Obra Homes, Inc. v. Gonzalez, No. 13-03-00644-CV (Tex. App. 6/3/2010)

• Decision Date: 03 June 2010
• Docket Number: No. 13-03-00644-CV.,No. 13-03-00700-CV.,13-03-00644-CV.,13-03-00700-CV.
• Court: Texas Court of Appeals
• Parties: OBRA HOMES, INC., ALEX FLORES, AND DAVID CANTU, Appellants, v. RICARDO GONZALEZ AND SANDRA BARBOUR, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED, Appellees. IN RE OBRA HOMES, INC.

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OBRA HOMES, INC., ALEX FLORES, AND DAVID CANTU, Appellants, v. RICARDO GONZALEZ AND SANDRA BARBOUR, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED, Appellees.

IN RE OBRA HOMES, INC.

No. 13-03-00644-CV.

No. 13-03-00700-CV.

Court of Appeals of Texas, Thirteenth District, Corpus Christi, Edinburg.

Delivered and Filed June 3, 2010.

On Appeal from the 138th District Court of Cameron County, Texas.

On Petition for Writ of Mandamus.

Before Chief Justice VALDEZ and Justices RODRIGUEZ and GARZA.

MEMORANDUM OPINION

Memorandum Opinion by Chief Justice VALDEZ.

By an accelerated interlocutory appeal and an accompanying petition for writ of mandamus, appellants/relators, Obra Homes, Inc., Alex Flores, and David Cantu (collectively "Obra Homes"), complain about the trial court's denial of a motion to compel arbitration and the certification of the underlying lawsuit as a class action in favor of appellees/real parties in interest, Ricardo Gonzalez and Sandra Barbour, on behalf of themselves and those similarly situated (collectively "the Gonzalez class"). By two issues in their interlocutory appeal in appellate cause number 13-03-644-CV, Obra Homes contends that the trial court clearly abused its discretion in denying Obra Homes's motion to compel arbitration and by certifying this matter as a class action. In addition, by its petition for writ of mandamus in appellate cause number 13-03-700-CV, Obra Homes makes substantially similar arguments as contained in their interlocutory appeal.

In appellate cause number 13-03-700-CV, we conditionally grant the writ requested. In appellate cause number 13-03-644-CV, we reverse the trial court's class certification order, and we remand for proceedings consistent with this opinion.

I. Background

This dispute pertains to the purchase of a home in Cameron County, Texas. On June 14, 2001, Gonzalez and Barbour contracted to purchase a home from Obra Homes for the purchase price of $73,686. Gonzalez, Barbour, and an Obra Homes representative each signed the underlying contract for the home purchase.

Subsequently, on May 29, 2003, the Gonzalez class filed an original class action petition against Obra Homes, alleging that the underlying contract was defective because Obra Homes neglected to include a disclosure statement that was required by section 27.007 of the Texas Property Code and, therefore, engaged in an unconscionable act and breached a fiduciary duty of good faith and fair dealing owed to the class. See Tex. Prop. Code Ann. § 27.007 (Vernon Supp. 2009).¹ The Gonzalez class further alleged that Obra Homes' failure to include the disclosure statement in the underlying contract entitled the class members to a "civil, statutory penalty of $500," court costs, and reasonable attorney's fees. On June 4, 2003, the Gonzalez class filed a first amended class action petition alleging the same causes of action against Obra Homes but adding language stating that: (1) the members of the class numbered in the thousands and would be impracticable to individually join as parties to the action²; (2) the questions of law and fact are common and of general interest to the class; (3) Gonzalez and Barbour's claims are typical of the class's claims; (4) Gonzalez and Barbour will fairly and adequately protect the interests of the class as representatives; and (5) class-action treatment of this dispute is necessary to avoid the "risk of inconsistent or varying adjudications with respect to individual class members which would establish incompatible standards of conduct for the Defendant [Obra Homes]" and to allow "other members not parties to the adjudications to protect their interests." See Tex. R. Civ. P. 42.

Obra Homes filed its original answer on June 26, 2003, arguing that the underlying contract compelled the Gonzalez class to submit their claims to arbitration. On July 28, 2003, Obra Homes filed motions to compel arbitration under the Federal Arbitration Act (the "FAA") and to abate the lawsuit pending arbitration. Attached to Obra Homes' motions was an affidavit executed by Larry Contreras, wherein he averred that: (1) at the time of the underlying transaction, Alex Flores and David Cantu were both employees of Obra Homes; and (2) many of the materials used in the construction of the class members' homes were manufactured outside the State of Texas and, thus, Obra Homes "operates in interstate commerce and [the] transactions with the plaintiffs involve interstate commerce."

