Court Opinion

ID: 2887197
Source: CourtListenerOpinion
Date Created: 2015-09-07 19:24:50.461351+00
Date Added: 2024-06-11T12:46:10.738037
License: Public Domain

NO. 07-02-0077-CV

                             IN THE COURT OF APPEALS

                      FOR THE SEVENTH DISTRICT OF TEXAS

                                     AT AMARILLO

                                       PANEL B

                                     MAY 29, 2002

                         ______________________________

                     CASH AMERICA INTERNATIONAL, INC.
                 AND MR. PAYROLL CORPORATION, APPELLANTS

                                           V.

                      EXCHANGE SERVICES, INC., APPELLEE

                       _________________________________

             FROM THE 320th DISTRICT COURT OF POTTER COUNTY;

                NO. 89151-D; HONORABLE DON EMERSON, JUDGE

                        _______________________________

Before BOYD, C.J., and QUINN and JOHNSON, JJ.

      Mr. Payroll Corporation and Cash America International, Inc., appeal from an order

denying their motion to abate a suit by Exchange Services, Inc., and to order the parties

to arbitration. We vacate the trial court’s order and remand.
                                      BACKGROUND

       Mr. Payroll Corporation, as franchisor (Mr. Payroll) and Exchange Services, Inc.,

as franchisee (ESI), executed an Amended and Restated Franchise Agreement (the

Agreement) to be effective July 31, 2000. Cash America International, Inc. (Cash America)

executed the Agreement in the capacity of Guarantor. The Agreement, in general,

concerns the establishment and operation of facilities which offer check cashing and

related services. The term of the Agreement is ten years from the date of execution, with

provisions for renewal. Under the Agreement, if ESI did not operate the business in which

a check-cashing facility was located (a “third party franchise”), then Mr. Payroll was, or is,

required to lease or sublease the facility Location and in turn sublease its Location rights

to ESI.

       Section 20 of the Agreement is entitled Resolution of Disputes. Among other

provisions, subsection 20.B provides that

       Except as provided in Section 20(D) below [addressing injunctive relief] and
       except for actions brought with respect to the ownership or use of the
       Proprietary Marks or payment of any fees described in Section 3 hereof (any
       of which actions shall be brought only in the state or federal courts in Tarrant
       County, Texas), Franchisor and Franchisee agree that any and all disputes
       between them, and any claim or controversy arising out of, or related to this
       Agreement, or the making, performance, or interpretation thereof, shall be
       finally settled solely and exclusively by arbitration in accordance with the
       Commercial Arbitration Rules of the American Arbitration Association
       (“AAA”) or any successor organization. . . .

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       Subsection 23.O of the Agreement provides that all previous agreements related

to Existing Franchises are terminated and of no further force or effect. The subsection

also provides that notwithstanding the termination provisions of subsection 23.O, “nothing

in this agreement shall terminate or otherwise affect any lease of real property that relates

to the Existing Franchises and that is valid and effective as of the date of this Agreement.”

As of the date of the Agreement, a lease dated February 3, 1989 (the 1989 lease), existed

between ESI and Toot ‘N Totum Food Stores (Toot ‘N Totum), whereby Toot ‘N Totum

leased locations in some of its convenience stores to ESI. The locations were for the

purpose of ESI operating check-cashing operations. The 1989 lease did not address

choice of law, venue or procedures for dispute resolution.

       In addition to the Amended and Restated Franchise Agreement, Mr. Payroll and ESI

executed an Assignment and Assumption of Lease and Estoppel Certificate agreement

effective July 31, 2000 (the Assignment). The Assignment, in relevant part, (1) assigned

to Mr. Payroll all of ESI’s rights under the 1989 lease, (2) required Mr. Payroll to perform

all of ESI’s obligations under the 1989 lease, and (3) provided that “venue for any dispute

in connection with this Assignment shall be in a court of competent jurisdiction in the

county in which the Premises are located.”

