Court Opinion

ID: 3128832
Source: CourtListenerOpinion
Date Created: 2015-10-16 16:08:26.535582+00
Date Added: 2024-06-11T11:53:39.350160
License: Public Domain

MEMORANDUM OPINION
                                         No. 04-10-00631-CV

                              LYDA SWINERTON BUILDERS, INC.,
                                         Appellant

                                                  v.

                                  POOLS BY BLUE HAVEN, INC.,
                                           Appellee

                     From the 288th Judicial District Court, Bexar County, Texas
                                  Trial Court No. 2009-CI-20145
                          Honorable Solomon Casseb, III, Judge Presiding

Opinion by:       Karen Angelini, Justice

Sitting:          Karen Angelini, Justice
                  Phylis J. Speedlin, Justice
                  Steven C. Hilbig, Justice

Delivered and Filed: March 2, 2011

REVERSED AND REMANDED

           The present appeal arises from the trial court’s denial of a motion to compel arbitration

filed by Lyda Swinerton Builders, Inc. (“Lyda”). We reverse the trial court’s orders denying

Lyda’s motion to compel arbitration and remand the case to the trial court for further

proceedings.
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                                         BACKGROUND

       The facts pertinent to Lyda’s appeal are largely undisputed. On July 14, 2006, Lyda

entered into a construction contract with Riverwalk CY Hotel Partners, Ltd. (“Riverwalk”) to

construct a hotel known as the Marriott Courtyard at the San Antonio Riverwalk (the “Hotel”).

The construction agreement between Lyda and Riverwalk contained provisions for the mediation

of disputes. The agreement further provided that if formal mediation could not resolve a dispute,

binding arbitration under the Construction Industry Rules of the American Arbitration

Association was required.

       Lyda subsequently entered into a subcontract (the “Subcontract”) with Pools by Blue

Haven, Inc. (“Blue Haven”) on March 8, 2007, concerning the design/construction of a

swimming pool and spa at the Hotel. The Subcontract contained various dispute resolution

clauses, including:

       15.     CLAIMS RESOLUTION PROCEDURE

       (a) In the event of any dispute or claim between Contractor and Owner which
       directly or indirectly involves Subcontractor’s Work, or in the event of any
       dispute or claim between Contractor and Subcontractor which directly or
       indirectly involves Subcontractor’s Work, or in the event of any dispute or claim
       between Contractor and Subcontractor which directly or indirectly involves a
       claim against Owner for either additional compensation or an extension of time
       under the Contract Documents, Subcontractor agrees to be bound to Contractor
       and Contractor agrees to be bound to Subcontractor by all decisions, findings or
       determinations made by the person so authorized in the Contract Documents, by
       an administrative agency, court of competent jurisdiction, or arbitration panel,
       whether or not Subcontractor is a party to the proceedings before said person,
       agency, court or panel. If any dispute or claim involving Subcontractor is
       prosecuted or defended by Contractor, Subcontractor agrees to cooperate fully
       with Contractor and to furnish all documents, statements, witnesses and other
       information required by Contractor for such purpose and shall pay or reimburse
       Contractor for all expenses and costs, including reasonable attorney’s fees,
       incurred in connection therewith to the extent of Subcontractor’s interest in such
       claim or dispute. It is expressly understood and agreed in connection with the
       determination of such claims or disputes that, as to any and all work done and
       agreed to be done by Subcontractor, and as to any and all damages, if any,

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       incurred by Subcontractor in connection with the Project, Contractor shall never
       be liable to Subcontractor to any greater extent than Owner is liable to Contractor.
       If a dispute between Contractor and Subcontractor is not subject to the dispute
       resolution procedure set forth in the Contract Documents, then the dispute
       resolution procedure set forth in paragraphs (b) and (c) below shall apply.

