Serv. Corp. v. Ruiz
| Decision Date | 25 January 2018 |
| Docket Number | NUMBER 13-16-00699-CV |
| Parties | SERVICE CORPORATION INTERNATIONAL AND SCI TEXAS FUNERAL SERVICES, INC., D/B/A BUENA VISTA BURIAL PARK AND D/B/A FUNERARIA DEL ANGEL BUENA VISTA, Appellants, v. MARIA RUIZ, Appellee. |
| Court | Texas Court of Appeals |
On appeal from the 138th District Court of Cameron County, Texas.
Before Justices Rodriguez, Benavides, and Longoria
In this appeal, appellants Service Corporation International and its Texas-based subsidiary, SCI Texas Funeral Services, Inc. (collectively "SCI") challenge the denial of its motion to compel arbitration. By what we treat as five issues, SCI asserts that none of the grounds raised by appellee Maria Ruiz offer a valid basis to deny arbitration. We reverse and remand.
Mary Ruiz filed this suit against SCI. Ruiz described Service Corporation as a company that operates more than 1,500 funeral homes and 400 cemeteries in 43 states and foreign countries. According to Ruiz's petition, SCI Texas Funeral Services does business in Brownsville as "Funeria Del Angel Buena Vista"1 (a funeral home) and "Buena Vista Burial Park" (a cemetery). Ruiz alleged that SCI committed fraud in handling the funeral services and burial of Ruiz's deceased brother, Ernesto Eguia.
Ruiz describes the underlying events as follows. After Ernesto's unexpected death, an autopsy was performed by the medical examiner. The medical examiner put Ernesto's organs in a plastic bag and then placed the bag back into the body cavity, stitched up the incision, and released the body to SCI's Buena Vista funeral home. SCI employees embalmed Ernesto's remains. Ruiz asserts that she never consented to the embalming.
While making arrangements for the funeral services, Ruiz toured the mausoleum where the service was to be held, and she noted a "musty smell" and a lack of air-conditioning. She was assured by an SCI employee that these problems would be resolved before the service.
On the day of the service, Ruiz arrived at the funeral home early. She and her son approached the casket and found "Ernesto's face, ears and chest . . . covered with what looked like gnats but could have been small flies." During the service, the air-conditioning did not function, and friends and family were forced to "fan[] away the ever-present haze of insects."
Three days after the service, an SCI employee contacted Ruiz to arrange a meeting with SCI's general manager, "Mr. Guerra." At the meeting, Mr. Guerra revealed that, by mistake, the bag containing Ernesto's organs had not been buried with his remains. Mr. Guerra explained that there were two options: (1) disinter Ernesto's remains, place the organs next to Ernesto's body, and re-inter the casket; or (2) cremate the organs and inter them near Ernesto's burial plot.
Ruiz alleges that the actions of SCI's employees constituted fraud by nondisclosure. Ruiz alleged that SCI breached its duty to disclose material facts related to the funeral which were known only to SCI. According to Ruiz, SCI knew and failed to disclose at the time of contracting: that Ernesto's remains were received in a condition that would cause insect infestation, that the remains had suffered a mishap or would be mishandled by SCI in a manner that would cause insect infestation, and that the remains were to be buried without internal organs, among other allegations. Based on these allegations, Ruiz's petition asserts fraud as both a claim for relief and as an affirmative defense to arbitration.
Shortly after receiving Ruiz's petition, SCI filed a motion to compel arbitration and to abate proceedings in the trial court. SCI relied on the arbitration clauses in twocontracts between Ruiz and SCI, which we refer to as the Interment Agreement and the Funeral Agreement, or together, the Agreements.
Both Agreements include arbitration provisions in which Ruiz agreed that any claims she had relating to the respective Agreement, including any dispute about the interpretation of its arbitration clause, would be submitted to arbitration under the rules of the American Arbitration Association ("AAA"). The arbitration clauses purported to apply to any claim Ruiz had against "the Seller," any third-party beneficiary to the Agreements, and any companies affiliated with "the Seller," as well as their employees. SCI made no similar promise to arbitrate any claims against Ruiz.
Beyond these arbitration provisions, the Agreements differed in their consideration and terms. Under the Interment Agreement, the primary consideration exchanged was that Ruiz would obtain from SCI the right to inter remains in a plot, and SCI would obtain a total price of $3,279 from Ruiz. Ruiz agreed to many terms favorable to SCI, such as SCI's disclaimer of warranties. For its part, SCI agreed to maintain the funeral grounds and to make deposits into a trust fund for grounds maintenance.
