Court Opinion

ID: 4063600
Source: CourtListenerOpinion
Date Created: 2016-09-29 20:58:45.8309+00
Date Added: 2024-06-11T14:31:41.545813
License: Public Domain

ACCEPTED
                                                                           13-15-00163-CV
                                                           THIRTEENTH COURT OF APPEALS
                                                                  CORPUS CHRISTI, TEXAS
                                                                      5/21/2015 4:58:03 PM
                                                                         DORIAN RAMIREZ
                                                                                    CLERK

                    CASE NO. 13-15-00163-CV

                 13TH COURT OF APPEALS         FILED IN
                                        13th COURT OF APPEALS
             CORPUS CHRISTI – EDINBURG, TEXAS
                                    CORPUS   CHRISTI/EDINBURG, TEXAS
                                           5/21/2015 4:58:03 PM
                                            DORIAN E. RAMIREZ
                HUDSON INSURANCE      COMPANY Clerk

                                v.

                         BVB PARTNERS

          TRIAL COURT CASE NO. CL-14-3125-D
  COUNTY COURT AT LAW NO. 4 - HIDALGO COUNTY, TEXAS

              BRIEF OF APPELLEE BVB PARTNERS

APPELLEE REQUESTS ORAL ARGUMENT

David E. Wood
SBN 21887100
1317 E. Quebec Ave.
McAllen, TX 78503
956-458-2052
956-581-4457 (fax)
e-mail: wood_candace@yahoo.com
Attorney for Appellee BVB Partners
                  TABLE OF CONTENTS

INDEX OF AUTHORITIES                        2

STATEMENT OF THE CASE                       3

STATEMENT REGARDING ORAL ARGUMENT           3

STATEMENT OF FACTS                          3

SUMMARY OF THE ARGUMENT                     6

ARGUMENT                                    7

PRAYER                                     15

CERTIFICATE OF COMPLIANCE                   16

CERTIFICATE OF SERVICE                16

                            1
                     INDEX OF AUTHORITIES

Black v. Dallas Cty. Child Welfare Unit,
835 S.W.2d 626, 630 n. 10 (Tex. 1992)………………………… 8

FD Frontier Drilling (Cypress) Ltd. v. Didmon,
438 S.W.3d 688, 692-693 (Tex. App. - Houston - 1st Dist. 2014,
pet. denied)…………………………………. …………………...7,8

In Re LaBatt Food Services,
279 S.W.3d 640, 643 (Tex. 2009)………………………………..7

Nobles v. Rural Community Ins. Services,
122 F. Supp. 2d 1290 (M.D. Ala. 2000)…………………………..11

Nobles v. Rural Community Ins. Services,
303 F. Supp. 2d 1279, (M.D. Ala. 2004)………………………….11

Nobles v. Rural Community Ins. Services,
303 F. Supp. 2d 1292 (M.D. Ala. 2004)…………………………..11, 12, 13

In Re Oakwood Mobile Homes, Inc.,
987 S.W.2d 571, 573 (Tex. 1999)………………………………..7, 9, 15

In Re Weekley Homes, LP,
180 S.W.3d 127…………………………………………………. 10

In Re Wilson Const. Co.,
196 S.W.3d 774, 783 (Tex. 2006)………………………………. 9

Worford v. Stamper,
801 S.W.2d 108, 109……………………………………………. 8

TRAP 38.1(g)……………………………………………………4, 5

TRAP 38.1(i)…………………………………………………….9

Texas Civil Practice and Remedies Code § 51.016……………..7

                                  2
                        STATEMENT OF THE CASE

      This is a suit for damages. (CR Vol. 1, p. 4). Hudson Insurance

Company (Hudson) filed a Motion to Compel Arbitration and Motion to Stay.

(CR Vol. 1, p. 11). On March 17, 2015, the trial court signed an order denying

said motions. (CR Vol. 2, p. 122).

                             ORAL ARGUMENT

      Oral argument will aid the decisional process by bringing clarity and

context to the facts of this case.

