TMI, Inc. v. Brooks, No. 14-05-00604-CV (Tex. App. 1/9/2007)
| Decision Date | 09 January 2007 |
| Docket Number | No. 14-05-00604-CV.,No. 14-05-00878-CV.,14-05-00604-CV.,14-05-00878-CV. |
| Parties | TMI, INC., D/B/A TRENDMAKER HOMES, Appellant, v. JOHN A. BROOKS, KIMBERLY M. BROOKS, MIKLYN M. PROVENZANO, ASTON B. GRIFFITHS, BERNICE M. GRIFFITHS, DANIEL L. WOODARD, CINDA J. WOODARD, CARSTEN ALSGUTH, SHERI L. ALSGUTH, TIMOTHY S. HART AND MARIAN HART, TANNER GARTH, TERRI GARTH, RAOUL LEBLANC, DEBBIE LEBLANC, GEORGE SAFI, JILL SAFI, JERRY THOMAS, AND NANCY THOMAS, Appellees. IN RE TMI, INC., D/B/A TRENDMAKER HOMES, Relator. |
| Court | Court of Appeals of Texas |
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JOHN A. BROOKS, KIMBERLY M. BROOKS, MIKLYN M. PROVENZANO, ASTON B. GRIFFITHS, BERNICE M. GRIFFITHS, DANIEL L. WOODARD, CINDA J. WOODARD, CARSTEN ALSGUTH, SHERI L. ALSGUTH, TIMOTHY S. HART AND MARIAN HART, TANNER GARTH, TERRI GARTH, RAOUL LEBLANC, DEBBIE LEBLANC, GEORGE SAFI, JILL SAFI, JERRY THOMAS, AND NANCY THOMAS, Appellees.
IN RE TMI, INC., D/B/A TRENDMAKER HOMES, Relator.
On Appeal from the 280th District Court Harris County, Texas, Trial Court Cause No. 03-69920.
Original Proceeding Writ of Mandamus.
Petition for Writ of Mandamus Denied; Reversed and Remanded.
Panel consists of Chief Justice HEDGES and Justices YATES and ANDERSON.
JOHN S. ANDERSON, Justice.
This is a consolidated interlocutory appeal and petition for writ of mandamus challenging the trial court's May 13, 2005 order denying a motion to compel arbitration filed by appellant, homebuilder TMI, Inc., d/b/a Trendmaker Homes ("Trendmaker"). See TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a) (Vernon 2005); 9 U.S.C. §§ 1-16. The lawsuit arose when appellees, nineteen homeowners ("the homeowners") in the Woodwind Lakes subdivision of Houston, learned their homesites were environmentally contaminated, and sued Trendmaker and other entities for failing to disclose the former presence of oil and gas operations on the property.1 Trendmaker moved to compel arbitration pursuant to an arbitration provision in its Purchase Agreement. Concluding the arbitration provision was procedurally and substantively unconscionable, the trial court denied Trendmaker's motion.
In five points of error, Trendmaker asserts the trial court erred in (1) "drawing all factual inferences against arbitrability and ignoring normal presumptions and public policy" favoring arbitration; (2) finding the arbitration clause in Trendmaker's Purchase Agreement was procedurally unconscionable; (3) finding the arbitration clause was substantively unconscionable; (4) considering the procedural unconscionability issue rather than submitting it to an arbitrator; and (5) "creating a new standard for enforceability of arbitration agreements that would essentially require discovery to be taken in connection with a motion to compel arbitration." We construe these contentions as a single claim that the trial court erred in denying Trendmaker's motion to compel arbitration on the grounds of unconscionability. We reverse the trial court's May 13, 2005 order, remand this case for further proceedings, and deny the petition for writ of mandamus.
Trendmaker is in the business of building and selling homes. The appellees, John A. Brooks, Kimberly M. Brooks, Miklyn M. Provenzano, Aston B. Griffiths, Bernice M. Griffiths, Daniel L. Woodard, Cinda J. Woodard, Carsten Alsguth, Sheri L. Alsguth, Timothy S. Hart and Marian Hart, Tanner Garth, Terri Garth, Raoul LeBlanc, Debbie LeBlanc, George Safi, Jill Safi, Jerry Thomas, and Nancy Thomas, purchased new homes in Woodwind Lakes from Trendmaker. Each appellee or set of husband/wife homeowners, signed an agreement ("the Purchase Agreement") with Trendmaker for the construction of a new house, ranging in value from $170,000 to $220,000. The Purchase Agreement contained an arbitration provision as follows:
All claims, disputes and other matters in question between Seller and Purchaser arising out of or relating to this agreement or to any alleged defects relating to the Property including, but not limited to, any claims brought under the Texas Deceptive Trade Practices Act or the Residential Construction Liability Act, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association promulgated by the American Arbitration Association, as in effect [sic] the date of any demand for arbitration hereunder, except that at Seller's sole option, it shall have all defenses based upon the applicable statute of limitations determined by a court of law or at any arbitrator's preliminary hearing. The foregoing agreement to arbitrate shall be enforceable under the prevailing Texas arbitration law. The award rendered by the arbitrator shall be final and binding upon the parties.
