Court Opinion

ID: 6337592
Source: CourtListenerOpinion
Date Created: 2022-05-04 06:13:07.433429+00
Date Added: 2024-06-11T09:24:48.939289
License: Public Domain

Affirmed and Opinion Filed April 26, 2022

                                       In The
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                No. 05-21-00103-CV

        WILLIAM HANN AND SUSANNE HANN, Appellants
                           V.
 VINTAGE ESTATE HOMES, LLC AND VINTAGE ESTATE HOMES OF
                   TEXAS LLC, Appellees

                On Appeal from the County Court at Law No. 2
                            Dallas County, Texas
                    Trial Court Cause No. CC-20-01731-B

                         MEMORANDUM OPINION
                Before Justices Osborne, Pedersen, III, and Reichek
                         Opinion by Justice Pedersen, III
      Appellants challenge the trial court’s February 7, 2021 order vacating an April

1, 2020 arbitration award. Appellants contend the trial court erred in vacating the

arbitration award because (ii) the combined question of arbitrability and jurisdiction

was reserved for the empaneled arbitrator and (ii) appellees waived their complaint

to the empaneled arbitrator. We affirm the order of the trial court.
                                       I.     BACKGROUND

       A. Parties’ Agreements

       On April 26, 2016, appellants entered into a contract (Home Contract) with

Vintage Estate Homes of Texas, LLC (VEH Texas)1 for the construction of a house

located at 5308 Diamante, Spicewood, TX, 78669 (Property). The Home Contract

included the following arbitration provision:

       19. DISPUTE RESOLUTION; MANDATORY BINDING
       ARBITRATION. THE LIMITED WARRANTY AGREEMENT
       CONTAINS MANDATORY PROCEDURES FOR RESOLVING
       DISPUTES BETWEEN YOU AND US (INCLUDING
       MANDATORY BINDING ARBITRATION), AND THOSE
       PROCEDURES BECOME EFFECTIVE UPON CLOSING. BY
       SIGNING THIS AGREEMENT, YOU AGREE TO ALL THE
       TERMS, CONDITIONS, RESTRICTIONS, DISCLAIMERS,
       WARRANTIES, RELEASES, PROCEDURES AND WAIVERS
       CONTAINED IN THE LIMITED WARRANTY AGREEMENT,
       INCLUDING THE OBLGATION TO SUBMIT ALL CLAIMS,
       DISPUTES AND CONTROVERSIES BETWEEN YOU AND US
       AND OUR AFFILIATES TO BINDING ARBITRATION RATHER
       THAN TO COURT. ANY AND ALL CLAIMS, DISPUTES AND
       CONTROVERSIES BETWEEN YOU AND US OR OUR AFFILIATE,
       WHICH ARE NOT SUBMITTED TO, COVERED OR RESOLVED BY
       THE TERMS OF THE LIMITED WARRANTY AGREEMENT, SHALL
       BE SUBMITTED TO FINAL AND BINDING ARBITRATION IN
       DALLAS COUNTY, TEXAS, AND NOT TO A COURT FOR
       DETERMINATION [ . . . ]. ARBITRATION SHALL BE CONDUCTED
       BY THE AMERICAN ARBITRATION ASSOCIATION (“AAA”) IN
       ACCORDANCE WITH ITS CONSTRUCTION INDUSTRY
       ARBITRATION AND MEDIATION RULES THAT ARE IN EFFECT
       AT THE COMMENCEMENT OF THE ARBITRATION
       PROCEEDINGS. THIS AGREEMENT TO ARBITRATE IS
       GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. §1

   1
      Pursuant to the original contract, the names “Vintage Estate Homes of Texas, LLC” and “Vintage
Estate Homes, LLC” are used interchangeably.
                                               –2–
      1 ET SEQ.), AND THE ARBITRABILITY OF ANY ISSUE WILL BE
      DECIDED BY THE ARBITRATOR.

