Court Opinion

ID: 2879873
Source: CourtListenerOpinion
Date Created: 2015-09-07 05:35:13.401304+00
Date Added: 2024-06-11T11:35:56.171615
License: Public Domain

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                                                 OPINION

                                            No. 04-09-00216-CV

      IN RE WELLS FARGO BANK, N.A., AMERICA’S SERVICING COMPANY,
    PREMIERE ASSET SERVICES, LANGLEY & BANACK, INC., Robert Carl JONES,
                           and Albert GARCIA

                                     Original Mandamus Proceeding1

Opinion by:       Rebecca Simmons, Justice

Sitting:          Catherine Stone, Chief Justice
                  Sandee Bryan Marion, Justice
                  Rebecca Simmons, Justice

Delivered and Filed: September 23, 2009

PETITION FOR WRIT OF MANDAMUS CONDITIONALLY GRANTED

           Relators Wells Fargo Bank, N.A. (“Wells Fargo”), America’s Servicing Company, Premiere

Asset Services, Langley & Banack, Inc., Robert Carl Jones (“Jones”), and Albert Garcia (“Garcia”),

defendants in the underlying proceeding, filed a petition for writ of mandamus seeking to compel

the trial court to vacate the order denying relators’ motions to compel arbitration. We conditionally

grant mandamus relief.

          … This proceeding arises out of Cause No. DC-08-01, styled Edward Huerta, et al. v. Wells Fargo Bank, et
           1

al., pending in the 229th Judicial District Court, Duval County, Texas, the Honorable Alex W . Gabert presiding.
                                                                                                         04-09-00216-CV

                                                 BACKGROUND

A.       Deed of Trust and Arbitration Agreement

         The underlying dispute involves allegations that relators wrongfully foreclosed on Edward

and Margarita Huerta’s (“the Huertas”) property. On December 27, 2000, the Huertas obtained a

home equity loan in the amount of $33,600 from Wells Fargo. The loan was secured by a lien on

property described as 4.867 acres of land with the address of “HC 1 Box 36 Concepcion, TX 78349,"

as evidenced by the Deed of Trust.2 In connection with this loan, the Huertas and Wells Fargo

entered into an arbitration agreement, referenced by and incorporated into the Deed of Trust. The

arbitration agreement provides as follows:

                   Any party to this Agreement or to any Loan Document may require
                   that any Dispute be resolved by binding arbitration in accordance with
                   the terms of this Arbitration Program, administered by the American
                   Arbitration Association (the “AAA”) . . . and the Federal Arbitration
                   Act . . . .

                   A ‘Dispute’ shall include any dispute, claim or controversy of any
                   kind, whether in contract or in tort, legal or equitable, now existing
                   or hereafter arising, relating in any way to this Note or Loan
                   Documents or any related agreement incorporating this Arbitration
                   Program (the “Documents”), or any past, present, or future loans,
                   transactions, contracts, agreements, relationships, incidents, or
                   injuries of any kind whatsoever relating to or involving consumer
                   lending, business banking, community banking, Private Client
                   Services, or any successor group or department of Lender. . . .
                   Arbitration may be demanded at any time, and may be compelled by
                   summary proceedings in Court.

         2
             …
             It is undisputed that this is not the correct property description. W ells Fargo sought to obtain a lien on the
Huertas’ home; however, according to the parties, the description of the property in the Deed of Trust is not owned by
the Huertas.

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                                                                                         04-09-00216-CV

        In 2005, the Huertas defaulted on the home equity loan, and eventually filed for bankruptcy.

The Huertas listed 9.95 acres as their homestead property. However, the property identified as the

Huertas’ homestead in the bankruptcy petition was not the same property as the property described

in the Deed of Trust with Wells Fargo. Wells Fargo was listed in the “Schedule D-Creditors Holding

Secured Claims.” The Huertas listed Wells Fargo, with the following description: “Dec. 2000,

supposed home equity loan on homestead property, 9.95 acres and home in Duval County Texas

debtor disputes claim and avers it to be unsecured.” According to the parties, neither the Huertas

nor Wells Fargo ever filed an adversary proceeding related to the Wells Fargo purported lien.3 On

January 11, 2006, the Huertas were discharged under section 727 of Title 11, of the United States

Code.

