Blane Ladymon, Metro Townhomes Limited Partnership, Metro Townhomes and Homes, Inc. and Ladymon & Associates, Inc. v. Jack Lewis and Alan Colvin ( 2017 )

REVERSE and REMAND; and Opinion Filed July 21, 2017.
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-16-00776-CV
BLANE LADYMON, METRO TOWNHOMES LIMITED PARTNERSHIP, METRO
TOWNHOMES AND HOMES, INC. AND LADYMON & ASSOCIATES, INC.,
Appellants
V.
JACK LEWIS AND ALAN COLVIN, Appellees
On Appeal from the County Court at Law No. 2
Dallas County, Texas
Trial Court Cause No. CC-15-02323-B
MEMORANDUM OPINION
Before Justices Bridges, Evans, and Stoddart
Opinion by Justice Bridges
Blane Ladymon, Metro Townhomes Limited Partnership, Metro Townhomes and Homes,
Inc. (Metro), and Ladymon & Associates (Ladymon) appeal the trial court’s denial of their
motion to compel arbitration in the underlying lawsuit. In two issues, Metro and Ladymon argue
the trial court erred in denying its motion to compel arbitration, and appellees’ attempt to enforce
performance under the construction contract constitutes estoppel of any defense to the arbitration
clause. We reverse and remand for further proceedings consistent with this opinion.
In May 2015, appellees sued Metro and Ladymon, alleging they contracted with Metro
for the construction of a home, but the home was not as represented, not of proper quality, and
was not designed and/or constructed in a good and workmanlike manner. Specifically, appellees
alleged their home was damaged by failure of the supports from the second to third floors of the
home. Appellees further alleged Ladymon designed the home, including the supports from the
second to third floors, but did not have the design reviewed by a licensed architect or a structural
engineer.
Appellees asserted against Metro claims of negligence, gross negligence, negligent
misrepresentation, breach of contract, breach of warranty, violation of the Texas Deceptive
Trade Practices Act (DTPA), fraud, fraudulent inducement, and fraud in a real estate transaction.
Appellees asserted against Ladymon claims of negligence and breach of warranty.
Metro and Ladymon filed an original answer and a motion to abate the case until
appellees complied with the requirements of the Residential Construction Liability Act. On
September 21, 2015, the trial court granted Metro’s motion to abate. In January 2016, Metro and
Ladymon filed their motion to compel binding arbitration in which they argued, pursuant to the
contracts between the parties, that all disputes were subject to binding arbitration. However, due
to the passage of time, Metro and Ladymon were unable to produce copies of the design contract
or the builder construction contract. Instead, Metro and Ladymon attached copies of contracts
they claimed accurately represented the contracts signed by appellees. The motion was
supported by the affidavit of Blane Ladymon which stated, in part, as follows:
8. After a diligent search, I could not locate a fully executed copy of the Design
Contract, in part, due to passage of more than fourteen years since creation of the
Design Contract and more than twelve years since execution of same. However,
after examining Exhibit B attached to Defendants’ Plea in Abatement and Motion
to Compel Arbitration, I am of the belief that Exhibit B truly and accurately
represents the Design Contract that Plaintiffs signed and otherwise agreed to prior
to start of any design work by Designer.
11. Prior to the start of construction, Builder prepared the NEW RESIDENTIAL
CONSTRUCTION CONTRACT WITH BUILDER’S AND MECHANIC’S
LIEN – FIXED PRICE (“Builder Construction Contract”), attached to
Defendants’ Plea in Abatement and Motion to Compel Arbitration as Exhibit “E”
and presented the same to Plaintiffs along with its standard Customer Service
Manual, Restrictive Covenant and Agreement, the applicable performance
standards under NAHB, and the Limited Warranty.
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13. At the closing, I signed the documents discussed in the preceding paragraph
on behalf of the Builder, and thereafter received a copy of the fully executed
contract documents after Plaintiffs also executed the same, including the Builder
Construction Contract, the Homeowner’s Guide, the Restrictive Covenant
Agreement, Builder’s Limited Warranty, as well as the Bank’s Lien Contract.