                          STATEMENT OF FACTS

      BVB Partners (BVB) farmed cotton in Hidalgo County in 2013.

Hudson insured BVB's 2013 cotton crop. As per BVB's petition - on or about

January 23, 2013, in the course of its business and for BVB's guidance,

Hudson falsely informed BVB that it would pay the lower priced enterprise

unit premium/subsidy on prevented planting coverage if BVB put their 522.7

acres of cotton in one unit and planted at least a 20 acre block.

      This was a misrepresentation relied on by BVB to their detriment

because when they made their prevented planting claim, Hudson told them

they were not entitled to the reduced premium/subsidy because they had not

planted at least 20 acres or 20% of at least two separate units. The

misrepresentation caused BVB's premium to be $48.00 per acre higher which

                                       3
caused them to be charged at least $25,000.00 more for crop insurance than

they would have been charged had Hudson not misrepresented as set forth

above. BVB alleged: that Hudson did not exercise reasonable care or

competence in obtaining or communicating the false information; BVB

justifiably relied on the false information; and the negligent misrepresentation

proximately caused their damages. (CR Vol. 1, p. 4).

      Hudson answered BVB's suit with a general denial and a request that

their claims be referred to arbitration. (CR Vol. 1, p. 8). Hudson then filed its

Motion to Compel Arbitration and Motion to Stay. (CR Vol. 1, p. 11). The

parties presented extensive briefing and arguments regarding the motions

before the court signed the order denying the motion to compel arbitration.

(CR Vol. 2, pgs. 4, 77, 81, 93, 104, 111, 118, 122)

      Pursuant to TRAP 38.1(g), BVB responds to Hudson's Statement of

Facts as follows to contradict, correct, and clarify statements contained

therein:

      1. The part of the arbitration provision in the crop insurance policy

quoted by Hudson actually reads: "If you and we fail to agree on any

determination made by us … the disagreement must be resolved through

arbitration in accordance with the rules of the American Arbitration

Association". (CR Vol. 1 pgs. 78-79).

                                        4
      2. The payments BVB received from Hudson were all based on

premiums they paid Hudson. (Appellant's Brief, Exhibit 3).

      3. BVB has never complained about Hudson's determination as to the

"premium/applicable premium rate"; and agrees that Hudson's determination

about it was correct. (CR Vol. 1, p. 4, CR Vol. 2, p. 104). BVB alleged that

Hudson's misrepresentations about the requirements for obtaining the lower

priced enterprise unit premium proximately caused their damages.

      4. BVB objects to Hudson's statement of fact wherein it describes its

Motion to Compel Arbitration and Motion to Stay as "establishing" that the

arbitration provision "encompasses" BVB's claim. BVB objects to Hudson's

statement of fact about the Supplement it filed to the motion to compel/stay

wherein it states that the supplement "demonstrated" that BVB's claim must

be arbitrated. Both statements are argument in violation of TRAP 38.1(g).

      5. Nothing in the Reporter's Record is inconsistent with BVB's position

as referenced above. Also, as per Plaintiff's Response to Defendant's Reply Re

Motion to Compel Arbitration and Motion to Stay filed on February 3, 2015,

BVB alleged that Ms. Helweg's affidavit (CR Vol. 2, p. 91) was incredible and

unsupported by any fact in light of the actual allegations in BVB's petition.

Her affidavit was also controverted. (CR Vol. 2, p. 103).

                                      5
      6. There is, apparently, nothing in the record which shows that BVB

"inevitably disagreed with Hudson's ultimate premium determination". There

is evidence that BVB agrees that Hudson's ultimate premium determination

was correct. (CR Vol. 1, p. 4; CR Vol. 2, p. 104, paragraph 5). There appears

to be nothing in the record that shows that BVB and Hudson disagree about

any "determination" made by Hudson.

                   SUMMARY OF THE ARGUMENT

      BVB's claim against Hudson is outside the scope of the arbitration

provision. BVB's cause of action is negligent misrepresentation based on

Hudson's misrepresentation about the requirements for obtaining the lower

priced enterprise unit premium for crop insurance.

