F.T. James Constr., Inc. v. Hotel Sancho Panza, LLC

657 S.W.3d 623

F.T. JAMES CONSTRUCTION, INC., Appellant,

v.HOTEL SANCHO PANZA, LLC, and Jordan Foster Construction, LLC., Appellees.

No. 08-20-00096-CV

Court of Appeals of Texas, El Paso.

September 28, 2022

ATTORNEY FOR APPELLANY: Stephen H. Nickey, Law Office of Stephen Nickey, 1201 North Mesa, Ste. B, El Paso, TX 79902.

ATTORNEYS FOR APPELLEES: Harrel L. Davis III, Gordon Davis Johnson & Shane, PC, 4695 N. Mesa Street, El Paso, TX 79912, Sylvan S. Lang Jr., Lang Law Firm, P.C., 10500 Heritage Blvd., Ste. 200, San Antonio, TX 78216.

Before Rodriguez, C.J., Palafox, and Alley, JJ.

OPINION

GINA M. PALAFOX, Justice Appellee Hotel Sancho Panza, LLC (the Hotel) filed suit against F.T. James Construction, Inc. (FTJC) over delays in the construction of the Courtyard Marriott Downtown/Convention Center hotel and meeting space in downtown El Paso. FTJC answered the lawsuit, made counterclaims against the Hotel, and initiated a third-party claim against one of its subcontractors, Jordan Foster Construction Inc. (Jordan Foster). In turn, Jordan Foster filed a counterclaim against FTJC, and subsequently, a third-party petition against the Hotel.

Just shy of one year after the Hotel initiated this lawsuit, FTJC moved to compel arbitration and abate the case, pursuant to what it views as a valid and enforceable arbitration clause in the contract between it and the Hotel. The trial court denied FTJC's motion to compel arbitration and this interlocutory appeal followed. FTJC asks this Court to reverse the trial court's denial of its motion. We affirm.

I. BACKGROUND

The Project

The Hotel hired FTJC to construct a Courtyard Marriott hotel and meeting space in downtown El Paso (the Project). The contract between the parties was entered on May 21, 2016. Among its terms, the contract provided for substantial completion of the Project within 420 days after commencement, and 30 days more for final completion. That timeline meant expected completion was by August 2017. The Project, however, was not completed within the time period called for in the contract. In the underlying suit, the parties dispute the cause of the delay. FTJC claims the delay resulted from multiple change orders submitted by the Hotel. Countering that argument, the Hotel claims delays resulted from "FTJC's failure to timely order materials, failure to properly process and approve change orders, and failure to schedule roof work." Provisions of the contract for the Project are relevant to this dispute.

The Contract

The agreement between the parties was titled "Cost of the Work Plus a Fee with a Negotiated Guaranteed Maximum Price Construction Agreement between Owner and Builder." The architect on the Project was identified on the first page of the agreement as being Mitchell Carlson Stone, Inc. (hereinafter referred to as MCS or the Architect). The second page of that agreement listed eight documents that, together with the agreement itself, constituted the "Contract Documents." The first document listed was titled, "AIA Document A201-1997 edition of the General Conditions of the Contract for Construction," published by the American Institute of Architects.

Several of the provisions in Document A201-1997 describe a multi-step dispute resolution process included within the parties’ agreement. The first of these provisions defined the term "claim" as "a demand or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms, payment of money, extension of time or other relief with respect to the terms of the Contract." Also included in the definition of the term "claim" is "other disputes and matters in question between the Owner and Contractor arising out of or relating to the Contract." Claims, as that term is defined, were to be initiated by written notice to the Architect and the other party. Also, it must have been "initiated within 21 days after occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim, whichever is later.

Claims were to be referred initially to the Architect for decision. After the Architect's initial decision, or thirty days after the submission of the claim to the Architect if no decision was made, claims were then subject to mediation as a condition precedent to arbitration or the initiation of legal or equitable proceedings. Claims not resolved by mediation were then subject to arbitration. A demand for arbitration was to be made within a reasonable time after any claim had arisen.

