journeyman-construction-inc-and-safeco-insurance-company-of-america-v ( 2014 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
________________________
No. 07-13-00393-CV
________________________
JOURNEYMAN CONSTRUCTION, INC. AND
SAFECO INSURANCE COMPANY OF AMERICA, APPELLANTS
V.
SCOTTCO MECHANICAL CONTRACTORS, INC., PALMER PAINTING COMPANY,
INC., AND BCL CONSTRUCTION AND ROOFING, L.L.C., APPELLEES
On Appeal from the 181st District Court
Potter County, Texas
Trial Court No. 100499-B; Honorable John B. Board, Presiding
September 26, 2014
MEMORANDUM OPINION
Before QUINN, C.J. and HANCOCK and PIRTLE, JJ.
In this interlocutory appeal, Appellants, Journeyman Construction, Inc. and
Safeco Insurance Company of America (Journeyman), appeal the trial court’s denial of
their Motion to Abate and Compel Arbitration.1 We reverse and remand for further
proceedings consistent with this opinion.
BACKGROUND
Journeyman served as a general contractor during the restoration of the historic
Potter County Courthouse (the “project”) and Safeco issued a performance and
payment bond for the project. Each of the Appellees, Scottco Mechanical Contractors,
Inc., Palmer Painting Company, Inc. and BCL Construction and Roofing, L.L.C.
(Scottco), entered into Subcontract Agreements with Journeyman to provide certain
goods and/or services in connection with the project. No one disputes that the relevant
provisions of the Subcontracts are identical.
In January 2013, Scottco filed suit against Journeyman to recover $201,319.94
allegedly due and owing under its Subcontract.2 In February, Journeyman answered
Scottco’s petition and also filed a Motion to Abate and to Compel Arbitration. Following
a hearing, the district court denied Journeyman’s Motion in October 2013.3 This appeal
followed.
1
The Texas Arbitration Act (“TAA”) provides for interlocutory appeal of an order denying a motion
to compel arbitration under the TAA. See TEX. CIV. PRAC. & REM. CODE ANN. § 171.098(a)(1) (West
2011). The record contains no evidence implicating the Federal Arbitration Act.
2
Palmer Painting Company, Inc. and BCL Construction and Roofing, L.L.C. subsequently
intervened alleging they were also owed money under their Subcontracts with Journeyman for materials
or services delivered in connection with the project.
3
The Honorable Richard Dambold, retired, was sitting by assignment in the 181st District Court
of Potter County, Texas. See TEX. GOV’T. CODE ANN. § 75.002(a)(3) (West 2013).
2
DISCUSSION
In a single issue, Journeyman contends the district court erred in denying its
Motion to Abate and Compel Arbitration. Specifically, Journeyman contends that the
Subcontracts unequivocally require all disputes arising out of or related to the
Subcontracts be submitted to arbitration. To the contrary, Scottco asserts the
arbitration provisions are unenforceable because (1) Journeyman failed to timely
demand arbitration under the Subcontracts, (2) Journeyman failed to timely request
mediation, (3) the Subcontracts do not require arbitration as a sole means of dispute
resolution, and (4) Journeyman waived its option to seek arbitration by participating in
Scottco’s suit while it was pending in district court. We disagree with Scottco.
STANDARD OF REVIEW
Because the parties do not dispute the validity of the arbitration provisions of the
Subcontracts, we move directly to the issue underlying this appeal, i.e., whether the
Subcontracts require that Scottco’s contract dispute be mediated and/or arbitrated.
Arbitration agreements are interpreted under traditional contract principles.
Davidson v. Webster, 128 S.W.3d 223, 228 (Tex. 2003). In construing a written
contract, the primary concern of the court is to ascertain the true intentions of the parties
as expressed. Id. at 229. To achieve this objective, we must examine and consider the
entire writing in an effort to harmonize and give effect to all the provisions of the contract
so that none will be rendered meaningless. Id. Although the language of the
agreement must clearly indicate the intent to arbitrate, Aldridge v. Thrift Fin. Mktg., LLC,
376 S.W.3d 877, 883 (Tex. App.—Fort Worth 2012, no pet.), courts must resolve any
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doubts about an arbitration agreement’s scope in favor of arbitration. In re FirstMerit
Bank, N.A., 52 S.W.3d 749, 753 (Tex. 2001) (orig. proceeding). Further, if the
arbitration agreement encompasses the claim being asserted and the party opposing
arbitration fails to prove its defenses, the trial court has no discretion but to compel
arbitration and stay its own proceedings. Id. at 754.