        On May 5, 2006, Wells Fargo, through its counsel Langley & Banack and Jones, sought a

non-judicial foreclosure of the home-equity loan based on the Deed of Trust. The property was

purchased by Wells Fargo at the foreclosure sale. According to the Huertas, Wells Fargo then hired

Garcia to evict the Huertas and remove their belongings from their home. Following the eviction,

on January 3, 2008, the Huertas filed suit against Wells Fargo, Langley & Banack, and other

defendants that are no longer a part of the case. Langley & Banack answered the suit on February

15, 2008, and Wells Fargo answered the suit on April 18, 2008. Then, on June 9, 2008, the Huertas

filed their First Amended Petition, adding America’s Servicing Company, who answered the suit on

October 13, 2008, and Jones, an attorney at Langley & Banack, who answered the suit on July 1,

2008. On October 15, 2008, the Huertas filed their Second Amended Petition, adding Premiere

        3
            …   The record does not include a copy of the W ells Fargo proof of claim.

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Asset Services, who answered the suit on December 3, 2008, and Garcia, who answered the suit on

November 5, 2008.4

        On January 5, 2009, Wells Fargo, Premiere Asset Services, and America’s Servicing Co.,

jointly filed a no evidence motion for summary judgment on the Huertas’ claims for exemplary or

additional statutory damages. The motion was set to be heard on February 6, 2009. However, on

January 22, 2009, Langley & Banack and Jones filed a motion to compel arbitration. Because of the

motion to compel arbitration, relators asked that the trial court remove the motion for summary

judgment from the trial court’s consideration. Subsequently, Wells Fargo, America’s Servicing

Company, and Premiere Asset Services filed a similar motion to compel arbitration. Finally, on

February 3, 2009, Garcia filed a motion to compel arbitration.

        In response to the motions to compel arbitration, the Huertas asserted there was not a valid

and binding arbitration agreement because: (1) the agreement was only between “Wells Fargo Bank

Texas, N.A.” and the Huertas, not any of the actual parties to the lawsuit; (2) the agreement was

discharged by the Huertas’ bankruptcy; (3) the agreement was merged, and therefore, eliminated, by

the foreclosure sale and the substitute trustee’s deed of trust; (4) the Huertas’ minor children were

not bound by the arbitration agreement; and (5) Margarita Huerta, who signed the arbitration

agreement “pro forma” was not bound by the arbitration agreement. In addition, the Huertas argued

their claims did not fall within the scope of the arbitration agreement, and asserted the defense that

relators waived their right to arbitration by substantially invoking the judicial process and by not

requesting arbitration within a “reasonable time.”

        4
         … The Huertas filed their Third Amended Petition on October 29, 2008 and their Fourth Amended Petition
on January 21, 2009.

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                                                                                       04-09-00216-CV

       Following a hearing on the motions to compel arbitration on March 2, 2009, the trial court

denied all of the motions to compel arbitration without detailing any explanation in the order. This

petition for writ of mandamus ensued.

                                            ANALYSIS

A.     Standard of Review

       Relators contend the trial court erred in denying relators’ motions to compel arbitration under

the Federal Arbitration Act (“FAA”). The parties do not dispute that the arbitration agreement

invokes the FAA. Mandamus will issue only to correct a clear abuse of discretion for which the

relator has no adequate remedy at law. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135 (Tex.

2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding).

When a motion to compel arbitration under the FAA has been erroneously denied, there is no

adequate remedy at law, and mandamus will issue. In re D. Wilson Constr. Co., 196 S.W.3d 774,

780 (Tex. 2006). A party seeking a writ of mandamus to compel arbitration under the FAA must:

(1) establish the existence of a valid arbitration agreement; and (2) show that the claims asserted are

within the scope of the agreement. See In re AdvancePCS Health, L.P., 172 S.W.3d 603, 607 (Tex.

2005) (orig. proceeding) (per curiam).

B.     Validity of the Arbitration Agreement

       Whether there is a valid and enforceable agreement to arbitrate is a legal question subject to

de novo review. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Although there

is a strong presumption favoring arbitration, that presumption arises only after the party seeking to

compel arbitration proves a valid arbitration agreement exists. Id. Under both the FAA and the

TAA, we apply ordinary state contract law principles in order to decide whether a valid arbitration

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                                                                                       04-09-00216-CV

agreement exists. See In re D. Wilson, 196 S.W.3d at 781 (citing First Options of Chi., Inc. v.

Kaplan, 514 U.S. 938, 944 (1995)). Once a valid agreement to arbitrate has been established, a

presumption attaches favoring arbitration and the burden shifts to the party resisting arbitration to

establish a defense to enforcing arbitration. See In re AdvancePCS, 172 S.W.3d at 607; In re

Hartigan, 107 S.W.3d 684, 687-88 (Tex. App.—San Antonio 2003, orig. proceeding [mand.

denied]).

