Philip W. Holifield and Hazel Holifield v. Barclay Properties, LTD ( 2021 )

REVERSE and REMAND and Opinion Filed October 5, 2021
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-21-00239-CV
PHILIP W. HOLIFIELD AND HAZEL HOLIFIELD, Appellants
V.
BARCLAY PROPERTIES, LTD, Appellee
On Appeal from the 68th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-21-01282
MEMORANDUM OPINION
Before Justices Schenck, Smith, and Garcia
Opinion by Justice Schenck
In this interlocutory appeal, appellants Phillip and Hazel Holifield (the
“Holifields”) challenge the trial court’s denial of their motion to compel arbitration.
In two issues, the Holifields contend the trial court erred in denying their motion
because (1) the claim asserted by Barclay Properties, Ltd. (“Barclay”) falls within
the scope of the parties’ arbitration agreement and (2) the parties delegated the issue
of arbitrability to the arbitrator. Because the parties’ arbitration agreement delegated
questions of arbitrability to the arbitrator, we reverse the trial court’s order denying
the motion to compel and remand this case to the trial court for further proceedings
consistent with this opinion. Because all issues are settled in law, we issue this
memorandum opinion. TEX. R. APP. P. 47.4.
BACKGROUND
Barclay is a construction company specializing in the construction of
residential homes. Barclay constructed and sold a home to the Holifields on
November 6, 2018. As part of the transaction, the parties entered into a New
Residence Construction Contract (the “Contract”), which contained the following
arbitration provision:
It is the policy of the State of Texas to encourage the peaceable
resolution of disputes through alternative dispute resolution procedures.
Purchaser and seller 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 design or
construction of the Property, (d) any alleged fraud, misrepresentations
or breach of warranties, express or implied, (e) claims for defective
design or construction of the Property, (f) intentional and/or negligent
infliction of emotional distress, (g) violations of the Texas Deceptive
Trade Practices-Consumer Protection Act, (h) violations of the Texas
Residential Construction Liability Act, and/or (i) any other cause of
action relating to or arising out of the construction and/or sale of the
Property by Seller to Purchaser, (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
binding arbitration with the AAA 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. 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
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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.
If any party to this Contract files a proceeding in any court to resolve
any such controversy, dispute or claim, such action shall not constitute
a waiver of the right of such party or a bar to the right of any other party
to seek arbitration of that or any other claim, dispute or controversy,
and the court shall, upon motion of any party to the proceeding, direct
that such controversy, dispute or claim be arbitrated in accordance
herewith.
The Contract further specified, if the Holifields have complaints concerning a
construction defect, they are required to send Barclay a letter pursuant to Chapter 27
of the Texas Property Code. More particularly, the Contract provided:
IF YOU HAVE A COMPLAINT CONCERNING A
CONSTRUCTION DEFECT ARISING FROM THE
PERFORMANCE OF THIS CONTRACT AND THE DEFECT
HAS NOT BEEN CORRECTED THROUGH NORMAL
WARRANTY SERVICE, YOU MUST PROVIDE NOTICE
REGARDING THE DEFECT TO THE CONTRACTOR BY
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, NOT
LATER THAN THE 60TH DAY BEFORE THE DATE YOU
FILE SUIT TO RECOVER DAMAGES IN A COURT OF LAW.
THE NOTICE MUST REFER TO CHAPTER 27, PROPERTY
CODE, AND MUST DESCRIBE THE CONSTRUCTION
DEFECT. IF REQUESTED BY THE CONTRACTOR, YOU
MUST PROVIDE THE CONTRACTOR AN OPPORTUNITY TO
INSPECT AND CURE THE DEFECT AS PROVIDED BY
SECTION 27.004, PROPERTY CODE.
