Cash America International, Inc. and Mr. Payroll Corporation v. Exchange Services, Inc.

NO. 07-02-0077-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL B
MAY 29, 2002
______________________________
CASH AMERICA INTERNATIONAL, INC.
AND MR. PAYROLL CORPORATION, APPELLANTS
V.
EXCHANGE SERVICES, INC., APPELLEE
_________________________________
FROM THE 320th DISTRICT COURT OF POTTER COUNTY;
NO. 89151-D; HONORABLE DON EMERSON, JUDGE
_______________________________
Before BOYD, C.J., and QUINN and JOHNSON, JJ.
Mr. Payroll Corporation and Cash America International, Inc., appeal from an order
denying their motion to abate a suit by Exchange Services, Inc., and to order the parties
to arbitration. We vacate the trial court’s order and remand.
BACKGROUND
Mr. Payroll Corporation, as franchisor (Mr. Payroll) and Exchange Services, Inc.,
as franchisee (ESI), executed an Amended and Restated Franchise Agreement (the
Agreement) to be effective July 31, 2000. Cash America International, Inc. (Cash America)
executed the Agreement in the capacity of Guarantor. The Agreement, in general,
concerns the establishment and operation of facilities which offer check cashing and
related services. The term of the Agreement is ten years from the date of execution, with
provisions for renewal. Under the Agreement, if ESI did not operate the business in which
a check-cashing facility was located (a “third party franchise”), then Mr. Payroll was, or is,
required to lease or sublease the facility Location and in turn sublease its Location rights
to ESI.
Section 20 of the Agreement is entitled Resolution of Disputes. Among other
provisions, subsection 20.B provides that
Except as provided in Section 20(D) below [addressing injunctive relief] and
except for actions brought with respect to the ownership or use of the
Proprietary Marks or payment of any fees described in Section 3 hereof (any
of which actions shall be brought only in the state or federal courts in Tarrant
County, Texas), Franchisor and Franchisee agree that any and all disputes
between them, and any claim or controversy arising out of, or related to this
Agreement, or the making, performance, or interpretation thereof, shall be
finally settled solely and exclusively by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association
(“AAA”) or any successor organization. . . .
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Subsection 23.O of the Agreement provides that all previous agreements related
to Existing Franchises are terminated and of no further force or effect. The subsection
also provides that notwithstanding the termination provisions of subsection 23.O, “nothing
in this agreement shall terminate or otherwise affect any lease of real property that relates
to the Existing Franchises and that is valid and effective as of the date of this Agreement.”
As of the date of the Agreement, a lease dated February 3, 1989 (the 1989 lease), existed
between ESI and Toot ‘N Totum Food Stores (Toot ‘N Totum), whereby Toot ‘N Totum
leased locations in some of its convenience stores to ESI. The locations were for the
purpose of ESI operating check-cashing operations. The 1989 lease did not address
choice of law, venue or procedures for dispute resolution.
In addition to the Amended and Restated Franchise Agreement, Mr. Payroll and ESI
executed an Assignment and Assumption of Lease and Estoppel Certificate agreement
effective July 31, 2000 (the Assignment). The Assignment, in relevant part, (1) assigned
to Mr. Payroll all of ESI’s rights under the 1989 lease, (2) required Mr. Payroll to perform
all of ESI’s obligations under the 1989 lease, and (3) provided that “venue for any dispute
in connection with this Assignment shall be in a court of competent jurisdiction in the
county in which the Premises are located.”
In September, 2001, ESI sued Mr. Payroll and Cash America in Potter County
where ESI alleged a majority of the premises in dispute are located. The suit alleged
execution of the Assignment by Mr. Payroll, assumption of Mr. Payroll’s obligations under
the Assignment by Cash America, and breach of the Assignment and the 1989 lease by
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both Mr. Payroll and Cash America. ESI alleged that (1) the 1989 lease required ESI to
pay certain remodeling costs incurred by Toot ‘N Totum, (2) Mr. Payroll and Cash America
assumed ESI’s lease obligations, (3) Mr. Payroll and Cash America refused to pay the
remodeling costs to Toot ‘N Totum, and (4) ESI paid the costs to Toot ‘N Totum because
of the refusal of Mr. Payroll and Cash America to pay. ESI sought damages for breach of
the Assignment and 1989 lease, as well as generally pleading for declaratory judgment
construing the agreements and declaring the rights and duties of the parties under the
written instruments. Toot ‘N Totum was not made a party to the suit by ESI, Mr. Payroll or
Cash America.
