Victor Hugo Gracia Roman v. Myrna Elizabeth Herrera ( 2021 )

NUMBER 13-20-00111-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
VICTOR HUGO GRACIA ROMAN, Appellant,
v.
MYRNA ELIZABETH HERRERA, Appellee.
On appeal from the 370th District Court
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Justices Benavides, Hinojosa, and Tijerina
Memorandum Opinion by Justice Benavides
Appellant Victor Hugo Gracia Roman (Gracia) appeals the trial court’s denial of his
motion to compel arbitration related to a premarital agreement with appellee Myrna
Elizabeth Herrera. By two issues, which we address as one, Gracia states the trial court
erred by denying his motion to compel arbitration (1) when the premarital agreement
contained an arbitration clause governing the validity, construction, and enforceability of
all provisions contained in the premarital agreement and (2) Herrera failed to carry her
burden of proving that Gracia substantially invoked the judicial process and she was
prejudiced by his invocation of the judicial process. We reverse and remand.
I. BACKGROUND
Gracia and Herrera were married on March 24, 2014. Three days prior to the
marriage, Gracia and Herrera executed a premarital agreement at Gracia’s attorney’s
office. Gracia told Herrera to seek her own legal counsel to review the premarital
agreement, which Herrera did before she signed the premarital agreement. Contained in
the premarital agreement was Article 17 titled “Arbitration” which stated:
The parties agree to submit to binding arbitration any dispute or controversy
regarding the validity, interpretation, or enforceability of this agreement, as
well as all issues involving its enforcement in connection with a dissolution
proceeding between the parties. Each party expressly waives any right to
trial by a court or trial by a jury. If a dissolution proceeding or declaratory
judgment proceeding is filed in Texas, the arbitrator appointed under this
agreement will simultaneously be designated as a special master under the
Texas Rules of Civil Procedure, and the parties agree to jointly apply to the
court for any orders that are necessary to vest the arbitrator with all powers
and authority of a special master under the rules.
The parties agree to appoint one arbitrator, who[se] decisions will be binding
in all respects. Any arbitrator appointed by the parties must be an attorney
who has undergone arbitration training conducted by the American Bar
Association or the American Academy of Matrimonial Lawyers and is in
good standing with the State Bar of Texas. The arbitrator must also be
board certified in family law by the Texas Board of Legal Specialization. The
first party requesting arbitration must designate the name of an arbitrator in
the request. The other party must then designate the name of an arbitrator.
If the parties cannot agree on a [sic] arbitrator within fourteen days after
either party’s written request for arbitration, the two designees must select
a qualified arbitrator, who will be designated as the sole arbitrator of the
dispute. If the parties cannot agree on the ground rules and procedures to
be followed during the arbitration proceedings, the arbitrator shall have the
sole authority to establish the ground rules and procedures to be followed
during the arbitration proceeding. The parties agree to attend the arbitration
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on the date and at the time and place set by the arbitrator. The cost of
arbitration must be borne as the arbitrator directs. The award of the
arbitrator will be binding and conclusive on the parties, and judgment setting
forth the arbitration award must be entered in any court of competent
jurisdiction.
Herrera filed for divorce on July 9, 2014. Her original petition did not mention the
premarital agreement.1 Almost two years later, on March 29, 2016, Herrera filed a first
amended petition and stated that Gracia had committed adultery, requested substituted
service of Gracia, requested reimbursement to the community estate of any funds or
assets used to benefit Gracia’s separate estate but still failed to mention the premarital
agreement. Gracia responded and filed his original answer in April 2016, which was a
general denial requesting a jury trial, but he also did not mention the premarital
agreement.
