Perlstein v. D. Steller 3, Ltd.

• Decision Date: 15 May 2003
• Docket Number: No. 13-02-180-CV.,13-02-180-CV.
• Citation: 109 S.W.3d 36
• Parties: Fred PERLSTEIN, Appellant, v. D. STELLER 3, LTD., Appellee.
• Court: Texas Court of Appeals

109 S.W.3d 36 Fred PERLSTEIN, Appellant,
v.
D. STELLER 3, LTD., Appellee. No. 13-02-180-CV. Court of Appeals of Texas, Corpus Christi-Edinburg. May 15, 2003. Rehearing Overruled July 17, 2003.

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COPYRIGHT MATERIAL OMITTED

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Tom Fleming, Fleming & Hernandez, Brownsville, for appellant.

William A. Faulk, Jr., Rentfro, Faulk & Blakemore, L.L.P., Brownsville, for appellee.

Before Justices HINOJOSA, CASTILLO, and CHAVE Z.¹

OPINION

Opinion by Justice CHAVEZ (Retired).

In this interlocutory appeal, appellant, Fred Perlstein ("Perlstein"), appeals the trial court's denial of his motion to abate and compel arbitration.²

D. Steller 3, Ltd. ("Steller"), a Texas limited partnership, purchased a general partnership interest in a limited partnership from Perlstein. At closing, the limited partnership was restructured in accordance with the agreement of the parties, and an Amended and Restated Agreement of Limited Partnership ("the Amended Agreement") was executed. The Amended Agreement contained the terms and provisions for the operation of an apartment complex that the limited partnership owned. Included in the Amended Agreement was an arbitration agreement. Steller later sued Perlstein, alleging Perlstein made false representations that induced Steller to purchase the general partnership. Perlstein moved the court to abate the suit and order Steller to arbitrate the dispute as required by the Amended Agreement. The trial court denied the motion, and this appeal followed. Because we hold that the arbitration paragraph does not apply to the dispute in question, we affirm the trial court's order denying arbitration.

Following a letter of intent ("the Letter Agreement") to purchase the general partnership interest, Steller and Perlstein entered into a Purchase Agreement on May 27, 2000 that set out the terms and conditions of the transaction. The Purchase Agreement contained the following remedies provision:

21. Remedies. In the event that any of the PERLSTEIN's representations or warranties contained herein are untrue or if PERLSTEIN shall have failed to have performed any of the covenants and/or agreements contained herein which are to be performed by PERLSTEIN, BUYER may, at its option, either (a) terminate this Agreement by giving written notice of termination to PERLSTEIN and receive a full and immediate refund of any and all Earnest Money previously deposited; or (b) sue PERLSTEIN for damages suffered by BUYER; or (c) BUYER may seek to enforce specific performance of this Agreement.

Paragraph 3.2 of the Purchase Agreement provided that there would be a restructuring of the limited partnership in an

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Amended and Restated Partnership Agreement and that the Purchase Agreement would be incorporated into the said Amended and Restated Partnership Agreement.

The sale was closed on December 28, 2000 when Steller signed the Amended Agreement with an effective date of January 1, 2001. The Amended Agreement contained an "Entire Agreement" clause that reads as follows:

17.02 Entire Agreement. This Agreement, the Letter Agreement and the Purchase Agreement dated May 27, 2000 between Perlstein and the General Partner (Steller), represent the entire and complete agreement of the Partners with respect to the subject matter hereof, and supersede all prior understandings and agreements, both written and oral, as to the subject matter hereof by and among any of the Partners hereto.

The Amended Agreement also contained the following arbitration paragraph:

16.01 Arbitration Generally. Any controversy, claim or dispute between or among the parties directly or indirectly concerning this Agreement or the breach thereof or the subject matter hereof, including questions concerning the scope and applicability of this Article XVI, shall be finally settled by arbitration held in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), as amended from time to time. The arbitrators shall have the right and authority to determine how their decision or determination as to each issue or matter in dispute may be implemented or enforced. Any decision or award of the arbitrators shall be final, binding and conclusive on the parties to this Agreement and there shall be no appeal therefrom other than for gross negligence or willful misconduct.

After Steller filed his fraudulent inducement lawsuit, Perlstein moved the court to abate the case and compel arbitration. Perlstein contended that all three agreements had been merged into one final and complete agreement, thus making all disputes subject to arbitration. Even if Steller disputed the applicability of the arbitration clause, argued Perlstein, that dispute was also subject to arbitration. Steller, on the other hand, disputes that a merger had occurred and argues that the fraudulent inducement claim was specifically reserved in the "remedies" clause contained in the Purchase Agreement.

Accordingly, we must decide whether the Amended Agreement merged all three agreements into one final agreement rendering the arbitration agreement applicable to this dispute, and if so, whether the remedies clause in the Purchase Agreement created an exception to arbitrate such a claim. We must also determine whether the dispute regarding the scope and applicability of the arbitration paragraph is itself subject to arbitration.

Historically, Texas law has favored settling disputes by arbitration. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.1996). Arbitration is a creature of contract; thus, when a party seeks to compel arbitration, he must first establish his right to that remedy under contract. City of Alamo v. Garcia, 878 S.W.2d 664, 665 (Tex.App.-Corpus Christi 1994, no writ). In Texas, courts favor arbitration agreements, and any doubts regarding the scope of an arbitration agreement are resolved in favor of arbitration. Koch v. Koch, 27 S.W.3d 93, 96 (Tex.App.-San Antonio 2000, no pet.). Once the existence of an arbitration agreement has been shown, the party resisting arbitration bears the burden of proving that the dispute at issue falls outside of the arbitration agreement. Prudential

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Sec., Inc. v. Marshall, 909 S.W.2d 896, 900 (Tex.1995). The policy favoring enforcement of arbitration provisions is so compelling that a court should not deny arbitration "unless it can be said with positive assurance that an arbitration clause is not susceptible of an interpretation which would cover the dispute at issue." Id. at 899.

In his second issue, Perlstein argues that Steller presented no evidence that the dispute is not governed by the arbitration provisions of the Amended Agreement. We review a trial court's determination concerning the existence of an arbitration agreement under an abuse of discretion standard. Southwest Tex. Pathology Assocs., L.L.P. v. Roosth, 27 S.W.3d 204, 207 (Tex.App.-San Antonio 2000, pet. denied); ANCO Ins. Servs. of Houston, Inc. v. Romero, 27 S.W.3d 1, 3 (Tex.App.-San Antonio 2000, pet. denied). Under this standard, we must uphold the trial court's decision unless we conclude that the trial court could reasonably have reached only one decision. Roosth, 27 S.W.3d at 207. Where, as here, the trial court does not enter findings of facts and conclusions of law, we must affirm the trial court's decision if there is sufficient evidence to support it upon any legal theory asserted. Pepe Inteniat'l Dev. Co. v. Pub Brewing Co., 915 S.W.2d 925, 929 (Tex. App.-Houston [1st Dist.] 1996, no writ). Even if we would have decided the issue differently, we cannot disturb the trial court's finding unless it is shown to be arbitrary and unreasonable. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). Legal conclusions, however, are reviewed de novo. Id; Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 820 (Tex.App.-San Antonio 1996, no writ). Whether an agreement imposes a duty on the parties to arbitrate a...