Jack B. Anglin Co., Inc. v. Tipps

• Decision Date: 18 November 1992
• Docket Number: No. D-1750,D-1750
• Parties: JACK B. ANGLIN CO., INC. v. The Honorable Arthur TIPPS, Judge.
• Court: Texas Supreme Court

Page 266

842 S.W.2d 266

61 USLW 2376

JACK B. ANGLIN CO., INC. v. The Honorable Arthur TIPPS, Judge.

No. D-1750.

Supreme Court of Texas.

Nov. 18, 1992.

Kevin H. Good, M. Kelly Allbritton, Mark M. Donheiser, Dallas, for petitioner.

Mike Willatt, Austin, David Lee Spiller, Jacksboro, Don Holcomb, Austin, John Pierce Griffin, Dallas, for respondent.

OPINION

CORNYN, Justice.

In this mandamus proceeding we decide three issues: 1) whether claims arising out of a construction contract dispute are arbitrable under the Federal Arbitration Act, 9 U.S.C. § 1--16 (the Federal Act), or the Texas General Arbitration Act, TEX.REV.CIV.STAT.ANN. art. 224--238-6 (the Texas Act); 2) whether claims brought under the Texas Deceptive Trade Practices Act, TEX.BUS. & COMM.CODE § 17.41--17.63 (DTPA), are subject to the Federal Act; and 3) the nature of the hearing a trial court must conduct on an application for arbitration. Because we hold that the Relator has established the applicability of the Federal Act and that the Plaintiff's DTPA claims are subject to arbitration, we conditionally grant the relief requested.

In July 1988, the Jack B. Anglin Company, a Michigan corporation, agreed to build an earthen dam for the City of Jacksboro. The contract contains the following arbitration clause:

All questions subject to arbitration under the Contract may be submitted to arbitration at the choice of either party to the dispute.

Following a mud slide on the downstream side of the dam, the City discovered that excessive moisture had weakened the dam. After remedial work was performed, a dispute arose between the parties over the expenses incurred for such work. The City claimed damages for extra engineering work and loss of water; Anglin claimed damages for extra work and the balance of the contract price. The City then filed this suit for breach of contract and negligence against Anglin, its bonding company, and two engineering firms. The City later amended its petition to add a cause of action against Anglin under the DTPA.

Anglin filed an application to compel arbitration and stay court proceedings, asserting that all of the City's claims were subject to arbitration pursuant to the parties' contract and must be arbitrated under the Federal Act or alternatively the Texas Act. Seeking to establish the project's impact on interstate commerce and thus the applicability of the Federal Act, Anglin tendered the affidavit of its president, Jack Anglin. ¹ In response, the City denied that its DTPA claims were subject to arbitration, claimed that no material issues were subject to the arbitration provision, and argued that arbitration would result in multiple suits because other defendants were not parties to the contract between Anglin and the City could not be compelled to arbitrate.

At the hearing on Anglin's application to compel arbitration, the trial court admitted Jack Anglin's affidavit over the City's hearsay objections. The City did not offer any evidence. The court granted the application in part and denied it in part, ordering arbitration "only with respect to the City's cause of action for breach of contract," thus denying arbitration of the City's DTPA claim. Anglin first sought a writ of mandamus in the court of appeals, which overruled Anglin's motion for leave to file its petition. Anglin then filed its motion in this court, which we granted.

I.

Arbitration has been defined as:

a contractual proceeding by which the parties to a controversy or dispute, in order to obtain a speedy and inexpensive final disposition of matters involved voluntarily select arbitrators or judges of their own choice, and by consent submit the controversy to such tribunal for determination in substitution for the tribunals provided by the ordinary processes of the law.

Alderman v. Alderman, 296 S.W.2d 312, 315 (Tex.Civ.App.--San Antonio 1956, writ ref'd) (quoting 6 C.J.S. Arbitration and Award § 1). Arbitration has been sanctioned in Texas since at least the time of our first state constitution in 1845. TEX. CONST. art. XVI, § 13 (repealed), interp. commentary (Vernon 1955). The public policy of both our state ² and federal governments favors agreements to resolve legal disputes through such voluntary settlement procedures. See TEX.CIV.PRAC. & REM.CODE § 154.003 (Texas' Alternative Dispute Resolution statute); Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 858, 79 L.Ed.2d 1 (1984) (citing "national policy favoring arbitration"). Both Texas and federal courts have noted their favorable disposition toward such agreements. See e.g., Volt Information Sciences v. Board of Trustees, 489 U.S. 468, 476, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 (1989); Southland Corp., 465 U.S. at 14-16, 104 S.Ct. at 860-61; Neal v. Hardee's Food Sys. Inc., 918 F.2d 34, 37 (5th Cir.1990); House Grain Co. v. Obst, 659 S.W.2d 903, 905 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.); Manes v. Dallas Baptist College, 638 S.W.2d 143, 145 (Tex.App.--Dallas 1982, writ ref'd n.r.e.). Efficiency and lower costs are frequently cited as the main benefits of arbitration. ³

II.

