Court Opinion

ID: 9885520
Source: CourtListenerOpinion
Date Created: 2023-10-06 13:06:17.453584+00
Date Added: 2024-06-11T07:48:54.946745
License: Public Domain

Dissenting Opinion By
Justice MURPHY.
The majority concludes that Hal Rachal, Jr., as the successor trustee to the written trust agreement established by John W. Reitz’s father, cannot enforce that agreement’s mandatory arbitration provision against Reitz. The majority reasons that the trust agreement is not a contract and does not meet the requirements of Texas contract law. Because I would conclude Rachal met his burden to show an agreement to arbitrate the parties’ dispute under the Texas General Arbitration Act, I respectfully dissent. See Tex. Civ. PraC. & Rem.Code Ann. §§ 171.001-.098 (West 2011).
Agreement to Arbitrate
On an application of a party showing both an agreement to arbitrate and the opposing party’s refusal, the trial court has no discretion but to compel arbitration. Id. § 171.021(a). If the party opposing a motion denies the existence of the agreement, the court must summarily determine the issue. Id. § 171.021(b).
An agreement containing an arbitration clause, signed by the parties, and attached to a pleading, establishes the existence of an arbitration agreement as a matter of law when the parties present no evidence disputing their signatures. See In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 675-76 (Tex.2006) (orig. proceeding). Texas law also recognizes a party may be bound by an arbitration agreement even in the absence of a signature. Id. at 677 (non-signatory could enforce arbitration agreement that inured to its benefit); In re Weekley Homes, L.P., 180 S.W.3d 127, 129 (Tex.2005) (orig. proceeding).
To meet his burden of showing an agreement to arbitrate, Rachal relies on the copy of the trust agreement attached to Reitz’s original petition, which Rachal incorporated into his motion to compel arbitration. Rachal contends the terms of the trust agreement, together with Reitz’s pleadings, establish his right to arbitrate the dispute. Reitz never denied the existence of the trust agreement or, at the hearing before the probate court, stated any opposition to Rachal’s motion. He did not file a written response and did not seek leave to do so. His counsel did not speak at all.
While it is undisputed that neither party signed the trust agreement, both parties are expressly named, Rachal as a successor trustee and Reitz as a beneficiary. Reitz alleged the basis for his standing in the underlying suit as “an interested party and beneficiary of the Trust.” See Perfect Union Lodge No. 10 v. Interfirst Bank of San Antonio, N.A., 748 S.W.2d 218, 220 (Tex.1988) (trust beneficiaries hold equitable title to trust property). Reitz also sued Rachal as the current successor trustee and seeks in his petition “to have the Court remove or disregard the provisions of article 10(A)(3) of the Trust giving [Ra-chal] the power to designate his successor and appoint any assistant or associate as successor Trustee.”
As a principle of trust construction, courts interpret trust documents as they would contracts. Lesikar v. Moon, 237 *313S.W.3d 361, 366 (Tex.App.-Houston [14th Dist.] 2007, pet. denied). A court’s main concern in construing a trust instrument is to determine the settlor’s intent “with the view of effectuating it.” Smith v. Moore, 425 S.W.2d 856, 862 (Tex.App.-Houston [1st Dist.] 1968), modified, 443 S.W.2d 552 (Tex.1969). That construction is a question of law for the court when there is no ambiguity in the trust agreement. Lesikar, 237 S.W.3d at 367.
Article 15 of the trust agreement here expresses Reitz’s father’s intent to bind all parties, including himself, beneficiaries, and those accepting any responsibilities under the agreement. Under the heading “AGREEMENT BINDING,’’ the document provides:
This agreement shall extend to and be binding upon the Grantor, Trustees, and beneficiaries hereto and on their respective heirs, executors, administrators, legal representatives, and successors.
Reitz does not argue he is not legally bound by this trust he seeks to enforce as a beneficiary and, absent that agreement, Reitz would have no claims as beneficiary against Rachal as the trustee. See Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874, 880 (Tex.App.-Waco 1992, writ denied) (party opposing arbitration would have no claims but for agreement containing arbitration provision); see also Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 307 (Tex.2006) (“When a party’s right to recover and its damages depend on the agreement containing the arbitration provision, the party is relying on the agreement for its claims.”); cf. Aberg v. First Nat’l Bank in Dallas, 450 S.W.2d 403, 407 (Tex.Civ.App.-Dallas 1970, writ ref'd n.r.e.) (a beneficiary of a trust who has not, by words or conduct, manifested his acceptance of the beneficial interest, may disclaim such interest). Reitz also provides no basis for excluding the arbitration provision from the agreement.
In concluding the trust agreement does not meet the requirements of section 171.021(a) of the TAA, the majority directs its analysis solely to the issue of whether an arbitration agreement in a trust meets all requirements for creation of a contract under Texas law. While I would agree our courts have continued to describe arbitration agreements as “a matter of contract” law, see, e.g., Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex.2011), they have not addressed the question of whether section 171.001 is applicable to a trust agreement.
Section 171.001 requires only “a written agreement to arbitrate.” Tex. Civ. Prac. & Rem.Code § 171.001(a) (emphasis added). It is rudimentary that an “agreement” is broader than a “contract,” and an agreement may lack an essential element of a contract. See Wiley v. Bertelsen, 770 S.W.2d 878, 882 (Tex.App.-Texarkana 1989, no writ); see also Connors v. Huey, No. 05-98-01139-CV, 2001 WL 549126, at *3 (Tex.App.-Dallas May 24, 2001, no pet.) (not designated for publication); Black’s Law Dictionary 74 (8th ed. 2004) (defining “agreement” and comment that although the term is synonymous to contract, “not every agreement is a contract”); cf. Tex.R. Civ. P. 11 (agreements between attorneys or parties to be in writing to be enforced). And as described, a fundamental principle of trust law requires that we apply contract rules of interpretation and enforce trust agreements based on the settlor’s intent. Lesikar, 237 S.W.3d at 366; Smith, 425 S.W.2d at 862.
