Court Opinion

ID: 2991060
Source: CourtListenerOpinion
Date Created: 2015-09-23 03:51:51.379203+00
Date Added: 2024-06-11T11:45:05.040568
License: Public Domain

Affirmed and Memorandum Opinion filed November 29, 2011.

                                          In The

                       Fourteenth Court of Appeals

                                  NO. 14-11-00001-CV

              TOMASA LOPEZ AND BAUDELIO LOPEZ, Appellants

                                             V.

                   CASA PONTIAC GMC BUICK, INC., Appellee

                        On Appeal from the 11th District Court
                                Harris County, Texas
                          Trial Court Cause No. 2006-58538

                    MEMORANDUM OPINION
       In this dispute regarding an automobile purchase, appellants Tomasa Lopez and
Baudelio Lopez challenge the trial court’s order compelling arbitration and its judgment
entering the arbitration award. First, they assert that the trial court erred in granting the
motion compelling arbitration filed by appellee Casa Pontiac GMC Buick, Inc. (―Casa
Pontiac‖) because Casa Pontiac failed to prove that a valid arbitration agreement
encompassed the disputed issues. Next, they contend that the trial court should not have
granted Casa Pontiac’s motion to confirm the arbitration award because the arbitration
agreement was not enforceable. We affirm.
                                             BACKGROUND

        In December 2004, Baudelio Lopez attempted to purchase a vehicle from Casa
Pontiac, an automobile dealership located in Baytown, Texas. Because he did not have a
sufficient credit rating to qualify for an automobile loan, his sister, Tomasa Lopez, agreed
to co-sign the loan.           She came into the dealership and signed various financing
paperwork, including an Arbitration Agreement.1 This agreement provides in pertinent
part:

        Buyer/Lessee acknowledges and agrees that the vehicle purchased or leased
        herein has traveled in interstate commerce.               Buyer/lessee thus
        acknowledges that the vehicle and other aspects of the sale, lease or
        financing transaction are in, affect, or have a direct impact upon, interstate
        commerce.
        Buyer/lessee and dealer agree that all claims, demands, disputes, or
        controversies of every kind or nature that may arise between them
        concerning any of the negotiations leading to the sale, lease or financing of
        the vehicle, terms and provisions of the sale, lease or financing agreement,
        arrangements for financing, purchase or insurance, purchase of extended
        warrantees or service contracts, Casa Benefit Package, the performance
        condition of the vehicle, or any other aspects of the vehicle and its sale,
        lease or financing shall be settled by binding arbitration conducted pursuant
        to the provisions of 9 U.S.C. Section 1 et seq. and according to the
        Commercial Rules of the American Arbitration Association. Without
        limiting the generality of the foregoing, it is the intention of the
        buyer/lessee and the dealer to resolve by binding arbitration all disputes
        between them concerning the vehicle, its sale, lease or financing, and its
        condition, including disputes concerning the terms and conditions of the
        sale, lease or financing, the condition of the vehicle, and damage to the
        vehicle, the terms and meaning of any of the documents signed or given in
        connection with the sale, lease or financing, any representations, promises
        or omissions made in connection with negotiations for the sale, lease, or
        financing of the vehicle, or any terms, conditions, or representations made
        in connection with the financing, credit life insurance, disability insurance,
        and vehicle extended warranty or service contract purchased or obtained in
        connection with the vehicle. . . .

        1
          Tomasa had to return to Casa Pontiace on a later date to sign additional paperwork, but the arbitration
agreement was signed the day Baudelio took possession of the vehicle.

                                                       2
       Tomasa asserts she was not provided copies of the financing paperwork when she
signed it. She does not dispute, however, that she signed the arbitration agreement.
According to Tomasa, she later received the paperwork and discovered that the loan
terms were not what Baudelio had agreed to and that the monthly payment and financing
charges were higher than expected. She also alleged that her signature had been forged
on the motor vehicle retail installment sales contract, which contained several additional
fees neither she nor Baudelio had authorized. Tomasa and Baudelio attempted to resolve
the matter with Casa Pontiac, but were unsuccessful. They filed suit against Casa Pontiac
on September 15, 2005, alleging ―unconscionable conduct‖ under the Texas Deceptive
Trade Practices-Consumer Protection Act (the ―DTPA‖).2

       Casa Pontiac answered and filed a motion to compel arbitration pursuant to the
arbitration agreement. The Lopezes responded, seeking to resist arbitration, but provided
no evidence in support of their opposition motion. The trial court heard the motion to
compel and later, on November 6, 2006, granted Casa Pontiac’s motion to compel and
ordered the parties to arbitration. The Lopezes filed a motion for reconsideration, which
was denied by the trial court. The Lopezes then filed a petition for writ of mandamus
with this court, which we denied because we found that the Lopezes were not entitled to
mandamus relief. See In re Lopez, No. 14-07-00536-CV, 2007 WL 2330928, at *1 (Tex.
App.—Houston [14th Dist.] Aug. 16, 2007, orig. proceeding) (mem. op.).                 Our
memorandum opinion did not state a substantive basis for the ruling. Id.

