Court Opinion

ID: 4462385
Source: CourtListenerOpinion
Date Created: 2019-12-09 08:14:10.533701+00
Date Added: 2024-06-11T13:33:45.950674
License: Public Domain

AFFIRMED; Opinion Filed December 6, 2019

                                             In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                      No. 05-19-00214-CV

                          SAN SABA PECAN, LP, Appellant
                                      V.
                   GIVE AND GO PREPARED FOODS CORP, Appellee

                      On Appeal from the 101st Judicial District Court
                                   Dallas County, Texas
                           Trial Court Cause No. DC-17-13535

                             MEMORANDUM OPINION
                        Before Justices Whitehill, Schenck, and Osborne
                                  Opinion by Justice Schenck
       San Saba Pecan, LP (“San Saba”) appeals the trial court’s denial of its motion to compel

arbitration. For the reasons discussed below, we affirm the trial court’s order. Because all issues

are settled in law, we issue this memorandum opinion. TEX. R. APP. P. 47.4.

                                         BACKGROUND

       San Saba is a family-owned business that grows, processes, and sells pecans with its

principal operations in San Saba, Texas. Appellee Give and Go Prepared Foods Corp. (“Give &

Go”) is a Canadian manufacturer of bakery goods supplied to retailers. For several years, Give &

Go sourced pecan halves and small pieces from San Saba without major incident. In October

2016, Give & Go issued purchase orders to San Saba for a total of 672 cases of pecan pieces to be

shipped between October 2016 and February 2017. In December 2016, San Saba issued invoices,
which had several conditions printed on the back, including Condition 11, which contained a

provision to arbitrate certain disputes, claims or controversies as detailed below.

       San Saba shipped the ordered pecan pieces between October 2016 and February 2017, and

during this time, Give & Go incorporated the pecan pieces into a variety of finished consumer

products. During January 2017, Give & Go discovered weevil larvae in two lots of pecan pieces

from San Saba. As a result, Give & Go put a hold on the remaining cases of pecan pieces from

San Saba and disposed of all finished product in stock involving the implicated lot numbers.

However, upon discovery of the issue, some of the other cases of the finished product involving

the implicated lot of San Saba pecan pieces had already been distributed to Give & Go’s customers.

After receiving customer complaints involving pecan weevil larvae in finished product made from

at least one San Saba lot number, Give & Go recalled much of its products.

       In October 2017, Give & Go filed suit against San Saba and another supplier of pecan

pieces for breach of contract, money had and received, negligence, and violations of the Texas

Deceptive Trade Practices Act. In response, San Saba filed a motion to transfer venue from Dallas

County to San Saba County, which the trial court later denied in May 2018.

       In December 2018, San Saba filed a motion to compel arbitration pursuant to Condition

11, in which it argued that “[b]y excepting quality disputes from the Dallas, Texas location, the

provision specifically allows quality dispute arbitration to occur at other locations . . . where more

is known about the pecan industry.” On January 10, 2019, Give & Go filed its first amended

petition against San Saba, which eliminated its claim for violations of the DTPA and added claims

for gross negligence, breach of express warranty, breach of implied warranty of merchantability,

breach of implied warranty of fitness, common-law fraud, fraud by nondisclosure, negligent

misrepresentation, and strict liability. On January 2, 2019, the trial court conducted a hearing on

the motion to compel. On January 28, 2019, the trial court signed an order denying the motion to

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compel without any separate findings of fact or conclusions of law. San Saba timely requested

findings of fact and conclusions of law, but the trial court did not file any.

                                                                 ANALYSIS

           A trial court’s determinations of whether a claim falls within the scope of an arbitration

agreement and whether a party waived its right to arbitrate are questions of law, which we review

de novo. See Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018).

           The Federal Arbitration Act (“FAA”) generally governs arbitration provisions in contracts

involving interstate commerce as is the case here. See In re Rubiola, 334 S.W.3d 220, 223 (Tex.

2011). A party seeking to compel arbitration under the FAA must establish that (1) there is a valid

arbitration clause, and (2) the claims in dispute fall within that agreement’s scope. Id.

           In its third issue, San Saba argues the claims fall within the arbitration provision’s scope. 1

In deciding questions of scope, we focus on the factual allegations and not on the legal causes of

action asserted. See Henry, 551 S.W.3d at 115. In determining whether parties have agreed to

arbitrate a certain matter under the FAA, we apply the contract law of the particular state that

governs the agreement. See Tittle v. Enron Corp., 463 F.3d 410, 419 (5th Cir. 2006) (citations

omitted). In Texas, contract terms are given their plain, ordinary, and generally accepted meanings

unless the contract itself shows them to be used in a technical or different sense. See Valence

Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).

           Give & Go’s original and amended petitions allege San Saba supplied Give & Go with

pecan pieces containing weevil larvae, such that the supplied pecan pieces were not merchantable

and were unfit for human consumption in violation of the agreements between the parties. Give

& Go alleges that because San Saba failed to provide pecan pieces fit for human consumption, San

      1
        The parties dispute whether they entered into a valid arbitration agreement, and that question is San Saba’s first issue. However, because
we do not find that the claims fall within the scope of the arbitration agreement and are excepted from arbitration, we may assume without deciding
that a valid arbitration agreement exists. See TEX. R. APP. P. 47.4.

