Aslam Virani v. Pat Cunningham

Affirmed and Memorandum Opinion filed August 20, 2009.

In The

Fourteenth Court of Appeals

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NO. 14-08-01166-CV

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ASLAM VIRANI, Appellant

V.

PAT CUNNINGHAM, Appellee

On Appeal from the 56th District Court

Galveston County, Texas

Trial Court Cause No. 07CV1407

M E M O R A N D U M   O P I N I O N

Appellant Aslam Virani brings this interlocutory appeal challenging the trial court=s order denying his plea in abatement and motion to compel arbitration in his breach of contract suit against appellee Pat Cunningham.  We affirm.

I. BACKGROUND

The Marina Del Sol Subdivision Homeowners Association (Athe Association@) sued Virani in 2003 for alleged deed restriction violations.  At that time, Cunningham was the Association=s president and a member of its board.

Following mediation, the Association and Virani entered into a settlement agreement.  Under the terms of the agreement, Virani agreed to reduce the size of his existing pier within six months or petition for amendment of the Association=s restrictions.  It was also agreed that the adjacent subdivision lot would be sold to Virani for $290,000, with the closing to occur within sixty days of execution of the agreement.  The agreement was signed by Cunningham, two other Association board members, the Association=s attorney, Virani, and Virani=s attorney.  Cunningham signed his name AJ.P. Cunningham,@ and underneath his signature appear these typewritten words: APat Cunningham, President and Board Member Marina Del Sol Subdivision Homeowners Association.@  The agreement contains a clause requiring arbitration of Aany future disputes by and between [the parties] . . . .@

On December 6, 2007, Virani sued Cunningham individually alleging that he breached the settlement agreement by failing to convey title to the adjacent lot to Virani.  Virani sought damages or, alternatively, specific performance of the agreement.  On July 30, 2008, Virani filed a Plea in Abatement and Motion to Compel Arbitration.  Cunningham filed a response. Following a hearing, the trial court denied Virani=s plea and motion.^[1] From the court=s order, Virani now brings this interlocutory appeal.

II. DISCUSSION

A.        Controlling Statute

As a preliminary matter, we note that the arbitration provision at issue does not expressly invoke either the Federal Arbitration Act (AFAA@) or the Texas General Arbitration Act (ATGAA@).^[2] When the TGAA is the controlling statute, interlocutory appeal is the appropriate mechanism to challenge a denial of arbitration.  Tex. Civ. Prac. & Rem. Code Ann. ' 171.098(a)(1) (Vernon 2005); see TMI, Inc. v. Brooks, 225 S.W.3d 783, 790 (Tex.App.CHouston [14 Dist.] 2007, pet. denied).  When the FAA controls, a petition for writ of mandamus is the proper mechanism to challenge a denial of arbitration.  See In re Halliburton Co., 80 S.W.3d 566, 567 (Tex. 2002). 

Here, neither party contends on appeal that the arbitration provision in the settlement agreement is governed by the FAA, nor did Virani file a petition for writ of mandamus.  Moreover, the FAA governs disputes that concern agreements evidencing a transaction involving interstate commerce.  See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269B70 (Tex. 1992).  Interstate commerce is evidenced by, inter alia, location of headquarters in another state, manufacture of components in a different state, transportation of goods across state lines, and billings prepared in another state.  TMI, Inc., 225 S.W.3d at 797 n.6.  In this case, the agreement involves modification of a boating pier and the sale of a lot in a Galveston County subdivision. Accordingly, the arbitration provision in this case is governed by the TGAA and an interlocutory appeal from the denial of arbitration is allowed by section 171.021 of the Act.  See Tex. Civ. Prac. & Rem. Code Ann. ' 171.098(a)(1) (Vernon 2005).

B.        Standard of Review

When reviewing by interlocutory appeal an order denying arbitration, we apply a de novo standard to legal determinations and a Ano evidence@ standard to factual determinations. See TMI, Inc., 225 S.W.3d at 791.  Under the Ano evidence@ standard, we view the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it.  See City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005); see TMI, Inc., 225 S.W.3d at 791.  We must credit favorable evidence and disregard contrary evidence only if a reasonable factfinder could do so.  City of Keller, 168 S.W.3d at 827; TMI, Inc., 225 S.W.3d at 791.