In May 2016, Herrera filed a second amended petition alleging adultery and fraud,
requesting reimbursement but finally stated that a premarital agreement existed. Herrera
requested that the premarital agreement be set aside and vacated because it was
“entered involuntarily and the agreement was unconscionable when entered.” In her
second petition, Herrera also claimed that H&Y Ltd., Gracia’s business, was the alter ego
of Gracia.2
In June 2016, Gracia filed his motion to compel arbitration and motion for protective
order. Gracia argued that “any disputes or controversy regarding the validity,
1 Gracia was not served with the original petition for divorce.
2 H&Y Ltd. would later be added as a third-party to the divorce proceedings in Herrera’s third
amended petition.
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interpretation, or enforcement” of the premarital agreement were to be subjected to
binding arbitration as per the agreement. In August 2016, Gracia filed a first amended
answer where he issued a general denial and objected to a trial by the court or a jury
based on the premarital agreement.
The trial court held a brief hearing on June 30, 2016, and reset the hearing on the
motion to compel arbitration for August 2016. At the same time, the trial court ordered
that discovery continue until the August hearing. No hearing was held, and Herrera
obtained a default judgment as to H&Y Ltd. in October 2016, which was later set aside
by an agreed order.
In August 2019, a hearing on Gracia’s motion to compel arbitration was finally
conducted. The trial court heard testimony from Herrera’s initial attorney who reviewed
the premarital agreement with her and Herrera. Herrera’s initial attorney said they
reviewed the premarital agreement and Herrera signed it, but he had no file or records of
Herrera’s visit. Herrera testified that the initial attorney looked at the premarital
agreement, said it was “standard,” and wrote a letter for her to take to Gracia’s attorney,
but did not explain anything further. 3 She then went to Gracia’s attorney’s office and
3 Gracia offered into evidence at the hearing the letter written and signed by Herrera’s initial lawyer
to Gracia’s initial lawyer regarding the premarital agreement which stated:
This letter comes as confirmation that we have read and discussed the Premarital
Agreement, which you provided to us, regarding Ms. Herrera and Mr. Gracia’s contract of
marriage.
The Premarital Agreement reviewed is a 27-page document with attached Schedules A, B,
C, and D. We have considered the various items on the Premarital Agreement and
reviewed it, and explained it, to Ms. Herrera. After such reviewing with our client, our client,
Ms. Herrera, wishes to proceed with the marriage and accepts all the provisions of the
Premarital Agreement.
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signed the premarital agreement without reading it or asking questions regarding any of
the provisions contained within it because she trusted Gracia. After they married, Herrera
discovered Gracia was having an affair and believed that Gracia only married her to obtain
his residency card for the United States. Herrera told the trial court that if her initial
attorney had gone through the premarital agreement like her current attorneys did, she
would not have signed it and she did not know or understand there was an arbitration
clause contained within the premarital agreement. However, Herrera agreed that she did
hire her initial attorney later to file the original divorce petition. Gracia’s attorney also had
Herrera admit that she continued to live in Gracia’s home, gave him money, and
supported his child from another woman until 2016 when she asked for reimbursement in
a subsequent petition filed with another attorney. Herrera also admitted that she had
sponsored Gracia to obtain residency in the United States, and when she found out about
his affair, she withdrew her sponsorship, causing Gracia to lose his status in the United
States.4 In her testimony, Herrera stated that she owned multiple businesses and had
dealt with business-type documents, had the premarital agreement in her hands prior to
the marriage, chose not to read it, did not obtain a copy because it did not “have any value
to her,” and made a mistake not reading the premarital agreement and just trusting
Gracia.
After the hearing, the parties submitted letters to the trial court. Relating to the
fraud allegation, Herrera’s counsel stated:
4 Herrera admitted that Gracia was in the United States legally on a visa when they met.
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Fraud: I have confirmed that the Court correctly advised counsel at the
hearing on this matter that the Supreme Court requires that the evidence of
the fraud relate to the arbitration provision itself. The evidence adduced by
[Herrera] in the hearing clearly applied to the entire pre-nuptial agreement,
and did not focus on the arbitration provision separately, which my client did
not even know was included in the document. She is further not sure
whether or not the document her lawyer talked to her about was the same
document she signed at the lawyer’s office of [Gracia], and since her lawyer
did not preserve the document, there is no evidence that they were the
same. Provided this Court finds waiver of the arbitration clause, this Court
will then try the issue of fraud related to the premarital agreement. If this
Court fails to find waiver occurred, then the fraud issue will be tried in
arbitration.