      The arbitration provision is not broad. Unlike most arbitration

provisions, it does not apply to any disagreement between the parties, but only

to a disagreement about a "determination" made by Hudson. (CR Vol. 1, pgs.

78-79).

      There is no disagreement between the parties about any "determination"

made by Hudson. BVB did not allege that Hudson decided to give them false

information about the requirements for obtaining the enterprise unit premium.

BVB only alleged negligent misrepresentation.

                                      6
      A party seeking to compel arbitration must establish that the claims fall

within the scope of the arbitration provision. In Re Oakwood Mobile Homes,

Inc., 987 S.W.2d 571, 573 (Tex. 1999). Hudson did not establish that BVB's

claim against it is within the scope of the arbitration provision.

                                ARGUMENT

                             Standard of Review

      The only issue in this case is whether Hudson established, under the

facts relevant herein, that BVB's claims were within the scope of the

arbitration provision.

      The abuse of discretion standard of review is applied to interlocutory

appeal of orders denying motions to compel arbitration in a matter subject to

the Federal Arbitration Act and appealed pursuant to section 51.016 of the

Texas Civil Practice and Remedies Code as is this case (see Hudson's brief,

Statement of Jurisdiction). FD Frontier Drilling (Cypress) Ltd. v. Didmon,

438 S.W.3d 688, 692-693 (Tex. App. - Houston - 1st Dist. 2014, pet. denied).

      Under that standard, the court must defer to the trial court's factual

determinations if they are supported by evidence. F. D. Frontier Drilling

(Cypress) Ltd. v. Didmon, 438 S.W.3d 688, 692-693 (Tex. App. - Houston -

1st Dist. 2014, pet. denied). In Re LaBatt Food Services, 279 S.W.3d 640, 643

(Tex. 2009).

                                        7
      Legal determinations are reviewed de novo, and whether a claim falls

within the scope of an arbitration agreement "involves" the trial court's legal

interpretation of the agreement, and such interpretations are reviewed de

novo. F. D. Frontier Drilling (Cypress) Ltd. v. Didmon, 438 S.W.3d 688, 692-

693 (Tex. App. - Houston - 1st Dist. 2014, pet. denied).

      No findings of fact or conclusions of law were requested or filed for

this case. It is therefore implied that the trial court made all the findings

necessary to support its decision. In determining whether some evidence

supports the decision and the implied findings of fact, it is proper to consider

only that evidence most favorable to the issue and to disregard entirely that

which is opposed to it or contradictory. Worford v. Stamper, 801 S.W.2d 108,

109. Black v. Dallas County Child Welfare Unit, 835 S.W.2d 626, 630 n. 10

(Tex. 1992).

      The trial court had before it BVB's petition, the arbitration provision,

the affidavit of Bruce Shields, and BVB's repeated admission that it was not

complaining about or disagreeing with Hudson's "ultimate premium

determination". (CR Vol. 1, p. 4; CR Vol. 1, p. 11; CR Vol. 2, p. 77; CR Vol.

2, p. 104; CR Vol. 2, p. 118). As per Worford and Black, the Court must

"disregard entirely" anything opposed to that evidence.

                                       8
      The trial court found that there was no disagreement between the parties

about any determination made by Hudson at issue in BVB's suit. Pursuant to

that finding, the only legal determination that could reasonably be made about

whether BVB's claim falls within the scope of the arbitration provision, is that

Hudson failed to establish that BVB's claims were within its scope.

                     Scope of the Arbitration Provision

      Arbitration is not automatic. A trial court is actually correct to deny

arbitration if, under the facts of the case, it finds that the provision is not

susceptible of an interpretation that covers the issue in dispute. In Re D.

Wilson Const. Co., 196 S.W.3d 774, 783 (Tex. 2006). Hudson failed to carry

its burden to show that BVB's claim is within the scope of the arbitration

provision as it was obliged to do. In Re Oakwood Mobile Homes, Inc., 987
S.W.2d 571, 573 (Tex. 1999).