THE SUBCONTRACTS
Paragraph 28 of the Subcontracts under “Additional Provisions of Subcontract”
provides as follows:
If at any time any controversy shall arise between the Contractor and the
Subcontractor with respect to any matter or thing involved in the
subcontract, and which the parties hereto do not promptly adjust and
determine or which the Owner or his authorized representative cannot
decide to the satisfaction of both parties hereto, then the written order of
the Contractor shall be followed and, upon completion of the work and
before the final settlement and payment is made, said controversy shall,
be decided by mediation and/or arbitration.
(Emphasis added.)
The Subcontract also provides that “[a]ny written Claim arising out of or related to
the Contract, and denied by the Contractor shall be subject to mediation as a condition
precedent to arbitration or the institution of legal or equitable proceedings by either
party,” paragraph 4.3.1 MEDIATION (emphasis added), and “[d]isputes not resolved by
mediation shall be decided by arbitration.” Paragraph 4.4.1 ARBITRATION (emphasis
added).
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Under the Subcontract, Scottco’s petition seeking the payment of additional
monies under the Subcontract plainly represents a “controversy” and “written Claim.”4
As such, the plain language of the Subcontract requires that Scottco mediate and then
arbitrate its claim before any legal or equitable proceeding moves forward. See
paragraph 4.3.2 MEDIATION (“[M]ediation shall proceed in advance of arbitration or
legal or equitable proceedings, which may be stayed pending mediation . . .”);
paragraph 4.4.1 ARBITRATION (“Disputes not resolved by mediation shall be decided
by arbitration . . .”). Accordingly, per the plain terms of the parties’ agreement,
Journeyman’s Motion should have been granted by the district court, i.e., Scottco’s suit
should be stayed pending mediation and arbitration of its claim.
Scottco asserts Journeyman failed to timely demand arbitration or mediation
under the Subcontract. The Subcontract does not require, and it would make no sense,
for Journeyman to be contractually responsible to champion Scottco’s claim. Further,
contrary to Scottco’s assertion that mediation and arbitration are not the sole means to
resolve a dispute under the Subcontracts, paragraph 28, “Additional Provisions of
Subcontract” as well as paragraphs 4.3.2 MEDIATION and paragraph 4.4.1
ARBITRATION plainly require Scottco to submit its claim to mediation and arbitration
before pursuing any legal or equitable remedies it may have afterwards.
Scottco also asserts Journeyman waived its contractual right to mediation and/or
arbitration because Scottco’s suit was pending for nearly a year before Journeyman
4
Neither term is defined by the contract and, in lieu thereof, we will use the plain, ordinary and
generally accepted meaning attributed to the terms. Newman v. Pilgrim’s Pride Corp., 122 S.W.3d 825,
833 (Tex. App.—Dallas 2003, pet. denied). That is, a “controversy” is “the act of disputing or contending,”
Webster’s Third New Int’l Dictionary 497 (4th Ed. 1976), and a “claim” is “an authoritative or challenging
request, demand.” Id. at 497.
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filed its Motion to Abate and Compel Arbitration and seven months passed before the
district court conducted a hearing on Journeyman’s Motion. “[A] party waives an
arbitration clause by substantially invoking the judicial process to the other party’s
detriment.” In re Citigroup Global Markets, Inc., 258 S.W.3d 623, 625 (Tex. 2008) (per
curiam).
After being served, Journeyman timely filed its answer and, at the same time,
filed its Motion. Journeyman can hardly be held responsible for the passage of time in
Scottco’s suit before it became a party. In addition, other than citing the mere passage
of time between the filing of Journeyman’s Motion and the district court’s hearing,
Scottco points to no evidence of record indicating it was prejudiced by the passage of
seven months or that Scottco performed any act, or failed to perform any act, in reliance
on Journeyman’s actions or lack thereof. Accordingly, Scottco has failed to come
forward with any evidence establishing Journeyman substantially invoked the judicial
process to Scottco’s detriment. See In re Citigroup Global Markets, Inc., 258 S.W.3d at
626-27. Journeyman’s sole issue is sustained.
CONCLUSION
The trial court’s order is reversed and this cause is remanded for further
proceedings consistent with this opinion.
Patrick A. Pirtle
Justice
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