       (b) MEDIATION. Subcontractor agrees, upon the request of Contractor, to submit
       any claim or dispute to a neutral mediator and to negotiate in good faith to reach
       an agreement with respect to the dispute. Any such mediation proceeding shall be
       under the auspices of and governed by the rules of the Construction Industry
       Mediation Rules of the American Arbitration Association; or as may be agreed by
       the parties. In such event, neither party shall proceed with arbitration or litigation
       until the completion of mediation proceedings. The costs of the mediator shall be
       shared equally by the parties. Venue for the mediation shall be at the most
       practical location convenient to the parties and/or the location of the project.

       (c) ELECTION OF ARBITRATION OR LITIGATION. In the event of a dispute
       between Contractor and Subcontractor, Contractor may elect to arbitrate such
       dispute in the manner provided below, or to litigate the dispute in a forum with
       jurisdiction to decide the dispute. Any arbitration proceeding shall be conducted
       in accordance with the Construction Industry Rules of the American Arbitration
       Association, provided, however, that only one arbitrator shall hear the dispute.
       The award rendered by the arbitrator shall be final and judgment may be entered
       upon in accordance with applicable law in any court having jurisdiction.

                                              ****

       (e) FEDERAL ARBITRATION ACT. The arbitration rights set forth herein shall
       be specifically enforceable under the Federal Arbitration Act, 9 U.S.C. 1, et seq.,
       the parties agreeing that the transactions contemplated hereunder will have an
       effect on interstate commerce.

       During the course of the construction of the Hotel, Lyda encountered various delays to

the dissatisfaction of Riverwalk. In accordance with their contractual agreement, Lyda and

Riverwalk proceeded to mediation in October and November 2008 to resolve their issues. The

mediation between Lyda and Riverwalk was unsuccessful.

       On January 9, 2009, Blue Haven submitted its initial pool/spa design for the Hotel for

approval by the project architect. The project architect rejected Blue Haven’s initial submittal

and requested Blue Haven to resubmit its plans. Despite the project architect’s rejection of Blue

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Haven’s initial pool/spa design, Blue Haven moved forward with the construction of the pool

and spa without resubmitting its design for approval. Blue Haven completed construction of the

pool and spa and proceeded to submit pay applications to Lyda on May 21, 2009 and June 25,

2009.

        After completing the construction of the pool and spa, Blue Haven resubmitted its plans

to the project architect for his approval on June 18, 2009 and, again, on August 5, 2009. The

project architect rejected both sets of plans submitted by Blue Haven and refused to certify Blue

Haven’s pay applications.

        In the meantime, Riverwalk filed a demand for arbitration against Lyda on July 9, 2009.

Riverwalk’s “demand for arbitration included an exhibit which listed three hundred and eighty-

four (384) items of allegedly non-conforming work which included items relating to Blue

Haven’s work on the Project.”       Riverwalk and Lyda selected arbitrators and agreed on a

scheduling order for the arbitration proceeding.

        On October 8, 2009, Blue Haven sent a demand letter to Lyda requesting payment of

$59,600 for the construction of the pool and spa at the Hotel. Blue Haven’s letter sought

payment of the entire amount past due and warned Lyda that it would “have no choice but to file

suit against [Lyda] for breach of contract, among other causes of action” if Lyda failed to comply

with its request for payment. Lyda refused to remit payment to Blue Haven and Blue Haven

filed suit against Lyda on December 18, 2009 for breach of contract, quantum meruit, violations

of Chapter 162 of the Texas Property Code, and a suit on sworn account. Lyda answered Blue

Haven’s allegations on January 22, 2010, providing a general denial as well as a verified denial

as to the suit on sworn account.