The Builder Construction Contract contained the following provision regarding arbitration:
18. MEDIATION-ARBITRATION/LIMITATION OF CLAIMS. It is the
policy of the State of Texas to encourage the peaceable resolution of disputes
through alternative dispute resolution procedures. Owner and Contractor hereby
agree that any controversy or claim or matters in question between the parties
including, but not limited to, any matter arising out of or relating to (a) this
Contract, and any amendments thereto, (b) any breach thereof, (c) the
construction transaction reflected in the Contract, (d) the design or construction of
the Improvements, (e) any alleged fraud, misrepresentations or breach of
warranties, express or implied, (f) claims for defective design or construction of
the Improvements, (g) intentional and/or negligent infliction of emotional distress,
(h) violations of the Texas Deceptive Trade Practices-Consumer Protection Act,
(i) violations of the Texas Residential Construction Liability Act, and/or (j) any
other cause of action relating to or arising out of the construction and/or sale of
the Improvements by Contractor, (herein referred to collectively as a “Dispute”),
shall be submitted to mediation with the American Arbitration Association
(“AAA”) where the parties will endeavor to resolve the Dispute in an amicable
manner. In the event any Dispute cannot be resolved by mediation, the Dispute
shall be submitted to the AAA for binding arbitration pursuant to Title 9 of the
United States Code, which the parties hereto acknowledge and agree applies to
the transaction involved herein, and in accordance with the Construction Industry
Arbitration Rules of the AAA or such other rules as the AAA may deem
applicable. If Title 9 of the United States Code is in applicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted by the
AAA pursuant to Chapter 171 of the Texas Civil Practice and Remedies Code and
in accordance with the Construction Industry Arbitration Rules of the AAA or
such other rules as the AAA may deem applicable. In any such arbitration
proceeding: (i) all federal and state law (including Chapter 27 of the Texas
Property Code) and all statutes of limitations which would otherwise be
applicable shall apply, and (ii) the proceeding shall be conducted by a single
arbitrator. The arbitrator shall be selected by the process of appointment from a
panel pursuant to the applicable procedures of the AAA. Any award rendered in
any such arbitration proceeding shall be final and binding, and judgment upon any
such award may be entered in any court having jurisdiction.
The limited warranty contained in the Home Owner’s Guide also provided for arbitration of
disputes:
17. Any disputes between YOU and US, or parties acting on OUR behalf, related
to or arising from this AGREEMENT, the design or construction of the HOME or
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the COMMON ELEMENTS or the sale of this HOME or transfer of to the
COMMON ELEMENTS will be resolved by binding arbitration. Binding
arbitration shall be sole remedy for resolving any and all disputes between YOU
and US, or OUR representatives, employees, subcontractors, independent
contractors, or agents. Disputes subject to binding arbitration include, but are not
limited to:
1. Any disagreement or dispute regarding whether a condition in the HOME or
the COMMON ELEMENTS is a CONSTRUCTION DEFECT and is therefore
covered by this AGREEMENT;
2. Any disagreement or dispute as to whether a CONSTRUCTION DEFECT has
been corrected in compliance with this AGREEMENT;
3. Any alleged breach of this AGREEMENT;
4. Any alleged violation of consumer protection, unfair trade practice, or any
other statute;
5. Any allegation of negligence, strict liability, fraud, and/or breach of duty of
good faith, and any other claims arising in equity or from common law;
6. Any dispute concerning the issues that should be submitted to binding
arbitration
7. Any dispute concerning the timelines of OUR performance and/or
PURCHASER’S notifications under this AGREEMENT;
8. Any dispute as to the payment or reimbursement of the arbitration filing fee;
9. Any dispute as to whether this AGREEMENT, or any provision thereof,
including, but not limited to any waiver hereunder, is unenforceable;
10. Any other claim arising out of or relating to the sale, design or construction of
PURCHASER’S HOME or the COMMON ELEMENTS, including, but not
limited to any claim arising out of, relating to or based upon any implied warranty
or claim for negligence or strict liability not effectively waived by this
AGREEMENT.
The limited warranty further provided that it was governed by the Federal Arbitration Act “to the
exclusion of any inconsistent state law, regulation or judicial decision.”
Appellees filed a response in which they objected to the “evidence” attached to Metro’s
motion on the basis that “none of the ‘evidence’ is authenticated and all is hearsay.” Appellees
objected that the statements in Ladymon’s affidavit regarding Exhibit B accurately representing
the Design Contract appellees signed, Ladymon’s and appellees’ signing of the Bank’s Lien
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Agreement, and Metro’s practice of requiring arbitration of any claims in agreements with
homeowners were “irrelevant, constitute[d] hearsay and violate[d] the best evidence rule.”
Appellees moved to strike Metro’s “evidence” and Ladymon’s affidavit and argued arbitration
could not be compelled because there was no written agreement between the parties that required
arbitration. The response was supported by the affidavits of appellees who both stated, “I do not
recall signing any documents with Defendants prior to construction of my home other than
documents relating to construction financing” and “I do not recall signing any documents with
Defendants requiring Arbitration.” The trial court denied Metro and Ladymon’s motion to
compel arbitration, and this appeal followed.
In their first issue, Metro and Ladymon argue the trial court erred in denying their motion
to compel arbitration. Specifically, they argue they conclusively established a valid arbitration
agreement governed by the Federal Arbitration Act, and they conclusively established appellees’
claims are within the scope of the arbitration agreement.
A person seeking to compel arbitration must first establish the existence of an arbitration
agreement subject to the FAA and show that the claims raised fall within the scope of that
agreement. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005); Roe v.
Ladymon, 318 S.W.3d 502, 510 (Tex. App.—Dallas 2010, no pet.). If the other party resists
arbitration, the trial court must determine whether a valid agreement to arbitrate exists. J.M.
Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). The trial court’s determination of
the arbitration agreement’s validity is a legal question subject to de novo review. Id. If the trial
court finds a valid agreement, the burden shifts to the party opposing arbitration to raise an
affirmative defense to enforcing arbitration. Id. A strong presumption favoring arbitration arises
after the party seeking to compel arbitration proves that a valid arbitration agreement exists. Id.