       In September, 2001, ESI sued Mr. Payroll and Cash America in Potter County

where ESI alleged a majority of the premises in dispute are located. The suit alleged

execution of the Assignment by Mr. Payroll, assumption of Mr. Payroll’s obligations under

the Assignment by Cash America, and breach of the Assignment and the 1989 lease by

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both Mr. Payroll and Cash America. ESI alleged that (1) the 1989 lease required ESI to

pay certain remodeling costs incurred by Toot ‘N Totum, (2) Mr. Payroll and Cash America

assumed ESI’s lease obligations, (3) Mr. Payroll and Cash America refused to pay the

remodeling costs to Toot ‘N Totum, and (4) ESI paid the costs to Toot ‘N Totum because

of the refusal of Mr. Payroll and Cash America to pay. ESI sought damages for breach of

the Assignment and 1989 lease, as well as generally pleading for declaratory judgment

construing the agreements and declaring the rights and duties of the parties under the

written instruments. Toot ‘N Totum was not made a party to the suit by ESI, Mr. Payroll or

Cash America.

       Mr. Payroll and Cash America responded to ESI’s suit with a Motion to Abate by

which they sought an order directing the parties to arbitrate the claims and abating the

lawsuit. They also filed an Original Answer subject to the motion to abate by which they

again asserted that the claims made by ESI were subject to arbitration. ESI did not and

does not contest the validity of the arbitration provision in the Agreement.1 Rather, ESI

urged the trial court to deny the motion to refer the claims for arbitration because (1) Toot

‘N Totum was a necessary party to the dispute, Toot ‘N Totum would have to be joined in

the suit before the claims could be resolved, and Toot ‘N Totum was not a party to an

       1
        Cash America signed the Franchise Agreement only as guarantor, and was not
included in the term “Franchisor” as used in the arbitration provision. ESI does not
contend that its claims against Cash America are not subject to the arbitration provision
on the basis that Cash America was not included in the term “Franchisor.” See, e.g.,
ANCO Ins. Servs. of Houston, Inc. v. Romero, 27 S.W.3d 1, 5 (Tex.App.--San Antonio
2000, pet. denied); Carlin v. 3V Inc., 928 S.W.2d 291, 294-97 (Tex.App.--Houston [14th
Dist.] 1996, no writ); Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874,
879 (Tex.App.--Waco 1992, writ denied).

                                             4
arbitration agreement, thus could not be compelled to arbitrate; and (2) ESI’s claims were

outside the scope of the arbitration provision.

       ESI recognizes that Texas public policy favors arbitration and that once the

existence of a valid arbitration agreement is shown, a party seeking to avoid the effects

of the agreement must show that the dispute is not within the scope of the agreement.

See, e.g., Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896, 898-900 (Tex. 1995).

ESI contends that the relevant determination is whether ESI’s “breach of contract/lease

claims fall outside the scope of the arbitration clause.” See In re FirstMerit Bank, N.A., 52
S.W.3d 749, 753 (Tex. 2001). In asserting that the claims are outside the scope of the

clause, ESI notes that it is not suing under the Amended and Restated Franchise

Agreement, but only under the Assignment and 1989 lease; neither the Assignment nor

the 1989 lease contain an arbitration clause; and the Assignment does not state that it is

made pursuant to the Franchise Agreement. ESI also maintains that Toot ‘N Totum did

not agree to arbitrate, cannot be forced to arbitrate, and because ESI’s claims involve the

1989 lease to which Toot ‘N Totum is a party, the dispute between ESI, Mr. Payroll and

Cash America are not arbitrable. We first address Toot ‘N Totum’s effect on the arbitration

question.