       Because the trial court did not specify the reason why it denied the motions to compel

arbitration, we must consider all of the Huertas’ arguments made in the trial court asserting there is

not a valid agreement to arbitrate.

       1.      Do relators have the right to enforce the agreement?

               a.      Wells Fargo

       The first issue before the trial court was whether Wells Fargo Bank, N.A. established it is

Wells Fargo Bank Texas, N.A., the lender listed on the arbitration agreement. The Huertas argued

in the trial court that Wells Fargo Bank, N.A. did not establish it is Wells Fargo Bank Texas, N.A.

and that Wells Fargo Bank, N.A. is not entitled to enforce the arbitration agreement. Although the

Huertas failed to address this issue in this court, we must consider it because it was an issue upon

which the trial court could have based its ruling.

       The Huertas’ Original Petition and all subsequent petitions in the record name Wells Fargo

Bank, N.A. as a defendant and assert that the loan they obtained was from Wells Fargo Bank, N.A.

In addition, in a reply to the Huertas’ sur-reply before the trial court regarding the motion to compel

arbitration, Wells Fargo Bank, N.A. specifically asserted that Wells Fargo Bank, N.A. is the

successor by merger to Wells Fargo Bank Texas, N.A. Furthermore, Wells Fargo Bank N.A.

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                                                                                       04-09-00216-CV

included as an exhibit to the reply a document from the Federal Reserve System National

Information Center and a letter from the Comptroller of the Currency, Administrator of National

Banks, indicating that Wells Fargo Bank Texas, N.A. was consolidated and the resulting charter is

Wells Fargo Bank, N.A. As a result of the foregoing, we conclude that Wells Fargo Bank, N.A.

established that Wells Fargo Bank Texas, N.A. was consolidated and resulted in Wells Fargo Bank,

N.A., and, therefore, has the right to enforce the agreement.

b.     Nonsignatories

       In addition to arguing Wells Fargo Bank, N.A. was not entitled to enforce the arbitration

agreement, the Huertas claimed that the remaining relators lacked standing to assert any right to

enforce the arbitration agreement. Therefore, we must address whether relators America’s Servicing

Company, Premiere Asset Services, Langley & Banack, Inc., Jones, and Garcia have the right to

enforce the arbitration agreement since they were nonsignatories to the arbitration agreement. In

support of their argument that they are entitled to compel arbitration under the arbitration agreement,

the nonsignatories assert they are agents of a signatory, Wells Fargo Bank.

       The burden of establishing the existence of a valid and enforceable arbitration agreement

includes proving that the party seeking to compel arbitration was a party to the agreement or had the

right to enforce the arbitration agreement. In re Merrill Lynch Trust Co., 123 S.W.3d 549, 545-555

(Tex. App.—San Antonio 2003, orig. proceeding), mand. granted, 235 S.W.3d 217 (Tex. 2007)

(orig. proceeding) (per curiam). “Federal courts have recognized six theories, arising out of common

principles of contract and agency law, that may bind nonsignatories to arbitration agreements:

(1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel; and

(6) third-party beneficiary.” In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005).

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                                                                                        04-09-00216-CV

       The nonsignatories to an arbitration agreement who are agents of a signatory may be able to

invoke an arbitration agreement in some cases. See In re Kaplan Higher Educ. Corp., 235 S.W.3d
206, 209 (Tex. 2007) (holding that “the agents of a signatory may sometimes invoke an arbitration

clause even if they themselves are nonsignatories and a claimant is not suing on the contract.”); In

re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (holding that “[w]hen contracting parties

agree to arbitrate all disputes ‘under or with respect to’ a contract . . ., they generally intend to

include disputes about their agents’. . . .”). “The scope of an arbitration agreement may be extended

to claims against agents of the principal when all the agents’ allegedly wrongful acts relate to their

behavior as agents of the principal signatory company, and those acts were within the scope of the

claims covered by the arbitration provisions for which the principal would be liable.” In re Merrill

Lynch, 123 S.W.3d at 556 (citing Pritzker v. Merrill Lynch, Inc., 7 F.3d 1110, 1121 (3d Cir. 1993)).

       The Huertas do not appear, in the trial court or in this court, to dispute that all of the

nonsignatory relators were agents of Wells Fargo. To the contrary, the Huertas’ Fourth Amended

Petition indicates that each of the nonsignatory relators were acting as agents of Wells Fargo:

               America’s Servicing is the assumed name for Wells Fargo Home
               Mortgage, Inc., a California Corporation registered to do business in
               Texas. America’s Servicing was specifically authorized by Wells
               Fargo to act as its agent in all proceedings and acts against the
               Plaintiffs complained of in this lawsuit. . . .