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                                                                                    04-10-00631-CV

       On February 17, 2010, in connection with its ongoing arbitration with Riverwalk, Lyda

filed a motion to join Blue Haven in the Lyda-Riverwalk arbitration. Lyda’s motion claimed

Blue Haven should be joined in the existing arbitration proceeding because Riverwalk’s

damages, if any, were attributable to the conduct of Blue Haven and the other named

subcontractors. Blue Haven objected to Lyda’s joinder request on March 12, 2010, arguing: (1)

Lyda’s “conduct in proceeding with . . . litigation without requesting mediation or arbitration

until [after months of delay] evidences [Lyda’s] knowing election to proceed with litigation”; (2)

Lyda’s “election to proceed with litigation, instead of arbitration, excuses Blue Haven from

being bound by any arbitration provisions in [Lyda’s] . . . subcontract”; (3) “having breached the

Subcontract by failing to pay for Blue Haven’s work, [Lyda] is not entitled to assert or avail

itself of the arbitration provisions, the right of joinder, or the warranty of Blue Haven”; and (4)

“[i]t is manifestly unjust to . . . require Blue Haven to entangle its payment claim in an

arbitration involving numerous claims of several other claimants having no relationship

whatsoever to the construction of the swimming pool.”

       An arbitrator was appointed pursuant to Rule R-7 of the American Arbitration

Association’s rules to decide Lyda’s request to join Blue Haven in the existing arbitration

proceeding. Following detailed briefing, the R-7 arbitrator concluded, on June 11, 2010, Lyda

could not join Blue Haven as a party to its “existing arbitration” with Riverwalk because Blue

Haven “did not contractually agree to joinder, and no controlling legal principles compel[s its]

joinder.” The R-7 arbitrator’s order declined to address “whether Lyda waived its right to elect

arbitration with Blue Haven” because the arbitrator considered the issue “moot.”

       On June 22, 2010, Blue Haven moved for partial summary judgment against Lyda in the

trial court. Lyda responded by filing a motion to compel arbitration in the trial court on June 29,

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                                                                                     04-10-00631-CV

2010, asking the court to compel the parties to arbitration in accordance with the terms of the

Subcontract. Blue Haven countered that compelling the parties to arbitration was improper

because “a Rule 7 Arbitrator ha[d] already ruled against Lyda on the issue of whether arbitration

of Blue Haven’s claims is proper.” It also asserted Lyda waived its right to arbitrate by waiting

until well after Blue Haven had initiated its lawsuit to raise its arbitration request. Blue Haven

further argued that Lyda had waived its right to arbitrate because it participated in the litigation

process prior to requesting arbitration and caused Blue Haven to incur unnecessary expenses

during such time. Finally, Blue Haven claimed Lyda waived its right to arbitrate because it was

first required to mediate with Blue Haven “as an express condition precedent before invoking the

arbitration provision” of the Subcontract.

       After hearing the parties’ arguments, the trial court denied Lyda’s motion to compel

arbitration and issued orders on September 3 and 7, 2010 reflecting its ruling.               Lyda

subsequently perfected its appeal of the trial court’s orders denying its motion to compel

arbitration. Lyda thereafter responded to Blue Haven’s motion for partial summary judgment

and filed a motion requesting the trial court to reconsider its arbitration ruling. The trial court

granted Blue Haven’s motion for partial summary judgment on September 24, 2010, holding the

contingent payment clause of the Subcontract is unenforceable. There were no other rulings

issued by the trial court below.

                                             DISCUSSION

   A. Improper Collateral Attack

       As a preliminary matter, Blue Haven contends the trial court correctly denied Lyda’s

motion to compel arbitration because an R-7 arbitrator has already ruled against Lyda and

concluded that arbitration of Blue Haven’s claims is improper. Blue Haven argues “Lyda’s

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attempt to compel arbitration despite the R-7 arbitrator’s ruling is essentially an improper

collateral attack of that ruling.” We are, however, unpersuaded by this argument due to the

nature of the order issued by the R-7 arbitrator.

