Court Opinion

ID: 4287580
Source: CourtListenerOpinion
Date Created: 2018-06-25 08:16:26.37331+00
Date Added: 2024-06-11T14:37:16.316622
License: Public Domain

NUMBER 13-16-00247-CV

                            COURT OF APPEALS

                  THIRTEENTH DISTRICT OF TEXAS

                     CORPUS CHRISTI - EDINBURG

VOSS ENGINEERING, INC.
AND RONALD A. VOSS,                                                       Appellants,

                                          v.

MICHELLE BAUER
AND JAVIER ALONSO,                                                         Appellees.

                   On appeal from the 94th District Court
                        of Nueces County, Texas.

                            MEMORANDUM OPINION

 Before Chief Justice Valdez and Justices Rodriguez and Benavides
           Memorandum Opinion by Chief Justice Valdez

      This is an interlocutory appeal challenging the trial court’s denial of a motion to

compel arbitration filed by appellants, Voss Engineering, Inc. and Ronald A. Voss.

Appellees, Michelle Bauer and Javier Alonso, sued appellants for breach of contract,

negligence, malpractice, deceptive trade practices, and negligent misrepresentation. By
four issues, appellants contend that the trial court improperly denied their motion to

compel arbitration. We affirm. 1

                                      I. Standard of Review

        We apply an abuse of discretion standard to the trial court’s denial of appellants’

motions to compel arbitration. Okorafor v. Uncle Sam & Assocs., Inc., 295 S.W.3d 27,

38 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). A trial court abuses its discretion

when it acts arbitrarily or unreasonably and without reference to any guiding rules or

principles. Id. If the ruling under review depends on the resolution of underlying facts,

we must defer to the trial court on its resolution of those facts and any credibility

determinations that may have affected those resolutions. Id. Furthermore, we may not

substitute our judgment for the trial court on those matters. Id. However, we must apply

a de novo standard of review to legal conclusions because a trial court has no discretion

in determining what the law is, which law governs, or how to apply the law. Id.

        Whether a valid arbitration agreement exists is a question of law and is therefore

reviewed de novo. In re C & H News Co., 133 S.W.3d 642, 645 (Tex. App.—Corpus

Christi 2003, orig. proceeding); Tenet Healthcare Ltd. v. Cooper, 960 S.W.2d 386, 388

(Tex. App.—Houston [14th Dist.] 1998, pet. dism’d w.o.j.). The party seeking arbitration

has the initial burden to prove, and the trial court must initially decide whether there is a

valid arbitration agreement, and if so whether the claims fall within the scope of the

arbitration agreement. In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.—

Houston [1st Dist.] 2002, orig. proceeding); Mohamed v. Auto Nation USA Corp., 89
S.W.3d 830, 836 (Tex. App.—Houston [1st Dist.] 2002, no pet.) (combined appeal & orig.

         1 Because this is a memorandum opinion and the parties are familiar with the facts, we will not

recite them here except as necessary to advise the parties of the Court’s decision and the basic reasons
for it. See TEX. R. APP. P. 47.4.
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proceeding).     There is a strong presumption favoring arbitration; however, that

presumption does not apply to the initial determination of whether a valid arbitration

agreement exists. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).

Arbitration agreements are interpreted under traditional contract principles. Id.

       Generally, parties must sign arbitration agreements before being bound by them.

In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding); see Grigson v.

Creative Artists Agency, L.L.C., 210 F.3d 524, 528 (5th Cir. 2000) (noting that “arbitration

is a matter of contract and cannot, in general, be required for a matter involving an

arbitration agreement non-signatory”). However, as set out by the Texas Supreme Court

in G.T. Leach Builders, LLC v. Sapphire V.P., L.P., non-signatories may be permitted to

enforce an arbitration agreement under limited circumstances including, among other

things, equitable estoppel. 458 S.W.3d 502, 524 (Tex. 2015) (citing and quoting In re

Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005)).

                                II.     EQUITABLE ESTOPPEL

       It is undisputed that appellants were not parties to the general contract containing

an arbitration clause. Nonetheless, by their first issue, appellants contend that they are

entitled to compel arbitration pursuant to the doctrine of equitable estoppel, which in

limited circumstances allows non-parties to compel arbitration despite not signing the

contract containing the arbitration clause. See id.

A.     Applicable Law

       Generally, “an arbitration clause cannot be invoked by a non-party to the arbitration

contract.” Id. (citing Grigson, 210 F.3d at 532) (internal quotations omitted). And although

the “policy favoring arbitration is strong . . . it alone cannot authorize a non-party to invoke

arbitration.” Id. Under the doctrine of equitable estoppel, “a litigant who sues based on

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a contract subjects him or herself to the contract’s terms . . . including the Arbitration

Addendum.” Id. at 527. “This equitable principle applies when a claimant seeks ‘direct

benefits’ under the contract that contains the arbitration agreement.” Id. (emphasis

added). However, the benefit must stem directly from the contract and may not merely

relate to the contract which contains an arbitration agreement. Id. Equitable estoppel

applies if the plaintiff’s claim depends on the existence of the contract meaning that “[t]he

alleged liability must ‘arise[] solely from the contract or must be determined by reference

to it.’” Id. at 528. Even if a claim refers to or relates to the contract, equitable estoppel

does not apply “‘when the substance of the claim arises from general obligations imposed

by state law, including statutes, torts and other common law duties, or federal law,’ rather

than from the contract.” Id.