               [Langley & Banack] was hired by America’s Servicing and/or Wells
               Fargo as its agent or subagent and acted in furtherance of its
               principals’ interests. . . .

               [Robert Carl Jones] is an employee or representative of Langley &
               Banack, Inc., and was directly responsible for the acts of Wells Fargo
               and America’s Servicing and the injury of the Plaintiffs. . . .

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                                                                                        04-09-00216-CV

               Albert Garcia and his agents and his employees invaded the Huertas’
               privacy. . . . Wells Fargo Bank and/or Premiere Asset Services
               authorized, controlled, directed, participated in, and/or conspired in
               these wrongful acts.

               Premiere Asset Services an assumed name of Wells Fargo Home
               Mortgage, A Division of Wells Fargo Bank, N.A. . . .

Because the parties in this court do not dispute that the nonsignatories were acting as agents of Wells

Fargo and each of their allegedly wrongful acts relate to their behavior as agents of Wells Fargo, we

conclude relators were entitled to enforce the arbitration agreement. Therefore, we hold this was not

a proper ground for the trial court to deny the motions to compel arbitration.

       2.      Was the arbitration agreement discharged in bankruptcy?

       Also before the trial court, was the issue of whether the arbitration agreement was discharged

in bankruptcy. The Huertas contend that after the discharge, the Huertas owned the 9.855 acres as

if they were bona fide purchasers for value. See In re Peebles, 197 B.R. 799, 801 (Bankr. W.D. Pa.

1996) (holding that a bankruptcy trustee has the status of a bona fide purchaser as of the date of

bankruptcy). They further assert that “[b]y operation of federal law, the bankruptcy court’s discharge

order absolved the Huertas from their pre-filing obligations and debts, necessarily including any

obligations under the Arbitration Agreement.” The Huertas assert that Green Tree Servicing, L.L.C.

v. Fisher is on point. See 162 P.3d 944 (Okla. Civ. App. 2007). However, we do not find Green

Tree Servicing persuasive.

       Green Tree involved a lawsuit filed by Green Tree Servicing against Fisher to foreclose on

property prior to the conclusion of the bankruptcy proceeding. Id. at 945-46. Fisher counterclaimed,

alleging Green Tree violated the bankruptcy injunction. Id. at 946. Green Tree filed a motion to

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compel arbitration. Id. at 947. The Oklahoma Court of Appeals determined that Fisher’s claims–

that Green Tree attempted to collect money or property that was no longer due or in his possession,

and to make telephone calls prohibited by the Oklahoma act– were not based upon duties imposed

by contract or statute that were brought into play by virtue of the contract. Id. at 948. The court

further held that “Green Tree’s alleged attempt to improperly collect money or property that was no

longer due from Fisher or in his possession occurred after the contractual relationship had been

terminated by discharge in bankruptcy.” Id. The court concluded the arbitration agreement was not

applicable to Fisher’s counterclaim. Id.

       Contrary to the Huertas’ arguments in this court, the court in Green Tree did not conclude

the arbitration agreement itself was discharged in bankruptcy, but instead, the court held that the

counterclaim was not a “dispute[], claim[], or controversy[] arising from or relating to [the]

Agreement.” Id. The Huertas provide no additional case law in support of their assertion that the

arbitration agreement was discharged in bankruptcy.

       To the contrary, relators argue that an arbitration agreement survives the termination or

repudiation of the contract itself; therefore, even if the Deed of Trust and the purported lien on the

property were terminated, the arbitration agreement survived. See Ambulance Billing Sys., Inc. v.

Gemini Ambulance Servs., Inc., 103 S.W.3d 507, 512-14 (Tex. App.—San Antonio 2003, no pet.)

(consolidated interlocutory appeal and orig. proceeding); In re Koch Indus., Inc., 49 S.W.3d 439,

444-45 (Tex. App.—San Antonio 2001, orig. proceeding [mand. denied]); see also Riley Mfg. Co.

v. Anchor Glass Container Corp., 157 F.3d 775, 782 (10th Cir. 1998).

