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Gainey v. Minoo, LLC

Court of Appeals of Texas, Second District, Fort Worth

December 12, 2019

Christopher Gainey a/k/a Chris Gainey, Philip Levy, and Marcus & Millichap Real Estate Investment Services of Nevada, Inc., Appellants
v.
Minoo, LLC, Appellee

          On Appeal from the 431st District Court Denton County, Texas Trial Court No. 18-2578-431

          Before Birdwell, Bassel, and Wallach, JJ.

          MEMORANDUM OPINION

          DABNEY BASSEL JUSTICE

         I. Introduction

         This appeal involves the denial of a motion to compel arbitration. Marcus & Millichap Real Estate Investment Services of Nevada, Inc.; Christopher Gainey; and Philip Levy are the Appellants, and we will refer to them as the Real Estate Agents or the Agents. The party opposing the arbitration, Minoo, LLC, sued the Agents claiming that they had represented a seller in a real estate transaction. In that transaction, Minoo was the buyer of a shopping center and claimed that the Real Estate Agents had failed to disclose information that a major tenant of the shopping center was planning to move. We refer to Minoo as the Buyer.

         The Real Estate Agents raise four issues arguing that the trial court should have ordered the claims against them to arbitration even though neither they nor the Buyer had signed the agreement containing the arbitration clause. The issues involve (1) a general challenge to the denial of the Agents' motion to compel arbitration, (2) various theories that bind the Buyer to arbitrate its claims against them, (3) various theories that make the Real Estate Agents able to compel arbitration, and (4) a theory regarding why-if the arbitration agreement may be invoked by the Agents against the Buyer-the arbitration clause covered the claims made by the Buyer. The Buyer counters these arguments and also contends that the Agents failed to present evidence to support their motion to compel arbitration and that this failing alone is enough to sustain the trial court's denial of the motion to compel.

         We sustain the Agents' issues for the following reasons:

• We have a record that is sufficient for us to reach the merits of this appeal and to determine whether the trial court abused its discretion by denying the motion to compel arbitration.
• The Buyer acknowledged that the party that had signed the agreement containing the arbitration clause was its agent. The Buyer, as principal, was bound to the agreement by the acts of its agent.
• The Real Estate Agents were third-party beneficiaries of the agreement containing the arbitration clause and thus were able to compel arbitration of the Buyer's claims against them.
• The arbitration clause covered the Buyer's claims because its artful pleading of fraudulent-inducement claims cannot avoid the arbitration clause's broad scope that encompasses claims "relating to" the agreement.

         Therefore, we reverse the trial court's order denying the Agents' motion to compel arbitration and render an order granting this motion. We also remand this case to the trial court and order the case stayed pending completion of arbitration.

         II. Factual Background

         The Buyer pleaded in its live pleading, its first amended petition, that its agent had negotiated the purchase of the shopping center that forms the basis of the controversy and that its agent had "entered into the Commercial Earnest Money Contract for the purchase of the Property . . . on behalf of [the Buyer]." We will refer to this agreement as the Purchase Agreement.

         The Buyer pleaded that the Real Estate Agents acted as the seller's real estate agents in the sale of the shopping center and that the relationship between the three Agents was that

Defendants Levy and Gainey were and are real estate agents for Defendants Marcus & Millichap Capital Corporation ("Millichap") and/or Marcus & Millichap Real Estate Investment Services of Nevada, Inc. ("Millichap Nevada"), and acted as the real estate agents and broker for Hebron Plaza, LLC [the seller] in the sale of the shopping center that is the subject of this suit.

         The petition emphasizes that the individual Real Estate Agents were acting in the scope of an agency relationship that they had with the corporate agent: "At all times herein, Defendants Levy and Gainey acted within the scope of duties and agency on behalf of Defendants Millichap and Millichap Nevada, real estate brokers doing business in the State of Texas." The remaining defendant is David R. Harrison, who is not a party to this appeal.[1]

         Harrison is described at one point in the Buyer's petition as the manager of the seller of the shopping center, but most of the petition's allegations focus on his ownership stake in the liquor store that was the largest tenant in the shopping center. The crux of the suit is that the liquor store tenant had plans to move from the shopping center but that this fact was not disclosed to the Buyer.

         The prospect of the largest tenant's move allegedly came to light when one of its employees "intimated" to the Buyer's real estate broker that the liquor store might be moving its location. This revelation prompted an inquiry by the Buyer's broker to the Real Estate Agents. The petition described the inquiry and the Agents' response as follows:

On or about April 2, 2014, Levy contacted [the Buyer's] broker regarding the status of the underwriting for the purchase of the property. [The Buyer's] broker responded to Levy (and Defendants Millichap and/or Millichap Nevada, Gainey[, ] and Harrison were copied on such email) and advised that [the liquor store] employees stated the store was closing but that Harrison has assured [the Buyer] that [the liquor store] is staying at the Property. [The Buyer's] broker stated in such email[, ] "Dave has assured me [the liquor store] is staying. If not, we need full disclosure." No response was made by any Defendant copied on the email until April 9, 2014, when Levy requested another update on the underwriting. Defendants Levy and Gainey, and on behalf of Millichap and/or Millichap Nevada, failed to make any disclosure to [the Buyer] or its agents that [the liquor store] was either in the process of moving its liquor license and/or planning on vacating the Property.