Although courts will enforce agreements to arbitrate disputes, arbitration cannot be ordered in the absence of such an agreement.  See Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994).  The presumption in favor of arbitration does not go so far as to create an obligation to arbitrate where none exists.  See Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 479 (1989) (Aarbitration under the [FAA] Act is a matter of consent, not coercion@); In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738 (Tex. 2005) (noting AFAA generally >does not require parties to arbitrate when they have not agreed to do so=@) (quoting Volt, 489 U.S. at 479); Jenkens & Gilchrist v. Riggs, 87 S.W.3d 198, 201 (Tex. App.CDallas 2002, no pet.) (AAlthough arbitration is encouraged, it is a contractual matter and, in the absence of an agreement to arbitrate, a party cannot be forced to forfeit the constitutional protections of the judicial system and submit its dispute to arbitration.@).  Thus, unless a party has agreed to arbitrate, arbitration should not be compelled.  See Freis, 877 S.W.2d at 284.^[3]

C.        Analysis

Virani contends the trial court erred when it refused to abate the proceedings and compel arbitration.  He argues that Cunningham is a party to the settlement agreement and is, therefore, subject to the agreement=s arbitration provision.  Cunningham contends the trial court correctly denied Virani=s motion to compel because (1) Cunningham individually was not a party to the underlying lawsuit brought by the Association and, thus, is not subject to the settlement agreement=s arbitration clause; (2) Cunningham signed the settlement agreement in a representative capacity as an agent of the Association, not in his individual capacity; and (3) the dispute in question in not within the arbitration agreement=s scope.

It is well-settled that the law does not presume agency.  See Bernsen v. Live Oak Ins. Agency, Inc. 52 S.W.2d 306, 309 (Tex. App.CCorpus Christi 2001, no pet.); Sw. Bell Media, Inc. v. Trepper, 784 S.W.2d 68, 72 (Tex. App.CDallas 1989, no writ); Lachmann v. Houston Chronicle Publ=g Co., 375 S.W.2d 783, 785 (Tex. Civ. App.CAustin 1964, writ ref=d n.r.e.).  An agent will be held personally liable on a contract he signs if he fails to disclose the fact and intent of his agency.  Ward v. Prop. Tax Valuation, Inc., 847 S.W.2d 298, 300 (Tex. App.CDallas 1992, writ denied).  Thus, to avoid personal liability, an agent must prove he (1) disclosed his representative capacity to the other contracting party; and (2) identified the true principal for whom he was acting.  See DiGiammatteo v. Olney, 794 S.W.2d 103, 104 (Tex. App.CDallas 1990, no writ).

Virani argues that nothing on the settlement agreement=s face supports Cunningham=s contention that Cunningham signed the agreement in a representative capacity and with no intention of incurring personal liability.  We disagree.  Cunningham and two other Association board members, John Wilkins and Angel Sierra, signed their names on page three of the settlement agreement in the signature block for APlaintiff(s).@  Under Cunningham=s signature, the designation APresident and Board Member Marina Del Sol Subdivision Homeowners Association@ appears.  This designation indicates a representative capacity and identifies the principal.  See DiGiammatteo, 794 S.W.2d at 104 (appellant signed consulting services contract in representative capacity only where he signed as corporation=s president and identified corporation as principal).^[4]

Virani contends that the typewritten designation under Cunningham=s signature does not reflect an intention to sign only in a representative capacity.  In support of his position, Virani relies on Austin Hardwoods, Inc. v. Vanden Berghe, 917 S.W.2d 320 (Tex. App.CEl Paso 1995, writ denied), and A. Duda & Sons v. Madera, 687 S.W.2d 83 (Tex. App.CHouston [1st Dist.] 1985, no writ).

In Austin Hardwoods, the appellee, Vanden Berghe, signed a credit application on behalf of a corporation in which he was an officer and shareholder.  See 917 S.W.2d at 321B32.  After the corporation filed for bankruptcy, the appellant creditor, Austin Hardwoods, initially made a demand upon Vanden Berghe for payment of the corporation=s indebtedness and subsequently filed suit for recovery .  See id. at 322.  The trial court signed a judgment in favor of Vanden Berghe and Austin Hardwoods appealed.  See id. at 321.

The court of appeals noted that although Vanden Berghe had signed the agreement in his corporate capacity as Vice President of Operations, the application specifically stated that Athe undersigned personally guarantees the payment of this account in his individual capacity.@  Id. at 323.  The court concluded that the contract=s plain language clearly evidenced an intent of the parties to hold Vanden Berghe personally liable.  See id.

In Madera, the appellant, A. Duda & Sons, Inc. sued Tomatoes, Inc. and the appellee, Madera, individually, alleging the two defendants were jointly and severally liable for the balance due on a promissory note.  See 687 S.W.2d at 83.  Following a non-jury trial, the trial court signed a judgment in favor of the appellant against Tomatoes, for the balance due, but signed a take-nothing judgment as to Madera.  See id. at 83B84.

The court of appeals held that Madera was individually liable for the balance due on the promissory note for several reasons.  See id. at 85.  First, the court concluded that because the organization=s name was not followed by Madera=s name and office, the note did not indicate that Madera signed in a representative capacity.  See id. Second, the court noted that the wording on the note, AFor Value Received we promise to pay A. Duda & Sons, Inc.@ affirmatively showed that payment was promised from more than one source.  See id.   Finally, the Madera court noted that a person who signs a promissory note is presumed to be liable in an individual capacity, unless he interposes a defense.  See id.  In that case, Madera had proceeded to trial on his original answer, a general denial, and the appellant had presented evidence that Madera had made representations that he would stand by the note, but Madera offered no evidence to rebut his apparent status of individual signer.  See id.