When Texas courts are called on to decide if disputed claims fall within the scope of an arbitration clause under the Federal Act, Texas procedure controls that determination. See Southland Corp., 465 U.S. at 16, n. 10, 104 S.Ct. at 861, n. 10; see also Batton v. Green, 801 S.W.2d 923, 928 (Tex.App.--Dallas 1990, no writ). Under the Texas Act, when a party contests the applicability of an arbitration provision in an agreement, the court is instructed to proceed summarily to the determine the issue. TEX.REV.CIV.STAT.ANN. art. 225.

Because the City complains that Anglin failed to offer any evidence other than Jack Anglin's affidavit in support of its application to compel arbitration, we must decide how a trial court is to summarily determine the applicability of an arbitration clause. The nature of such a hearing is a matter of first impression in Texas.

Summary disposition of contested issues is the exception under our rules of civil procedure. Ordinarily, contested issues are decided after a plenary hearing, that is, a hearing at which witnesses present sworn testimony in person or by deposition rather than by affidavit. For example, our rules permit trial courts to render final judgments in civil cases on motions for summary judgment. A trial court may render a summary judgment based on a record consisting of deposition transcripts, interrogatory answers, and other discovery responses, along with the pleadings, admissions, affidavits, stipulations, and authenticated or certified public records before the court at the time the motion is heard. TEX.R.CIV.P. 166a(c). This procedure, as the title suggests, is summary in nature. See In re Price's Estate, 375 S.W.2d 900, 904 (Tex.1964); see also Dae Won Choe v. Chancellor, Inc., 823 S.W.2d 740, 742 (Tex.App.--Dallas 1992, no writ) (summary judgment serves to summarily dispose of patently unmeritorious cases); Beech Aircraft Corp. v. Jinkins, 698 S.W.2d 722, 728 (Tex.App.--Houston [1st Dist.] 1985), aff'd, 739 S.W.2d 19 (Tex.1987) (summary judgment summarily disposes of cases when no questions of fact and judgment may be rendered as a matter of law). Our rules also prescribe summary determination of motions to transfer venue, objections to discovery requests, and special appearances contesting jurisdiction. These matters are likewise determinable on the basis of affidavits, pleadings, the results of discovery, and the stipulations of the parties. TEX.R.CIV.P. 87, 88 (venue); TEX.R.CIV.P. 166b(4) (objections to discovery); TEX.R.CIV.P. 120a(3) (special appearance). ⁴

Because the main benefits of arbitration lie in expedited and less expensive disposition of a dispute, and the legislature has mandated that a motion to compel arbitration be decided summarily, we think it unlikely that the legislature intended the issue to be resolved following a full evidentiary hearing in all cases. ⁵ We also envision that the hearing at which a motion to compel arbitration is decided would ordinarily involve application of the terms of the arbitration agreement to undisputed facts, amenable to proof by affidavit. With these considerations in mind, we hold that the trial court may summarily decide whether to compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations. However, if the material facts necessary to determine the issue are controverted, by an opposing affidavit or otherwise admissible evidence, the trial court must conduct an evidentiary hearing to determine the disputed material facts.

III.

Next we consider whether the Federal Act applies to this dispute. Section 2 of the Federal Act provides in pertinent part:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

The Federal Act thus applies to all suits in state and federal court when the dispute concerns a "contract evidencing a transaction involving commerce." Perry v. Thomas, 482 U.S. 483, 489, 107 S.Ct. 2520, 2525, 96 L.Ed.2d 426 (1987); Southland Corp., 465 U.S. at 14-16, 104 S.Ct. at 860-61; 9 U.S.C. § 1 ("commerce" means commerce "among the several States ..."). Nor is its application limited solely to interstate shipment of goods. Prima Paint v. Flood & Conklin Mfg. Co., 388 U.S. 395, 401 n. 7, 87 S.Ct. 1801, 1805 n. 7, 18 L.Ed.2d 1270 (1967); Mesa Operating Ltd. Partnership v. Louisiana Intrastate Gas Corp., 797 F.2d 238, 243 (5th Cir.1986); Lost Creek Util. v. Travis Indep. Painter, 827 S.W.2d 103, 105 (Tex.App.--Austin 1992, writ denied). ⁶ Here, the material evidence before the court consisted of the pleadings, the contract, and Jack Anglin's affidavit, which states that...