       Furthermore, relators contend other courts have held that post-discharge, plaintiffs are still

required to submit claims to arbitration. See MBNA Am. Bank, N.A. v. Hill, 436 F.3d 104, 110 (2d

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Cir. 2006); Bigelow v. Green Tree Fin. Servicing Corp., No. CV-99-6644, 2000 WL 33596476, *6

(E.D. Ca. Nov. 30, 2000). In MBNA, Hill filed for bankruptcy and his debts were discharged in

2003. See MBNA Am. Bank, N.A., 436 F.3d at 106. During the bankruptcy, Hill filed an adversary

proceeding against MBNA, claiming that MBNA violated the automatic stay. Id. MBNA moved to

compel arbitration based on the credit agreement with regard to the consumer loan, but the motion

to compel was denied because the court held that the bankruptcy court was the most appropriate

forum because permitting arbitration would seriously jeopardize the bankruptcy proceeding. Id. at

107. The Second Circuit reversed and compelled arbitration, concluding that since the bankruptcy

had ended, arbitration of the dispute would not jeopardize the bankruptcy proceeding. Id. at 108-09.

As a result, relators contend this case represents an example of how an arbitration agreement can

survive bankruptcy and still be enforced.5

        We find no support for the Huertas’ argument that the arbitration agreement was discharged

in bankruptcy. Therefore, we conclude that this was not a proper ground for the trial court to deny

the motion to compel arbitration. Because we have concluded that the arbitration agreement was not

discharged by bankruptcy, we do not need to reach relators’ additional argument that the Huertas

were required to file an adversary proceeding in order to challenge Wells Fargo’s purported lien.

        3.          Did the arbitration agreement merge into the trustee’s deed?

        Another issue before the trial court was whether the arbitration agreement merged into the

trustee’s deed, and, therefore, is unenforceable. In the trial court and in their response to this court,

the Huertas argue that, assuming the arbitration agreement survived the discharge in bankruptcy, the

        5
            … Bigelow provides a similar example of when a court has compelled arbitration after a claim arose against
the secured creditor for acts after bankruptcy was filed, but before the debt was discharged. Bigelow, 2000 W L
33596476 at *6.

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arbitration agreement is invalid/unenforceable because the Deed of Trust, that referenced and

incorporated the arbitration agreement, merged into the trustee’s deed following the foreclosure sale.

See Fed. Land Bank of Hous. v. Brooks, 124 S.W.2d 161, 163 (Tex. Civ. App.—Beaumont 1938),

rev’d on other grounds, 143 S.W.2d 928 (Tex. 1940) (holding that in a trespass to try title case, the

deed of trust merged into its title by the deed made to it by its trustee); see also Alvarado v. Bolton,

749 S.W.2d 47, 48 (Tex. 1988) (holding that when a deed is delivered and accepted as performance

of a contract to convey, the contract is merged in the deed). However, we do not find these cases

persuasive because neither of them represent an example of a deed of trust merging into a trustee’s

deed following a foreclosure sale.

        We are not aware of any authority, nor do the Huertas cite any authority for the proposition

that an arbitration agreement is invalid or unenforceable because the deed of trust merged into the

trustee’s deed after the foreclosure sale. To the contrary, this court has previously considered a

petition for writ of mandamus that sought to enforce an arbitration agreement after the property

subject to a lien in a deed of trust was foreclosed upon. See In re Centex Home Equity Co., No. 04-

04-00585-CV, 2004 WL 2945702, *4-5 (Tex. App.—San Antonio 2004, orig. proceeding) (mem.

op.). The issue before the court in In re Centex was whether Centex had waived arbitration after

waiting fifteen months to compel arbitration. Id. at *4. We acknowledge that in In re Centex the

issue before this court was not whether a deed of trust merged into the trustee’s deed following the

foreclosure, eliminating the agreement to arbitrate. Id. However, In re Centex represents an example

of the enforcement of an arbitration agreement following foreclosure of the property. Id.

        Relators contend the arbitration agreement created obligations independent of and collateral

to the Deed of Trust, and therefore, the agreement to arbitrate remained after the foreclosure sale and

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the trustee’s deed.6 We agree. In addition, the arbitration agreement specifically provides that “[t]he

provisions of this Arbitration Program shall survive any termination, amendment, or expiration of

the Documents or relationships of the parties.” Therefore, we find the Huertas’ arguments that the

Deed of Trust merged into the trustee’s deed and extinguished any agreement to arbitrate

unpersuasive. As a result of the foregoing, we conclude this was not a proper ground for the trial

court to deny the motion to compel arbitration.

         4.       Are the minor children bound by the agreement?

         Another issue before the trial court was whether the minor children were bound by the

agreement. The Huertas argued in the trial court that because the minor children’s claims have

nothing to do with a contract, the minor children are not bound by the arbitration agreement. The

Huertas argue their claims all arise because there was no contract on the 9.855 acres and none of

their claims are predicated upon any contractual right or the violation of any contractual duty on the

part of Wells Fargo and/or its agents.