(emphasis in bold original; emphasis in italics added). On April 26, 2016,

appellants also signed an amendment to the Home Contract, which provides:

      2. The Home Contract provides that Vintage Estate Homes, LLC will
      provide a Limited Warrant [sic] to Buyers at Closing.
      3. Vintage Estate Homes, LLC in lieu of providing a Limited Warranty
      shall provide a Limited Warranty (“Home Limited Warranty”) by and
      through an independent third party home warranty provider which shall
      be issued to Buyers at Closing, at Vintage Estate Homes expense.

      Parties here to agree as follows:
      1. Recitals. The above recitals are true and correct and are expressly
      incorporate [sic] herein.
      2. Home Warranty. Vintage Estate Homes, LLC shall provide Buyers
      with a Home Limited Warranty (a copy of which is attached) at Closing
      paid by Vintage Estate Homes, LLC. This Home Limited Warranty
      replaces any other Limited Warranty Agreement to be provided to
      Buyers pursuant to the contract.
      3. Limited Warranties: Disclaimer of Implied Warranties: The
      warranties contained in the Home Limited Warranty are the only
      warranties Your [sic] will receive from Us concerning the Home.

      VEH Texas constructed the house, and appellants closed on March 10, 2017.

VEH Texas provided a home buyer’s warranty for the Property—the 2-10 Home

Buyers Warranty (2-10 HBW). Vintage Estate Homes, LLC and appellants executed

the 2-10 HBW as builder/seller and buyers, respectively. The 2-10 HBW included a

“Buyer’s Acknowledgment and Consent,” which provides

      Buyer(s) agree that any and all claims or disputes between him (them)
      and the Builder/Seller (including any person you contend is responsible
      for a defect in your home) arising from or relating to the Warranty, shall
      be submitted to binding arbitration pursuant to the Federal Arbitration
      Act (9 U.S.C. §§1–16). By signing below, Buyer acknowledges reading

                                         –3–
      the 2-10 HBW Warranty Booklet, and CONSENTS TO THE TERMS
      OF THAT DOCUMENT INCLUDING THE BINDING
      ARBITRATION PROVISION contained therein. Buyer(s) accepts
      the 2-10 HBW warranty and in return, waives the Builder/Seller’s
      implied warranty of habitability, merchantability or fitness to the extent
      allowed by law.

(emphasis in original). The 2-10 HBW included its own arbitration clause, which

provides:

      To expedite the resolution of any and all claims, disputes and
      controversies by or between the homeowner, the Builder/ Seller, 2-10
      HBW, as administrator, the Warranty Insurer or any combination of the
      foregoing, arising from or related to this Warranty, the Warranty
      Insurance Policy, the 2-10 HBW Program, or to the Home, shall be
      settled by binding arbitration. Agreeing to arbitration means You are
      waiving Your right to a jury trial, class action or consolidation.
      ....
      The arbitration shall be conducted by DeMars & Associates, Ltd or by
      Construction Dispute Resolution Services, LLC or by any mutually
      agreeable arbitration service, pursuant to the service’s applicable rules
      in effect at the time of the arbitration. The choice of the arbitration
      service shall be that of the Homeowner, or if the Homeowner is not
      involved, that of the party who initiates the arbitration. The arbitration
      shall be held in the home. No arbitration proceeding shall involve more
      than one single-family detached dwelling or more than one Multi-
      Family Building. The arbitrator shall render an award in accordance
      with the substantive law in the state in which the Home is located.
      ....
      The parties expressly agree that this warranty and this arbitration
      agreement involve and concern interstate commerce and are governed
      by the provisions of the Federal Arbitration Act (9 U.S.C. § 1, et seq.)
      now in effect and as the same may from time to time be amended, to
      the exclusion of any different or inconsistent state or local law,
      ordinance or judicial rule.
      This arbitration agreement is a self-executing arbitration agreement.
      Any disputes concerning the interpretation or the enforceability of this
      arbitration agreement, including without limitation, its revocability or
      voidability for any cause, the scope of arbitrable issues, and any defense

                                         –4–
      based upon waiver, estoppel or laches, shall be decided by the
      arbitrator.

