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Voss Engineering, Inc. v. Bauer

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

June 21, 2018


          On appeal from the 94th District Court of Nueces County, Texas.

          Before Chief Justice Valdez and Justices Rodriguez and Benavides



         This is an interlocutory appeal challenging the trial court's denial of a motion to compel arbitration filed by appellants, Voss Engineering, Inc. and Ronald A. Voss. Appellees, Michelle Bauer and Javier Alonso, sued appellants for breach of contract, negligence, malpractice, deceptive trade practices, and negligent misrepresentation. By four issues, appellants contend that the trial court improperly denied their motion to compel arbitration. We affirm.[1]

         I. Standard of Review

         We apply an abuse of discretion standard to the trial court's denial of appellants' motions to compel arbitration. Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex. App.-Houston [1st Dist.] 2009, pet. denied). A trial court abuses its discretion when it acts arbitrarily or unreasonably and without reference to any guiding rules or principles. Id. If the ruling under review depends on the resolution of underlying facts, we must defer to the trial court on its resolution of those facts and any credibility determinations that may have affected those resolutions. Id. Furthermore, we may not substitute our judgment for the trial court on those matters. Id. However, we must apply a de novo standard of review to legal conclusions because a trial court has no discretion in determining what the law is, which law governs, or how to apply the law. Id.

         Whether a valid arbitration agreement exists is a question of law and is therefore reviewed de novo. In re C & H News Co., 133 S.W.3d 642, 645 (Tex. App.-Corpus Christi 2003, orig. proceeding); Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386, 388 (Tex. App.-Houston [14th Dist.] 1998, pet. dism'd w.o.j.). The party seeking arbitration has the initial burden to prove, and the trial court must initially decide whether there is a valid arbitration agreement, and if so whether the claims fall within the scope of the arbitration agreement. In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.- Houston [1st Dist.] 2002, orig. proceeding); Mohamed v. Auto Nation USA Corp., 89 S.W.3d 830, 836 (Tex. App.-Houston [1st Dist.] 2002, no pet.) (combined appeal & orig. proceeding). There is a strong presumption favoring arbitration; however, that presumption does not apply to the initial determination of whether a valid arbitration agreement exists. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Arbitration agreements are interpreted under traditional contract principles. Id.

         Generally, parties must sign arbitration agreements before being bound by them. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding); see Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000) (noting that "arbitration is a matter of contract and cannot, in general, be required for a matter involving an arbitration agreement non-signatory"). However, as set out by the Texas Supreme Court in G.T. Leach Builders, LLC v. Sapphire V.P., L.P., non-signatories may be permitted to enforce an arbitration agreement under limited circumstances including, among other things, equitable estoppel. 458 S.W.3d 502, 524 (Tex. 2015) (citing and quoting In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005)).

         II. Equitable Estoppel

         It is undisputed that appellants were not parties to the general contract containing an arbitration clause. Nonetheless, by their first issue, appellants contend that they are entitled to compel arbitration pursuant to the doctrine of equitable estoppel, which in limited circumstances allows non-parties to compel arbitration despite not signing the contract containing the arbitration clause. See id.

         A. Applicable Law

         Generally, "an arbitration clause cannot be invoked by a non-party to the arbitration contract." Id. (citing Grigson, 210 F.3d at 532) (internal quotations omitted). And although the "policy favoring arbitration is strong . . . it alone cannot authorize a non-party to invoke arbitration." Id. Under the doctrine of equitable estoppel, "a litigant who sues based on a contract subjects him or herself to the contract's terms . . . including the Arbitration Addendum." Id. at 527. "This equitable principle applies when a claimant seeks 'direct benefits' under the contract that contains the arbitration agreement." Id. (emphasis added). However, the benefit must stem directly from the contract and may not merely relate to the contract which contains an arbitration agreement. Id. Equitable estoppel applies if the plaintiff's claim depends on the existence of the contract meaning that "[t]he alleged liability must 'arise[] solely from the contract or must be determined by reference to it.'" Id. at 528. Even if a claim refers to or relates to the contract, equitable estoppel does not apply "'when the substance of the claim arises from general obligations imposed by state law, including statutes, torts and other common law duties, or federal law, ' rather than from the contract." Id.

         B. Analysis

         Here, the general contract between Homes by Connie Graygor, Inc. (the Builder) and appellees provided that the Builder agreed to construct improvements to appellees' home. The general contract provided that the improvements would be constructed by the Builder and that appellees agreed to pay for such services. The general contract states that appellees are "advised that the Builder may have contracted with one or more independent professional architects, engineers, surveyors, designers, or other professional third parties (Builder's Professionals) to perform services and/or prepare certain documents or reports for completion of the Construction Documents and/or ...

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