         However, “a nonparty may be compelled to arbitrate ‘if it seeks, through the claim, to derive

a direct benefit from the contract containing the arbitration provisions.’” In re Weekley Homes, L.P.,
180 S.W.3d at 131 (internal citations omitted). The Supreme Court went on to explain that:

                  Under both Texas and federal law, whether a claim seeks a direct
                  benefit from a contract containing an arbitration clause turns on the

         6
           … Relators further contend the Huertas’ merger argument is easily disposed of by Stanford Development Corp.
v. Stanford Condominium Owners Ass’n, 285 S.W.3d 45, 51-52 (Tex. App.— Houston [1st Dist.] 2009, no pet.). In
Stanford, the court of appeals held that the arbitration agreement contained in an earnest money contract did not merge
into the deed. Id. at 52. However, as the Huertas point out, the issue before the court of appeals in Stanford was whether
an arbitration clause in an earnest money contract merged into a deed, not whether an arbitration clause in a deed of trust
merges into a trustee’s deed in a foreclosure context. Id.

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                substance of the claim, not artful pleading. Claims must be brought
                on the contract (and arbitrated) if liability arises solely from the
                contract or must be determined by reference to it.

Id. at 132 (emphasis added).

        Relators assert the Huertas’ claims against them are based on relators’ enforcement of the

loan documents, contending that “but for the Loan Documents, there would have been no dispute

and neither the Huertas nor their minor children would have any claims.” Relators further contend

that as the Huertas make it clear in their pleadings, both in the trial court and in this court, the Deed

of Trust between the Huertas and Wells Fargo defines the rights of the parties and, as the Huertas

claim, establishes Wells Fargo had no rights to the property owned by the Huertas.

        The Huertas have asserted in the trial court, among other claims, violations of the Texas Debt

Collection Act, trespass, theft, invasion of privacy, wrongful post-foreclosure eviction, and they have

sought declaratory relief. The Huertas’ Fourth Amended Petition specifically requests a declaratory

judgment “that Defendant Wells Fargo has no lien or other rights in and to the 9.855 Acres, and has

no rights to pursue any deficiency against the Plaintiffs for any of the debt discharged in

bankruptcy.”

        Because the Huertas’ Fourth Amended Petition specifically requests a declaratory judgment

that Wells Fargo has no lien or other rights to the 9.855 acres, and because the Huertas and the minor

children have asserted other claims which will likely require a determination as to the validity of the

lien by reference to the contract, the minor children’s claims must be sent to arbitration along with

the Huertas’ claims. See In re Weekley Homes, L.P., 180 S.W.3d at 131. As a result, we conclude

that this was not a proper basis to deny the motions to compel arbitration as to the minor children.

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          5.      Is Margarita Huerta bound by the agreement?

          Also before the trial court, was whether Margarita Huerta was bound by the arbitration

agreement because she signed the agreement “pro forma.” The Huertas contend that because

Margarita Huerta signed the deed and the arbitration agreement “pro forma” only, she expressly

reserved her right to challenge the substantive provisions of the agreement. However, we do not

need to reach this issue because just as the minor children are bound by the agreement for the reasons

explained above, so is Margarita Huerta.

C.        Are the Huertas’ claims within the scope of the agreement?

          Having determined that a valid arbitration agreement exists between the parties, we next

address whether the claims asserted are within the scope of the agreement. See In re AdvancePCS,
172 S.W.3d at 607. As previously mentioned, the arbitration agreement provides that a “dispute”

includes in part, “any dispute, claim or controversy of any kind, whether in contract or in tort, legal

or equitable, now existing or hereafter arising, relating in any way to this Note or Loan Documents

or any related agreement incorporating this Arbitration Program (the “Documents”).”

          The Huertas asserted in the trial court and in this court that their claims do not fall within the

scope of the arbitration agreement because the tortious acts of the relators were extraneous to any

note, loan document, or lending function. The Huertas further contend that at the time the tortious

acts occurred, Wells Fargo had no lien rights to the 9.855 acres and “[f]or all practical purposes

Wells Fargo and the Huertas were strangers when Wells Fargo ousted the Huertas from their 9.855

acres.”

          On the other hand, relators assert the arbitration agreement specifically requires the Huertas

to submit “any” dispute relating to the note and loan documents and the property located at HC 1

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Box 36, Concepcion, Texas 78349. Therefore, relators contend the scope of the arbitration

agreement would therefore necessarily include: (a) whether the Deed of Trust was invalid; (b)

whether relators violated the debt collection statutes by attempting to collect the debt secured by the

Deed of Trust; and (c) whether Wells Fargo wrongfully evicted the Huertas from the property. In

order to further support their argument that the Huertas’ claims fall within the scope of the

agreement, relators contend the Huertas’ lawsuit centers on the validity of the lien in the Deed of

Trust because the basis of the Huertas’ claims of wrongful collection and eviction are based on the

alleged invalidity of the lien. Relators contend their argument is further supported by the Huertas’

request for a declaratory judgment that Wells Fargo’s purported lien was invalid.