As in Austin Hardwoods and Madera, the agreement at issue here contains language indicating individual performance. The agreement states as follows:

PAT CUNNINGHAM agrees to sell his lot #13 of Marina Del Sol, a subdivision in the City of League City, Galveston County, Texas, immediately adjacent to Virani=s lot to Virani for the sum of $290,000.00, closing to occur within sixty (60) days from the date of this Settlement Agreement, Cunningham to pay for a title policy, warrant title as marketable by a general warranty deed.

Cunningham testified at the hearing that the Association did not own his lot and did not have written authority to sell or convey it to Virani.  This language supports Virani=s contention that Cunningham signed the agreement in his individual capacity.

The conflicting indications appearing on the settlement agreement=s face render the agreement ambiguous with respect to whether Cunningham signed solely in a representative capacity on behalf of the Association, or also in his individual capacity.  Determining whether a contract is ambiguous is a question of law for the court.  J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).  Standing alone, a disagreement between contracting parties does not render the contract ambiguous.  In re Sterling Chems, Inc., No. 14-08-00280-CV, 2008 WL 3062630, at *2 (Tex. App.CHouston [14th Dist.] 2008, no pet.). Rather, a contract is ambiguous when it is susceptible to more than one reasonable interpretation.  Frost Nat=l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005).  The court may conclude that a contract is ambiguous in the absence of such pleading by any party. Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993).^[5] Here,  the settlement agreement is susceptible to more than one reasonable interpretation regarding the capacity in which Cunningham signed.

When a contract is ambiguous, discerning the parties= intent is a determination left to the exclusive province of the fact finder.  Coker v. Coker, 650 S.W.2d 391, 395 (Tex. 1983).  For purposes of this interlocutory appeal, that fact finder was the trial court.  In denying Virani=s plea and motion, the court made an implied finding that Cunningham signed the agreement in his representative capacity.  See P. McGregor Enters., Inc. v. Denman Bldg. Prods., Ltd., 279 S.W.3d 717, 724 (Tex. App.CAmarillo 2007, pet. denied) (record supported implied finding that project owner had, through its conduct, agreed to arbitrate validity of subcontractor=s mechanic=s lien although owner was not party to arbitration agreement).  We apply a Ano evidence@ standard to factual determinations in this context.  See TMI, Inc., 225 S.W.3d at 791.

At the hearing, Cunningham testified as follows:

Q:      And when you signed [the settlement agreement], you just signed it Pat Cunningham, correct?

A:      No, I signed it J.P. Cunningham on behalf of the homeowners association.

Cunningham=s testimony, in addition to the typewritten designation under his signature, constitute some evidence that he intended to sign the agreement only in his capacity as association president and board member.  Viewing the evidence in the light most favorable to the challenged finding and indulging every reasonable inference that would support it, we hold the trial court did not err in denying Virani=s Plea in Abatement and Motion to Compel Arbitration.  See In re Kellogg Brown & Root, Inc., 166 S.W.3d at 738; Freis, 877 S.W.2d at 284.^[6]  Issue one is overruled.

                                               III. CONCLUSION       

Accordingly, we affirm the judgment of the trial court.

/s/        William J. Boyce

Justice

Panel consists of Justices Anderson, Guzman, and Boyce.

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^[1]  In denying the requested arbitration, the trial court inadvertently referred to Plaintiff=s Objection to Referral to Arbitration in its order.

^[2]  Additionally, in his plea and motion, Virani requested that the court compel arbitration Aas required by the Federal and/or Texas [A]rbitration Act . . . .@

^[3]  Non-signatories can be compelled to arbitrate in certain narrow circumstances.  See In re Kellogg Brown & Root, Inc., 166 S.W.3d at 739 (AFederal courts have recognized six theories, arising out of common principles of contract and agency law, that may bind non‑signatories to arbitration agreements: (1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel, and (6) third‑party beneficiary.@)  Virani does not contend that these narrow circumstances are present here; instead, he contends that Cunningham signed the settlement agreement in his individual capacity and therefore is bound to arbitrate claims brought against him individually.

^[4]  Cunningham attached the affidavit of Charles Daughtry, the Association=s attorney, as an exhibit to his response to Virani=s plea and motion.  In his affidavit, Daughtry stated that Wilkins and Sierra signed the agreement in their capacity as board members Aas with all three signing this represented a majority of the Board.@  Under Wilkins and Sierra=s names, the typewritten words ABoard Member, on behalf of the Association@ appear.  This evidence further supports the conclusion that Cunningham signed in a representative capacity.

^[5]  Cunningham did not plead ambiguity.

^[6]  Because we conclude that the trial court did not err in finding that Cunningham signed the agreement in his representative capacity, we do not reach Cunningham=s alternative arguments that he was not a party to the underlying suit and that the dispute is not within the scope of the arbitration clause.  Further, we need not address whether Cunningham individually could be bound by the provisions of the arbitration clause as a non-signatory because Virani did not raise that issue in the trial court or on appeal.  See Tex. R. App. P. 33.1.