Court Opinion

ID: 4390632
Source: CourtListenerOpinion
Date Created: 2019-04-25 11:39:37.383028+00
Date Added: 2024-06-11T09:24:24.230423
License: Public Domain

AFFIRMED; Opinion Filed April 23, 2019.

                                                        In The
                                     Court of Appeals
                              Fifth District of Texas at Dallas
                                               No. 05-18-00462-CV

            SIG-TX ASSETS, LLC D/B/A LINCOLN FUNERAL HOME, Appellant
                                        V.
              BEATRICE SERRATO, INDIVIDUALLY, BEATRICE SERRATO,
               AS MOTHER AND NEXT FRIEND OF M.S., A MINOR CHILD,
                 PHILLIP SERRATO, AND SYLVIA RAMIREZ, Appellees

                                  On Appeal from the 95th District Court
                                          Dallas County, Texas
                                   Trial Court Cause No. DC-17-17209

                                   MEMORANDUM OPINION
                           Before Justices Bridges, Partida-Kipness, and Carlyle
                                    Opinion by Justice Partida-Kipness
         Appellant SIG-TX Assets, LLC d/b/a Lincoln Funeral Home (SIG-TX) appeals the trial

court’s denial of its motion to compel arbitration of the claims filed against it by appellees Beatrice

Serrato, individually and as next friend of M.S., a minor child, Phillip Serrato, and Sylvia Ramirez

(collectively appellees). SIG-TX generally contends that although appellees did not sign an

arbitration agreement with it, they are bound to arbitrate their claims under the equitable theory of

direct-benefits estoppel.1 SIG-TX also challenges the trial court’s evidentiary rulings on its

objections to Beatrice Serrato’s affidavit. For the reasons that follow, we conclude SIG-TX (1)

    1
       In its opening appellate brief, SIG-TX presented four theories under which appellees should be compelled to
arbitrate. In its reply brief and at the oral argument of this cause, however, SIG-TX abandoned three of those theories
and elected to proceed solely on the theory that appellees were required to arbitrate pursuant to the doctrine of direct-
benefits estoppel.
failed to establish the trial court abused its discretion in denying its motion to compel arbitration,

and (2) did not establish the trial court’s evidentiary rulings constituted reversible error.

Accordingly, we affirm the trial court’s order denying SIG-TX’s motion to compel arbitration.

                                         BACKGROUND

       Appellees are, respectively, the daughter-in-law, biological grandchildren, and biological

daughter of decedent Maria Serrato. SIG-TX took possession of Serrato’s body pursuant to a

contract for funeral services and a cemetery contract signed by Juana Serrato, another one of

Serrato’s daughters-in-law. Juana is not a party in this lawsuit. The present dispute arose after

SIG-TX presented to appellees the wrong body for a private family viewing that was held before

the funeral.

       According to appellees’ petition, although they immediately realized the body presented to

them on December 18 was not that of their loved one, a funeral home employee insisted it was the

correct body. Appellees allege the employee checked the ankle identification on the body

presented and discovered it was not Maria Serrato but another decedent whose first name was also

“Maria.” Appellees assert the employee did not reveal the true identity of the body to them at that

time. Instead, appellees were later informed that Serrato’s body had been buried on December 18

after a funeral service held for the family of the other decedent “Maria.” The next day, December

19, Serrato’s body was exhumed from the other grave and her clothes, accessories, and make-up

were changed. Appellees filed this lawsuit against SIG-TX asserting claims for negligence,

negligence per se, gross negligence, intentional infliction of emotional distress, and fraud. They

sought damages for pain, medical expenses, mental anguish, loss of enjoyment of life, and

exemplary damages.

                                                 –2–
       SIG-TX moved to compel arbitration of appellees’ claims based on arbitration clauses

contained in the funeral contract and the cemetery contract. Specifically, the arbitration clause in

the funeral contract stated:

       ARBITRATION: YOU AGREE THAT ANY CLAIM YOU MAY HAVE
       RELATING TO THE TRANSACTION CONTEMPLATED BY THIS
       AGREEMENT (INCLUDING ANY CLAIM OR CONTROVERSY
       REGARDING THE INTERPRETATION OF THIS ARBITRATION CLAUSE)
       SHALL BE SUBMITTED TO AND FINALLY RESOLVED BY MANDATORY
       AND BINDING ARBITRATION IN ACCORDANCE WITH THE
       APPLICABLE RULES OF THE AMERICAN ARBITRATION ASSOCIATION
       (“AAA”); PROVIDED, HOWEVER, THAT THE FOREGOING REFERENCE
       TO THE AAA RULES SHALL NOT BE DEEMED TO REQUIRE ANY FILING
       WITH THAT ORGANIZATION, NOR ANY DIRECT INVOLVEMENT OF
       THAT ORGANIZATION. THE ARBITRATOR SHALL BE SELECTED BY
       MUTUAL AGREEMENT OF THE PARTIES. IF THE PARTIES FAIL TO OR
       ARE UNABLE TO AGREE ON THE SELECTION OF AN APPROPRIATE
       ARBITRATOR, THE AAA SHALL SELECT THE ARBITRATOR PURSUANT
       TO ITS RULES AND PROCEDURES UPON THE APPLICAIOTN (SIC) OF
       ONE OR BOTH PARTIES. THIS AGREEMENT TO ARBITRATE ALSO
       APPLIES TO ANY CLAIM OR DISPUTE BETWEEN OR AMONG THE
       SELLER, YOU AS THE PURCHASER, ANY PERSON WHO CLAIMS TO BE
       A THIRD PARTY BENEFICIARY OF THIS AGREEMENT, ANY OF THE
       SELLER’S EMPLOYEES OR AGENTS, ANY OF THE SELLER’S PARENT,
       SUBSIDIARY, OR AFFILIATE CORPORATIONS, AND ANY OF THE
       EMPLOYEES OR AGENTS OF THOSE PARENT, SUBSIDIARY OR
       AFFILIATE CORPORATIONS. EXCEPT AS MAY BE REQUIRED BY LAW,
       NEITHER PARTY NOT (SIC) AN ARBITRATOR MAY DISCLOSE THE
       EXISTENCE, CONTENT, OR RESULTS OF ANY ARBITRATION
       HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF BOTH
       PARTIES.

The cemetery contract contained a similar arbitration provision:

       ARBITRATION: THE PARTIES HERETO AGREE THAT ANY AND ALL
       DISPUTES, CLAIMS OR CONTROVERSIES OF ANY KIND OR
       CHARACTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
       ANY PARTY’S PERFORMANCE OF THIS AGREEMENT OR THE GOODS
       AND/OR SERVICES PROVIDED PURSUANT TO THIS AGREEMENT
       SHALL BE RESOLVED EXCLUSIVELY BY BINDING ARBITRATION
       BEFORE A SINGLE ARBITRATOR AND CONDUCTED IN ACCORDANCE
       WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN
       ARBITRATION ASSOCIATION AND STATE LAW. SUCH ARBITRATION
       SHALL BE HELD IN THE STATE AND COUNTY OF EXECUTION OF THIS
       AGREEMENT, OR ELSEWHERE IN THE EVENT ALL PARTIES TO THIS
       AGREEMENT SO CONSENT. THE PARTIES HERETO SPECIFICALLY
                                                –3–
       WAIVE ANY RIGHTS TO TRIAL OF ANY CLAIMS BY A JUDGE OR JURY,
       AT ANY TIME PRIOR TO THE COMMENCEMENT OF AN ARBITRATION
       PROCEEDING AS PROVIDED FOR HEREINABOVE, THE PARTIES SHALL
       AT ALL TIMES HAVE THE RIGHT TO MUTUALLY AGREE TO MEDIATE
       OR SETTLE A DISPUTE.

       Appellees opposed SIG-TX’s motion arguing they were not parties to, and did not sign,

any contract with SIG-TX. In support of their position, appellees submitted the affidavit of

Beatrice Serrato. Among other things, Beatrice stated that Juana Serrato signed the agreement

because she accompanied Maria in 2008 at the initial meeting with the funeral home and made

payments on Maria’s behalf. Beatrice further testified that she did not make any payments to the

funeral home nor did she negotiate or change the terms of the agreement between Maria and the

funeral home. SIG-TX objected to the following statements in Beatrice’s affidavit as hearsay and

not based on personal knowledge:

       (1) To the best of my knowledge, the balance had been paid by my mother-in-law
       and Juana Serrato prior to her death.

       (2) To the best of my knowledge, the terms were decided without my presence,
       before the death of my mother-in-law.

       (3) To the best of my knowledge, my mother-in-law selected certain details
       regarding plot location, memorial stone, and memorial stone inscription during her
       first meeting with the funeral home in 2008, and prior to the death of her husband
       which occurred in September of 2008.

After hearing oral argument on the motion, the trial court overruled SIG-TX’s objections to the

affidavit statements and denied the motion to compel arbitration. This interlocutory appeal ensued.