       We agree with relators that the Huertas’ claims fall within the scope of the arbitration

agreement. The Huertas seek a declaratory judgment that the purported lien is invalid, which is a

claim that clearly “relates . . . to the Note or Loan Documents.” Based on the foregoing, we conclude

that because the Huertas’ claims fall within the scope of the arbitration agreement, this was not an

appropriate basis for the trial court to deny the motions to compel arbitration.

D.     Did relators waive their right to arbitration?

       Next we turn to whether relators waived their right to arbitration. A party waives arbitration

by substantially invoking the judicial process to the other party’s detriment. Perry Homes v. Cull,

258 S.W.3d 580, 589-90 (Tex. 2008). “Due to the strong presumption against waiver of arbitration,

this hurdle is a high one.” Id. at 590. Up until Perry, the Texas Supreme Court had never found

such a waiver. Id. The Court took the federal court approach to waiver by adopting the “totality of

the circumstances” analysis. Id. at 590-91. The Court acknowledged that like federal courts, this

Court has considered factors such as:

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                 (1) when the movant knew of the arbitration clause;
                 (2) how much discovery has been conducted;
                 (3) who initiated the discovery;
                 (4) whether it related to the merits rather than arbitrability or
                     standing;
                 (5) how much of it would be useful in arbitration; and
                 (6) whether the movant sought judgment on the merits.

Id. at 591-92.

        The Court further held that “a party who enjoys substantial direct benefits by gaining an

advantage in the pretrial litigation process should be barred from turning around and seeking

arbitration with the spoils.” Id. at 593. The Court concluded that “in close cases, the ‘strong

presumption against waiver’ should govern.” Id. (quoting In re D. Wilson, 196 S.W.3d at 783).

        Whether a party has waived its right to arbitration is a question of law that we review de

novo, giving no deference to the trial court’s ruling. Id. at 598.

1.      Substantial Invocation of the Judicial Process:

        The Huertas treat all relators as one and contend relators waived their right to arbitration

because the following has taken place: (1) extensive discovery has been conducted; (2) relators

presumably knew all along there was an arbitration agreement; (3) an oral deposition was noticed;

(4) a motion for summary judgment was filed by Wells Fargo, Premiere Asset Services, and

America’s Servicing Co.; (5) a cross-claim was filed by Garcia against Wells Fargo and Premiere

Asset Services; (6) relators participated in six depositions; (7) the Huertas’ have incurred

approximately $200,000 in attorneys’ fees; and (8) relators agreed to a docket control order and did

not oppose a trial setting.

        In their response to the petition for writ of mandamus, the Huertas provide a summary of all

of the written discovery in the case. However, a significant amount of that discovery was conducted

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by the Huertas themselves. As the Supreme Court pointed out in Perry when comparing the case

to Vesta, “while the party opposing arbitration in Vesta allegedly incurred more than $200,000 in

expenses, most of that was incurred in getting discovery rather than providing it; a party who

requests lots of discovery is not prejudiced by getting it and taking it to arbitration in the same way

that a party who produces lots of discovery outside the stricter discovery limits in arbitration. Perry,
258 S.W.3d at 598 (citing In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 764 (Tex. 2006)).

        We analyze each individual relator’s acts based on the totality of the circumstances to

determine whether they waived their right to arbitration by substantially invoking the judicial

process. It is clear from the record that relators Premiere Asset Services, America’s Servicing

Company, and Garcia did not waive their right to compel arbitration. Premiere Asset Services did

not file an answer to the suit until December of 2008; America’s Servicing Company did not file an

answer to the suit until October of 2008; and Garcia did not file an answer to the suit until November

of 2008. Shortly after the first motion to compel arbitration was filed by Langley & Banack, Inc. and

Jones,Wells Fargo Bank, N.A., America’s Servicing Company, and Premiere Asset Services filed

a joint motion to compel arbitration on January 30, 2009. Garcia filed a similar motion to compel

arbitration on February 3, 2009. In addition, according to the parties, Premiere Asset Services has

only propounded requests for disclosure on the Huertas, filed a motion for summary judgment jointly

with Wells Fargo and America’s Servicing Company, agreed to a docket control order, and did not

oppose a trial setting. America’s Servicing Company’s only participation in the lawsuit is filing a

joint motion for summary judgment along with Wells Fargo and Premiere Asset Services, agreeing

to a docket control order, and not opposing a trial setting. Garcia has only filed a cross-claim against

Wells Fargo and Premiere Asset Services, agreed to a docket control order, and did not oppose a trial

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setting. As a result of the foregoing limited activities of the parties, we conclude the Huertas did not

establish that Premiere Asset Services, America’s Servicing Company, and Garcia waived their right

to arbitration by substantially invoking the judicial process.