      B. Disputes and Arbitration Proceedings

      On February 8, 2019, appellants demanded arbitration before the American

Arbitration Association (AAA), specifically attaching the below request for

arbitration from the 2-10 HBW.

Appellants’ demand for arbitration included a list of “construction defects to be

arbitrated,” which itemized and enumerated several alleged defects under specific

provisions of the 2-10 HBW.

                                      –5–
      On February 23, 2019, appellants submitted a letter to Home Buyers

Warranty, which indicated the fee schedule for AAA and a builder fee for the

arbitration before AAA of $1,875. On February 26, 2019, appellees emailed

appellants’ counsel (i) that appellees did “not agree to arbitration before the AAA”

and (ii) that arbitration was to commence under the terms of the 2-10 HBW with

Construction Dispute Resolution Services. Despite appellees’ objection, appellants

proceeded to arbitration before the AAA against appellees. The AAA empaneled

arbitrator Jason Spencer, who conducted the arbitration between the parties on

February 18 to February 20, 2020. Spencer signed a final award on April 1, 2020,

which included—under the “Facts of the Case and Initial Findings” section—the

following:

      The Demand for Arbitration was filed with the AAA on February 8,
      2019. Although VEH was served and was corresponding with the
      AAA/Scott Hunter on March 20, 2019, VEH did not file their answer
      until August 9, 2019. The Answer noted VEH “objects to the
      jurisdiction of this arbitration and specific demand is made that the
      Claimants provide written documentation of either of both Respondents
      being subject to arbitration and relief requested herein.” The
      Arbitrability Order was entered by the Arbitrator on October 11, 2019,
      which was supplemented on February 21, 2020.

(emphasis added). Spencer resolved the arbitration in favor of appellants—finding

several different construction defects. Inter alia, Spencer awarded appellants

damages for repair costs in the amount of $253,092.16; recovery for temporary

housing during the repairs in the amount of $25,000.00; and appellants’ reasonable

and necessary attorney’s fees in the amount of $58,853.80.

                                        –6–
       C. Motion to Vacate the Arbitrator’s Final Award

       On April 3, 2020, appellees filed their petition to vacate arbitration final award

before the trial court. Appellants answered, asserting that appellees did not object

“to the Austin attorney Spencer as the arbitrator or conducting the arbitration in

Travis county.” Following a hearing on appellees’ motion to vacate, the trial court

entered an order vacating arbitrator Spencer’s final award in favor of appellants.

       IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that
       Plaintiffs’ Motion to Vacate Arbitration Award is GRANTED in its
       entirety.
       IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that the
       Final Award entered in American Arbitration Association Case No. 01-
       19-0000-7687, attached hereto as Exhibit A, is VACATED in its
       entirety.

       This appeal followed.2

                                         II.     ISSUES RAISED

       Verbatim, appellants present three issues to our Court:

       1.    Was arbitrator Spencer’s appointment a violation of the contract,
             and if so, was vacation of the award required?
       2.    Did the trial court err in deciding arbitrability?
       3.    Did the trial court err in vacating the arbitration award?

   2
      It is undisputed that the arbitration agreements are both governed by the Federal Arbitration Act
(FAA). See 9 U.S.C. §§1–16. The FAA provides that an appeal may be taken from an order vacating an
arbitration award. 9 U.S.C. § 16(a)(1)(E). Texas Rule of Civil Procedure 51.016 provides:
       In a matter subject to the Federal Arbitration Act (9 U.S.C. Section 1 et seq.), a person may
       take an appeal or writ of error to the court of appeals from the judgment or interlocutory
       order of a district court, county court at law, or county court under the same circumstances
       that an appeal from a federal district court’s order or decision would be permitted by 9
       U.S.C. Section 16.
TEX. CIV. PRAC. & REM. CODE ANN. § 51.016.
                                                   –7–
Appellants’ briefing and presentation in oral argument, however, assert that the trial

court erred in vacating the arbitration award because (i) the combined question of

arbitrability and jurisdiction was reserved for the arbitrator under the Home Contract

and (ii) appellees’ waived their complaint to the empaneled arbitrator. We take these

as the two issues raised before our Court.

