in Re Rick Bates

Opinion issued April 28, 2005

In The

Court of Appeals

For The

First District of Texas

NO. 01-04-01086-CV

RICK BATES, MARIANNE BATES, AND DOROTHY BATES, Appellants

V.

MTH HOMES-TEXAS, L.P. D/B/A HAMMONDS HOMES AND

MERITAGE CORPORATION, Appellees

On Appeal from the 11th District Court

Harris County, Texas

Trial Court Cause No. 2004-38830

* * *

__________

NO. 01-04-01156-CV

__________

IN RE RICK BATES, MARIANNE BATES, AND DOROTHY BATES,

Relators

Original Proceeding on Petition for Writ of Mandamus

O P I N I O N

In dual proceedings, appellants/relators, Rick Bates, Marianne Bates, and

Dorothy Bates (“Bates”), challenge the trial court’s order that granted appellees/real

parties in interest, MTH Homes-Texas, L.P. d/b/a Hammonds Homes and Meritage

Corporation’s (“Hammonds”), motion to compel arbitration.

In one issue, Bates

contends that the trial court erroneously found an agreement to arbitrate. We dismiss

the interlocutory appeal for want of jurisdiction and conditionally grant the petition

for writ of mandamus.

Background

On January 26, 2004, Bates filed suit against Hammonds because of defects

sustained during the construction of Bates’s new home. On September 9, 2004,

Hammonds filed a motion to compel arbitration based on a clause in an earnest-money contract addendum. On September 28, 2004, the trial court granted the motion

to compel. Bates filed both an interlocutory appeal and a petition for writ of

mandamus complaining of the trial court’s order. On January 21, 2005, we stayed the

trial court’s arbitration order.

Appeal

The trial court did not expressly determine whether the Federal Arbitration Act

(“FAA”) or the Texas Arbitration Act (“TAA”) applies. See 9 U.S.C. §§ 1-16 (2004);

T ex. Civ. Prac. & Rem. Code Ann . §§ 171.001-.098 (Vernon Supp. 2004-2005).

Our method of review usually depends on which act applies. However, because

mandamus, not interlocutory appeal, lies over an order granting a motion to compel

arbitration, whether under the TAA or the FAA, we need not determine which act

applies. See Mohamed v. Auto Nation USA Corp ., 89 S.W.3d 830, 834 (Tex.

App.—Houston [1st Dist.] 2002, no pet.) (combined appeal & orig. proceeding) .

Accordingly, we dismiss Bates’s interlocutory appeal for want of jurisdiction.

Mandamus

Standard of Review

Mandamus is an extraordinary remedy that will issue only to correct a clear

abuse of discretion or the violation of a legal duty when there is no adequate remedy

at law. In re Masonite Corp ., 997 S.W.2d 194, 197 (Tex. 1999). When a trial court

erroneously grants a party’s motion to compel arbitration, the movant has no adequate

remedy at law and is entitled to a writ of mandamus. See In re Am. Homestar, Inc .,

50 S.W.3d 480, 483 (Tex. 2001). We review the trial court’s order for abuse of

discretion. Jack B. Anglin Co. v. Tipps , 842 S.W.2d 266, 271 (Tex. 1992); Trico

Marine Servs., Inc. v. Stewart & Stevenson Technical Servs . Inc. , 73 S.W.3d 545, 548

(Tex. App.—Houston [1st Dist.] 2002, no pet.) (combined appeal & orig.

proceeding). A trial court abuses its discretion when it errs in determining what the

law is or in applying the law to the facts. In re Bruce Terminix Co ., 988 S.W.2d 702,

703 (Tex. 1998); Trico Marine Servs ., 73 S.W.3d at 548 . The trial court’s order does

not state its grounds for granting Hammonds’ motion to compel arbitration. Thus, we

review the grounds stated in Hammonds’ motion and affirm the trial court’s order if

any of the grounds are meritorious. See In re H.E. Butt Grocery Co., 17 S.W.3d 360,

367 (Tex. App.—Houston [14th Dist.] 2000, orig. proceeding); North American

Shipbuilding, Inc. v. Southern Marine & Aviation , 930 S.W.2d 829, 832 (Tex.