        We now turn to whether the remaining relators Wells Fargo, Langley & Banack, Inc., and

Jones waived their right to arbitration. Langley & Banack was the first defendant sued, and it

answered on February 15, 2008 and filed its motion to compel arbitration on January 22, 2009; Wells

Fargo answered the suit on April 18, 2008, and filed its motion to compel arbitration on January 30,

2009; and, Jones answered the suit on July 1, 2008, and filed his motion to compel arbitration jointly

with Langley & Banack, Inc.

        Wells Fargo has propounded the following discovery and motion: (1) requests for disclosure

propounded on Edward Huerta, Margarita Huerta, and the three minor children; (2) first set of

requests for production propounded on Edward Huerta and Margarita Huerta, individually; (3) first

set of interrogatories propounded on Edward Huerta and Margarita Huerta, individually; (4)

depositions on written questions propounded to a number of third parties; and (5) motion for

summary judgment jointly with Premiere Asset Services and America’s Servicing Company

regarding exemplary damages. According to the record, Langley & Banack has only propounded

basic discovery requests on the Huertas. As to Jones, there is nothing in the record indicating that

he has conducted any discovery individually.

        In Vesta, the Supreme Court held that incurring more than $200,000 in expenses and fees,

propounding standard requests for disclosure, noticing a total of four depositions, and each defendant

propounding requests for production, fell short of overcoming the presumption against waiver of a

right compel arbitration. See In re Vesta, 192 S.W.3d at 764. Unlike the situation in Perry when

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the Texas Supreme Court determined there was waiver, the case at hand is not one in which the

parties have waited until the eve of trial after all or the majority of the discovery has been completed.

Perry, 258 S.W.3d at 595-596. The parties have indicated that the trial is not until October 2009, and

there is remaining discovery that needs to be conducted, including deposing the Huertas. As a result,

we conclude that Wells Fargo, Langley & Banack, and Jones have not substantially invoked the

judicial process to the extent that it overcomes the presumption against waiver of the right to compel

arbitration.

        Because we have found that the Huertas did not meet their burden of proving relators

substantially invoked the judicial process, we do not need to consider whether the Huertas were

prejudiced. As a result, we conclude that waiver of the right to arbitration was not a proper basis

for the trial court to deny the motions to compel arbitration.

E.      Failure to Exercise Right to Arbitration Within a “Reasonable Time”

        The final issue before the trial court was whether relators were required to make a showing

that they exercised their contractual right to arbitration within a “reasonable time” as required by the

arbitration agreement. The Huertas rely on the following provision in the arbitration agreement to

support their contention that the arbitration agreement requires relators to demand arbitration at a

reasonable time:

                Abritrators; Preservation of Remedies. . . .The involvement of any
                party in judicial or other proceedings as plaintiff or in any other
                capacity shall not impair such party’s right to demand arbitration at
                any reasonable time.

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The Huertas further assert that the burden of establishing compliance with the requirement that

arbitration be demanded within a “reasonable time” is on the relators and is a condition precedent

to seeking to compel arbitration.

       We conclude that rather than a condition precedent that must be met prior to seeking to

compel arbitration, the language relied upon by the Huertas preserves a party’s remedies by

providing in part that participation in judicial proceedings will not impair that party’s right to

demand arbitration at any reasonable time. In addition, the arbitration agreement clearly indicates

in the section entitled “Agreement For Binding Arbitration,” that “[a]rbitration may be demanded

at any time, and may be compelled by summary proceedings in Court.” We conclude this was not

a proper basis for the trial court to deny the motions to compel arbitration.

                                         CONCLUSION

       Based on the foregoing, we conclude the trial court clearly abused its discretion in denying

relators’ motions to compel arbitration. Accordingly, we conditionally grant the petition for writ

of mandamus. The writ will issue only if the trial court fails to within 10 days (1) withdraw its

March 27, 2009 order denying relators’ motions to compel arbitration, and (2) issue an order staying

the underlying cause pending arbitration of the case. In addition, the stay imposed by this court’s

order of April 16, 2009 is lifted.

                                                       Rebecca Simmons, Justice

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