In re Wells Fargo Bank Minnesota N.A.

• Decision Date: 10 July 2003
• Docket Number: No. 14-03-00191-CV.,14-03-00191-CV.
• Citation: 115 S.W.3d 600
• Parties: In re WELLS FARGO BANK MINNESOTA N.A., as Trustee and Orix Capital Markets, LLC, Relators
• Court: Texas Court of Appeals

115 S.W.3d 600

In re WELLS FARGO BANK MINNESOTA N.A., as Trustee and Orix Capital Markets, LLC, Relators

No. 14-03-00191-CV.

Court of Appeals of Texas, Houston (14th Dist.).

July 10, 2003.

Jeff Joyce, Paul V. Simon, Houston, for relator.

Jodi Masera, Matt E. Rubin, Houston, for respondent.

Panel consists of Justices ANDERSON, SEYMORE, and GUZMAN.

OPINION

ANDERSON, Justice.

Relators, Wells Fargo Bank Minnesota N.A., as Trustee and Orix Capital Markets, LLC, seek a writ of mandamus ordering respondent, the Honorable Joseph Halbach, to enforce the parties' contractual jury waivers in the underlying suit. We conditionally grant the writ.

I. BACKGROUND

Relators filed the underlying suit against Real Parties in Interest—Cyrus II Partnership, Bahar Development, Inc., and Mondona Rafizadeh—to recover on a $6.4 million mortgage note and guaranty.¹ Real Parties filed a counterclaim alleging bad faith, breach of contract, wrongful acceleration and foreclosure, abuse of rights, and tortious interference with contract, and seeking at least $350 million in damages.

The mortgage note was signed as follows:

CYRUS II PARTNERSHIP, a Louisiana partnership in commendam

By: Bahar Development, Inc. a Texas corporation, its general partner

By: [signature]

Name: Mondona Rafizadeh

Title: President

Rafizadeh also individually signed the guaranty. The note and guaranty contain Louisiana choice of law provisions.² In addition, both the note and guaranty contain jury waiver provisions. Specifically, the note provides

MAKER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO

THIS NOTE, THE MORTGAGE [DEED OF TRUST] AND THE OTHER SECURITY DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.

The guaranty contains a similar provision:

5.13 Waiver of Right to Trial by Jury. GUARANTOR HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR.

Despite these jury waivers, Real Parties filed a jury demand and paid the fee, and the suit was placed on the jury docket. Relators filed a motion to enforce the contractual jury waivers. After a hearing on February 7, 2003, the trial court orally denied the motion. On February 19, 2003, the trial court signed an order denying the motion. Relators then filed this petition for mandamus relief.

II. STANDARD OF REVIEW

Mandamus relief is available if the trial court clearly abuses its discretion, either in resolving factual issues or determining legal principles, and there is no other adequate remedy at law. Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex.1992). A trial court clearly abuses its discretion if "it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Id. at 839. To show abuse of discretion in resolving factual issues, Relators must show the trial court could reasonably have reached only one decision. Id. at 839-40. To show abuse of discretion in determining legal principles, Relators must show the trial court clearly failed to analyze or apply the law correctly. Id. at 840. A trial court has no "discretion" in determining what the law is or applying the law to the facts. Id. Further, a court must construe an unambiguous contract as a matter of law. See Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983); Mobil Exploration and Producing U.S., Inc. v. Dover Energy Exploration, L.L.C., 56 S.W.3d 772, 776 (Tex.App.-Houston [14th Dist.] 2001, no pet.). Finally, Relators must also show they have no other adequate remedy. Walker, 827 S.W.2d at 840.

III. ABUSE OF DISCRETION

This mandamus petition presents an issue of first impression in Texas. The parties do not cite, and we have not found, a Texas case addressing the enforceability of contractual jury waivers.³ Nevertheless, in their sole issue, Relators contend the trial court abused its discretion by refusing to enforce these unambiguous jury waivers.⁴ In response, Real Parties dispute the enforceability of contractual jury waivers in general and these waivers in particular.