Herrera’s lawyer also stated that she was prejudiced due to “voluminous” discovery
requests from Gracia and substantial fees and expenses incurred from having to continue
the litigation. Gracia argued that there was no evidence of prejudice to Herrera submitted
at the hearing in August of 2019.
In February 2020, the trial court issued the following order denying Gracia’s motion
to compel arbitration which stated:
The Court finds such Motion should be denied because [Gracia] previously
has waived any right to arbitrate the subject dispute and [Herrera] would be
substantially prejudiced if she were required to arbitrate this dispute after
more than 5 years of litigation.
This appeal followed.
II. ARBITRATION CLAUSE
By his first issue, Gracia argues the trial court committed error by denying his
motion to compel arbitration because the arbitration provision was valid, and the divorce
proceedings fell within its scope. In his second issue, Gracia claims the trial court erred
by finding Gracia substantially invoked the judicial process and Herrera was prejudiced.
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A. Standard of Review
The trial court’s ruling on a motion to compel arbitration is reviewed for an abuse
of discretion. Robinson v. Home Owners Mgmt. Enters., Inc., 590 S.W.3d 518, 525 (Tex.
2019); Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018); Enter. Field Servs., LLC
v. TOC–Rocky Mountain, Inc., 405 S.W.3d 767, 773 (Tex. App.—Houston [1st Dist.]
2013, pet. denied). A trial court abuses its discretion if it reaches a decision so arbitrary
and unreasonable that it amounts to a clear and prejudicial error of law or if it clearly fails
to correctly analyze or apply the law. In re Olshan Found. Repair Co., 328 S.W.3d 883,
888 (Tex. 2010) (orig. proceeding). Under this standard, we defer to the trial court’s factual
determinations if they are supported by evidence, but we review a trial court’s legal
determinations de novo. In re Labatt Food Servs., L.P., 279 S.W.3d 640, 643 (Tex. 2009)
(orig. proceeding); see Robinson, 590 S.W.3d at 525. Whether a valid arbitration
agreement exists and whether the arbitration agreement is ambiguous are questions of
law that we review de novo. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006)
(orig. proceeding). We review de novo whether an arbitration agreement is enforceable.
Rachal v. Reitz, 403 S.W.3d 840, 843 (Tex. 2013); see SCI Tex. Funeral Servs., L.L.C.
v. Montoya, No. 13-19-00088-CV, 2020 WL 5582367, at 4 (Tex. App.—Corpus Christi–
Edinburg Sept. 17, 2020, no pet.) (mem. op.).
B. Applicable Law
A party seeking to compel arbitration must establish (1) the existence of a valid,
enforceable arbitration agreement and (2) that the claims at issue fall within that
agreement’s scope. Bonsmara Nat. Beef Co., v. Hart of Tex. Cattle Feeders, LLC, 603
7
S.W.3d 385, 397 (Tex. 2020); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737
(Tex. 2005) (orig. proceeding). If the movant establishes that an arbitration agreement
governs the dispute, then the burden shifts to the party opposing arbitration to establish
an affirmative defense to the arbitration agreement. Ellis v. Schlimmer, 337 S.W.3d 860,
862 (Tex. 2011) (per curiam); In re Provine, 312 S.W.3d 824, 829 (Tex. App.—Houston
[1st Dist.] 2009, orig. proceeding); see SCI Tex. Funeral Servs., 2020 WL 5582367, at *5.