Also on July 28, 2003, the Gonzalez class filed a motion to certify the class. On September 8, 2003, the class filed a supplemental motion to certify, specifically addressing the underlying causes of action and the numerosity, commonality, typicality, and adequacy of representation of the class members' claims. See id. at R. 42(a).

On September 22, 2003, the trial court conducted a hearing on Obra Homes's motion to compel arbitration and the Gonzalez class's request for class certification. On the day of the hearing, the class filed a fourth amended class action petition, revising their causes of action against Obra Homes. In addition to their causes of action for breach of fiduciary duty and for violations of section 27.007 of the property code, the class asserted that Obra Homes had breached the underlying contract and was negligent in failing to include the section 27.007 disclosure statement. The class further asserted that: "Defendants [Obra Homes] included arbitration agreements that were ambiguous, contracts of adhesion, unconscionable, resulted from uneven economic power, were against public policy, and were procured by fraud in the inducement of the arbitration agreements. Furthermore, there was no mutuality of consideration regarding such arbitration agreements and burdensome costs."

On October 2, 2003, the trial court entered an order denying Obra Homes's motion to compel arbitration. Specifically, the trial court noted the following in its order:

In reaching such finding[,] the Court finds that the penalty/fine provision of the Residential Construction Liability Act /[]Texas Property Code (§[]27.007) upon which the Plaintiffs [the Gonzalez class] bring suit is outside the scope of the arbitration agreement. Moreover, the arbitration agreement included in the Purchase Agreements with Plaintiffs is a contract of adhesion and unconscionable. The Court further finds that the arbitration agreement is not supported by mutual consideration and based on illusory promises of the Defendant Obra Home[s], Inc. The Court further finds that the enforcement of the arbitration agreement would be unduly costly and violate public policy considerations.

The next day, the trial court entered an order granting the Gonzalez class's request for class certification and making numerous findings pertaining to the certification of the class.

On October 17, 2003, Obra Homes filed their notice of accelerated appeal of the trial court's October 2 and 3, 2003 orders in appellate cause number 13-03-644-CV. Shortly thereafter, Obra Homes filed a petition for writ of mandamus in appellate cause number 13-03-700-CV, also challenging the trial court's October 2 and 3, 2003 orders.

However, while this dispute was pending in this Court, Obra Homes notified us of the bankruptcy filing of a named party—Alex Flores. As a result, the causes were abated. See 11 U.S.C. § 362 (setting out various acts subject to the automatic stay associated with a bankruptcy filing); see also Tex. R. App. P. 8. The parties filed a joint motion to reinstate this dispute on March 30, 2010, asserting that the automatic stay in Flores's bankruptcy proceeding had been lifted and including a certified copy of the order discharging Flores's debts. See Tex. R. App. P. 8.3(a). On April 16, 2010, this Court granted the parties' joint motion to reinstate.

II. Preliminary Matters

In the instant case, Obra Homes challenges the trial court's: (1) refusal to compel the parties to arbitration under the FAA; and (2) certification of the Gonzalez class. Generally, "[a] party may not appeal an interlocutory order unless authorized by statute." Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352, 352 (Tex. 2001) (citing Cherokee Water Co. v. Ross, 698 S.W.2d 363, 365 (Tex. 1985) (per curiam)). Section 51.014(a)(3) of the civil practice and remedies code provides that a party may appeal from an interlocutory order certifying or refusing to certify a class in a suit brought under rule 42 of the rules of civil procedure. Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(3) (Vernon 2008); see Tex. R. Civ. P. 42. Because section 51.014(a)(3) provides Obra Homes with an adequate remedy on appeal regarding the trial court's interlocutory order certifying the Gonzalez class, we will not analyze their issues pertaining to the class certification within the context of their petition for writ of mandamus. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(3); see also In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004) (stating that mandamus will issue to correct a clear abuse of discretion for which the remedy by appeal is inadequate); Bally Total Fitness Corp., 53 S.W.3d at 352.

However, section 51.014 of the civil practice and remedies code does not provide for the appeal of an interlocutory order refusing to compel parties to arbitration under the FAA. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014. Traditionally, Texas courts have handled such complaints via mandamus. See In re Halliburton Co., 80 S.W.3d 566, 573 (Tex. 2002) (orig. proceeding); Hawthorne Townhomes, L.P. v. Branch (In re Hawthorne Townhomes, L.P.), 282 S.W.3d 131, 137 (Tex. App.-Dallas 2009, no pet.) ("The denial of arbitration under the Federal Arbitration Act cannot be appealed.") (citing Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 272 (Tex. 1992)); Nabors Drilling USA, LP v. Carpenter, 198 S.W.3d 240, 246 (Tex. App.-San Antonio 2006, orig. proceeding); see also In re HEB Grocery Co.,...