Veronica Ellis and Pacesetter Builders, Inc. D/B/A Coldwell Banker Pacesetter Steel Realtors v. Dr. Ron Schlimmer and Tana Schlimmer

NUMBER 13-09-00426-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

VERONICA ELLIS AND PACESETTER BUILDERS,
INC. D/B/A COLDWELL BANKER PACESETTER
STEEL REALTORS, Appellants,
v.

DR. RON SCHLIMMER AND TANA SCHLIMMER, Appellees.

On appeal from the County Court at Law No. 4
of Nueces County, Texas.

MEMORANDUM OPINION ON REMAND
Before Chief Justice Valdez and Justices Benavides and Wittig
Memorandum Opinion on Remand by Justice Wittig1

1
The Honorable Linda Reyna Yañez, former Justice of this Court, did not participate in this opinion
because her term of office expired on December 31, 2010, and she was replaced on panel by Chief Justice
Rogelio Valdez in accordance with the appellate rules. See TEX. R. APP. P. 41.1(a). Retired Justice Don Wittig
was assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to TEX. GOV‘T CODE ANN.
§ 74.003 (West 2005).
 Some ten months after litigation was initiated, appellants, Veronica Ellis and Pacesetter

Builders, Inc. d/b/a Coldwell Banker Pacesetter Steel Realtors, filed a motion to abate and

compel arbitration. Appellees, Ron and Tana Schlimmer, in their initial response to the motion,

claimed waiver and estoppel and argued that the language of the agreement did not include

the dispute between the parties. The trial court denied the appellants‘ motion. This

interlocutory appeal ensued. We reverse and remand.

I. JURISDICTION

The trial court apparently did not determine whether the Texas Arbitration Act or the

Federal Arbitration Act applied to this proceeding. See TEX. CIV. PRAC. & REM. CODE ANN. §

171.001-.098 (West 2006) (―TAA‖); 9 U.S.C. § 2 (―FAA‖). We previously held that because

appellants did not plead or invoke the TAA, we had no jurisdiction on this interlocutory appeal;

however, the supreme court determined that because appellants argued the TAA to the trial

court, and appellees had the burden to show that some Texas state law or statutory

requirement would prevent enforcement of the arbitration agreement under the TAA,

jurisdiction attached. Ellis v. Schlimmer, 338 S.W.3d 12, 17 (Tex. App.—Corpus Christi 2010),

rev’d, 337 S.W.3d 860, 862 (Tex. 2011) (per curiam). Thus, we now address the merits of

appellants‘ complaints.

II. ARBITRATION AGREEMENT

The detailed background of this case has previously been reported in the two cases

cited above. Appellants maintain that, given the parties‘ agreement to arbitrate any

disagreement between the parties, the trial court had no discretion to deny their motion to

compel arbitration. The agreement provided:

SHOULD THERE BE ANY DISAGREEMENT BETWEEN SELLER AND BUYER
THAT CAN NOT BE RESOLVED THROUGH MEDIATION, BOTH BUYER AND

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 SELLER AGREE TO SUBMIT THIS DISAGREEMENT TO BINDING
ARBITRATION WITH A MUTUALLY AGREEABLE ARBITRATOR.

When we review an order denying arbitration under the TAA, we apply a no-evidence

standard to any factual determinations, and a de novo standard to legal determinations. In re

Trammell, 246 S.W.3d. 815, 829 (Tex. App.—Dallas 2008, orig. proceeding). We will sustain a

no-evidence issue if: (1) the record discloses a complete absence of evidence of a vital fact;

(2) the court is barred by rules of law or evidence from giving weight to the only evidence

offered to prove a vital fact; (3) the proof of a vital fact is no more than a mere scintilla; or (4)

the evidence conclusively establishes the opposite of a vital fact. Marathon Corp. v. Pitzner,

106 S.W.3d 724, 727 (Tex. 2003). When determining whether to compel arbitration, the trial

court must determine: (1) was there a valid, enforceable arbitration agreement; and (2)

whether the claims asserted fall within the scope of the agreement. Howell Crude Oil Co. v.

Tana Oil & Gas Corp., 860 S.W.2d. 634, 636 (Tex. App.—Corpus Christi 1993, no writ).

Appellees argued to the trial court that the arbitration contract language did not

include the dispute at issue, but they presented no evidence to allow the trial court to reach

such a conclusion.2 On appeal, appellees argue that the arbitration clause is overly broad and

not specific as to what it applies. They argue that a contractual clause is ambiguous if its

meaning is uncertain and doubtful or is susceptible to more than one meaning, citing Coker v.

Coker, 650 S.W.2d 391, 393─94 (Tex. 1983). Furthermore, appellees contend that the

contract must be complete in its essential and material terms and capable of performance

without adding to its terms, citing Walzem Dev. Co. v. Gerfers, 487 S.W.2d 219, 222 (Tex.

App.—San Antonio 1972, writ ref‘d n.r.e.). Furthermore, because the arbitration clause

contained a mediation clause before arbitration, somehow it is ambiguous. We disagree.