                             III.   STANDARD OF REVIEW

      “We review a trial court’s decision to vacate or confirm an arbitration award

de novo, based on the entire record.” Cambridge Legacy Group, Inc. v. Jain, 407

S.W.3d 443, 447 (Tex. App.—Dallas 2013, pet. denied). “All reasonable

presumptions are indulged in favor of the award, and none against it.” CVN Group,

Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002) (quoting City of San Antonio v.

McKenzie Const. Co., 150 S.W.2d 989, 996 (1941)). “An arbitration award has the

same effect as a judgment of a court of last resort, and a court reviewing the award

may not substitute its judgment for that of the arbitrators merely because it would

have reached a different decision.” Statewide Remodeling, Inc. v. Williams, 244

S.W.3d 564, 568 (Tex. App.—Dallas 2008, no pet.).

                                    IV.      ANALYSIS

      “‘Under the FAA, the validity of an arbitration award is subject to attack only

on grounds listed in sections 10 and 11 of the Act.’” Roehrs v. FSI Holdings, Inc.,

246 S.W.3d 796, 805–06 (Tex. App.—Dallas 2008, pet. denied) (quoting Thomas

James Assocs., Inc. v. Owens, 1 S.W.3d 315, 319–20 (Tex. App.—Dallas 1999, no

                                          –8–
pet.)) A court may vacate an arbitration award “where the arbitrators exceeded their

powers.” 9 U.S.C.A. § 10(a)(4). The Texas Supreme Court has explained:

      Arbitrators derive their power from the parties’ agreement to submit to
      arbitration. City of Pasadena v. Smith, 292 S.W.3d 14, 20 (Tex. 2009).
      They have no independent source of jurisdiction apart from the parties’
      consent. I.S. Joseph Co. v. Mich. Sugar Co., 803 F.2d 396, 399 (8th
      Cir.1986). Accordingly, arbitrators must be selected pursuant to the
      method specified in the parties’ agreement. Brook v. Peak Int’l,
      Ltd., 294 F.3d 668, 672–73 (5th Cir. 2002). An arbitration panel
      selected contrary to the contract-specified method lacks jurisdiction
      over the dispute. Accordingly, courts “do not hesitate to vacate an
      award when an arbitrator is not selected according to the contract-
      specified method.” Bulko v. Morgan Stanley DW, Inc., 450 F.3d 622,
      625 (5th Cir. 2006). So we look to the arbitration agreement
      to determine what the parties specified concerning the arbitrator-
      selection process.

Americo Life, Inc. v. Myer, 440 S.W.3d 18, 21–22 (Tex. 2014).

Issue One: Arbitrability and Jurisdiction

      Appellants first assert the trial court erred in vacating the arbitration award

because the parties had a valid agreement requiring arbitration with the AAA under

the Home Contract—which reserved the issue of arbitrability for the arbitrator.

Appellants further assert that the questions of jurisdiction and arbitrability are the

same for the purposes of the parties’ agreements. Appellants rely on our opinion in

Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc. to assert “we may not

vacate an [arbitration] award even if it is based upon a mistake in law or fact.” 294

S.W.3d 818, 826 (Tex. App.—Dallas 2009, no pet.). Appellants rely on our opinion

in Saxa Inc. v. DFD Architecture Inc. to assert that the scope of the arbitration

                                         –9–
agreement and the claims and parties it encompasses are questions of substantive

arbitrability, reserved for the arbitrator to decide. 312 S.W.3d 224, 229–30 (Tex.