Because state and federal policies favor arbitration, a strong presumption exists in
favor of arbitration and courts are required to resolve doubts regarding arbitrability in
favor of referring the dispute to arbitration. Ellis, 337 S.W.3d at 862; In re FirstMerit Bank
N.A., 52 S.W.3d 749, 753 (Tex. 2001) (orig. proceeding). A court has no discretion but to
compel arbitration and stay its own proceedings when a claim falls within the scope of
a valid arbitration agreement and there are no defenses to its enforcement. Richmont
Holdings, Inc. v. Superior Recharge Sys., L.L.C., 392 S.W.3d 633, 635 (Tex. 2013) (per
curiam); Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008); In re FirstMerit Bank,
N.A., 52 S.W.3d at 753–54; Rocha v. Marks Transp., Inc., 512 S.W.3d 529, 535–36 (Tex.
App.—Houston [1st Dist.] 2016, no pet.).
A valid arbitration agreement creates a strong presumption in favor of arbitration.
RSL Funding, LLC v. Newsome, 569 S.W.3d 116, 121 (Tex. 2018). While an arbitration
agreement procured by fraud is unenforceable, the party opposing arbitration must show
that the fraud relates to the arbitration provision specifically, not to the broader contract
in which it appears. Forest Oil Corp., 268 S.W.3d at 56. If a trial court finds that the claims
fall within the scope of a valid arbitration agreement, the “court has no discretion but to
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compel arbitration and stay its own proceedings.” Id. (quoting In re FirstMerit Bank, 52
S.W.3d at 753–54).
A party asserting implied waiver as a defense to arbitration, as Herrera did, has
the burden to prove that (1) the other party has “substantially invoked the judicial process,”
which is inconsistent with a claimed right to compel arbitration, and (2) the inconsistent
conduct has caused it to suffer detriment or prejudice. G.T. Leach Builders, LLC v.
Sapphire V.P., LP, 458 S.W.3d 502, 511–12 (Tex. 2015); Perry Homes v. Cull, 258
S.W.3d 580, 593–94 (Tex. 2008). Because the law favors and encourages arbitration,
“this hurdle is a high one.” G.T. Leach, 458 S.W.3d at 512 (quoting Perry Homes, 258
S.W.3d at 589–90); Richmont Holdings, 455 S.W.3d at 575. A “heavy burden of proof” is
required to establish waiver of arbitration rights, and the court must resolve any doubt in
favor of arbitration. In re Bruce Terminix Co., 988 S.W.2d 702, 702 (Tex. 1998); In re
Christus Spohn Health Sys. Corp., 231 S.W.3d 475, 478 (Tex. App.—Corpus Christi–
Edinburg 2007, no pet.). Whether a party has substantially invoked the judicial process
depends on the totality of the circumstances. G. T. Leach, 458 S.W.3d at 512; Perry
Homes, 258 S.W.3d at 589–90 (listing previous cases where parties did not waive
arbitration even though events occurred in the process of litigation).
C. Discussion
1. Validity of Arbitration Agreement
Gracia’s first issue argues that the trial court erred because the arbitration
agreement was valid and enforceable. The burden fell on Herrera to present evidence of
any defense to Gracia’s motion to compel arbitration. See Ellis, 337 S.W.3d at 862; Forest
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Oil Corp., 268 S.W.3d at 56. Herrera presented no evidence that the arbitration
agreement itself was unenforceable and procured by fraud. Her testimony was that her
initial attorney did not review the premarital agreement with her, and she chose not to
read it herself. Her testimony did not show any proof that the arbitration agreement was
invalid or that Gracia obtained her consent to the agreement by fraudulent means. Gracia
told Herrera to seek her own legal counsel to review the premarital agreement, including
the arbitration agreement contained within, which Herrera chose to do. Herrera
additionally chose not to read or question any of the provisions contained in the premarital
agreement, including the arbitration provision. The testimony from her initial counsel and
the letter he wrote to Gracia’s initial counsel that was entered into evidence stated that
he reviewed the premarital agreement and schedules attached to it, which detailed the
property each party brought into the marriage, and Herrera agreed to sign it. Additionally,
Herrera’s own counsel agreed in his post-hearing letter brief that the evidence they
presented of fraud or invalidity related to the entire premarital agreement and not to the
arbitration agreement. See Forest Oil Corp., 268 S.W.3d at 56. The trial court’s order also
made no reference to the arbitration agreement being invalid or obtained by fraud;
therefore, we understand the trial court to have found the arbitration agreement valid.