       Upon reviewing the R-7 arbitrator’s order, it becomes evident that the arbitrator never

addressed the issue of whether Lyda is entitled to compel Blue Haven to arbitrate in a proceeding

solely between Lyda and Blue Haven. According to the R-7 arbitrator’s order, the arbitrator

denied Lyda’s request to join Blue Haven in the existing Lyda-Riverwalk arbitration because

Blue Haven “did not contractually agree to joinder[] and no controlling legal principles compel

[its] joinder.” The R-7 arbitrator’s order further reflects that the arbitrator declined to reach the

issue of whether “Lyda waived its right to elect arbitration with Blue Haven” as he considered

the issue “moot.” Because the R-7 arbitrator never addressed the issue of whether Lyda is

entitled to compel Blue Haven to arbitrate in a proceeding solely between Lyda and Blue Haven,

the record simply does not support Blue Haven’s first contention on appeal.

   B. Failure to Fulfill Condition Precedent

       Blue Haven also argues the trial court properly denied Lyda’s motion to compel

arbitration because the trial court may have found that mediation was a condition precedent to

arbitration. Blue Haven asserts Lyda cannot compel it to arbitration because Lyda was required

under the terms of the Subcontract to pursue mediation with Blue Haven before resorting to

arbitration. Blue Haven’s argument is, yet again, contradicted by the record.

       Section 15(b) of the parties’ Subcontract expressly refers to mediation and provides:

       Subcontractor agrees, upon the request of Contractor, to submit any claim or
       dispute to a neutral mediator and to negotiate in good faith to reach an agreement
       with respect to the dispute. Any such mediation proceeding shall be under the
       auspices of and governed by the rules of the Construction Industry Mediation
       Rules of the American Arbitration Association; or as may be agreed by the
       parties. In such event, neither party shall proceed with arbitration or litigation

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       until the completion of mediation proceedings. The costs of the mediator shall be
       shared equally by the parties. Venue for the mediation shall be at the most
       practical location convenient to the parties and/or the location of the project.

(emphasis added). It is apparent from the plain language of the Subcontract that Lyda, as the

Contractor, had the option to first proceed through mediation if a dispute arose between it and

Blue Haven, the subcontractor. This option was at Lyda’s discretion, but Lyda instead chose to

dispense with mediation and opted to pursue arbitration as authorized by paragraph 15(c) of the

Subcontract, which states “[i]n the event of a dispute between Contractor and Subcontractor,

Contractor may elect to arbitrate such dispute . . . or to litigate the dispute in a forum with

jurisdiction to decide the dispute.” Blue Haven’s contention that Lyda was required to fulfill a

condition precedent prior to seeking arbitration thus lacks merit. See Dallas Cardiology Assocs.,

P.A. v. Mallick, 978 S.W.2d 209, 212-13 (Tex. App.—Texarkana 1998, pet. denied) (suggesting

contractual language did not rise to the level of a condition precedent where it provided, “[a]ny

dispute arising over the terms and conditions of this Agreement or in any manner relating to this

Agreement which the parties are unable to resolve informally between themselves or by

mediation shall be submitted, upon the motion of either party, to arbitration under the appropriate

rules of the American Arbitration Association”).

   C. Waiver

       Lastly, Blue Haven argues the trial court properly denied Lyda’s motion to compel

arbitration because Lyda waived its right to arbitration. “[A] party waives an arbitration clause

by substantially invoking the judicial process to the other party’s detriment or prejudice.” Perry

Homes v. Cull, 258 S.W.3d 580, 589-90 (Tex. 2008). “Waiver is a legal question for the court

based on the totality of the circumstances, and asks whether a party has substantially invoked the

judicial process to an opponent’s detriment, the latter term meaning inherent unfairness caused

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by ‘a party’s attempt to have it both ways by switching between litigation and arbitration to its

own advantage.’” In re Citigroup Global Mkts., Inc., 258 S.W.3d 623, 625 (Tex. 2008) (citation

omitted). When assessing the totality of the circumstances, we may consider: whether the

movant was the plaintiff (who chose to file in court) or the defendant (who merely responded);

how long the movant waited before seeking arbitration; whether the movant knew of the

arbitration clause all along; how much pretrial activity related to the merits rather than

arbitrability or jurisdiction; how much time and expense has been incurred in litigation; whether

the movant sought or opposed arbitration earlier in the case; whether the movant filed affirmative

claims or dispositive motions; whether discovery would be useful in arbitration; and whether the

movant sought judgment on the merits. Perry Homes, 258 S.W.3d at 591-92; PER Group, L.P. v.

