Mikey's Houses LLC v. Bank of America, N.A.

• Decision Date: 03 May 2007
• Docket Number: No. 2-05-397-CV.,2-05-397-CV.
• Citation: 232 S.W.3d 145
• Parties: MIKEY'S HOUSES LLC and Helen L. Martin, Joyce A. Powell, Appellants, v. BANK OF AMERICA, N.A., Appellee.
• Court: Texas Court of Appeals

232 S.W.3d 145

MIKEY'S HOUSES LLC and Helen L. Martin, Joyce A. Powell, Appellants, v. BANK OF AMERICA, N.A., Appellee.

No. 2-05-397-CV.

Court of Appeals of Texas, Fort Worth.

May 3, 2007.

Jay L. Gueck, Olson, Nicoud & Gueck, L.L.P., Dallas, for Appellants.

Eric S. Lipper, Hirsch & Westheimer, P.C., Houston, for Appellee.

PANEL F: LIVINGSTON, GARDNER, and WALKER, JJ.

OPINION

SUE WALKER, Justice.

I. INTRODUCTION

This is an interlocutory appeal from the trial court's order granting Appellee Bank of America, N.A.'s motion to enforce a contractual jury waiver. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(d) (Vernon Supp.2006). In one issue, Appellants Mikey's Houses, LLC, Helen L. Martin, and Joyce A. Powell contend that the trial court erred by granting Bank of America's motion to enforce the prelitigation contractual jury waiver. Because we hold that Bank of America did not meet its burden of producing prima facie evidence that Martin and Powell knowingly and voluntarily made the prelitigation contractual waiver of their constitutional right to trial by a jury, we reverse the trial court's order enforcing the waiver.

II. BACKGROUND FACTS

Mikey's Houses LLC is a Texas limited liability corporation owned by Martin and Powell. Martin and Powell formed Mikey's Houses to buy foreclosed homes and renovate them for resale.¹ On March 18, 2003, Mikey's Houses entered into a contract with Bank of America to purchase a house and lot at 3325 Meadowbrook in Fort Worth for $54,000.00. Martin signed the contract as President, and Powell signed it as Vice President. Either Bank of America or Bank of America's broker drafted the contract. After Martin and Powell, on behalf of Mikey's Houses, and Bank of America had signed the sales contract, Martin and Powell were presented with an addendum to the contract from Bank of America,² which they both signed. The addendum is a two-page, single-spaced document entitled "Bank of America Mortgage Addendum to Contract;" it is not a standard Texas Real Estate Commission Form.

Paragraph 13 of the addendum provides, Waiver of Trial by Jury. Seller and Buyer knowingly and conclusively waive all rights to trial by jury in any action or proceeding relating to this Contract.

Bank of America contends that the phrase "Waiver of Trial by Jury" is bolded, but we cannot tell from our examination of the addendum contained in the clerk's record and the copy of the addendum attached as an appendix to Appellants' brief whether this phrase is bolded or not.³ Many of the addendum's other numbered paragraphs begin with a descriptive phrase, such as "11. Termination of Contract" or "14. Conflict." The "Waiver of Trial by Jury" phrase does not appear to be any more or any less bolded than the other introductory phrases in the addendum. Bank of America also points out that the phrase "Waiver of Trial by Jury" is underlined. While it is true that this phrase is underlined, it appears that at some point someone underlined it by hand, not that it was underlined when the addendum was printed. Entire sentences and some of the other paragraph titles in the addendum likewise appear to be hand-underlined. We cannot tell from the record whether these sentences and phrases were hand-underlined before or after the addendum was executed.

The parties did not verbally discuss the jury waiver provision in the addendum. Appellants were not represented by counsel nor did they have an attorney review the contract or the addendum for them. It is undisputed that neither the contract nor the addendum was negotiated and that the addendum was separately presented to Martin and Powell after they had executed the sales contract.

After the April 15, 2003 closing, when Appellants later received the deed and title policy, they discovered that Bank of America had, in fact, only had title to and sold them a thirty-foot strip of land rather than the house and lot that they thought they had purchased. Appellants sued Bank of America for breach of contract, specific performance, negligence, negligent or intentional misrepresentation, breach of express and implied warranties, DTPA violations, and fraud. Bank of America filed a motion to enforce the contractual jury waiver set forth in paragraph 13 of the addendum as to all of Appellants' claims. After a hearing, the trial court granted the motion and signed an order allowing an interlocutory appeal under section 51.014(d) of the civil practice and remedies code. TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(d).

III. ANALYSIS

A. Standard of Review

Because the issue on appeal involves a question of law, we review it de novo. See J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 239 (Tex.2003).