       This case remained in the trial court without activity for almost two years. The
Lopezes filed a petition to compel arbitration or to vacate the order to compel arbitration
in June 2009. On February 19, 2010, the trial court signed another order compelling the
case to arbitration within thirty days. The Lopezes filed a motion for reconsideration,
asking the trial court to vacate the order compelling arbitration. Casa Pontiac responded
to this motion, and the trial court signed an order denying the Lopezes’ motion for
reconsideration on May 17, 2010.

       2
           See Tex. Bus. & Com. Code Ann. § 17.41 (West 2011).

                                                      3
       The case proceeded to arbitration, and an award denying the Lopezes’ claims was
issued on November 16, 2010. Casa Pontiac filed a motion to confirm the arbitration
award in December 2010. The Lopezes filed a motion to vacate the arbitration award and
to vacate the order compelling arbitration. On December 20, 2010, the trial court signed
a final judgment confirming the arbitration award that the Lopezes take nothing against
Casa Pontiac. This appeal timely followed.

                                      STANDARD OF REVIEW

       A party moving to compel arbitration must establish that (1) a valid, enforceable
arbitration agreement exists, and (2) the claims asserted fall within the scope of that
agreement. Valero Energy Corp. v. Teco Pipeline Co., 2 S.W.3d 576, 581 (Tex. App.—
Houston [14th Dist.] 1999, no pet.).         If the movant establishes that an arbitration
agreement governs the dispute, the burden then shifts to the party opposing arbitration to
establish a defense to the arbitration agreement. See In re Oakwood Mobile Homes, Inc.,
987 S.W.2d 571, 573 (Tex. 1999) (orig. proceeding). ―Once the trial court concludes that
the arbitration agreement encompasses the claims, and that the party opposing arbitration
has failed to prove its defenses, the trial court has no discretion but to compel arbitration
and stay its own proceedings.‖ In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753–54
(Tex. 2001).        Consequently, we consider whether an agreement imposes a duty to
arbitrate under a de novo standard of review. In re Provine, No. 01-09-00769-CV; 2009
WL 4967245, at *3 (Tex. App.—Houston [1st Dist.] Dec. 10, 2009, orig. proceeding).

                                           ANALYSIS

       In their first issue, the Lopezes assert that the trial court erred in granting Casa
Pontiac’s motion to compel arbitration because Casa Pontiac failed to prove that an
agreement to arbitrate requires arbitration of the issues in dispute here. In three broad
sub-issues, the Lopezes contend that: (1) Casa Pontiac did not prove that the Federal
Arbitration Act (the ―FAA‖)3 applies to the arbitration agreement; (2) the agreement did
not expressly require arbitration of a claim of unconscionable conduct under the DTPA;
       3
           See 9 U.S.C.A. §§ 1–307.

                                               4
and (3) the trial court was required to hold an evidentiary hearing because they claimed
that the arbitration agreement is procedurally unconscionable and because they demanded
a jury trial on this issue.         Under each of these main sub-issues, the Lopezes offer
numerous supporting arguments, many of which are inadequately briefed.4 Their second
issue, in which they assert the trial court erred in entering the arbitration award, relies
exclusively on a determination that the arbitration agreement was unenforceable.

        A. Casa Pontiac Proved the FAA Applies to the Arbitration Agreement

        The FAA applies to all suits in state or federal court when the dispute concerns a
―contract evidencing a transaction involving commerce.‖ Jack B. Anglin Co. v. Tipps,
842 S.W.2d 266, 269-70 (Tex. 1992) (orig. proceeding). ―Interstate commerce‖ in this
context is not limited to the actual shipment of goods across state lines, but includes all
contracts ―relating to‖ interstate commerce. In re FirstMerit Bank, 52 S.W.3d 749, 754
(Tex. 2001) (orig. proceeding). To be applicable, the FAA does not require a substantial
effect on interstate commerce; it requires only that commerce be involved or affected.
See In re L & L Kempwood Assocs., 9 S.W.3d 125, 127 (Tex. 1999) (orig. proceeding).
Interstate commerce may be shown in a variety of ways, including: (1) location of
headquarters in another state; (2) transportation of materials across state lines;
(3) manufacture of parts in a different state; (4) billings prepared out of state; and
(5) interstate mail and phone calls in support of a contract. See Jack B. Anglin, 842
S.W.2d at 270.