App.—Dallas 2010, pet. denied). Appellants further refer to our opinions in

McGehee v. Bowman, 339 S.W.3d 820 (Tex. App.—Dallas 2011, no pet.) and

Employee Solutions McKinney, LLC v. Wilkerson, 2017 WL 1908626 (Tex. App.—

Dallas May 10, 2017, no pet.) for the same contentions regarding arbitrability.

        However, neither Ancor, Saxa, McGehee, nor Wilkerson apply to the dispute

before us because none of those cases involved an issue challenging the arbitrator-

selection process—challenging whether the arbitrator was “selected contrary to the

contract-specified method.” Americo Life, Inc., 440 S.W.3d at 21 (explaining an

arbitrator selected contrary to the contract-specified method lacks jurisdiction over

the dispute). Accordingly, we disagree with appellants’ contention that the questions

of (i) jurisdiction—the question of who has the authority to decide a dispute3—and

(ii) arbitrability—the question of whether a dispute or claim is subject to an

arbitration agreement4—are the same in this circumstance. Although both parties

refer to arbitrability, it is apparent from the briefing, record, and oral argument that

    3
       “[Arbitrators] have no independent source of jurisdiction apart from the parties’ consent.” Americo
Life, Inc. v. Myer, 440 S.W.3d 18, 21–22 (Tex. 2014) (citing I.S. Joseph Co. v. Mich. Sugar Co., 803 F.2d
396, 399 (8th Cir.1986)).
    4
       “The status, under applicable law, of a dispute’s being or not being resolvable by arbitrators because
of the subject matter.” Arbitrability, BLACK’S LAW DICTIONARY (11th ed. 2019). “[T]he question of
arbitrability is a gateway issue . . . . [that] include[s] whether the parties agreed to arbitrate and whether a
claim or dispute is encompassed in the agreement to arbitrate. Saxa Inc., 312 S.W.3d at 229) (internal
citations omitted).
                                                    –10–
appellants’ issue relates to the trial court’s determination that arbitrator Spencer

lacked jurisdiction. The trial court made no determination regarding arbitrability.5

        Appellees argue the trial court did not err in vacating the arbitration award

because the parties’ agreements—both the Home Contract and the 2-10 HBW—

required arbitration to proceed under the 2-10 HBW. Appellees assert empaneled

AAA arbitrator Spencer had no authority to decide any issue in this dispute because

he was selected contrary to the parties’ agreements under the 2-10 HBW. We agree

with appellees assertion that Spencer had no authority to decide the issues in this

dispute.

        Here, it is undisputed that the parties entered into two agreements: the Home

Contract and the 2-10 HBW. It is further undisputed that the parties entered an

amendment to the Home Contract, which anticipated a separate “home limited

warranty.” Though not explicitly incorporated by reference in the Home Contract or

the amendment, it is evident from the record that the 2-10 HBW was the “home

limited warranty” anticipated in the Home Contract and its according amendment.

        By virtue of the Home Contract’s arbitration agreement, the language “THE

LIMITED           WARRANTY               AGREEMENT               CONTAINS             MANDATORY

PROCEDURES FOR RESOLVING DISPUTES BETWEEN YOU AND US

(INCLUDING MANDATORY BINDING ARBITRATION), AND THOSE

    5
      Indeed, the record shows the trial court signed no findings or conclusions regarding the arbitrability
of appellants’ disputes or claims.
                                                  –11–
PROCEDURES BECOME EFFECTIVE UPON CLOSING” anticipated a separate

“limited warranty agreement” and separate arbitration agreement—which would

become effective upon closing. Furthermore, the Home Contract’s arbitration

agreement extends its limited application to “ANY AND ALL CLAIMS,

DISPUTES AND CONTROVERSIES BETWEEN YOU AND US OR OUR

AFFILIATE, WHICH ARE NOT SUBMITTED TO, COVERED OR RESOLVED BY

THE TERMS OF THE LIMITED WARRANTY AGREEMENT.” (emphasis added).