         Allegedly another prospective purchaser of the shopping center had advised the Real Estate Agents that it did not purchase the center because it became aware of the tenant's planned move. Harrison allegedly assured the Buyer that the tenant did not plan to move. Finally, the Buyer alleges that additional inquiries about the status of the tenant did not produce a disclosure of the tenant's plans to move.

         The Buyer allegedly predicated the value of the shopping center on the tenant's continued presence and pleaded that it had "relied on the statements and assurances made by Defendant Harrison that [the liquor store] would not be vacating the Tenant Space in deciding to purchase such Property." Allegedly, no one disclosed that the tenant had entered into a lease at another shopping center and had begun the process of obtaining approval from governmental agencies to move and to acquire another liquor license for it new location.

         After completing its due diligence, the Buyer's agent entered into the Purchase Agreement for the shopping center, and the Buyer later closed on the purchase. About a year after the closing, the liquor store vacated its space in the shopping center.

         The petition alleges the consequences of the failure to disclose the tenant's imminent departure as follows: "[The Buyer] and [the Buyer's] agents relied on the statements and assurances made by Defendant Harrison that [the liquor store] would not be vacating the Tenant Space in deciding to purchase such Property."

         Predicated on the described allegations, the Buyer sued the Real Estate Agents under the real estate fraud provision of the Texas Business and Commerce Code. See Tex. Bus. & Comm. Code Ann. § 27.01. That cause of action turned on the contentions that

[the Agents] benefited from the sale of the Property to [the Buyer] by not disclosing that a third[ ]party's representations were false. [The Agents] failed to disclose to [the Buyer] after an express request for full disclosure as to whether the largest tenant at the Property (based on rent paid) would remain at the Property and was not planning to vacate the Property. [The Agents'] silence was calculated to avoid losing a sale upon which [the Agents] were to earn commissions. Particularly as prior prospective purchasers had pulled out of any sale for similar, related concerns. [The Buyer] relied and/or reasonably relied on [the Agents'] conduct as [the Agents'] nondisclosure indicated that [the liquor store] was remaining at the Property.

         Though phrased with slight differences, the Buyer's petition also alleged a cause of action against the Real Estate Agents for fraud by nondisclosure on the same basis as the statutory fraud claim. The pleading of this cause of action included the allegations that "[b]y failing to provide such disclosures, [the Agents] intended to induce [the Buyer] into purchasing the Property." As discussed below, we construe these causes of action to be, in essence, claims that the Buyer was fraudulently induced to purchase the shopping center.

         III. Procedural Background

         The Real Estate Agents answered the Buyer's suit and several months later moved to compel arbitration. The motion to compel arbitration asserted that although the Real Estate Agents were not signatories of the Purchase Agreement, various theories permitted them to invoke the arbitration provision contained in the Purchase Agreement, including agency and third-party beneficiary status. The motion attached a declaration that authenticated a copy of the Purchase Agreement and included it as an exhibit. The motion also relied on various allegations from the Buyer's first amended petition.

         The Buyer filed a response that challenged the legal arguments relied on by the Real Estate Agents. The Buyer did not challenge the authenticity of the copy of the Purchase Agreement attached to the Real Estate Agents' motion to compel and instead referred to its terms. The only evidence attached to the Buyer's response was an affidavit from the Buyer's agent that stated that he had not entered into any agreement with the Real Estate Agents and had "not agree[d] to arbitrate any dispute with or claims against" the Real Estate Agents.

         The trial court conducted a hearing on the Agents' motion to compel. That hearing lasted only a few minutes, and neither party adduced any evidence beyond what had been filed with the motion to compel and the response. The trial court later signed an order denying the Agents' motion to compel. The Agents then perfected this interlocutory appeal.

         IV. Preliminary Question: Do we have an adequate record to determine whether the Buyer's claims should have been sent to arbitration?

         Before we can address the Agents' four issues challenging the denial of their motion to compel, we must first decide whether there was any evidence before the trial court that we can review or whether our review ends. The Buyer argues that

[the Agents] failed to meet their burden by failing to present any evidence supporting their arbitration claim. [The Agents] brought no evidence to an evidentiary hearing and only offered argument instead. That alone is enough to affirm the trial court's order[, ] and it can hardly be an abuse of discretion for a court to deny a motion requiring evidence when no such evidence is presented.

         As we explain below, we conclude that there was evidence before the trial court, and thus a record exists for us to review.