        The purchase of an automobile clearly implicates interstate commerce. Cf. In re
FirstMerit Bank, N.A., 52 S.W.3d at 754 (concluding that installment contract for sale of
mobile home related to interstate commerce and was subject to FAA). Moreover, the
arbitration agreement explicitly states that the contract relates to interstate commerce:
―Buyer/Lessee acknowledges and agrees that the vehicle purchased or leased herein has
traveled in interstate commerce. Buyer/lessee thus acknowledges that the vehicle and

        4
          See Tex. R. App. P. 38.1(i) (―The brief must contain a clear and concise argument for the contentions
made, with appropriate citations to authorities and to the record.‖).

                                                      5
other aspects of the sale, lease or financing transaction are in, affect, or have a direct
impact upon, interstate commerce.‖ Finally, the arbitration agreement explicitly provides
that the FAA governs, and Tomasa admits that she signed the agreement. See In re
Choice Homes, Inc., 174 S.W.3d 408, 412 (Tex. App.—Houston [14th Dist.] 2005, orig.
proceeding) (―When parties agree to arbitrate under the FAA, they are not required to
establish that the transaction at issue involves or affects interstate commerce.‖); In re
Kellogg Brown & Root, 80 S.W.3d 611, 617 (Tex. App.—Houston [1st Dist.] 2002, orig.
proceeding) (concluding that, because courts have upheld choice-of-law provisions in
arbitration agreements, when parties agree to arbitrate under the FAA, they are not
required to establish that the transaction at issue involves or affects interstate commerce).

       Under these circumstances, Casa Pontiac established that the FAA applies to the
arbitration agreement. The Lopezes’ arguments to the contrary are without merit. We
overrule this portion of the Lopezes’ first issue.

       B. The Arbitration Agreement Applies to the Lopezes’ Unconsionability
          Claim Under the DTPA
       To determine whether a claim falls within the scope of an arbitration agreement,
we examine the factual allegations of the complaint rather than the legal causes of action.
In re FirstMerit Bank, 52 S.W.3d at 754. To fall within the scope of an arbitration
provision, the allegations need only be factually intertwined with arbitrable claims or
otherwise touch upon the subject matter of the agreement containing the arbitration
provision. In re Prudential Sec., Inc., 159 S.W.3d 279, 283 (Tex. App.—Houston [14th
Dist.] 2005, orig. proceeding). Any doubts about these issues must be resolved in favor
of arbitration. In re FirstMerit Bank, 52 S.W.3d at 754.

       Turning to the Lopezes’ factual allegations, they assert that Casa Pontiac engaged
in an unconscionable action or course of action by (a) deceiving Baudelio about being
able to improve his credit rating by merely making payments towards a note in someone
else’s name, (b) changing the agreed upon price of the automobile, (c) adding additional
charges for services that neither of the Lopezes had agreed to, (d) changing the monthly

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payments that had been agreed upon, and (e) forging Tomasa’s signature on the sales
contract. All of these factual allegations arise out of or relate to the sale and financing of
the vehicle. As noted in the excerpt from the arbitration agreement above, these types of
claims all fall within the scope of the arbitration agreement. Accordingly, Casa Pontiac
established that the arbitration agreement encompasses the Lopezes’ claims.

        Because Casa Pontiac established that the agreement covers the Lopezes’ claims,
the burden then shifted to them to establish a valid defense to the arbitration agreement.
J.M. Dvidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). These defenses include
fraud, waiver, unconscionability, or that the dispute falls outside the scope of the
agreement. Henry v. Gonzalez, 18 S.W.3d 684, 689 (Tex. App.—San Antonio 2000, pet.
dism’d).     However, defenses must relate to the arbitration agreement itself, not the
contract as a whole, to defeat arbitration. In re FirstMerit Bank, 52 S.W.3d at 756.
Additionally, a party opposing arbitration must present evidence to support its defense;
otherwise it fails to satisfy its burden and the trial court should compel arbitration. In re
Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999) (orig. proceeding) (per
curiam), abrogated on other grounds by In re Halliburton Co., 80 S.W.3d 566, 571 (Tex.
2002) (orig. proceeding).

        In their opposition to Casa Pontiac’s motion to compel arbitration, the Lopezes
alleged that the arbitration agreement is invalid ―due to the unconscionable conduct of
[Casa Pontiac] over the course of the entire transaction and because the Arbitration
Agreement was the first step in the fraudulent scheme.‖5                    Although they raised an
unconscionability defense by asserting that their lack of education and sophistication in
legal and financial matters, coupled with their weak English skills, rendered the
arbitration agreement unconscionable, they presented no evidence to support this defense.

        5
           Under Texas law, ―unconscionability includes two aspects: (l) procedural unconscionability, which
focuses on the circumstances surrounding the adoption of the arbitration provision; and (2) substantive
unconscionability, which focuses on the terms of the arbitration provision itself.‖ In re Media Arts Group,
Inc., 116 S.W.3d 900, 910 (Tex. App.—Houston [14th Dist.] 2003, orig. proceeding). Based on the allegations
in the Lopezes’ opposition to Casa Pontiac’s motion to compel arbitration, it appears they were alleging the
arbitration agreement is invalid because of procedural unconscionability. However, in the opposition motion,
the Lopezes did not indicate which defense they were claiming.