                                           ANALYSIS

       In its first, third, and fourth issues, SIG-TX generally contends that the trial court erred in

denying its motion to compel appellees to arbitrate their claims because they were bound by the

                                                –4–
arbitration clauses in the funeral and cemetery contracts under the theory of direct-benefits

estoppel.2

           We review a trial court’s ruling on a motion to compel arbitration under an abuse of

discretion standard. See Henry v. Cash Biz, L.P., 551 S.W.3d 111, 115 (Tex. 2018). Under that

standard, we defer to the trial court’s factual determinations when they are supported by evidence,

but review de novo the trial court’s legal determinations. VSR Fin. Servs., Inc. v. McLendon, 409

S.W.3d 817, 827 (Tex. App.—Dallas 2013, no pet.).

           Generally, a party seeking to compel arbitration under the Federal Arbitration Act (FAA)3

must establish there is a valid agreement to arbitrate and the claims raised fall within the scope of

that agreement. See id. Under the FAA, whether an arbitration agreement is binding on a nonparty

is one of the “gateway matters” for the courts to decide. See In re Weekley Homes, L.P., 180

S.W.3d 127, 130 (Tex. 2005) (orig. proceeding). Although there is a strong presumption favoring

arbitration, the presumption arises only after the party seeking to compel establishes the existence

of a valid arbitration agreement. McLendon, 409 S.W.3d at 827. “Even the exceptionally strong

policy favoring arbitration cannot justify requiring litigants to forego a judicial remedy when they

have not agreed to do so.” Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 496 (Tex. App.—

Dallas 2011, pet. denied).

           The question presented here is whether a binding arbitration agreement exists between

SIG-TX and appellees. SIG-TX, as movant, bore the burden of establishing the arbitration

agreements bind appellees as non-signatories. See D.R. Horton-Emerald, Ltd. v. Mitchell, No. 01-

17-00426-CV, 2018 WL 542403, at *3 (Tex. App.—Houston [1st Dist.] Jan. 25, 2018, no pet.)

    2
      Specifically, SIG-TX’s issues are as follows: (1) the trial court erred in denying SIG-TX’s motion to compel
arbitration and motion to abate proceedings pending arbitration; (3) the trial court erred in denying SIG-TX’s motion
to compel arbitration; and (4) the trial court erred in refusing to stay its own proceedings pending the completion of
arbitration.
    3
        The parties do not dispute that the FAA governs here.
                                                         –5–
(mem. op.). “[A] party cannot be forced to arbitrate absent a binding agreement to do so.” See

Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 632 (Tex. 2018). Non-signatories

may be bound to an arbitration clause in accordance with general rules of state contract and agency

law or equity under six theories: (1) incorporation by reference, (2) assumption, (3) agency,

(4) alter ego, (5) equitable estoppel, and (6) third-party beneficiary. Id. at 633. Here, SIG-TX

argues that the equitable estoppel doctrine known as direct-benefits estoppel precludes appellees

from avoiding arbitration even though they did not sign the funeral and cemetery contracts

containing the arbitration clauses that SIG-TX seeks to enforce against them.

       “Direct-benefits estoppel applies to parties who seek ‘to derive a direct benefit’ from a

contract with an arbitration agreement.” Id. at 637. There are two ways direct-benefits estoppel

can bind a non-signatory to an arbitration agreement. See Weekley Homes, 180 S.W.3d at 132.

The first way the doctrine may apply is when the non-signatory’s claims (and thus the defendant’s

liability) arise solely from the contract or must be determined by reference to it. See id. The

second way is when the non-signatory deliberately seeks and obtains direct and substantial benefits

from the contract containing the arbitration clause, irrespective of whether the non-signatory’s

lawsuit claims are based on the contract. See id. at 132–33. SIG-TX asserts that both avenues of

direct-benefits estoppel are implicated here. We do not agree.

       With respect to the first application of direct-benefits estoppel, appellees do not purport to

make any claim based on either the funeral contract or the cemetery contract. Instead, they allege

damages based on SIG-TX’s mishandling of Maria’s body, as well as SIG-TX’s subsequent

actions after appellees questioned whether the body they were shown at the private viewing was

that of Maria Serrato. We view these duties as separate and independent from any duties arising

under the contracts. “A non-signatory cannot be compelled to arbitrate when claims merely ‘touch

                                                –6–
matters’ covered by a contract or ‘are dependent upon’ a contract; instead, the claims must rely on

the terms of the contract.” See Carr, 337 S.W.3d at 498.