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Arbitration agreements are creatures of contract, and courts must therefore apply standard
contract principles to determine whether a valid arbitration agreement exists. Wright v.
Hernandez, 469 S.W.3d 744, 756 (Tex. App.—El Paso 2015, no pet.). A party attempting to
enforce an arbitration agreement must, therefore, show that the agreement meets all requisite
contract elements in accordance with standard contract principles. Id. The elements of a valid
contract, including agreements to arbitrate, are: (1) an offer, (2) an acceptance, (3) a meeting of
the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract
with the intent that it be mutual and binding. Id.
Appellees argue there is no evidence of a signed agreement evidencing appellees’ intent
to submit its claims to binding arbitration. However, the absence of a party’s signature does not
necessarily destroy an otherwise valid contract and is not dispositive of the question of whether
the parties intended to be bound by the terms of a contract. Id.; Tukua Invs., LLC v. Spenst, 413
S.W.3d 786, 794 (Tex. App.–El Paso 2013, pet. denied). If a contract is not signed by a party,
then other evidence may be used to establish the nonsignatory’s unconditional assent to be bound
by the contract, including any arbitration provision. Spenst, 413 S.W.3d at 794.
Ladymon’s affidavit established that Metro presented to appellees the builder’s
construction contract attached as Exhibit E to its motion to compel arbitration. The builder’s
construction contract required arbitration of all causes of action relating to or arising from the
design, construction, or sale of the home. A closing was scheduled where Ladymon signed the
contract documents, and he later received a copy of the fully executed contract documents after
appellees executed the documents, including the builder’s construction contract. Thus,
Ladymon’s affidavit established the existence of a contract between Metro, Ladymon, and
appellees and the arbitration provision therein. See Wright, 469 S.W.3d at 756. All of appellee’s
claims are within the scope of the arbitration provision. Roe, 318 S.W.3d at 510.
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Appellees objected that some of the statements in Ladymon’s affidavit were “irrelevant,
constitute[d] hearsay and violate[d] the best evidence rule.” However, appellees did not obtain a
ruling on this objection. An objection that an affidavit contains hearsay is an objection to the
form of the affidavit. Stone v. Midland Multifamily Equity REIT, 334 S.W.3d 371, 374 (Tex.
App.—Dallas 2011, no pet.). The failure to obtain a ruling from the trial court on an objection to
the form of an affidavit waives the objection. Id.
In response to Metro and Ladymon’s motion to compel arbitration, appellees filed
affidavits stating they “do not recall” signing any documents other than documents relating to
financing and “do not recall” signing documents requiring arbitration. To have probative value,
an affiant “must swear that the facts presented in the affidavit reflect his personal knowledge.”
Kerlin v. Arias, 274 S.W.3d 666, 668 (Tex. 2008) (quoting In re E.I. DuPont de Nemours and
Co., 136 S.W.3d 218, 224 (Tex. 2004)). An affiant’s belief about the facts is legally
insufficient. 1 Id. The fact that appellees did not “recall” signing documents requiring arbitration
does not contradict Ladymon’s assertion that appellees executed the builder’s construction
contract, which contained an arbitration provision.
Thus, the evidence established a contract between the parties containing a valid
arbitration agreement governed by the Federal Arbitration Act. Further the evidence showed that
appellees’ claims, both as to the design and construction of their home, were within the scope of
the arbitration agreement. Under these circumstances, we conclude the trial court erred in
denying appellees’ motion to compel arbitration. See Webster, 128 S.W.3d at 227. We sustain
Metro and Ladymon’s first issue. Because of our disposition of their first issue, we need not
1
In his affidavit quoted above, Ladymon qualified his statement about the design contract as based on his belief. But his statements about
the Construction Contract and the Builder’s Limited Warranty were not qualified as based on his belief. We have relied only on the arbitration
clauses in the Construction Contract and the Builder’s Limited Warranty.
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address whether appellees’ conduct estopped them from asserting any defense to the arbitration
clauses.
We reverse the trial court’s order denying Metro and Ladymon’s motion to compel
arbitration and remand for further proceedings consistent with this opinion.
/David L. Bridges/
DAVID L. BRIDGES
JUSTICE
160776F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
BLANE LADYMON, METRO On Appeal from the County Court at Law
TOWNHOMES LIMITED PARTNERSHIP, No. 2, Dallas County, Texas
METRO TOWNHOMES AND HOMES, Trial Court Cause No. CC-15-02323-B.
INC. AND LADYMON & ASSOCIATES, Opinion delivered by Justice Bridges.
INC., Appellants Justices Evans and Stoddart participating.
No. 05-16-00776-CV V.
JACK LEWIS AND ALAN COLVIN,
Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and this cause is REMANDED to the trial court for further proceedings consistent
with this opinion..
It is ORDERED that appellants BLANE LADYMON, METRO TOWNHOMES
LIMITED PARTNERSHIP, METRO TOWNHOMES AND HOMES, INC. AND LADYMON
& ASSOCIATES, INC. recover their costs of this appeal from appellees JACK LEWIS AND
ALAN COLVIN.
Judgment entered this 21st day of July, 2017.
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