                                                     7
See In re Oakwood Mobile Homes, 987 S.W.2d at 573. It was only after the trial court
signed Casa Pontiac’s motion to compel arbitration and denied the Lopezes’ motion for
reconsideration that they presented evidence in the form of an affidavit by Tomasa to
show that the arbitration agreement was invalid. But a late-filed affidavit raising a
defense to an arbitration agreement should not be considered as evidence. See EZ Pawn
Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex. 1996) (per curiam).

        Because the Lopezes failed to timely present evidence supporting their defense to
arbitration, the trial court had no discretion but to stay its proceedings and compel
arbitration. See In re FirstMerit Bank, 52 S.W.3d at 753–54; EZ Pawn Corp., 934
S.W.2d at 91. Accordingly, the Lopezes’ converse arguments lack merit,6 and this sub-
issue is overruled.

        C. The Trial Court Was Not Required to Hold an Evidentiary Hearing

        Relying on In re Washington Mutual Finance, L.P., appellants assert that a trial
court must hold an evidentiary hearing to determine disputed material facts. 173 S.W.3d
189, 192–93 (Tex. App.—Corpus Christi 2005, orig. proceeding) (citing Jack B. Anglin

        6
          The Lopezes rely largely on an Alabama case to support their claim that an allegation of forgery
is not arbitrable. See Carl Gregory Chrysler-Plymouth, Inc. v. Barnes, 700 So. 2d 1358, 1360 (Ala. 1997)
(per curiam) (plurality op.). Notably, the Gregory case involved only an allegation that Barnes’s
signature was forged on an extended service agreement. The Alabama Supreme Court concluded:
        We find no agreement to arbitrate the dispute in this case. Although the arbitration
        provision Gregory relies on is broad, it is clear that it does not compel arbitration of
        Barnes and Rogers’s claim. The dispute here does not concern the negotiations leading
        to the sale of the Hyundai, nor does it concern the terms and provisions of the sale, the
        performance or the condition of the Hyundai, or any other aspect of the vehicle or its sale.
        The dispute arises solely from Gregory’s alleged forgery of Barnes’s signature onto the
        service agreement. The fact that the arbitration provision mentions service contracts does
        not compel arbitration of this dispute, because Barnes says the only reason he has a
        service agreement is that his name was forged onto it—this alleged forgery is the heart of
        the fraud alleged in this case.
Id. (emphasis added). Here, the Lopezes’ claims do not involve simply the alleged forgery; instead, they
encompass most of the matters relating to the negotiation and sale of the vehicle, including the alleged
forged financing agreement. This factor undermines their reliance on this out-of-state case because to fall
within the scope of an arbitration agreement, allegations need only be factually intertwined with arbitrable
claims or otherwise touch on the subject matter of the arbitration agreement. In re Prudential Sec., Inc.,
159 S.W.3d at 283.

                                                     8
Co., 842 S.W.2d at 269. However, a court is not required to conduct an evidentiary
hearing before compelling arbitration in every case. In re Jim Walter Homes, Inc., 207
S.W.3d 888, 896 (Tex. App.—Houston [14th Dist.] 2006, orig. proceeding); In re
Washington Mutual, 173 S.W.3d at 192. A trial court may summarily determine to
compel arbitration on the basis of affidavits, pleadings, discovery, and stipulations. In re
Jim Walter Homes, 207 S.W.3d at 896. A material fact issue must be raised, by affidavit
or other admissible evidence, to necessitate an evidentiary hearing. Id. at 897. Here, as
discussed above, the Lopezes failed to provide any evidence to support their defense of
unconscionability when the trial court initially ordered the parties to arbitration.
Accordingly, the trial court was not required to hold an evidentiary hearing in this case.
We overrule this sub-issue, which disposes of the entirety of their first issue.

       D. The Trial Court Did Not Err in Granting Casa Pontiac’s Motion to
          Confirm the Arbitration Award
       In their second issue, the Lopezes assert that, because the arbitration agreement is
unenforceable, any award granted by an arbitrator is unenforceable. But as discussed
above, we have determined that the trial court properly compelled the parties to
arbitration because a valid arbitration agreement exists, which covers the Lopezes’
claims, and to which they provided no evidence of a defense to arbitration. Hence, their
second issue presents nothing for our review and is overruled.

                                      CONCLUSION

       Having overruled each of the Lopezes’ issues, we affirm the trial court’s
judgment.

                                           /s/       Adele Hedges
                                                     Chief Justice

Panel consists of Chief Justice Hedges and Justices Anderson and Christopher.

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