Mr. Payroll and Cash America responded to ESI’s suit with a Motion to Abate by
which they sought an order directing the parties to arbitrate the claims and abating the
lawsuit. They also filed an Original Answer subject to the motion to abate by which they
again asserted that the claims made by ESI were subject to arbitration. ESI did not and
does not contest the validity of the arbitration provision in the Agreement.1 Rather, ESI
urged the trial court to deny the motion to refer the claims for arbitration because (1) Toot
‘N Totum was a necessary party to the dispute, Toot ‘N Totum would have to be joined in
the suit before the claims could be resolved, and Toot ‘N Totum was not a party to an
1
Cash America signed the Franchise Agreement only as guarantor, and was not
included in the term “Franchisor” as used in the arbitration provision. ESI does not
contend that its claims against Cash America are not subject to the arbitration provision
on the basis that Cash America was not included in the term “Franchisor.” See, e.g.,
ANCO Ins. Servs. of Houston, Inc. v. Romero, 27 S.W.3d 1, 5 (Tex.App.--San Antonio
2000, pet. denied); Carlin v. 3V Inc., 928 S.W.2d 291, 294-97 (Tex.App.--Houston [14th
Dist.] 1996, no writ); Merrill Lynch, Pierce, Fenner & Smith v. Eddings, 838 S.W.2d 874,
879 (Tex.App.--Waco 1992, writ denied).
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arbitration agreement, thus could not be compelled to arbitrate; and (2) ESI’s claims were
outside the scope of the arbitration provision.
ESI recognizes that Texas public policy favors arbitration and that once the
existence of a valid arbitration agreement is shown, a party seeking to avoid the effects
of the agreement must show that the dispute is not within the scope of the agreement.
See, e.g., Prudential Securities, Inc. v. Marshall, 909 S.W.2d 896, 898-900 (Tex. 1995).
ESI contends that the relevant determination is whether ESI’s “breach of contract/lease
claims fall outside the scope of the arbitration clause.” See In re FirstMerit Bank, N.A., 52
S.W.3d 749, 753 (Tex. 2001). In asserting that the claims are outside the scope of the
clause, ESI notes that it is not suing under the Amended and Restated Franchise
Agreement, but only under the Assignment and 1989 lease; neither the Assignment nor
the 1989 lease contain an arbitration clause; and the Assignment does not state that it is
made pursuant to the Franchise Agreement. ESI also maintains that Toot ‘N Totum did
not agree to arbitrate, cannot be forced to arbitrate, and because ESI’s claims involve the
1989 lease to which Toot ‘N Totum is a party, the dispute between ESI, Mr. Payroll and
Cash America are not arbitrable. We first address Toot ‘N Totum’s effect on the arbitration
question.
EFFECT OF A NECESSARY PARTY
NOT SUBJECT TO THE ARBITRATION AGREEMENT
Mr. Payroll and Cash America urge that even if Toot ‘N Totum were to be made a
party to the suit, Mr. Payroll and Cash America would still be entitled to arbitrate their
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disputes with ESI because the disputes are within the scope of a valid arbitration
agreement. They cite Prudential-Bache Securities, Inc. v. Garza, 848 S.W.2d 803, 807
(Tex.App.--Corpus Christi 1993, orig. proceeding), in which the court addressed claims
made in the same lawsuit by a wife and husband. The wife had not signed an arbitration
agreement with the defendant; the husband had signed an arbitration agreement with the
defendant which covered some, but not all, claims being made by the husband. The court
held that claims made by the husband which were within the scope of the arbitration
agreement were arbitrable despite the presence in the same lawsuit of the wife who had
not agreed to arbitrate, and although one of the husband’s claims was not subject to the
arbitration agreement. Id. at 807.
We agree with Mr. Payroll and Cash America. If a party to a valid arbitration
agreement could effectively negate the agreement by filing suit and joining into the suit a
necessary or proper party who had not agreed to arbitration, or alleging the necessity or
possibility of future joinder of such a party, then agreements to arbitrate disputes would be,
practically speaking, illusory. The Texas Arbitration Act, TEX . CIV . PRACT . & REM . CODE
ANN . § 171.001, et seq. (Vernon Supp. 2002), recognizes that arbitration agreements may
not cover all parties and all issues in a lawsuit. See id. § 171.025. The Act directs that
the trial court shall stay a proceeding which involves an issue subject to arbitration, but
that the stay applies only to the issue subject to arbitration if that issue is severable from
the remainder of the proceeding. Id. Assuming, arguendo, that Toot ‘N Totum is a
necessary party to the lawsuit, such fact does not preclude Mr. Payroll and Cash America
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from asserting their right to arbitrate issues within the scope of a valid arbitration
agreement, whether or not Toot ‘N Totum is actually a party to the suit. See id.; Garza,
848 S.W.2d at 807.
SCOPE OF THE ARBITRATION PROVISION
Mr. Payroll and Cash America urge that ESI’s claims arise out of and are related to
the Amended and Restated Franchise Agreement because the Assignment was executed
as part of the transaction involving execution of the Agreement, and was required by the
Agreement. They further assert that even if ESI’s claims are construed as claims or
controversies not “arising out of or related to” the Amended and Restated Franchise
Agreement, the language of the arbitration provision is broad enough to require arbitration
of ESI’s claims because the language requires arbitration of “any and all disputes”
between the parties in addition to disputes arising out of or related to the Franchise
Agreement. For the reasons set out hereafter, we need not determine if the claims arise
out of or are related to the Agreement.