Claims by the Hotel, FTJC, and Jordan Foster

On February 6, 2019, the Hotel initiated litigation by filing its original petition against FTJC. The Hotel's petition alleged that the Project was not completed on time due to a number of failures by FTJC. It also alleged that the Project suffered serious concrete defects, among other deficiencies claimed. On March 11, 2019, FTJC filed its original answer and a counterclaim against the Hotel, along with a third-party claim for breach of contract against Jordan Foster, a concrete subcontractor on the Project. Against the Hotel, FTJC asserted a claim of breach of contract, seeking to foreclose on a mechanic's lien in the amount of $1,900,000.¹ As for the third-party claim against Jordan Foster, FTJC also asserted a breach of contract claim against it, and sought indemnification in the event the Hotel established there were concrete deficiencies on the Project. With its answer to FTJC's third-party claim, Jordan Foster, in turn, filed a counterclaim against FTJC for breach of contract and quantum meruit. Months later, Jordan Foster filed a third-party petition against the Hotel also seeking to foreclose on a mechanic's lien. The Hotel answered Jordan Foster's claim and filed its own counterclaim against Jordan Foster, alleging the subcontractor's lien claim against the Hotel was improper. Responding to the initial discovery requested by FTJC, Jordan Foster served 53,390 pages of documents on all parties to the lawsuit. The trial court signed the original scheduling order on May 8, 2019, initially setting the case for trial on June 5, 2020. On August 1, 2019, the Hotel served its first set of requests for admissions to FTJC.

Jordan Foster and FTJC's Arbitration Demands

FTJC first demanded arbitration in a letter to counsel for the Hotel, dated September 23, 2019. The letter said, "F.T. James Construction, Inc. hereby demands arbitration pursuant to the Arbitration Clause contained in the General Conditions." On September 25, 2019, the Hotel conducted two depositions solely on the issue of arbitration. The first deposition was of Francisco Licon, a project manager for third-party defendant Jordan Foster. The second deposition was of Frank James, the owner of FTJC. During Frank James’ deposition, he testified that he did not know whether FTJC was making a demand for arbitration; that he did not know if there was a right to arbitration in the contract between FTJC and the Hotel; that he did not know if FTJC had a preference that the dispute be resolved in the court system or in arbitration; and that he did not know of any concern about litigating the dispute in the court system.

On November 11, 2019, Jordan Foster filed an amended motion to compel arbitration.² The motion included a standard subcontract form agreement, entered June 10, 2016, between Jordan Foster and FTJC. Jordan Foster's motion to compel arbitration sought to send the entire case to arbitration based on arbitration clauses found in the contract between it and FTJC, and in the purported contract between FTJC and the Hotel. Jordan Foster's motion to compel arbitration was opposed by the Hotel, but not by FTJC. The Hotel's opposition was based primarily upon the fact that there was no direct agreement to arbitrate between Jordan Foster and the Hotel. On December 20, 2019, by written order, the trial court denied Jordan Foster's motion to compel arbitration.

Meanwhile, on November 12, 2019, FTJC sent a letter to MCS—the Project architect—indicating it sought to submit the dispute for resolution in accordance with the alternative dispute resolution procedure outlined in AIA Document A201-1997. When MCS did not respond, FTJC advanced to the next step of the process, demanding mediation with the Hotel, by letter dated December 20, 2019. On January 7, 2020, the Hotel's counsel sent a letter to FTJC's counsel indicating the letter was intended as a response to FTJC's letter to MCS, dated November 12, 2019. Counsel for the Hotel informed FTJC that MCS had been retained as an expert witness in the lawsuit. Counsel stated, "[o]n October 2, 2019, I met with Keith Carlson and Grant Fisher for an in-depth discussion of the case; and an engagement letter was fully executed as of October 29, 2019." In closing, the letter indicated the Hotel contended that FTJC had waived any right under the contract to have MCS "decide the validity" of any claims asserted between the parties; and finally, to the extent certain claims were mentioned in FTJC's letter of November 12, those claims had already been determined by the Architect. After all parties agreed to a continuance, the trial court reset the trial date for December 4, 2020.

On January 29, 2020, FTJC filed its own motion to compel arbitration. Attached to this motion, FTJC included several exhibits including an affidavit of Frank James asserting the exhibits were true and correct copies; an exhibit B, identified as copies of pages 1 and 2 of a "Cost of Work Plus Fee With a Negotiated Guaranteed Maximum Price Construction Agreement Between Owner and Builder dated May 21, 2016"; and an exhibit C, identified as a copy of "General Conditions of the Contract of Construction AIA Document A201-1997."

In response to FTJC's motion, the Hotel argued that FTJC did not provide the trial court with an authenticated arbitration agreement and there was no meeting of the minds on an agreement to arbitrate between itself and...