      With regard to Hudson's law of "direct benefits estoppel" argument,

there appears to be nothing in In Re D. Wilson Const. Co., 196 S.W.3d 774

(Tex. 2006), that even mentions it. BVB objects to this argument because

TRAP 38.1(i) requires appropriate citations to authorities in support of the

argument, and this argument has no such support.

                                       9
      BVB has never contended and does not now contend that the arbitration

provision is not valid or that they would not have to arbitrate this case if there

actually was a disagreement between the parties about a determination made

by Hudson with which they disagree. Since the issue of whether BVB's claim

falls within the scope of the provision is the only issue, BVB's argument will

focus only on that issue.

      The arbitration provision herein is narrow in comparison with the

arbitration language in the cases cited by Hudson. They require arbitration of

any disagreement between the parties. It is not surprising that the courts have

decided that almost any disagreement falls within the broad scope of those

provisions.

      The arbitration provision in this case applies only to disagreements

about determinations made by Hudson, in contrast with broad arbitration

provisions such as the one cited by the Supreme Court of Texas in In Re

Weekley Homes, LP, 180 S.W.3d 127, which required arbitration of "any

claim, dispute, or cause of action".

      It is not hard to write a broad arbitration provision, but the arbitration

provision in this case is not like those in the cases cited by Hudson.

                                       10
      If the RMA had meant to write a broad arbitration provision into the

crop insurance policies issued by insurers like Hudson, it could have easily

done so with broad language such as appears in the referenced cases. The

arbitration provision in this case is different, and Hudson is stuck with that

provision, not the one they wish they had.

                            "Nobles" is Dispositive

         There are three Nobles opinions: (1) Nobles v. Rural Community Ins.

Services, 122 F. Supp. 2d 1290 (M.D. Ala. 2000); (2) Nobles v. Rural

Community Ins. Services, 303 F. Supp. 2d 1279, (M.D. Ala. 2004); and (3)

Nobles v. Rural Community Ins. Services, 303 F. Supp. 2d 1292 (M.D. Ala.

2004).

      Nobles v. Rural Community Ins. Services, 303 F. Supp. 2d 1292 (M.D.

Ala. 2004), is on point for this case. It dealt with basically the same arbitration

provision. Both it and the second Nobles opinion show that the plaintiff

farmers' state-law claims against their crop insurance company were

reinstated after the parties submitted the issue of the farms' insurability to

arbitration.

      The farmers in Nobles v. Rural Community Ins. Services, 303 F. Supp. 2d
1292 (M.D. Ala. 2004) filed suit against a private insurance company selling

FCIC reinsured crop insurance such as Hudson.

                                        11
      They claimed the insurer failed to pay their claims because it

determined that their farm land was not insurable after having represented to

them that it was insurable before they purchased the insurance. The court in

the first Nobles case ordered arbitration on the issue of the insurer's

determination that the farm was not insurable under crop insurance rules,

because there was an obvious disagreement between the parties on that issue.

      After the parties completed arbitration (wherein the arbitrator found

that the farm was insurable), the court reinstated the farmers' claims for breach

of contract, fraud/negligent or wanton training, suppression of material facts

and negligence/wantonness, and bad faith, so they could seek relief on those

state law claims. The insurance company complained that it should not have

to defend such claims because crop insurance regulations required that they

find that the farm was not insurable. The court ruled against them and said

(emphasis added):

"The key act underlying Nobles and Hales' fraud claim, for example, is not
RCIS' denial of their insurance coverage, but is instead RCIS' act of telling
them that their land was insurable. While RCIS maintains that it was required
to find that 4,990 acres of Nobles and Hales' cotton crop were uninsurable due
to FCIC rules, it certainly was not required to misrepresent to them that their
land was insurable when in fact it was not. Similarly, the basis for Nobles and
Hales' suppression-of-material-fact and negligence-and-wantonness claims is
RCIS' failure to tell Nobles and Hales about 9(a)'s one-in-three requirement.
Again, while RCIS may have been required under FCIC rules to find that
4,990 acres of Nobles and Hales' cotton crop were uninsurable, those rules did
not require it to fail to tell Nobles and Hales about the requirements of 9(a)."