Additionally, because we determine legal questions under a de novo review, for the
reasons laid out previously, we conclude as a matter of law that the arbitration agreement
is valid and enforceable. In re Labatt Food Servs., 279 S.W.3d at 643; see Robinson, 590
S.W.3d at 525; In re D. Wilson Constr., 196 S.W.3d at 781; Rachal, 403 S.W.3d at 843;
see also SCI Tex. Funeral Servs., 2020 WL 5582367, at 4. We sustain Gracia’s first issue.
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2. Waiver of Arbitration Agreement
Gracia’s second issue stated that Herrera did not prove Gracia waived his motion
to compel arbitration by substantially invoking the judicial process. The judicial process
has been substantially invoked when the party seeking arbitration has taken specific and
deliberate actions, after the filing of suit, that are inconsistent with the right to arbitrate or
has actively tried, but failed, to achieve a satisfactory result through litigation before
turning to arbitration. In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 763 (Tex. 2006) (orig.
proceeding); In re Christus, 231 S.W.3d at 478. However, even when a party has
substantially invoked the judicial process, a party’s right to arbitration is not waived absent
a clear showing that the opposing party has been prejudiced. In re Christus, 231 S.W.3d
at 479.
Waiver occurs only where “a party has acted inconsistently with its right to arbitrate
and such actions have prejudiced the other party.” Id. at 478. Waiver of arbitration must
be intentional. In re Bank One, N.A., 216 S.W.3d 825, 827 (Tex. 2007); EZ Pawn Corp.
v. Mancias, 934 S.W.2d 87, 89 (Tex. 1996). “Merely taking part in litigation” is “not
enough” to constitute waiver. In re D. Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex.
2006). Merely participating in discovery or taking purely defensive measures do not
substantially invoke the judicial process; however, pursuing extensive discovery may
substantially invoke the judicial process. See In re Christus, 231 S.W.3d at 479.
Some of the factors courts can consider to determine the invocation of the judicial
process include:
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how long the party moving to compel arbitration waited to do so; the reasons
for the movant’s delay; whether and when the movant knew of the
arbitration agreement during the period of delay; how much discovery the
movant conducted before moving to compel arbitration, and whether that
discovery related to the merits; whether the movant requested the court to
dispose of claims on the merits; whether the movant asserted affirmative
claims for relief in court; the extent of the movant’s engagement in pretrial
matters related to the merits (as opposed to matters related to arbitrability
or jurisdiction); the amount of time and expense the parties have committed
to litigation; whether the discovery conducted would be unavailable or useful
in arbitration; whether activity in court would be duplicated in arbitration; and
when the case was to be tried.
G.T. Leach Builders, 458 S.W.3d at 512; Perry Homes, 258 S.W.3d at 590–91.