On September 29, 2020, the Holifields sent Barclay a letter (the “Letter”)
identifying fourteen categories of alleged defects and items of concern. The
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Holifields also sent the letter to Bobby Fletcher, the President of Cresthill Properties,
Inc., and to Mike Simmons, the Senior Pastor at Hillcrest Baptist Church (the
“Church”). Barclay had been working for the past year with the Church on potential
business opportunities, including the development and construction of a 37,000
square foot, two-story, commercial medical office building on Church property that
was to be jointly operated by Barclay and the Church. Further, the other recipient
of the Letter, Cresthill Properties, is a development company owned or otherwise
affiliated with the Church and has done business with Barclay in the past. Barclay
notified the Holifields that all of the listed items were outside the warranty period,
and they were not legitimate warranty complaints.
On February 1, 2021, Barclay filed suit against the Holifields seeking a
declaration that it owed them no obligations and was not liable to them for any
alleged construction defects and asserting that the Holifields tortiously interfered
with prospective business relations of Barclay by sending the letter to representatives
of Cresthill Properties and the Church and directing other homeowners in their sub-
division to do the same. Barclay asserted that the Holifields had no legitimate reason
for sending the letter to Fletcher and Simmons and that they did so in an attempt to
damage Barclay’s business relations with the Church and to prevent Barclay from
obtaining a construction contract with the Church. The Holifields sought to compel
mediation and arbitration. Barclay then amended its petition to assert a tortious
interference with prospective business relations claim only and argued this claim
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was outside the scope of the Contract’s arbitration provision. Following the hearing
on the motion to compel, the Holifields notified the trial court that they did not plan
on filing a construction defect claim against Barclay at that time. The trial court
denied the Holifields’ motion and this interlocutory appeal followed.
DISCUSSION
We address the Holifieds’ second issue first as it is dispositive of this appeal.
In it, they assert the trial court erred in failing to refer issues of arbitrability to the
arbitrator. They contend that under the Contract, this issue was for the arbitrator to
decide.
Generally, the question of arbitrability is a gateway issue to be decided by a
court rather than an arbitrator. AT&T Techs., Inc. v. Commc’ns Workers of Am., 475
U.S. 643, 649 (1986); Saxa Inc. v. DFD Architecture Inc., 312 S.W.3d 224, 229
(Tex. App.—Dallas 2010, pet. denied). The parties, however, may agree to submit
matters of substantive arbitrability to arbitration. Saxa, 312 S.W.3d at 229 (citing
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002) (“[A]n arbitration
clause that reallocates traditional court functions to the arbitrator is enforceable. . .
.”)). When deciding whether parties agreed to arbitrate a certain matter, courts
ordinarily apply state-law principles governing the formation of contracts. Seven
Hills Commercial, LLC v. Mirabal Custom Homes, Inc., 442 S.W.3d 706, 715 (Tex.
App.—Dallas 2014, pet. denied). Courts should not assume that parties agreed to
arbitrate arbitrability unless there is clear and unmistakable evidence that they did
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so. Id.; see First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
Silence or ambiguity about who should decide the arbitrability issue should not lead
a court to presume the parties intended the issue to be decided by the arbitrator.
Saxa, 312 S.W.3d at 229. Rather, a court must examine the arbitration agreement to
decide if it evidences a clear and unmistakable intention that the arbitrator will have
the authority to determine the scope of arbitration. Id. Where the parties’ contract
clearly and unmistakably delegates the arbitrability question to the arbitrator, the
court possesses no power to decide the arbitrability issue. HomeAdvisor, Inc. v.
Waddell, No. 05-19-00669-CV, 2020 WL 2988565, at *5 (Tex. App.—Dallas June
4, 2020, no pet.) (mem. op.) (citing Robinson v. Home Owners Mgmt. Enters., Inc.,