2
The trial court‘s denial of the motion to compel arbitration seems to be based on waiver, given his
citation to authorities concerning this doctrine.

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 Appellees argue that the arbitration clause is not clear as to whether it applies to the

agreement between the buyer and seller or to the broker fee. They say that because the

arbitration provision is placed after page 8 containing the brokerage fee arrangement, it is

unclear as to its application. We do not agree. Paragraph 11, ―Special Provisions‖ of the

standard family residential real estate contract, is one of twenty-one named provisions. It

follows paragraph 10 which discusses possession. Paragraph 11 clearly incorporates the

―SPECIAL PROVISONS attached‖ containing the arbitration provision. The paragraph 11

special provision attached addendum also discusses (1) a contingent sale of the appellees‘

property, (2) documentation of warranties, and (3) seller (appellants) presenting marketing

materials. As noted, it also contains the arbitration clause quoted above. The arbitration

clause is straightforward and clearly applies to ―any disagreement‖ between the parties.

Appellees supply no proof that the clause is limited to the brokerage fee.

While appellees maintain that mediation is required by the contract, they apparently did

not seek mediation before filing suit or in contesting the arbitration clause. The standard form

residential real estate contract signed by the parties provides for mediation in paragraph 16.

Likewise, the arbitration clause requires mediation. The record discloses no effort by either

party to seek mediation. However, paragraph 16 also provides: ―This paragraph does not

preclude a party from seeking equitable relief from a court of competent jurisdiction.‖

Appellees cite no authority that the mediation clause somehow makes the contract language

ambiguous or unclear. See TEX. R. APP. P. 38.1(i); 38.2(a)(1). In appellees‘ written response

to appellants‘ motion to compel arbitration, they did not contend that mediation was a condition

precedent, nor did they contend as they do on appeal that the clause somehow made the

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agreement ambiguous.3 Appellees fail to carry their burden to overcome the presumption

favoring the arbitration agreement. See J.M. Davidson, Inc. v. Webster, 128 S.W. 3d 223, 227

(Tex. 2003).

Appellees also state that the provision is overly broad. They argue it ―does not say it

applies to Ellis‘s contract with the Schlimmers.‖ Yet, we noted above, the provision was clearly

incorporated into the special provision section of the real estate contract and manifestly applies

to ―any disagreement between seller and buyer.‖ Once a valid agreement to arbitrate has

been established, a presumption exists favoring agreements to arbitrate, and we must resolve

all doubts about the scope of the arbitration in favor of arbitration. In re FirstMerit Bank, N.A.,

52 S.W.3d 749, 753 (Tex. 2001) (orig. proceeding). Further, once it is determined that a valid

arbitration agreement exits, the burden shifts to the party opposing arbitration to raise an

affirmative defense to enforcing arbitration. TEX. CIV. PRAC. & REM. CODE ANN. § 171.021(a)

(West 2006); Webster, 128 S.W. 3d at 227. We hold that the agreement is not ambiguous and

that the dispute is within the scope of the agreement.

III. WAIVER

Appellees argued both to the trial court and on appeal that appellants waived the

arbitration provision. They urge that there was a waiver because appellants waited until five

months before trial to demand arbitration, discovery had taken place, experts were retained,

and an alleged $11,000 had been spent in litigation expenses.4 Appellees cite In re Certain

Underwriters at Lloyd's, 18 S.W.3d 867, 872 (Tex. App.—Beaumont 2000 orig. proceeding)

3
At the hearing on the motion to abate and compel arbitration, counsel for appellant Ellis indicated
―there‘s not going to be any problem in us going to mediation.‖ Indeed, the trial court could have granted the
requested abatement and ordered mediation under either or both of the mediation clauses found in the contract.
4
Appellants complain that appellees provided no evidence of litigation expenditures. Appellees counter
that their pleadings included the sum of expenses. Because of the relatively small amount of discovery and the
reasonable nature of the expenses, we will accept as true, arguendo, appellees‘ expense allegations.

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(holding that there is no set rule as to what constitutes waiver of an arbitration agreement;

rather, waiver depends on the facts of each case). Waiver may be express or implied, but it

must be intentional. Southwind Group v. Landwehr, 188 S.W. 3d 730, 735 (Tex. App.—

Eastland 2006, no pet.). Waiver may be found only when (1) the party seeking arbitration has

substantially invoked the judicial process and (2) the party opposing suffered actual prejudice

as a result. Id. A "heavy burden of proof" is required to establish waiver of arbitration rights,

and the court must resolve all doubt in favor of arbitration. In re Certain Underwriters at

Lloyd's, 18 S.W.3d at 872.

Both sides cite Perry Homes v. Cull, 258 S.W.3d 580, 591─592 (Tex. 2008). In that

case the supreme court reviewed federal standards and held that waiver must be decided on a

case-by-case basis, and that courts should look to the totality of the circumstances. Id. at 591.