B.     Analysis

       Here, the general contract between Homes by Connie Graygor, Inc. (the Builder)

and appellees provided that the Builder agreed to construct improvements to appellees’

home. The general contract provided that the improvements would be constructed by the

Builder and that appellees agreed to pay for such services. The general contract states

that appellees are “advised that the Builder may have contracted with one or more

independent professional architects, engineers, surveyors, designers, or other

professional third parties (Builder’s Professionals) to perform services and/or prepare

certain documents or reports for completion of the Construction Documents and/or use in

constructing the Improvements.” Finally, the general contract contains an agreement that

any claims by appellees against the Builder will be resolved in arbitration.

       In G.T. Leach Builders, the Texas Supreme Court held that equitable estoppel

could not be invoked by non-signatory subcontractors although the general contract

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formed the genesis of the plaintiff’s claims against them. 458 S.W.3d at 528. The court

reasoned that the plaintiff had not sued these parties for breach of obligations under the

general contract, and instead, the plaintiff alleged that each of the subcontractors had

“breached duties that they each contractually agreed to perform and [each] failed to

perform them as a reasonable professional would have performed them.” Id. The record

showed that the subcontractor engineers and insurance brokers had contracts directly

with the plaintiff wherein they agreed to perform certain duties, which were not part of the

general contract. Id. at 529. The court noted that the plaintiff’s claims of breach of

contract against the other subcontractors were based on obligations that the

subcontractors had accepted in separate contracts with the builder.         Id. The court

recognized that the plaintiff’s claims would not have arisen but for the existence of the

general contract but concluded that is not enough to establish equitable estoppel. Id.

The court held that in its suit against the non-signatory subcontractors, the plaintiff had

not sought a direct benefit from the general contract and had instead sought direct

benefits under the other above-mentioned contracts. Id.

       Appellees sued appellants for breach of contract, negligence, malpractice,

deceptive trade practices, and negligent misrepresentation.              Appellants were

subcontractors hired by the Builder, and as previously stated were not signatories to the

general contract. To prevail, appellants had the burden to show that appellees’ claims

could not stand independently from the general contract with the Builder, which contains

the arbitration clause. In other words, appellees, as signatories to the general contract,

must have relied on the terms of the general contract in asserting its claims against the

non-signatory appellants. See Positive Software Sols., Inc. v. New Century Mortg. Grp.,

259 F. Supp. 2d 531, 539 (N.D. Tex. 2003). As to the breach of contract claim, the general

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contract does not specify any obligations required to be performed by appellants. The

general contract imposes obligations to be performed by the Builder, and it states that the

Builder would hire subcontractors, such as engineers, to perform other required services.

In their pleading appellees alleged that the Builder “retained the services of [appellants]

to perform engineering services for [appellees’] construction project, and part of the

construction project was the design of the retaining walls and their components.” In their

pleading, appellees stated that they were third-party beneficiaries of the contract between

the Builder and appellants and that appellants breached that contract resulting in a failure

to provide adequate engineering services with respect to a sea wall and/or retaining wall.

       Appellees also sued appellants for negligence and professional malpractice for

allegedly failing to use reasonable care in the design of the retaining walls, the anchors,

other components, and other specifications, as well as failing to use reasonable care in

developing the plans that incorporated the designs. Appellees also sued appellants under

the Texas Deceptive Trade Practices Act (DTPA) claiming that appellants were “guilty of

false, misleading, and/or deceptive acts against” appellees and for negligent

misrepresentation claiming that appellants made representations that they would provide

engineering services of a particular quality and supplied no plans, supplied false

information, “did not exercise reasonable care or competence in obtaining or

communicating the information that they were not plans,” and appellees justifiably relied

on the representations suffering a loss.

       Appellees’ claims do not stem directly from the general contract. Instead, as stated

above, appellees’ pleading shows that they are not suing appellants for a breach of the

contract between appellants and the Builder. Appellees are not relying on a breach of

the general contract by appellants, and appellees’ breach of contract claim does not arise

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solely from the general contract. As held in G.T. Leach Builders, such a claim is not

dependent on the general contract requiring the trial court to compel arbitration. See 458
S.W.3d at 528. Regarding appellees’ tort and DTPA claims, appellants’ liability, if any,

arises from general obligations imposed by common law and statute, and the general

contract is silent regarding these obligations. 2 See id. Therefore, in making their claims

against appellants, appellees have not sought a direct benefit from the general contract

and, instead, are relying on the subcontracts and statutory and common law. Accordingly,

we conclude the trial court did not abuse its discretion when it denied appellants’ motion

to compel arbitration. See id.; Okorafor, 295 S.W.3d at 38. We overrule appellants’ first

issue.

                                           III.    CONCLUSION

         We affirm the trial court’s judgment. 3

                                                                    /s/ Rogelio Valdez
                                                                    ROGELIO VALDEZ
                                                                    Chief Justice

Delivered and filed the
21st day of June, 2018.

        2 We note that appellants have not specifically argued or explained how the substance of appellees’

tort and DTPA claims arise from the general contract and not from general obligations imposed by state
law. See TEX. R. APP. P. 38.1(i). In addition, in their motion to compel arbitration, appellants made no
mention of the tort and DTPA claims and generally stated that all claims were subject to arbitration based
on an equitable estoppel theory.

        3 Having concluded that the appellants could not compel arbitration under the general contract, we

need not address appellants’ other issues as they are not dispositive. See id. 47.1. Those issues include
that appellees’ claims against appellants “fall within the scope of the arbitration agreement,” that appellants
“are not precluded from compelling arbitration because of a condition precedent (mediation),” and
appellants did not waive their right to compel arbitration.
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