In the absence of an allegation of ambiguity in the contract language, the instrument
alone will be deemed to express the intent of the parties. See Exxon Corp. v. West Tex.
Gathering Co., 868 S.W.2d 299, 302 (Tex. 1993). A contract should be construed as a
whole, attempting to give effect to all contract provisions so that none will be rendered
meaningless. See Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464
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(Tex. 1998). Separate contracts between the same parties executed at the same time and
pertaining to the same transaction are generally construed together. See DeWitt County
Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999); Jim Walter Homes, Inc. v.
Schuenemann, 668 S.W.2d 324, 327 (Tex. 1984). A contract is construed in accordance
with the plain meaning of its language, unless it definitely appears from the writing as a
whole that the intention of the parties would be defeated by such a procedure. See Parks,
1 S.W.3d at 101.
The plain, unambiguous language of the arbitration provision before us provides for
arbitration of all disputes between ESI and Mr. Payroll with specific exceptions for actions
with regard to ownership or use of Proprietary Marks or fees to be paid under a specified
section of the Agreement. ESI offers no authority for its argument that the language “any
and all disputes” does not mean what it clearly says: all disputes involving these parties,
with specified exceptions, none of which apply to the current dispute. Nor does ESI offer
authority for its assertion that the language is not broad enough to cover this specific
dispute arising out of duties and obligations created during the course of business
dealings involving check cashing operations and locations, which are the bases of ESI’s
relationship with Mr. Payroll and Cash America. See Parks, 1 S.W.3d at 102. And, we
have previously addressed and discounted ESI’s argument that the dispute is outside the
scope of the arbitration provision because Toot ‘N Totum is, should be, or could be
involved. We conclude that the dispute is within the scope of the arbitration provision.
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Finally, we consider ESI’s argument that the venue provision in the Assignment
removes this dispute from the arbitration provision, even if the dispute would otherwise fall
within the scope of the provision. See Point Lookout West, Inc. v. Whorton, 742 S.W.2d
277, 278 (Tex. 1987). The language of the venue provision does not reference or purport
to be an amendment to the section of the Franchise Agreement entitled “Resolution of
Disputes,” the subsection entitled “Arbitration,” nor the specific language of the arbitration
provision. The venue provision is part of a single sentence which includes choice of law
and forum selection language. The sentence selects the law of the state in which the
premises are located as the law to be used in construing the Assignment, and designates
the location for dispute resolution as the county in which the premises are located.
Reasonably construed together with the Amended and Restated Franchise Agreement
which was to be effective on the same date as the Assignment, the provision does not
prescribe how disputes are to be resolved, only where. See In re Winter Park Constr.,
Inc., 30 S.W.3d 576, 578 (Tex.App.--Texarkana 2000, orig. proceeding). We conclude that
the venue provision in the Assignment does not contradict language of the arbitration
provision nor does it remove disputes from the scope of the provision.
CONCLUSION
The claims asserted by ESI in its Original Petition are within the scope of the
arbitration provision in the Amended and Restated Franchise Agreement executed by ESI
and Mr. Payroll as principals and Cash America as guarantor. The Order of the trial court
denying the motion of Mr. Payroll and Cash America to abate ESI’s suit and order the
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parties to arbitration is vacated. The cause is remanded to the trial court for further
proceedings in accordance with this opinion.
Phil Johnson
Justice
Quinn, J., concurring
Publish.
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NO. 07-02-0077-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL B
MAY 29, 2002
______________________________
CASH AMERICA INTERNATIONAL, INC.
AND MR. PAYROLL CORPORATION,
Appellants
v.
EXCHANGE SERVICES, INC.,
Appellee
_________________________________
FROM THE 320th DISTRICT COURT OF POTTER COUNTY;
NO. 89151-D; HONORABLE DON EMERSON, JUDGE
_______________________________
Concurring Opinion
_______________________________
I concur in the majority’s opinion and disposition but write to specifically address a
contention Exchange Services, Inc. made at oral argument. There, it asserted that
because the parties agreed via paragraph 23.0 of the franchise agreement that “nothing
in this [franchise] agreement shall terminate or otherwise affect any lease of real property
that relates to the Existing Franchises,” the arbitration clause contained in the franchise
agreement has no “affect” upon disputes arising under the lease. (Emphasis added).
Assuming arguendo that the passage “or otherwise affect any lease” could be read as
encompassing disputes or litigation involving duties imposed by the lease, I note that the
claims of Exchange Services are founded on more than just the lease. For instance, it also
seeks to enforce obligations purportedly assumed by Mr. Payroll Corporation under the
Assignment and Assumption of Lease and Estoppel Certificate agreement. The latter,
more importantly, is mentioned nowhere in paragraph 23.0. Thus, any purported immunity
from arbitration created by paragraph 23.0 does not encompass those disputes implicating
or arising under the agreement to assign the lease.
Brian Quinn
Justice
Publish
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