                                       12
        Nobles v. Rural Community Ins. Services, 303 F. Supp. 2d 1292 (M.D.

Ala. 2004) shows what is and is not supposed to go to arbitration regarding

farmers' claims against their crop insurers. Real disagreements about actual

determinations made by the insurer must be arbitrated. Misrepresentation

about FCIC rules, which is BVB's claim, is not within the scope of the

arbitration provision because misrepresentation is not a "determination", it is

a tort that is to be handled in court.

        In response to Hudson's assertion that the arbitration provision in

Nobles was more narrow than the provision in this case, BVB says there is

nothing to support this. Apparently, the RMA simply deleted the word

"factual" for being superfluous, and changed the language so it would apply

only to determinations made by the insurer. Hudson does not make a case for

how Nobles would have been decided differently had the present provision

been at issue there, because it would have made no difference.

        Hudson goes to some length arguing that BVB's filing suit against it

shows     they   disagreed     with      Hudson's   determination   about   the

"premium/applicable premium rate". This argument is disingenuous, but it

seems to be the only one Hudson has, since it is unable to point to any actual

disagreement between the parties about any determination made by Hudson.

                                         13
      The trial court found otherwise because BVB never made any such

claim, and clearly stated that they agreed that the determination was correct.

      When, in response to BVB's prevented planting claim, Hudson

correctly determined that BVB did not qualify for the reduced premium

because all their cotton was in one unit, it was apparent that Hudson had

misrepresented the requirements by its prior representation that they would

qualify if they put all their cotton in one unit. BVB's cause of action for

negligent misrepresentation was complete at that point because it was not until

then that they sustained damages. If Hudson had determined to charge BVB

the lower premium then BVB would have no negligent misrepresentation case

because there would be no damages. Nevertheless, this does not amount to a

disagreement between the parties about a determination made by Hudson. It

just shows a ripe cause of action for negligent misrepresentation.

      In response to Hudson's "direct benefits estoppel" argument, BVB says

that it does not deny and never has denied that the insurance contract in

question contains a valid arbitration clause. The cases cited by Hudson about

this doctrine are not relevant to this case because none of them stand for the

proposition that anyone who benefits in any way pursuant to an agreement

with an arbitration provision must then go to arbitration even if their claim is

not within the scope of the provision.

                                         14
       In any event, the "benefits" BVB received were nothing more than the

result of their bargained for agreement under the policy whereby they get

insurance coverage in exchange for premiums they pay.

       BVB is not making any "equitable objection" to arbitration. BVB's

position is that its claim is not within the scope of the arbitration provision.

       In Re Oakwood Mobile Homes, Inc. is still the law, and it requires that

Hudson establish that BVB's claim falls within the scope of the arbitration

provision. Hudson failed to do this, so the trial court was correct in denying

its motion to compel arbitration.

                                    PRAYER

       Wherefore, appellee BVB Partners prays that the trial court is affirmed,

and for such other and further relief, at law or in equity, to which they may be

entitled.

                                  Respectfully submitted,

                                  /s/ David E. Wood
                                  SBN 21887100
                                  1317 E. Quebec Ave.
                                  McAllen, TX 78503
                                  956-458-2052
                                  956-581-4457 (fax)
                                  e-mail: wood_candace@yahoo.com
                                  Attorney for Appellee BVB Partners

                                       15
                    CERTIFICATE OF COMPLIANCE

        I certify that the number of words in this computer generated brief is
3039.
                                  /s/ David E. Wood

                        CERTIFICATE OF SERVICE

      I certify that this brief was e-filed and sent to appellant's attorney, Steve
E. Couch, by e-service through the electronic filing manager on May 21, 2015.

                                  /s/ David E. Wood

                                        16