Foreign courts that have concluded a trust agreement arbitration provision is unenforceable have done so in the context of express statutory requirements for an “arbitration contract.” See Diaz v. Bukey, 125 Cal.Rptr.3d 610, 611-13, 615 (Cal.Ct.App.2011) (“The Trust does not meet the *314statutory definition of a contract because there is no evidence that the beneficiaries gave either their consent or consideration to achieve the status of beneficiary.”); Schoneberger v. Oelze, 208 Ariz. 591, 96 P.3d 1078, 1082 (Ariz.Ct.App.2004) (“defendants face a fundamental problem that defeats their demand for arbitration: section 12-1501 required defendants to prove the existence of ‘a provision in a written contract to submit to arbitration.’ ”), superseded by statute, 2008 Ariz. Sess. Laws, ch. 247, § 16 (2d Reg.Sess.) (current version at Ariz.Rev.Stat. Ann. § 14-10205 (West, Westlaw through Feb. 2011 Sess.)). Conversely, section 171 does not require a contract.1
Under the TAA, a court must order the parties to arbitrate on application of a party showing an agreement to arbitrate and the opposing party’s refusal. Id. § 171.021(a). It is only “if’ the opponent denies the existence of the agreement, the court summarily determines the issue. Id. § 171.021(b); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex.2003). And while a court may require the applicant seeking to compel arbitration to attach a copy of the agreement and define the issue subject to arbitration, a court may not find an application inadequate because of the absence of those requirements unless it requires the applicant to meet the requirements of the court and grants a ten-day period to comply. Tex. Civ. Prac. & Rem. Code Ann. § 171.085(b). Here, Reitz did not deny the existence of an agreement to arbitrate. While we do not know the court’s basis for overruling Rachal’s motion, the record is clear that the trial court did not give Rachal time or opportunity to meet any perceived deficiencies in the application.
It would be helpful if the Texas Legislature added a provision to the TAA confirming that an arbitration provision in a trust agreement is enforceable pursuant to a settlor’s intent. See Smith, 425 S.W.2d at 862 (courts construe trust agreement to effect settlor’s intent). I disagree with the majority that we must wait for such legislation when, as here, the settlor has emphasized his unambiguous intent that Ra-chal as the successor trustee and Reitz as one of his two named beneficiaries are bound by the terms of his trust agreement, including the mandatory arbitration provision. I also would conclude the arbitration provision is an “agreement” that meets the requirements of section 171.021(a)(1). See Tex. Civ. Prac. & Rem.Code Ann. § 171.021(a)(1).
Scope of the Arbitration Agreement
In seeking to compel arbitration, Rachal also had the burden of showing Reitz’s claims are within the scope of the arbitration provision. See J.M. Davidson, 128 S.W.3d at 227. Courts are directed to focus on factual allegations rather than the legal causes of action asserted. See In re FirstMerit Bank, 52 S.W.3d 749, 754 (Tex. 2001). Any doubts about the factual scope of the arbitration clause must be resolved in favor of coverage. See id. Generally, if the facts alleged touch, have a significant relationship, are inextricably enmeshed, or are factually intertwined with the subject of the arbitration provision, the claim will be arbitrable. See Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 498 (Tex.App.-San Antonio 2000, orig. proceeding). The na*315ture of the parties’ relationship is also critical. See In re Great W. Drilling, Ltd., 211 S.W.3d 828, 838 (Tex.App.-Eastland 2006, orig. proceeding). If the parties’ “sole relationship is established and governed by an agreement with an arbitration provision, their disputes are more likely to fall within the scope of the arbitration provision.” Id.
The arbitration provision here requires arbitration of “any dispute of any kind involving this Trust or any of the parties or persons concerned herewith (e.g., beneficiaries, Trustees).” The scope is broad, and the parties’ relationship and related duties and responsibilities are dependent on the trust agreement. Reitz’s factual allegations are also substantially related to that underlying agreement. The very core of Reitz’s lawsuit is Rachal’s alleged failure to perform his duties as trustee and alleged misdeeds in managing trust assets. In an attempt to avoid the broad scope of the arbitration provision squarely encompassing Reitz’s factual allegations, he argues Rachal’s alleged criminal acts of looting trust funds for his personal gain fall outside the scope of the agreement. I would disagree.
Reitz cites no authority that would exclude otherwise arbitrable claims because they may also have criminal law consequences. The applicable legal standard instead requires us to focus on the factual allegations, not legal claims. See In re FirstMerit Bank, 52 S.W.3d at 754. Regardless of how Reitz pleads or characterizes his legal claims, the underlying factual allegations rest on the existence of the trust agreement and the parties’ relationship established and governed by that agreement. I would conclude Reitz’s claims are within the scope of the arbitration agreement and therefore would sustain Rachal’s sole issue.
Conclusion
For these reasons, I would conclude the probate court erred when it overruled Ra-chal’s motion to compel arbitration and stay the underlying litigation. Accordingly, I would reverse the probate court’s order and remand this case to the probate court for further proceedings.

. Additionally, those courts have been criticized for their "ill-advised distinction” between "a trust or will versus a contract” and "misguided logic.” See Michael P. Bruyere & Meghan D. Marino, Mandatory Arbitration Provisions: A Powerful Tool to Prevent Contentions and Costly Trust Litigation, But Are They Enforceable?, 42 Real Prop. Prob. & Tr. J. 351, 360-62 (2007).