590 S.W.3d 518, 532 (Tex. 2019)).
The Holifields and Barclay agreed that any arbitration would be administered
by the AAA and governed by the AAA’s Construction Industry Arbitration Rules
(the “Rules”). The Rules provide the arbitrator has the power “to rule on his or her
own jurisdiction, including any objections with respect to the existence, scope or
validity of the arbitration agreement” and “to determine the existence or validity of
a contract of which an arbitration clause forms a part.” See American Arbitration
Association, Construction Industry Arbitration Rules & and Mediation Procedures,
Rule 9, available at:
https://www.adr.org/sites/default/files/Construction%20Rules.pdf. This Court, and
many others, have held that a bilateral agreement to arbitrate under the AAA rules
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constitutes clear and unmistakable evidence of the parties’ intent to delegate the
issue of arbitrability to the arbitrator. See HomeAdvisor, 2020 WL 2988565, at *5;
see also Arnold v. Homeaway, Inc., 890 F.3d 546, 553 (5th Cir. 2018); Trafigura
Pte. Ltd. v. CNA Metals Ltd., 526 S.W.3d 612, 617 (Tex. App.—Houston [14th
Dist.] 2017, no pet.); Schlumberger Tech. Corp. v. Baker Hughes Inc., 355 S.W.3d
791, 802 (Tex. App.—Houston [1st Dist.] 2011, no pet.); Saxa, 312 S.W.3d at 230;1
In re Rio Grande Xarin II, Ltd., Nos. 13-10-00115-CV, 13-10-00116-CV, 2010 WL
2697145, at *8 (Tex. App.—Corpus Christi–Edinburg July 6, 2010, pet. dism’d)
(mem. op.) (cataloging cases). Where the parties have assigned the question of
arbitrability, the scope of that assignment is a matter for the arbitrator to resolve as
with any other question so assigned.2 FSC Sec. Corp. v. Freel, 14 F.3d 1310, 1312
(8th Cir. 1994).
When, as here, the parties agree to a broad arbitration clause3 and explicitly
incorporate rules empowering the arbitrator to decide issues of arbitrability, the
incorporation serves as clear and unmistakable evidence of the parties’ intent to
delegate such issues to an arbitrator. Saxa, 312 S.W.3d at 230. Because there is
1
Barclay asserts the Supreme Court of Texas overruled Saxa in Jody James Farms, JV v. Altman Grp.,
Inc., 547 S.W.3d 624 (Tex. 2018). It did not and, in fact, it declined to decide the consequence of
incorporating the AAA rules in disputes between signatories to an arbitration agreement as the dispute
involved a party to the arbitration agreement and a non-signatory. Id. at 631–32.
2
As such a determination has not yet been made, the question of our standard of review of such a
determination is not presently before us.
3
Here, the parties agreed to submit “any controversy or claim or matters in question between the parties
including, but not limited to, any matter arising out of or relating to” the Contract etc. to arbitration.
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unmistakable evidence that the parties agreed to arbitrate questions of arbitrability,
it is for the arbitrator to decide whether Barclay must arbitrate its claim against the
Holifields. See id. The trial court therefore abused its discretion when it reached
this question and denied the arbitrator the opportunity to decide same. We sustain
the Holifields’ second issue and pretermit consideration of the Holifields’ first issue
urging the trial court erred in denying their motion because Barclay’s claim is within
the scope of the arbitration agreement. TEX. R. APP. P. 47.1.
CONCLUSION
We reverse the trial court’s order denying the motion to compel arbitration
and remand this case to the trial court for further proceedings consistent with this
opinion.
/David J. Schenck/
DAVID J. SCHENCK
JUSTICE
210239F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
PHILIP W. HOLIFIELD AND On Appeal from the 68th Judicial
HAZEL HOLIFIELD, Appellants District Court, Dallas County, Texas
Trial Court Cause No. DC-21-01282.
No. 05-21-00239-CV V. Opinion delivered by Justice
Schenck. Justices Smith and Garcia
BARCLAY PROPERTIES, LTD, participating.
Appellee
In accordance with this Court’s opinion of this date, the trial court’s order
denying Appellants’ Motion to Compel Arbitration is REVERSED and this cause
is REMANDED to the trial court for further proceedings consistent with this
opinion.
It is ORDERED that appellants PHILIP W. HOLIFIELD AND HAZEL
HOLIFIELD recover their costs of this appeal from appellee BARCLAY
PROPERTIES, LTD.
Judgment entered this 5th day of October 2021.
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