Like the federal courts, state courts have considered factors such as: (1) when the movant

knew of the arbitration clause; (2) how much discovery had been conducted; (3) who initiated

the discovery; (4) whether it related to the merits rather than arbitrability or standing; (5) how

much of it would be useful in arbitration; and (6) whether the movant sought judgment on the

merits. Id. at 592.

While appellees contend that, as real estate professionals, appellants should have

known of the arbitration clause, counsel for appellants indicated they did not know of the

clause until shortly before filing their motion to compel arbitration. Regarding discovery, Ellis

had propounded one set of discovery, (production requests, interrogatories and disclosure

requests) but Pacesetter had not sent any discovery. Depositions had been noticed by both

sides but no depositions had been accomplished. All parties participated in a docket control

conference. Appellees, plaintiffs below, retained expert witnesses.

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 The modicum of discovery accomplished related to the merits of the case and could

therefore be useful in arbitration. The parties‘ efforts in requesting and obtaining the limited

discovery here is not prejudicial. See In re Harthorne, 282 S.W.3d 131, 142 (Tex. App.—

Dallas 2009, orig. proceeding). While appellees assert that appellants sought affirmative relief,

the only relief sought was the original motion to compel arbitration, based upon Ellis‘s contract

with the builder, and the present matter seeking to compel arbitration with appellees.

Appellants sought no other affirmative relief against appellees, and filed no dispositive motions

or other actions to dismiss appellees claims.

Appellees also argue waiver because Pacesetter filed its answer on September 22,

2008, and Ellis filed her answer on September 28, 2008, then they waited until June 15, 2009

before they sought to compel arbitration. Appellants argue that under EZ Pawn Corp. v.

Mancias, 934 S.W.2d 87, 89 (Tex. 1996) (applying the FAA), implying waiver from a party's

actions is appropriate only if the facts demonstrate that the party seeking to enforce arbitration

intended to waive its arbitration right. This principle is cited with approval in Perry Homes, 258

S.W. 3d at 591, n. 59. In similar cases, no waiver was found when the demand for arbitration

was as late as two years. See In re Vesta Ins. Group, Inc., 192 S.W.2d 759, 763 (Tex. 2006)

(orig. proceeding). While waiver could perhaps be found with as little as ten months‘ delay,

depending on the totality of the circumstances, appellees still must show that it has suffered

prejudice as a result of the delay. See Perry Homes, 258 S.W. 3d at 593.

Appellants argue from Fleetwood that the evidence is legally insufficient to support the

trial court‘s implied finding of prejudice. See In re Fleetwood Homes of Tex., L.P., 257 S.W.3d

692, 694-695 (Tex. 2008) (orig. proceeding). There, as in our case, no depositions were

taken, although here some had been noticed and cancelled. One set of discovery had been

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served before the motion to compel arbitration was filed. Id. No dispositive motion had been

filed and movant did not wait until the eve of trial to file their motion. ―Taken together, these

actions are not enough to overcome the presumption against waiver.‖ Id. (citing In re Vesta

Ins. Group, Inc., 192 S.W.3d at 763; In re Bruce Terminix, 988 S.W.2d 702, 704 (Tex. 1998)

(orig. proceeding)). We hold that appellees did not overcome the presumption against waiver

and meet their burden to show prejudice.

IV. ESTOPPEL

Appellees also argue equitable estoppel, citing Perry Homes, 258 S. W. 3d at 593.

There the supreme court noted: ―[e]stoppel is a defensive theory barring parties from

asserting a claim or defense when their representations have induced ‗action or forbearance of

a definite and substantial character‘ and ‗injustice can be avoided only by enforcement.‘‖ Id.

―By the same token, a party who enjoys substantial direct benefits by gaining an advantage in

the pretrial litigation process should be barred from turning around and seeking arbitration with

the spoils.‖ Id. They urge, as in their waiver argument, appellees had to prepare, answer

discovery, locate experts and spend over $11,000 in litigation costs. Appellants waited over

ten months before seeking enforcement of the arbitration clause, setting a trial date, initiating

discovery and sending deposition notices. Appellees argue that appellants, as real estate

agents, should have known of the arbitration provision and it is fundamentally unfair to allow

appellants ―to cultivate their facts during months of litigation then discovering their error to

change gears and shift the case into arbitration.‖ Appellees, as plaintiffs below, failed to prove

how either parties‘ preparation for trial or arbitration somehow disadvantaged appellees.

Appellees proved no direct benefit or advantage to appellants. We fail to see how these

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actions by appellants, taken together, overcome the presumption in favor of arbitration. See In

re Bruce Terminix, 988 S.W.2d at 704.

V. CONCLUSION

Given our finding of a valid arbitration agreement, appellees failed to meet their burden

to overcome the presumption favoring arbitration. We reverse and remand and direct the trial

court to compel arbitration and to undertake such other actions it deems appropriate

consistent with this opinion.

DON WITTIG
Justice

Delivered and filed the
24th day of August, 2011.

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