         Texas procedural law dictates what mechanisms a trial court uses in deciding questions such as whether an arbitration agreement binds a nonparty. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding) ("Whether an arbitration agreement is binding on a nonparty is one of those gateway matters. Texas courts apply Texas procedural rules in making that determination." (footnotes omitted)). A motion to compel arbitration is initially presented to the trial court in a summary proceeding. See Tex. Civ. Prac. & Rem. Code Ann. § 171.021(b) ("If a party opposing an application . . . denies the existence of the agreement, the court shall summarily determine that issue. The court shall order the arbitration if it finds for the party that made the application. If the court does not find for that party, the court shall deny the application."). The proceeding moves to an evidentiary hearing only if there are fact issues concerning the existence of the agreement. As we recently explained,

In the trial court, motions to compel arbitration are treated somewhat similarly to motions for summary judgment. [Doe v. Columbia N. Hills Hosp. Subsidiary, L.P., 521 S.W.3d 76, 81 (Tex. App.-Fort Worth 2017, pet. denied)] (citing In re Jebbia, 26 S.W.3d 753, 756-57 (Tex. App.- Houston [14th Dist.] 2000, orig. proceeding); Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 268-69 (Tex. 1992)). The same evidentiary standards apply, and the party alleging that an arbitration agreement exists must present summary proof that the dispute is subject to arbitration (through affidavits, pleadings, discovery, or stipulations), and the party resisting arbitration may contest the opponent's proof or present evidence supporting the elements of a defense to enforcement. Id. If the evidence raises a genuine issue of material fact, the trial court must conduct an evidentiary hearing to resolve the factual dispute. Id. (citing Jack B. Anglin Co., 842 S.W.2d at 269; In re Estate of Guerrero, 465 S.W.3d 693, 700 (Tex. App.-Houston [14th Dist.] 2015, pet. denied)).

Hawk Steel Indus., Inc. v. Stafford, No. 02-19-00040-CV, 2019 WL 3819506, at *2 (Tex. App.-Fort Worth Aug. 15, 2019, pet. filed) (mem. op.); see Weekley Homes, 180 S.W.3d at 130 (stating that Texas's procedural rules "call for determination by summary proceedings, with the burden on the moving party to show a valid agreement to arbitrate").

         As it is entitled to do, the trial court conducted a summary hearing on the motion to compel arbitration. As noted, the Real Estate Agents filed a declaration that authenticated the Purchase Agreement that was the basis of the motion to compel and also cited to the Buyer's first amended petition, from which we drew our description of the underlying facts. The Buyer responded to the motion to compel and challenged the Agents' argument that the facts set out in the motion to compel established the Real Estate Agents' right to compel arbitration. But that response did not point to any fact issues that the trial court would have to resolve to determine arbitrability. The order denying the motion to compel recites that the trial court considered "the evidence" in making its ruling. The live petition and the Purchase Agreement provided the trial court with the means to make a summary determination of the motion to compel and give us an adequate record to determine the questions of arbitrability presented in this appeal.

         With respect to the authenticity of the Purchase Agreement, which contains the arbitration clause that the Real Estate Agents relied on, it became part of the evidence before the trial court. The Agents attached the Purchase Agreement to a declaration stating that it was a true and correct copy of the original. This declaration was sufficient to establish the authenticity of the agreement. See Tex. R. Evid. 901(a) ("To satisfy the requirement of authenticating or identifying an item of evidence, the proponent must produce evidence sufficient to support a finding that the item is what the proponent claims it is."); Branch Law Firm L.L.P. v. Osborn, 532 S.W.3d 1, 14 (Tex. App.-Houston [14th Dist.] 2016, pet. denied) ("Under the summary judgment standard applicable in this arbitration context, copies of documents must be authenticated for them to constitute competent summary judgment evidence. A properly sworn affidavit stating that the attached documents are true and correct copies of the original authenticates the copies so they may be considered as summary judgment evidence." (internal citations omitted)).

         Even if we were to find the authentication lacking, the Buyer never challenged the authenticity of the agreement and instead took the agreement as authentic. We have held that when there is no challenge to how the party moving to compel arbitration attempts to authenticate an agreement in the trial court, we cannot affirm the denial of a motion to compel based on a challenge to that attempt that was never raised in the trial court. See Geo-Tech Found. Repair v. Leggett, No. 02-16-00289-CV, 2017 WL 1173840, at *3 (Tex. App.-Fort Worth Mar. 30, 2017, no pet.) (mem. op.) ("Under these specific circumstances, because Leggett never denied in the trial court that an arbitration agreement existed and assumed or acknowledged that one existed, we cannot affirm the trial court's order on the basis of Geo-Tech's failure to present competent evidence of an agreement to arbitrate, as Leggett argues."); see also Branch Law Firm, 532 S.W.3d at 15 (stating that only an objection to the complete absence of authentication may be raised for the first time on appeal).

         The other evidence that the Real Estate Agents relied on is the Buyer's first amended petition. The Buyer never tells us why the statements in its live pleading are not judicial admissions that we and the trial court could rely on.[2] Instead, the Buyer appears to admit that certain statements in its pleadings are admissions but then shifts to an argument that goes to one of the legal questions before us instead of whether it is bound by the statements in its pleadings.[3] The Buyer's argument is not that its pleading fails to show an interrelationship between the underlying sales transaction and the agreement but that the arbitration clause does not embrace a ...


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