Under the Funeral Agreement, Ruiz was to receive various goods and services from SCI, including embalming the remains, delivering a particular casket, providing funeral services, etc. In exchange, SCI would receive the total price of $5,295.75 from Ruiz. Ruiz further agreed to other provisions favorable to SCI, such as SCI's disclaimer of warranties and consequential damages.
Based on these Agreements and the arbitration clauses they contained, SCI moved to compel arbitration. Ruiz opposed SCI's motion, claiming the Agreements and their arbitration clauses were not enforceable for multiple reasons. First, Ruiz arguedthat the arbitration provisions were unconscionable. Second, Ruiz cited fraud as an affirmative defense against arbitration. Third, Ruiz asserted that her sole claim for relief—a claim for fraud—fell outside the scope of the arbitration clauses. Fourth, Ruiz argued they were unenforceable because no valid consideration supported the arbitration clauses.
The trial court denied SCI's motion to compel arbitration. In its order, the trial court agreed with and relied upon Ruiz's theory that her fraud claim did not fall within the scope of the arbitration clauses. According to the order, Ruiz's petition alleged "the Defendant's employees knew that the decedent's body was not only not well taken care of but was also buried without the organs," and failed to disclose this fact. Ruiz's claim for fraud "could and should not be contemplated within an agreement to arbitrate." The trial court did not reach the parties' arguments concerning unconscionability, Ruiz's fraud defense against arbitration, or illusory consideration.
SCI filed this interlocutory appeal challenging the denial of its motion to compel arbitration.
We review an order denying a motion to compel arbitration under an abuse of discretion standard. In re Labatt Food Serv., LP, 279 S.W.3d 640, 642-43 (Tex. 2009) (orig. proceeding). Under that standard, we defer to the trial court's factual determinations if they are supported by evidence, but we review the trial court's legal determinations de novo. Id. at 643. It is an abuse of discretion for the trial court to rule arbitrarily, unreasonably, without regard to guiding legal principles, or without supporting evidence. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). Whether the partiesreached an agreement to arbitrate in the first instance is a question of fact. Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.—Houston [14th Dist.] 2010, pet. denied). The question of whether an arbitration agreement is enforceable is subject to de novo review. Labatt, 279 S.W.3d at 643.
The trial court's order did not specify whether the arbitration agreements in this case were governed by the Federal Arbitration Act ("FAA") or another body of authority. See 9 U.S.C.A. §§ 1-16 (West, Westlaw through P.L. 115-89). As an initial matter, SCI asserts that the Agreements are governed by the FAA, whereas Ruiz asserts that the FAA does not apply.
The FAA applies to arbitration clauses in contracts that affect interstate commerce, and the FAA thus extends as far as the Commerce Clause of the United States Constitution will reach. Fredericksburg Care Co., LP v. Perez, 461 S.W.3d 513, 517 (Tex. 2015), cert. denied sub nom. Perez v. Fredericksburg Care Co., LP, 136 S.Ct. 798 (2016). Under Commerce Clause jurisprudence, the applicability of the FAA is not limited to transactions that individually have a "substantial effect on interstate commerce." Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (per curiam). Rather, the FAA may extend to individual cases without showing any specific effect upon interstate commerce if, in the aggregate, the economic activity in question would represent "a general practice . . . subject to federal control." Id. at 56-57.2
Multiple aspects of the record confirm that the FAA applies to the Agreements. SCI submitted the affidavit of Abelardo Perez, who attested that SCI Texas Funeral Services, Inc. sold goods to Texas residents, including Ruiz, that were purchased or manufactured out of state. See id. at 57 (). Perez further testified that in providing services, SCI Texas Funeral Services relied on goods and materials purchased or manufactured outside of Texas, such as the equipment SCI used to dig graves. See Serv. Corp. Int'l v. Lopez, 162 S.W.3d 801, 807 (Tex. App.—Corpus Christi 2005, no pet.) ("A party who alleges interstate commerce may show it in several ways [including] transportation of materials across state lines [and] manufacture of parts in a different state . . . ."); see also SCI Tex. Funeral Servs., Inc. v. Leal, No. 13-09-00050-CV, 2009 WL 332043, at *3 (Tex. App.—Corpus...
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