Dava Oncology, L.P., 294 S.W.3d 378, 389 (Tex. App.—Dallas 2009, no pet.).

    The party who asserts waiver of an arbitration clause bears a heavy burden. EZ Pawn Corp.

v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996). A strong presumption against waiver exists in the

law, and any doubts regarding waiver are resolved in favor of arbitration. In re Bruce Terminix

Co., 988 S.W.2d 702, 704 (Tex. 1998); In re Multifuels, L.P., No. 01-09-00475-CV, 2010 WL
1981570, at *6 (Tex. App.—Houston [1st Dist.] May 7, 2010, orig. proceeding) (mem. op.).

“Waiver of arbitration rights may be expressed or implied.” In re Multifuels, 2010 WL 1981570,

at *6.

    Blue Haven maintains Lyda waived its right to arbitrate because Lyda substantially invoked

the judicial process to Blue Haven’s detriment. It asserts Lyda substantially invoked the judicial

process by: (1) failing to make a pre-suit demand for arbitration; (2) failing to invoke the

arbitration provision of the Subcontract in its answer; (3) filing an answer to Blue Haven’s

allegations and asserting a defense based on the contingent payment clause found within the

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Subcontract; (4) going forward with the hearing on Blue Haven’s motion for summary judgment;

(5) electing not to include Blue Haven as a party to the Lyda-Riverwalk arbitration when such

arbitration was originally commenced; and (6) waiting nearly six months after suit was brought

to file its motion to compel arbitration. Even if we were to assume the aforementioned actions

demonstrate Lyda substantially invoked the judicial process — a proposition we need not decide

to resolve this appeal — Blue Haven has nonetheless failed to carry its burden of showing that it

would suffer prejudice if compelled to arbitration.

   As it did in its response to Lyda’s motion to compel arbitration, Blue Haven argues on appeal

that compelling it “to arbitration ‘would cause prejudice to plaintiff’ and ‘would not be in the

interest of justice.’” Blue Haven alleges it will suffer prejudice if compelled to arbitration

because it has expended significant time and resources initiating and prosecuting the underlying

suit. Absent from the record, however, is any evidence detailing the time and resources allegedly

expended by Blue Haven in connection with this matter. This court has consistently recognized

that generalized complaints about delay and expense, without evidence in support, are

insufficient to establish prejudice. See Global Fin. Servs., L.L.C. v. Estate of McLean, No. 04-

07-00627-CV, 2008 WL 372521, at *3 (Tex. App.—San Antonio Feb. 13, 2008, no pet.) (mem.

op.); Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 499 (Tex. App.—San Antonio 2000, no

pet.). Moreover, the Texas Supreme Court has acknowledged that “waiver of arbitration requires

a showing of prejudice.” See Perry Homes, 258 S.W.3d at 595. Because Blue Haven has made

nothing more than generalized protestations about the time and resources it has expended, we

conclude Blue Haven has failed to make the required showing of prejudice. See In re Houston

Auto M. Importers N., Ltd., No. 01-09-00625-CV, 2009 WL 4756218, at *3 (Tex. App.—

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                                                                                    04-10-00631-CV

Houston [1st Dist.] Dec. 3, 2009, orig. proceeding) (mem. op.) (reversing trial court’s denial of a

motion to compel arbitration where plaintiff introduced no evidence of prejudice at the hearing).

                                          CONCLUSION

   Based on the foregoing, we hold that the trial court erred in denying Lyda’s motion to

compel arbitration. We therefore reverse the trial court’s orders denying Lyda’s motion to

compel arbitration and remand the cause to the trial court for further proceedings consistent with

this opinion.

                                                  Karen Angelini, Justice

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