                                                                      –3–
Saba now holds money that belongs to Give & Go in equity and good conscience. Further, Give

& Go alleges San Saba failed to exercise reasonable care in the handling, processing, inspection,

and packing of the pecan pieces. Give & Go alleges San Saba made misrepresentations about the

quality and characteristics of the pecan pieces by representing they were selling pecan pieces that

were merchantable and fit for use in finished products intended for human consumption. Give &

Go also alleges San Saba failed to disclose that they were selling pecan pieces contaminated with

pecan weevil larvae. Finally, Give & Go alleges the pecan pieces supplied by San Saba were

defective and lacked adequate warnings and notices that they may be contaminated with pecan

weevil larvae.

       The arbitration provision, Condition 11, provided as follows:

       This Agreement and the determinations and enforcement of all rights and duties of
       the parties hereunder shall be governed and construed in accordance with the laws
       of the State of Texas, including the Texas Uniform Commercial Code, as effective
       and in force on the date of this Agreement, and any and all claims and disputes
       hereunder, except as otherwise specifically provided herein, shall be resolved only
       in the federal or state courts of Texas. All disputes, claims, or controversies
       arising out of or relating to this Agreement, or the breach thereof, except as to
       the quality of the product delivered, shall be settled solely by arbitration held in
       Dallas, Texas, in accordance with the rules then obtaining of the American
       Arbitration Association, and judgment upon any award may be entered in any
       court having jurisdiction thereof. Any action for breach of this Agreement must
       be commenced within one (1) year after the cause of action has accrued.

(emphasis added).

       The provision thus carves out an exception for “disputes, claims or controversies . . . as to

the quality of the product delivered . . . .” All of Give & Go’s allegations concern whether the

pecan pieces San Saba sold contained pecan weevil larvae so that they were not merchantable and

were unfit for human consumption. Thus, Give & Go’s allegations fall squarely within the plain

language of the exception to the arbitration provision. We overrule San Saba’s third issue.

                                               –4–
       In its second issue, San Saba urges the trial court failed to consider and give effect to every

provision in the invoice containing Condition 11. Specifically, San Saba points to Condition 7,

which provides for notice of quality concerns and defines what “quality” means.

       Notice of rejection on the account of quality and request for inspection must be
       made within forty-eight (48) hours after arrival of goods at destination (Sunday and
       legal holidays excepted), and if not so made, the delivery shall be considered good
       delivery and the product so delivered shall be conclusively presumed to satisfy the
       standards of quality set forth herein and be fit for human consumption. Quality is
       to equal or better than U.S.D.A. Grades and Standards. If sold on approval of
       sample, shipment is to be equal to or better than sample.

(emphasis added). San Saba complains that allowing Give & Go’s claims to be interpreted as

excepted from arbitration gives no meaning to Condition 7 because it allows Give & Go to proceed

on a dispute regarding quality without requiring Give & Go to take the steps required above,

including notifying San Saba of rejection in a timely fashion and requesting an inspection.

       Under Texas law, a court construing a contract must read that contract in a manner that

confers meaning to all of its terms, rendering the contract’s terms consistent with one another. See

Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). In doing so, we examine and consider the

entire writing in an effort to harmonize and give effect to all the provisions of the contract so that

none will be rendered meaningless. See id. (citing). No single provision taken alone will be given

controlling effect; rather, all the provisions must be considered with reference to the whole

instrument. See id.

       San Saba urges that Condition 7 “defines quality” such that the allegations raised by Give

& Go must address that definition in order to exclude this dispute from arbitration. San Saba notes

that none of Give & Go’s allegations address whether the complained-of shipments complied with

U.S.D.A. Grades and Standards and thus cannot be said to be quality disputes excluded from

arbitration. Condition 7 states that the product sold must be equal to or better than U.S.D.A Grades

and Standards but also provides that if the shipment is sold on sample, the shipment must be equal

                                                 –5–
to or better than the sample thus providing another potential “definition” of quality. Thus,

“quality” is not defined as strictly as San Saba argues. San Saba also complains that Give & Go

failed to comply with Condition 7’s rejection and inspection requirements such that quality must

be presumed and thus any dispute cannot be regarding quality.                                                   We find this argument

unpersuasive.

           Condition 7 is not rendered meaningless by concluding Give & Go’s claims represent

disputes regarding the quality of products delivered. Instead, Condition 7 provides San Saba with

a potential substantive defense to raise against Give & Go’s claims. See, e.g., Cheung-Loon, LLC

v. Cergon, Inc., 392 S.W.3d 738, 745 (Tex. App.—Dallas 2012, no pet.) (affirmative defense of

condition precedent).

           We overrule San Saba’s second issue.

           In light of our resolution of San Saba’s second and third issues, we pretermit any discussion

of its first, fourth, or fifth issues.2

                                                                CONCLUSION

           We affirm the trial court’s order denying San Saba’s motion to compel arbitration.

                                                                            /David J. Schenck/
                                                                            DAVID J. SCHENCK
                                                                            JUSTICE

190214F.P05

      2
        In its first issue, San Saba urges the existence of a valid arbitration agreement between itself and Give & Go. In its fourth issue, San Saba
urges that it did not substantially invoke the judicial process or otherwise waive arbitration. In its fifth issue, San Saba argues Give & Go failed to
establish a defense to enforcement of the arbitration agreement.

                                                                        –6–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

 SAN SABA PECAN, LP, Appellant                       On Appeal from the 101st Judicial District
                                                     Court, Dallas County, Texas
 No. 05-19-00214-CV          V.                      Trial Court Cause No. DC-17-13535.
                                                     Opinion delivered by Justice Schenck.
 GIVE AND GO PREPARED FOODS                          Justices Whitehill and Osborne
 CORP, Appellee                                      participating.

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

        It is ORDERED that appellee GIVE AND GO PREPARED FOODS CORP recover its
costs of this appeal from appellant SAN SABA PECAN, LP.

Judgment entered this 6th day of December, 2019.

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