                          EFFECT OF A NECESSARY PARTY
                 NOT SUBJECT TO THE ARBITRATION AGREEMENT

       Mr. Payroll and Cash America urge that even if Toot ‘N Totum were to be made a

party to the suit, Mr. Payroll and Cash America would still be entitled to arbitrate their

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disputes with ESI because the disputes are within the scope of a valid arbitration

agreement. They cite Prudential-Bache Securities, Inc. v. Garza, 848 S.W.2d 803, 807

(Tex.App.--Corpus Christi 1993, orig. proceeding), in which the court addressed claims

made in the same lawsuit by a wife and husband. The wife had not signed an arbitration

agreement with the defendant; the husband had signed an arbitration agreement with the

defendant which covered some, but not all, claims being made by the husband. The court

held that claims made by the husband which were within the scope of the arbitration

agreement were arbitrable despite the presence in the same lawsuit of the wife who had

not agreed to arbitrate, and although one of the husband’s claims was not subject to the

arbitration agreement. Id. at 807.

       We agree with Mr. Payroll and Cash America. If a party to a valid arbitration

agreement could effectively negate the agreement by filing suit and joining into the suit a

necessary or proper party who had not agreed to arbitration, or alleging the necessity or

possibility of future joinder of such a party, then agreements to arbitrate disputes would be,

practically speaking, illusory. The Texas Arbitration Act, TEX . CIV . PRACT . & REM . CODE

ANN . § 171.001, et seq. (Vernon Supp. 2002), recognizes that arbitration agreements may

not cover all parties and all issues in a lawsuit. See id. § 171.025. The Act directs that

the trial court shall stay a proceeding which involves an issue subject to arbitration, but

that the stay applies only to the issue subject to arbitration if that issue is severable from

the remainder of the proceeding. Id. Assuming, arguendo, that Toot ‘N Totum is a

necessary party to the lawsuit, such fact does not preclude Mr. Payroll and Cash America

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from asserting their right to arbitrate issues within the scope of a valid arbitration

agreement, whether or not Toot ‘N Totum is actually a party to the suit. See id.; Garza,
848 S.W.2d at 807.

                      SCOPE OF THE ARBITRATION PROVISION

      Mr. Payroll and Cash America urge that ESI’s claims arise out of and are related to

the Amended and Restated Franchise Agreement because the Assignment was executed

as part of the transaction involving execution of the Agreement, and was required by the

Agreement. They further assert that even if ESI’s claims are construed as claims or

controversies not “arising out of or related to” the Amended and Restated Franchise

Agreement, the language of the arbitration provision is broad enough to require arbitration

of ESI’s claims because the language requires arbitration of “any and all disputes”

between the parties in addition to disputes arising out of or related to the Franchise

Agreement. For the reasons set out hereafter, we need not determine if the claims arise

out of or are related to the Agreement.

       In the absence of an allegation of ambiguity in the contract language, the instrument

alone will be deemed to express the intent of the parties. See Exxon Corp. v. West Tex.

Gathering Co., 868 S.W.2d 299, 302 (Tex. 1993). A contract should be construed as a

whole, attempting to give effect to all contract provisions so that none will be rendered

meaningless. See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464

                                             7
(Tex. 1998). Separate contracts between the same parties executed at the same time and

pertaining to the same transaction are generally construed together. See DeWitt County

Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999); Jim Walter Homes, Inc. v.

Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984). A contract is construed in accordance

with the plain meaning of its language, unless it definitely appears from the writing as a

whole that the intention of the parties would be defeated by such a procedure. See Parks,
1 S.W.3d at 101.

       The plain, unambiguous language of the arbitration provision before us provides for

arbitration of all disputes between ESI and Mr. Payroll with specific exceptions for actions

with regard to ownership or use of Proprietary Marks or fees to be paid under a specified

section of the Agreement. ESI offers no authority for its argument that the language “any

and all disputes” does not mean what it clearly says: all disputes involving these parties,

with specified exceptions, none of which apply to the current dispute. Nor does ESI offer

authority for its assertion that the language is not broad enough to cover this specific

dispute arising out of duties and obligations created during the course of business

dealings involving check cashing operations and locations, which are the bases of ESI’s

relationship with Mr. Payroll and Cash America. See Parks, 1 S.W.3d at 102. And, we

have previously addressed and discounted ESI’s argument that the dispute is outside the

scope of the arbitration provision because Toot ‘N Totum is, should be, or could be

involved. We conclude that the dispute is within the scope of the arbitration provision.