A. IS THERE A CONFLICT BETWEEN LOUISIANA AND TEXAS LAW ON ENFORCEABILITY OF CONTRACTUAL JURY WAIVERS?

The parties disagree over what law applies to the issue of enforceability of contractual jury waivers. Relators contend Louisiana law, as chosen by the parties, governs this issue, and Louisiana enforces contractual jury waivers. Real Parties do not dispute that the parties chose Louisiana law in their contracts. However, they contend contractual jury waivers should be unenforceable per se in Texas because Texas constitutionally guarantees⁵ the right to a jury trial while Louisiana does not.⁶ They ask us to apply the choice of law principles set forth in section 187 of the Restatement of Conflicts of Laws and find Louisiana law inapplicable to this dispute. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187 (1971); see also DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677 (Tex.1990) (adopting section 187).⁷

We need not engage in a choice of law analysis under section 187 if there is no conflict between Louisiana and Texas law on the disputed issue. See Fraud-Tech, Inc. v. Choicepoint, Inc., 102 S.W.3d 366, 377-78 (Tex.App.-Fort Worth 2003, no pet. h.) (citing Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 419 (Tex.1984) and holding court need not decide which state's law applies if no conflict exists on the issues); Chesapeake Operating, Inc. v. Nabors Drilling USA, Inc., 94 S.W.3d 163, 168-69 (Tex.App.-Houston [14th Dist.] 2002, no pet.) (reviewing Texas and Louisiana law on enforceability of indemnity provisions before conducting choice of law analysis because "we need not decide which law applies if it makes no difference."); Young Refining Corp. v. Pennzoil Co., 46 S.W.3d 380, 385 (Tex.App.-Houston [1st Dist.] 2001, pet. denied) (finding choice of law analysis unnecessary absent a conflict of law on the issues presented). Therefore, we will examine the laws of both states on enforceability of contractual jury waivers.

1. LOUISIANA ENFORCES CONTRACTUAL JURY WAIVERS.

Louisiana has unequivocally upheld contractual jury waivers. In Cook v. Hibernia National Bank, 847 So.2d 617, 2002 WL 31336987 (La.Ct.App. Mar.15, 2002), writ denied, 817 So.2d 98 (La.2002), the court upheld the trial court's strike of a jury request where the parties had clearly and specifically waived a jury trial in their contract, and the party opposing the waiver was an experienced businesswoman. Real Parties cite no Louisiana authority holding contrary to Cook or otherwise prohibiting enforcement of contractual jury waivers.

2. DOES TEXAS PROHIBIT CONTRACTUAL JURY WAIVERS?

As Real Parties contend, the Texas constitution does indeed guarantee the right to a jury trial in a civil case. See TEX. CONST. art. I, § 15 ("The right of trial by jury shall remain inviolate."); TEX. CONST. art. V, § 10 (granting right to jury trial in district courts). However, no Texas law prohibits parties from waiving that constitutional right—whether contractually or otherwise.⁸ In fact, parties can, and do, frequently waive that right by (a) agreeing to a bench trial, see Am. Indus. Life Ins. Co. v. Ruvalcaba, 64 S.W.3d 126, 131 (Tex.App.-Houston [14th Dist.] 2001, pet. denied); (b) failing to timely pay a jury fee, see TEX. R. CIV. P. 216; Higginbotham v. Collateral Prot., Inc., 859 S.W.2d 487, 489-90 (Tex.App.-Houston [1st Dist.] 1993, writ denied); (c) failing to timely request a jury trial, see TEX. R. CIV. P. 216; Huddle v. Huddle, 696 S.W.2d 895 (Tex.1985); (d) failing to appear for trial, see TEX. R. CIV. P. 220; and (e) failing to object to a bench trial despite a properly perfected jury request, see Massey v. Galvan, 822 S.W.2d 309, 318 (Tex.App.-Houston [14th Dist.] 1992, writ denied). In fact, the Texas Constitution implies that the right to a jury trial can be waived by providing "no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury." See TEX. CONST. art. V, § 10.

Although no Texas court has directly addressed the enforceability of contractual jury waivers, Texas allows parties to contractually waive the right to a jury trial by enforcing arbitration agreements. "It is clear that when a party agrees to have a dispute resolved through arbitration rather than judicial proceeding, that party has waived its right to a jury trial." Massey, 822 S.W.2d at 318. Although parties agreeing to arbitrate waive considerably more than just the right to a jury trial, arbitration is strongly favored under Texas law. See Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex.1995) (citing Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941-42, 74 L.Ed.2d 765 (1983); Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943)).⁹

Moreover, Texas has a "strong commitment to...