App.—Houston [1st Dist.] 1996, no writ).

Agreement to Arbitrate

In its first issue, Bates argues that there is no agreement to arbitrate.

A party cannot be required to arbitrate unless it has agreed to do so. Trico

Marine Servs ., 73 S.W.3d at 548 (quoting Hou-Scape, Inc. v. Lloyd , 945 S.W.2d 202,

205 (Tex. App.—Houston [1st Dist.] 1997, orig. proceeding)); see also T ex. Civ.

Prac. & Rem. Code Ann . § 171.021(a) (Vernon Supp. 2004-2005) (requiring judge

to order arbitration upon finding agreement to arbitrate). “The parties’ agreement to

arbitrate must be clear. In this determination, Texas contract law applies.” Trico

Marine Servs ., 73 S.W.3d at 548 (citations omitted). “Construction of an

unambiguous contract is a question of law.” Id . (citing MCI Telecommunications

Corp. v. Tex. Util. Elec. Co ., 995 S.W.2d 647, 650 (Tex. 1999)). This Court may not

expand upon the terms of the contract or tolerate a liberal interpretation of it by

reading into it a voluntary, consensual agreement to arbitrate when one otherwise

does not exist. See Seale v. Roy M. Mitchell Contracting Co ., 321 S.W.2d 149, 151

(Tex. Civ. App.—Austin 1959, writ ref’d) (finding “no clear incorporation of the

arbitration provisions of the principal contract into the subcontract between” the

parties); In re ACG Cotton Mktg., L.L.C ., 985 S.W.2d 632, 633 (Tex. App.—Amarillo

1999, orig. proceeding); Escajeda v. Cigna Ins. Co ., 934 S.W.2d 402, 407 (Tex.

App.—Amarillo 1996, no writ) (“[B]efore a contract can be read as delegating to

third-parties that power [as sole arbiters of reasonableness and necessity of all future

medical expenses], the words evincing the delegation must be express, plain, clear,

and certain.”).

Whether an enforceable agreement to arbitrate exists is a legal question subject

to de novo review. In re Kellogg Brown & Root , 80 S.W.3d 611, 615 (Tex.

App.—Houston [1st Dist.] 2002, orig. proceeding). Although an arbitration

agreement does not have to assume any particular form, the language of the

agreement must clearly indicate the intent to arbitrate. See Massey v. Galvan , 822

S.W.2d 309, 316 (Tex. App.—Houston [14th Dist.] 1992, writ denied). Without an

agreement to arbitrate, arbitration cannot be compelled. Freis v. Canales , 877 S.W.2d

283, 284 (Tex. 1994) (orig. proceeding).

Under both the TAA and the FAA, a party seeking to compel arbitration has

the initial burden to establish the arbitration agreement’s existence and to show that

the claims asserted fall within the agreement’s scope. In re Kellogg Brown & Root ,

80 S.W.3d at 615 ; see T ex. Civ. Prac. & Rem. Code Ann . § 171.021(a). If the party

seeking arbitration carries its initial burden, the burden then shifts to the party

resisting arbitration to present evidence on its defenses to the arbitration agreement.

See In re Oakwood Mobile Homes, Inc ., 987 S.W.2d 571, 573 (Tex. 1999); see also

T ex. Civ. Prac. & Rem. Code Ann . § 171.021(b) (Vernon Supp. 2004-2005);

Mohamed , 89 S.W.3d at 835 .