Here, Gracia was not the movant in the divorce with Herrera; rather, Herrera was
the party that filed for divorce. See G.T. Leach, 458 S.W.3d at 512. Although she initially
filed her petition in 2014, Gracia was not served until Herrera filed an amended petition
in 2016. Shortly after he was served, Gracia filed his motion to compel arbitration. The
trial court conducted a hearing in June 2016, and although no ruling on the motion was
made at that time, the trial court ordered the parties to continue with discovery until the
next hearing. During that time period, Herrera added H&Y Ltd. as a third party to the
divorce. A default judgment was granted against H&Y Ltd., and H&Y Ltd. filed documents
to have the default judgment set aside. The parties included documents relating to
discovery from 2016 as evidence during the 2019 hearing and also submitted additional
certificates of written discovery through 2018 in a supplemental clerk’s record to this
Court. At the 2019 hearing, Herrera presented no evidence to show any of these actions
caused her prejudice. The only allusion to prejudice Herrera presented was in the form of
a letter brief from her current counsel to the trial court following the 2019 hearing. In the
letter, counsel stated that Herrera was prejudiced because of the continued litigation,
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hiring of multiple counsel, “voluminous” written discovery requests that filled up a banker’s
box, and “more than $30,000 in fees and expenses.” 5 Gracia’s lawyer responded by
stating that the trial court ordered discovery to continue, Herrera was the party who kept
amending her pleadings, Herrera’s counsel requested the 2016 motion to compel hearing
be reset, and Herrera later added H&Y Ltd. as a third-party defendant. Gracia’s counsel
also stated that discovery concluded in February 2018, and only motions to withdraw as
counsel have been heard between that date and the 2019 hearing.
With respect to the G.T. Leach factors, we note that Gracia filed his motion to
compel arbitration very shortly after he was served with Herrera’s petition. See id.
Although there has been a delay before the 2016 hearing and the trial court’s ruling in
2020, the reasons for the delay can be attributed to both parties. Some discovery was
conducted between the parties during the period of the delay, but Herrera did not show if
that discovery related to the merits of the case, was useful in arbitration, or would be
unavailable to be used during the arbitration process. Gracia primarily invoked the judicial
process to vacate the default judgment against the third-party defendant, H&Y Ltd., not
to pursue any claims related to the divorce. Herrera also did not show that any activity in
court would be duplicated in arbitration and the case did not have a trial setting.
A party’s litigation conduct aimed at defending itself and minimizing litigation
expenses does not amount to substantial invocation of the judicial process. G.T. Leach,
458 S.W.3d at 513. We hold that based on the totality of the circumstances in this case,
5 Although Herrera’s counsel alleges she had incurred substantial fees during the pendency of this
divorce, there was no testimony or evidence presented before the trial court regarding Herrera’s legal
expenses. Without any evidence, other than Herrera’s bare assertion, we do not find the mention of “more
than $30,000 in fees and expenses” amounts to prejudice.
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Gracia did not “substantially invoke the judicial process” with his actions over the last four
years.6 See id. at 512; Perry Homes, 258 S.W.3d at 589–90.
Additionally, Herrera did not prove that she suffered any prejudice. Delay does not
necessarily demonstrate prejudice. EZ Pawn Corp, 934 S.W.2d at 90. Both parties hired
and replaced attorneys during the four years this case was pending. Herrera added an
additional defendant and pursued a default judgment during the divorce. Both parties
conducted discovery and the partial deposition of Gracia. Both parties agreed to Rule 11
resets of the trial court hearings. Herrera did not show that the discovery conducted would
not be useful in an arbitration. See G.T. Leach, 458 S.W.3d at 512. Here, Herrera did not
meet her burden to prove that she would be prejudiced by going to arbitration. Therefore,
we hold that Herrera has not met the heavy burden required to establish prejudice. See
id.; Richmont Holdings, 455 S.W.3d at 575; In re Bruce, 988 S.W.2d at 702; In re Christus,
231 S.W.3d at 478.
Because we hold that Herrera failed to meet either prong to show waiver, we
sustain Gracia’s second issue.
D. Summary
For the foregoing reasons, we conclude that the trial court abused its discretion in
denying Gracia’s motion to compel arbitration. See Robinson, 590 S.W.3d at 525; Henry,
551 S.W.3d at 115; TOC–Rocky Mountain, 405 S.W.3d at 773.
6 Although the trial court stated that Gracia delayed for over “five” years, he was not served with
the divorce petition until 2016. Herrera filed her case in 2014 and waited over a year to serve her petition.
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III. CONCLUSION
We reverse the trial court’s denial of the motion to compel arbitration and remand
for proceedings consistent with this opinion.
GINA M. BENAVIDES
Justice
Delivered and filed on the
8th day of April, 2021.
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