The words "defect" and "Property" are not defined in the Purchase Agreement.
After purchasing their homes, the homeowners discovered the property comprising Woodwind Lakes had been the former site of oil and gas operations. Until the 1970s, ChevronTexaco and Amerada Hess Corporation conducted oil and gas exploration and processing on the property. These operations involved a gas compression station, storage tanks, spill containment facilities, and disposal pits for oil and products derived from oil and natural gas. When the oil and gas operations concluded, the property was sold. Ultimately, Woodwind Lakes Partners #3, Ltd., purchased the property to develop it as a housing subdivision.
During the development process, Lakeland Development Company, the project manager, discovered portions of the property were contaminated from the oil and gas operations. Lakeland began moving the contaminated soil to the platted recreational areas for remediation. Over time, some of the soil was moved back into the residential lots. The homeowners became aware of the contamination issues at various times in 2003, when defendant ChevronTexaco issued letters to the homeowners requesting permission to conduct research concerning the environmental conditions in the neighborhood and on individual lots. Such testing revealed various levels of mercury, benzene, and other contaminants on individual lots and in common areas.
Various groups of homeowners brought suits against the developer, the builder, and the petroleum companies.2 In the case at bar, homeowners Brooks, Provenzano, Griffiths, Woodard, Alsguth, and Hart3 ("the original plaintiffs") brought suit against Trendmaker in the 234th District Court, alleging negligence, various forms of fraud, violations of the Deceptive Trade Practices Act, negligent misrepresentation, nuisance, and civil conspiracy, and seeking damages of more than one million dollars per home.4
Trendmaker answered, alleging inter alia, that the plaintiffs were barred from bringing the action because they had agreed to binding arbitration provisions in the Purchase Agreements for the homes. Trendmaker then filed a motion to compel arbitration, and on June 28, 2004, Judge Bruce D. Oakley granted the motion. Homeowners Garth, LeBlanc, Safi, and Thomas intervened, and Trendmaker filed motions to compel arbitration as to the intervenors.
Subsequently, the original plaintiffs filed a motion to reconsider the order compelling arbitration. On November 8, 2004, after a hearing, Judge Oakley orally denied the motion. However, no written order appears in the record, and the parties contend Judge Oakley retired from the bench without ruling on the motion to reconsider. Judge Oakley's successor was recused, and the case was assigned to Judge Tony Lindsay of the 280th District Court.
On May 13, 2005, after a hearing, Judge Lindsay found that, although the scope of the arbitration clause covers the claims that form the basis of this suit, the clause is both procedurally and substantively unconscionable. Judge Lindsay (1) granted the homeowners' motion to reconsider the prior order compelling arbitration and withdrew the order compelling arbitration as to the original plaintiffs, (2) denied Trendmaker's motion to compel arbitration, (3) stayed discovery and pretrial matters pending this appeal, and (4) allowed the homeowners to file motions to sever. Seeking relief from this order, Trendmaker filed this interlocutory appeal and petition for writ of mandamus. The homeowners do not dispute the existence of the arbitration agreement or the trial court's finding that the arbitration agreement encompasses the homeowners' claims, and therefore, these issues are not before this Court on appeal. The sole issue on appeal is whether the homeowners established the arbitration clause in the Purchase Agreement is unenforceable based on their affirmative defense of unconscionability.
A. Standard of Review
The parties agree the Texas General Arbitration Act ("TGAA") governs this dispute.5 When an arbitration provision is governed by the TGAA, interlocutory appeal is the appropriate mechanism to challenge a denial of arbitration. TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a)(1) (Vernon 2005); see Am. Med. Techs., Inc. v. Miller, 149 S.W.3d 265, 269 (Tex. App.-Houston [14th Dist.] 2004, no pet.).6
Under the TGAA, a party seeking to compel arbitration must establish (1) the existence of a valid, enforceable arbitration agreement and (2) that the claims asserted fall within the scope of that agreement. Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 581 (Tex. App.-Houston [14th Dist.] 1999, no pet.). If the party seeking arbitration carries its initial burden, the burden then shifts to the party resisting arbitration to present evidence on its defenses to the arbitration agreement. See In re H. E. Butt Grocery Co., 17 S.W.3d 360, 367 (Tex. App.-Houston [14th Dist.] 2000, orig. proceeding). To resist summary arbitration, the party opposing arbitration needs "only to raise an issue of material fact about a necessary element of its opponent's >case in chief' or present some evidence supporting every element of a defensive claim that there is no enforceable agreement to arbitrate." In re Jebbia, 26 S.W.3d 753, 757 (Tex. App.-Houston [14th Dist.] 2000, orig. proceeding). A party may revoke the agreement only on a ground that exists at law or in equity for the revocation of a contract. TEX. CIV. PRAC. & REM. CODE ANN. § 171.001 (Vernon 2005). Once the trial court...
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