B. The Right to a Jury Trial Is a Constitutional Right

The Seventh Amendment of the United States Constitution provides that "[i]n suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of common law." U.S. CONST. amend. VII. The Texas Constitution likewise provides that "[t]he right of trial by jury shall remain inviolate" and that "[i]n the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury." TEX. CONST. art. I, § 15,⁴ art. V, § 10. Clearly, the right to a jury trial in civil disputes—when the right existed at common law—is a constitutional right. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 132 (Tex.2004) (original proceeding) (recognizing the right to trial by jury is a constitutional right to be given the "same protections as other constitutional rights"); Nicole Mitchell, Note, Pre-Dispute Contractual Jury Waivers: The New Arbitration in Texas? A Case Note on In re Prudential Insurance Company of America, 58 BAYLOR L.REV. 243, 244 (2006); see also Brief of Gerald R. Powell as Amicus Curiae, 1-3, in Coca-Cola Co. v. Harmar Bottling Co., 50 Tex. Sup.Ct. J. 21, 2006 WL 2997436 (Tex. Oct. 20, 2006).

C. In Texas, Prelitigation Contractual Jury Waivers Are Not Per Se Unenforceable but Must Be Knowing and Voluntary

The constitutional right to trial by jury may be waived via contract so long as the waiver is made knowingly, voluntarily, and intelligently "with sufficient awareness of the relevant circumstances and likely consequences." In re Prudential, 148 S.W.3d at 132 (quoting Brady v. United States, 397 U.S. 742, 748, 90 S.Ct. 1463, 1469, 25 L.Ed.2d 747 (1970)).⁵ In holding that prelitigation contractual jury waivers are not per se unenforceable, the Texas Supreme Court in In re Prudential expressly "echo[ed] the United States Supreme Court's admonition [in Brady v. United States] that `waivers of constitutional rights must be knowing, intelligent acts done with sufficient awareness of the relevant circumstances and likely consequences.'" Id. Thus, the Texas Supreme Court equated the Texas standard for a "knowing and voluntary" prelitigation contractual jury waiver with the "knowing and voluntary" standard utilized in criminal cases like Brady to assess the validity of a defendant's pretrial waiver of a jury trial via a guilty plea.⁶ In re Prudential, 148 S.W.3d at 132; see Brady, 397 U.S. at 748, 90 S.Ct. at 1469. But see L & R Realty v. Conn. Nat'l Bank, 246 Conn. 1, 715 A.2d 748, 755 (1998) (holding in commercial loan transaction "that it is appropriate to apply a lower standard in determining the enforceability of prelitigation contractual jury trial waivers than for waivers in criminal cases"). This was a logical step by the supreme court because a guilty plea, once expressly approved by the trial court, is a binding contract between the State and the defendant, that is, a guilty plea is a prelitigation contractual jury waiver.⁷ The Brady standard for a "knowing and voluntary" jury waiver requires a consideration of all relevant surrounding circumstances and requires special scrutiny when the litigant is not represented by counsel. Brady, 397 U.S. at 748 n. 6, 749, 90 S.Ct. at 1469.

D. Burdens of Proof to Establish That Prelitigation Contractual Jury Waiver Was Made Knowingly and Voluntarily

1. Presumption against jury waiver; arbitration procedures do not apply⁸

Because the right to a jury trial is a constitutional right, the United States Supreme Court has recognized that every reasonable presumption is indulged against the waiver of that right. Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393, 57 S.Ct. 809, 811-12, 81 L.Ed. 1177 (1937) ("But, as the right of jury trial is fundamental, courts indulge every reasonable presumption against waiver."); Hodges v. Easton, 106 U.S. 408, 412, 1 S.Ct. 307, 311, 27 L.Ed. 169 (1882) ("It has been often said by this court that the trial by jury is a fundamental guaranty of the rights and liberties of the people. Consequently, every reasonable presumption should be indulged against its waiver."); see also College Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 681-82, 119 S.Ct. 2219, 2229, 144 L.Ed.2d 605 (1999) (recognizing in different context that "[c]onstructive consent is not a doctrine commonly associated with the surrender of constitutional rights"); Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 848, 106 S.Ct. 3245, 3255, 92 L.Ed.2d 675 (1986) (recognizing that "Article III's guarantee of an impartial and independent federal adjudication is subject to waiver, just as are other personal constitutional rights that dictate the procedures by which civil and criminal matters must be tried."); RDO Fin. Servs. Co. v. Powell, 191 F.Supp.2d 811, 813 (N.D.Tex.2002) (holding prelitigation waiver of jury trial "must be made knowingly and voluntarily, and courts will indulge in every reasonable presumption against a waiver of that right").

The Texas Supreme Court's recognition in In re Prudential that the right to trial by...