27 S.W.3d 204, 207 (Tex.App.-San Antonio 2000, no pet.); Hardin Constr. Group v. Strictly Painting, 945 S.W.2d 308, 312 (Tex.App.-San Antonio 1997, no writ).

Relators' Burden of Proof

A party seeking a writ of mandamus to compel arbitration under the Federal Arbitration Act must first establish the existence of a valid agreement to arbitrate and show that the claims in dispute are within the scope of the agreement. In re FirstMerit Bank, 52 S.W.3d at 753. Once the movant proves the existence of a valid agreement to arbitrate, both state and federal policy favors arbitration and any doubts about the scope of the agreement must be resolved in favor of arbitration. Id. at 753. However, we may not simply assume the parties agreed to arbitrate; the burden is on the Relators to prove by "clear and unmistakable evidence" the existence of a valid and enforceable contract to arbitrate. First Options v. Kaplan, Inc., 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).

Policy Considerations

It is only after the establishment of a valid and enforceable agreement to arbitrate that state and federal policies favor arbitration become applicable. EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (2002); Fleetwood Enterpr., Inc. v. Gaskamp, 280 F.3d 1069, 1074 (5th Cir.2002). The purpose of the Federal Arbitration Act is "to make arbitration agreements as enforceable as other contracts, but not more so." Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n. 12, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967); see also Mitsubishi Motors Corp. v. Soler Chrysler Plymouth, 473 U.S. 614, 625-26, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); Waffle House, 534 U.S. at 294, 122 S.Ct. 754.

Accordingly, we must determine, as a matter of contract interpretation, whether the Relators met their burden of proving the existence of a valid and enforceable contract to arbitrate. Labor Ready Central III v. Gonzalez, 64 S.W.3d 519, 521-22 (Tex.App.-Corpus Christi 2001, no writ). Because the trial court concluded that Relators did not meet their burden of proof, we must uphold that court's ruling unless the record conclusively requires a contrary result. See Pepe Int'l Dev. Co. v. Garcia, 915 S.W.2d 925, 929 (Tex.App.-Houston [1st Dist.] 1996, no writ).

The Palm Harbor Agreement

The Relators rely upon the provisions of two documents (Palm Harbor No. 1 and No. 2) to support their contention that the Ripples entered into a valid and enforceable agreement to arbitrate. Palm Harbor No. 1 is a one-page printed form dated October 1, 1998. It bears a heading, including address and telephone numbers, entitled "Palm Harbor Village." It is signed by the Ripples, as "Purchaser," and by a representative of Palm Harbor Village, as "Retailer." The document recites that the parties to the "Retail Installment Contract or Cash Sales Contract" agree that:

any and all controversies and claims arising out of or relating to said contracts or to the negotiation, purchase, financing, installation, ownership, occupancy, habitation, manufacture, warranties (express or implied), repair, or sale/disposition of the "home" which is subject to said contracts, will be settled solely by means of final and binding arbitration before a three-judge panel of the American Arbitration Association.

1. The arbitration provision will inure to the benefit of the manufacturer of the home as fully as if the manufacturer was a signatory to said contracts;

2. The arbitration provision also will inure to the benefit of any lender or mortgagee (or assigns) who provide financing for the purchase of the home at the sole discretion of that lender or mortgagee, and

3. Nothing in this contract requires a lender or mortgagee to invoke this Arbitration Provision, and the lender or...

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