In its motion to compel arbitration, Hammonds relied on the following clause

of the earnest money contract addendum to show the parties’ intent to arbitrate:

THIS CONTRACT IS SUBJECT TO CHAPTER 27 OF THE

TEXAS PROPERTY CODE. THE PROVISIONS OF THAT

CHAPTER MAY AFFECT THE PURCHASER’S RIGHT TO

RECOVER DAMAGES ARISING FROM THE

PERFORMANCE OF THIS CONTRACT. IF PURCHASER

HAS A COMPLAINT CONCERNING A CONSTRUCTION

DEFECT ARISING FROM THE PERFORMANCE OF THIS

CONTRACT AND THAT DEFECT HAS NOT BEEN

CORRECTED THROUGH NORMAL WARRANTY SERVICE,

THE PURCHASER MUST PROVIDE NOTICE REGARDING

THE DEFECT TO THE BUILDER BY CERTIFIED MAIL,

RETURN RECEIPT REQUESTED, NOT LATER THAN THE

60TH DAY BEFORE THE DATE THE PURCHASER

INITIATES A CLAIM TO RECOVER DAMAGES IN AN

ARBITRATION PROCEEDING. THE NOTICE MUST REFER

TO CHAPTER 27 OF THE TEXAS PROPERTY CODE, AND

MUST DESCRIBE THE CONSTRUCTION DEFECT. IF

REQUESTED BY THE BUILDER, THE PURCHASER MUST

PROVIDE THE BUILDER AN OPPORTUNITY TO INSPECT

AND CURE THE DEFECT AS PROVIDED BY SECTION

27.004 OF THE TEXAS PROPERTY CODE.

Hammonds argues that this clause shows that the parties intended to waive the

right to a trial and instead to resolve any disputes through binding arbitration.

Hammonds contends that if the parties had intended something other than arbitration,

they would have used language such as “court of law,” instead of “arbitration

proceeding.”

We disagree that this language is sufficiently “express, plain, clear, and

certain” to evince the agreement of the parties to delegate to arbitrators the power to

decide disputes between them. See Escajeda , 934 S.W.2d at 407 . The clause in the

earnest money contract addendum on which Hammonds relies is not a traditional

arbitration clause. Rather, it is substantially similar to the statutorily mandated

disclosure statement provided for in former section 27.007 of the Texas Property

Code.

See Act of May 8, 1999, 76th Leg., R.S., ch. 189, 1999 Tex. Gen. Laws

666–667 (amended 2003) (current version at T ex. Prop. Code Ann . § 27.007

(Vernon Supp. 2004-2005)). Section 27.007 is entitled, “Disclosure Statement

Required.” Id . The clause required pursuant to section 27.007 and the one at issue

here both instruct the buyer regarding the giving of notice of construction defects to

the seller. See Sanders v. Constr. Equity, Inc ., 42 S.W.3d 364 , 371–72 (Tex.

App.—Beaumont 2001, pet. denied). Although the clause in the earnest money

contract addendum refers to arbitration, it does not limit the parties’ rights to

arbitration only. Rather, the clause—a statutorily required disclosure

statement—provides the notice procedures to follow if a party seeks damages in an

arbitration proceeding.

We conclude that the clause on which Hammonds relies, although it includes

the word “arbitration,” is not sufficient to constitute an agreement to arbitrate because

it does not clearly indicate the intent to arbitrate. Thus, contrary to Hammonds’

argument, the parties did not expressly agree in writing in the clause at issue to

submit the dispute to arbitration. See Glazer’s Wholesale Distribs, Inc. v. Heineken

U.S.A., Inc. , 95 S.W.3d 286, 297 (Tex. App.—Dallas 2001, pet. granted, judgm’t

vacated w.r.m.); In re Anaheim Angels Baseball Club, Inc ., 993 S.W.2d 875, 880

(Tex. App.—El Paso 1999, orig. proceeding).

We sustain Bates’s first issue.

Conclusion

We dismiss the interlocutory appeal in appellate cause number 01-04-01086-CV for want of jurisdiction. We conditionally grant the petition for writ of

mandamus in appellate cause number 01-04-01156-CV and order the trial court to

vacate its September 28, 2004 order granting the motion to compel arbitration of the

real parties in interest. The writ will issue only if the trial court fails to vacate its

order. We withdraw our January 21, 2005 order staying all proceedings in the trial

court. All pending motions are hereby denied.

Evelyn V. Keyes

Justice

Panel consists of Justices Taft, Keyes, and Hanks.