                                             8
       Finally, we consider ESI’s argument that the venue provision in the Assignment

removes this dispute from the arbitration provision, even if the dispute would otherwise fall

within the scope of the provision. See Point Lookout West, Inc. v. Whorton, 742 S.W.2d
277, 278 (Tex. 1987). The language of the venue provision does not reference or purport

to be an amendment to the section of the Franchise Agreement entitled “Resolution of

Disputes,” the subsection entitled “Arbitration,” nor the specific language of the arbitration

provision. The venue provision is part of a single sentence which includes choice of law

and forum selection language. The sentence selects the law of the state in which the

premises are located as the law to be used in construing the Assignment, and designates

the location for dispute resolution as the county in which the premises are located.

Reasonably construed together with the Amended and Restated Franchise Agreement

which was to be effective on the same date as the Assignment, the provision does not

prescribe how disputes are to be resolved, only where. See In re Winter Park Constr.,

Inc., 30 S.W.3d 576, 578 (Tex.App.--Texarkana 2000, orig. proceeding). We conclude that

the venue provision in the Assignment does not contradict language of the arbitration

provision nor does it remove disputes from the scope of the provision.

                                       CONCLUSION

       The claims asserted by ESI in its Original Petition are within the scope of the

arbitration provision in the Amended and Restated Franchise Agreement executed by ESI

and Mr. Payroll as principals and Cash America as guarantor. The Order of the trial court

denying the motion of Mr. Payroll and Cash America to abate ESI’s suit and order the

                                              9
parties to arbitration is vacated. The cause is remanded to the trial court for further

proceedings in accordance with this opinion.

                                               Phil Johnson
                                                 Justice

Quinn, J., concurring

Publish.

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                                   NO. 07-02-0077-CV

                              IN THE COURT OF APPEALS

                       FOR THE SEVENTH DISTRICT OF TEXAS

                                      AT AMARILLO

                                         PANEL B

                                      MAY 29, 2002

                          ______________________________

                        CASH AMERICA INTERNATIONAL, INC.
                         AND MR. PAYROLL CORPORATION,

                                                                Appellants

                                             v.

                             EXCHANGE SERVICES, INC.,

                                                                Appellee

                        _________________________________

             FROM THE 320th DISTRICT COURT OF POTTER COUNTY;

                 NO. 89151-D; HONORABLE DON EMERSON, JUDGE

                         _______________________________

                                   Concurring Opinion
                         _______________________________

       I concur in the majority’s opinion and disposition but write to specifically address a

contention Exchange Services, Inc. made at oral argument. There, it asserted that

because the parties agreed via paragraph 23.0 of the franchise agreement that “nothing

in this [franchise] agreement shall terminate or otherwise affect any lease of real property
that relates to the Existing Franchises,” the arbitration clause contained in the franchise

agreement has no “affect” upon disputes arising under the lease. (Emphasis added).

Assuming arguendo that the passage “or otherwise affect any lease” could be read as

encompassing disputes or litigation involving duties imposed by the lease, I note that the

claims of Exchange Services are founded on more than just the lease. For instance, it also

seeks to enforce obligations purportedly assumed by Mr. Payroll Corporation under the

Assignment and Assumption of Lease and Estoppel Certificate agreement. The latter,

more importantly, is mentioned nowhere in paragraph 23.0. Thus, any purported immunity

from arbitration created by paragraph 23.0 does not encompass those disputes implicating

or arising under the agreement to assign the lease.

                                                        Brian Quinn
                                                          Justice

Publish

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