      Thus, the parties contracted (i) for the 2-10 HBW’s arbitration agreement to

become effective upon closing and (ii) for the Home Contract’s arbitration

agreement to apply only when the controversy was not covered by the 2-10 HBW’s

arbitration agreement. The record shows appellants’ disputes are based on the

warranties within the 2-10 HBW. The 2-10 HBW—as the “limited warranty

agreement” anticipated in the Home Contract and its amendment—includes a

separate arbitration agreement. The pertinent language from the 2-10 HBW

arbitration agreement encompasses appellants’ disputes:

      To expedite the resolution of any and all claims, disputes and
      controversies by or between the homeowner, the Builder/Seller, 2-10
      HBW, as administrator, the Warranty Insurer or any combination of the
      foregoing, arising from or related to this Warranty, the Warranty
      Insurance Policy, the 2-10 HBW Program, or to the Home, shall be
      settled by binding arbitration. Agreeing to arbitration means You are
      waiving Your right to a jury trial, class action or consolidation.

Under a section named “Selecting an Arbitration Service,” the 2-10 HBW’s

arbitration agreement provided “arbitration shall be conducted by DeMars &

                                      –12–
Associates, Ltd or by Construction Dispute Resolution Services, LLC or by any

mutually agreeable arbitration service.” Unlike the Home Contract, the 2-10 HBW’s

arbitration agreement included no express authority for the AAA to conduct

arbitration.

      Although the parties agreed the 2-10 HBW’s arbitration agreement would

control in post-closing disputes on the limited home warranty, appellants indicated

“AAA Arbitration” on their 2-10 HBW’s request for arbitration form to resolve their

post-closing disputes. The record shows that appellees objected to the AAA’s

jurisdiction as arbitrator for this dispute; appellees did not mutually agree to AAA

arbitration under the 2-10 HBW as an “agreeable arbitration service.” Accordingly,

empaneled AAA arbitrator Spencer was not “selected pursuant to the method

specified in the parties’ agreement.” Americo Life, Inc., 440 S.W.3d at 21. Since

arbitration nevertheless proceeded to final award, arbitrator Spencer’s final award

was entered without jurisdiction. See id.

      Therefore, we conclude the trial court did not err in vacating arbitrator

Spencer’s award, because the empaneled arbitrator lacked jurisdiction under the

parties’ agreements. See id. (citing Bulko v. Morgan Stanley DW, Inc., 450 F.3d 622,

625 (5th Cir. 2006)). We overrule appellants’ first issue. Furthermore, because we

conclude the empaneled arbitrator lacked jurisdiction, we need not reach appellants’

second issue regarding waiver. See TEX. R. APP. P. 47.1 (“The court of appeals must

hand down a written opinion that is as brief as practicable but that addresses every

                                        –13–
issue raised and necessary to final disposition of the appeal.”). To that end, we

pretermit any further discussion of appellants’ second issue.6

                                           V.      CONCLUSION

         Having overruled appellants’ first issue, we affirm the order of the trial court.

                                                       /Bill Pedersen, III//
210103f.p05                                            BILL PEDERSEN, III
                                                       JUSTICE

   6
       Indeed, discussion of appellants’ second issue of waiver would risk providing an advisory opinion.

                                                  –14–
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

WILLIAM HANN AND SUSANNE                       On Appeal from the County Court at
HANN, Appellants                               Law No. 2, Dallas County, Texas
                                               Trial Court Cause No. CC-20-01731-
No. 05-21-00103-CV           V.                B.
                                               Opinion delivered by Justice
VINTAGE ESTATE HOMES, LLC                      Pedersen, III. Justices Osborne and
AND VINTAGE ESTATE HOMES                       Reichek participating.
OF TEXAS LLC, Appellees

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is AFFIRMED.

      It is ORDERED that appellees VINTAGE ESTATE HOMES, LLC AND
VINTAGE ESTATE HOMES OF TEXAS LLC recover their costs of this appeal
from appellants WILLIAM HANN AND SUSANNE HANN.

Judgment entered this 26th day of April, 2022.

                                        –15–