        Indeed, although SIG-TX’s duty to prepare and inter Maria’s body arose from the contracts,

there is an independent duty under Texas tort law to immediate family members not to negligently

mishandle a corpse. See SCI Tex. Funeral Servs., Inc. v. Nelson, 540 S.W.3d 539 (Tex. 2018)

(negligent mishandling of a corpse is a legal duty where mental anguish damages may be

available). Likewise, the duties not to defraud appellees or intentionally inflict emotional distress

on them are duties that do not arise from the funeral or cemetery contracts nor must SIG-TX’s

liability for these torts be determined by reference to the contracts. See Weekley Homes, 180

S.W.3d at 132 (claims must be arbitrated if liability arises solely from contract or must be

determined by reference to it).

        The dissent would conclude that the existence of an independent tort duty makes no

difference here because it did not in Weekley.4 “[A]pplying direct-benefits estoppel to compel

arbitration of a tort claim that does not rely upon—or require reference to—the contract containing

the arbitration clause is the exception, not the rule.” Rocha v. Marks Transp., Inc., 512 S.W.3d

529, 539 (Tex. App.—Houston [1st Dist.] 2016, no pet.) (emphasis added) (reversing order

compelling arbitration in slip-and-fall at car dealership when plaintiff’s husband had signed

arbitration agreement years prior upon purchasing car). SIG-TX seeks to shoehorn appellees’

claims into a contract box by the logic that there would be no relationship between the parties but

for the contract. Though non-signatory plaintiffs will not always be able to avoid arbitration

clauses by pleading tort claims and tort damages, appellees here have suffered injuries outside the

    4
      The dissent does not meaningfully distinguish Jody James Farms, the supreme court’s most recent direct-
benefits estoppel case and a case that refuses to apply direct-benefits estoppel.
                                                    –7–
contract and request damages outside the contract. The dissent’s proposed analysis invites a

construction of direct-benefits estoppel that may cause this exception to swallow the rule.

        In reaching the conclusion that appellees’ claims are not based on the funeral and cemetery

contracts, we are unpersuaded by SIG-TX’s contention that because appellees Beatrice, M.S., and

Phillip are not Maria Serrato’s “next of kin,” they have not brought claims that arise from general

obligations imposed by law.5 In support of its position, SIG-TX relies on SCI Texas Funeral

Services, Inc. v. Nelson. In Nelson, the decedent’s son sued the funeral home for cremating his

mother’s body without his permission. 540 S.W.3d at 542. The funeral home argued that absent

evidence of malice on its part, physical injury to Nelson, or shocking and disturbing injuries,

Nelson could not recover mental anguish damages without establishing a special relationship with

the funeral home, specifically, contractual privity. See id. at 546. The Texas Supreme Court

reasoned that although common law requires a special relationship to support mental anguish

damages for negligent mishandling of a corpse, the special relationship does not have to be a

contractual one. Id. Thus, Nelson, as decedent’s son and next of kin having the superior right to

control the disposition of his mother’s remains, could recover mental anguish damages for the

funeral home’s cremation of his mother’s body without his consent. See id. at 545.

        Contrary to SIG-TX’s position, Nelson does not stand for the position that appellees’

claims do not arise from an independent legal duty because they are not Maria Serrato’s next of

kin. The Nelson court did not analyze or define the scope of what relationships or proximity of

kin could give rise to a legal duty that, when breached, would create liability for mental anguish

damages. Instead, the court merely stated that a contract is not required to recover mental anguish

    SIG-TX does not assert that Sylvia Ramirez, the biological daughter of Maria, is not Maria’s next of kin. But
    5

SIG–TX still contends its duties to Ramirez arise from the funeral and cemetery contracts.
                                                      –8–
damages if the defendant breaches an independent legal duty that gives rise to mental anguish

damages. See id. at 547.

         SIG-TX argues that even if appellees’ lawsuit claims do not seek a direct benefit from the

funeral and cemetery contracts, appellees still must arbitrate because they deliberately sought and

obtained direct benefits from the contracts outside of the lawsuit.6 Specifically, SIG-TX alleges

appellees participated in negotiating the contracts, took an active role in their execution and

performance, and derived benefits from both contracts as the surviving family members of Maria

Serrato. Moreover, SIG-TX asserts appellees insisted it treat them as parties to the contract after

presenting them with the wrong body for viewing on December 18.

         To support its contentions, SIG-TX submitted the affidavit of its funeral director who stated

that Beatrice had called the day before Maria’s death to inquire as to what was owed on Maria’s

prearrangement contract. Beatrice also called the funeral home to advise of Maria’s passing and

provided the information for the funeral and to prepare the death certificate. The funeral home’s

“first call” sheet listed Beatrice, daughter-in-law, as Maria’s next-of-kin. The funeral director also

indicated that at a December 16 meeting with Beatrice, Juana Serrato, Ana Serrato, and two of

Maria’s grandsons, “Beatrice Serrato spoke on behalf of the family and was the primary decision

maker.” In response to the funeral director’s question regarding who would be signing the

contracts, Beatrice stated that Juana would be signing the funeral and cemetery contracts because

Juana and not Beatrice was the next-of-kin. SIG-TX also relies on Beatrice’s affidavit stating that

after appellees were told the body they had viewed on December 18 was not that of Maria Serrato,

    6
       On pages 23 through 25 of its reply brief, SIG-TX also asserts that because appellees seek to hold it liable for
its performance of the funeral and cemetery contracts, they are necessarily third-party beneficiaries of the contracts.
We need not address this assertion because SIG-TX confirmed at oral argument that it was abandoning this theory as
a basis to compel arbitration.
                                                         –9–
Beatrice again met with the funeral home on December 19 to discuss Maria’s exhumation and

reburial and where SIG-TX requested she select a new casket.

        Initially, we question whether SIG-TX’s primary reliance on Beatrice’s actions supports

its contention that all appellees deliberately sought and obtained direct benefits from the contracts.

Nevertheless, we cannot conclude that Beatrice’s actions establish conclusively that she or the

other appellees deliberately sought and obtained direct benefits from the contracts. There is no

evidence appellees ever acted under the authority of the contracts or sought to enforce any specific

provision of the contracts. Moreover, any benefits appellees received from the contracts were

nothing more than what any other family member or friend receives from participating in the

funeral and burial of a loved one. As noted in Weekley, the equitable nature of direct-benefits

estoppel may render firm standards inappropriate, requiring trial courts to exercise some discretion

based on the facts of each case. See Weekley Homes, 180 S.W.3d at 135. Based on the record in

this case, we cannot conclude the trial court abused its discretion in determining appellees did not

deliberately seek and obtain direct benefits from the contracts. Having concluded that SIG-TX did

not meet its burden to establish a valid arbitration agreement between it and appellees on the basis

of direct-benefits estoppel, we resolve its first, third, and fourth issues against it.

        In its second issue, SIG-TX complains about the trial court’s adverse rulings with respect

to its objections to Beatrice’s affidavit. We review a trial court’s ruling admitting or excluding

evidence for an abuse of discretion. See McClendon, 409 S.W.3d at 825. For an evidentiary ruling

to constitute reversible error, however, the complaining party must not only show the trial court

committed error, but also show that the error was reasonably calculated to cause and probably did

cause rendition of an improper judgment. See id. We review the entire record in making that

determination. See id.

                                                  –10–
       Here, the statements objected to by SIG-TX largely addressed the decedent’s actions with

respect to the funeral and cemetery contracts. For purposes of the application of direct-benefits

estoppel, however, it is the actions of the non-signatories that are determinative. See Weekley

Homes, 180 S.W.3d at 132–33. Thus, even if the objected-to statements were erroneously admitted

and considered by the trial court, the error did not cause rendition of an improper judgment. We

resolve SIG-TX’s second issue against it.

                                        CONCLUSION

       Based on the record before us, we affirm the trial court’s order denying SIG-TX’s motion

to compel arbitration.

                                                 /Robbie Partida-Kipness/
                                                 ROBBIE PARTIDA-KIPNESS
                                                 JUSTICE
Bridges, J., dissenting

180462F.P05

                                              –11–
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                        JUDGMENT

 SIG-TX ASSETS, LLC D/B/A LINCOLN                       On Appeal from the 95th District Court,
 FUNERAL HOME, Appellant                                Dallas County, Texas
                                                        Trial Court Cause No. DC-17-17209.
 No. 05-18-00462-CV          V.                         Opinion delivered by Justice Partida-
                                                        Kipness, Justices Bridges and Carlyle
 BEATRICE SERRATO,                                      participating.
 INDIVIDUALLY, BEATRICE
 SERRATO, AS MOTHER AND NEXT
 FRIEND OF M.S., A MINOR CHILD,
 PHILLIP SERRATO, AND SYLVIA
 RAMIREZ, Appellees

       In accordance with this Court’s opinion of this date, the trial court’s order denying
appellant’s motion to compel arbitration is AFFIRMED.

        It is ORDERED that appellees Beatrice Serrato, individually, Beatrice Serrato, as mother
and next friend of M.S., a minor child, Phillip Serrato, and Sylvia Ramirez recover their costs of
this appeal from appellant SIG-TX Assets, LLC d/b/a Lincoln Funeral Home.

Judgment entered this 23rd day of April, 2019.

                                                 –12–