Rivas v. Molina

1

HUMBERTO RIVAS, Individually, STEVE RIVAS, Individually, ATLANTIS CUSTOM POOLS & SPAS, HUMBERTO RIVAS d/b/a ATLANTIS POOLS & SPAS, and STEVE RIVAS d/b/a ATLANTIS POOLS & SPAS, Appellants, v. CARMEN MOLINA,Appellee.

No. 08-23-00102-CV

Court of Appeals of Texas, Eighth District, El Paso

February 15, 2024

Appeal from the 243rd Judicial District Court of El Paso County Texas (TC# 2021DCV0785)

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

MEMORANDUM OPINION

GINA M. PALAFOX, JUSTICE

Appellants Humberto Rivas, individually, Steve Rivas, individually Atlantis Custom Pools & Spas, Humberto Rivas d/b/a Atlantis Pools & Spas, and Steve Rivas d/b/a Atlantis Pools & Spas (collectively, the Rivas Defendants), appeal the trial court's order denying Humberto Rivas's motion to compel arbitration.^[1] The central issue of this appeal is whether the Rivas Defendants waived their arbitration right by substantially engaging in litigation to the detriment of Appellee Carmen Molina. Based on the totality of the circumstances, we hold the trial court did not abuse its discretion. We affirm.

Factual and Procedural Background

On March 10, 2019, Molina contracted with the Rivas Defendants to construct a pool at her residence for the cash contract price of $30,000. After two years, Molina filed a lawsuit asserting the pool was faultily constructed and not completed on time. Molina alleged various causes of action against the Rivas Defendants including breach of contract, breach of the common law implied warranty of good and workmanlike services negligence, and violation of the Deceptive Trade Practices Act. With her original petition, she attached a copy of the parties' one-page, pool-construction contract. On its face, the contract included the following sentence written all in bold: "THIS AGREEMENT IS SUBJECT TO ARBITRATION UNDER THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION."

The Rivas Defendants responded by generally denying all allegations of the suit. After a scheduling conference was held on September 2, 2021, the trial court set the case for a jury trial on June 24, 2022. However, two months prior to this setting, the parties filed an agreed motion to continue the trial date. The motion described that some discovery had been completed but depositions and mediation still needed to be done. Molina also reported to the court that she had hired contractors to perform construction and repairs on the pool at issue. She noted that new information would subsequently be available regarding her claimed damages. The trial court granted the continuance.

Several months later, on August 18, 2022, the trial court held a status hearing where Molina informed the court that repairs were completed, and she calculated her damages at more than $20,000. The parties then represented they were ready for the court to set the case for trial. On August 30, 2022, the court issued an order setting the case for a jury trial on April 28, 2023, with a corresponding pretrial conference set for April 13, 2023. The written order required all discovery to be completed by the date of the pretrial conference.

Months later, on January 20, 2023, the Rivas Defendants sent Molina a demand to arbitrate. And four days thereafter, their attorney filed a motion to compel arbitration attaching the same one-page contract included with Molina's petition. Initially, the trial court set the motion for hearing on February 9, 2023, but it was then reset to March 2, 2023, based on Molina's unopposed request for more time to respond.

Molina filed an objection to the motion on February 27, 2023, arguing primarily that the Rivas Defendants had waived their right to compel arbitration by their litigation conduct. As a second point, Molina argued that compelled arbitration would advantage the Rivas Defendants. She pointed out that only a one-page contract had been produced, yet the terms indicated they remained subject to a "reverse side." Molina claimed she had concerns that, should the court compel arbitration, the Rivas Defendants could argue to her detriment that her claims were not properly arbitrable due to an unknown contract term. The Rivas Defendants replied with a series of arguments: first, they denied they had substantially invoked the judicial process; second, they urged they were not responsible for Molina's delay in bringing the case to trial; and last, they claimed Molina had failed to show she was prejudiced by their failure to seek arbitration at an earlier time.

The trial court held a hearing on March 23, 2023. Counsel for both parties argued largely about whether the Rivas Defendants had waived their right to compel arbitration. The trial court noted that months earlier, at the status hearing of August 18, 2022, the parties expressed they were both ready for trial, and the case was then set for jury trial in April 2023. Moreover, at that conference, the trial court informed the parties that no further continuances would be granted. Ending the hearing, the trial court particularly noted the case had been filed in 2021, and it was now 2023. The trial court later signed a written order denying the motion to compel without making any findings of fact or conclusions of law.

The Rivas Defendants timely appealed and shortly thereafter filed an opposed motion for a stay of the jury trial scheduled for April 28, 2023. See Tex. Civ. Prac. & Rem. Code Ann. § 171.098; Tex.R.App.P. 29.3. We granted the motion, staying all trial court proceedings pending resolution of the appeal or further order of this Court.

Issues on Appeal

The Rivas Defendants present two issues on appeal. First, they contend they established the existence of a valid and enforceable agreement to arbitrate. Second, they argue Molina failed to establish a waiver of the arbitration clause.

Standard of Review

Arbitration is a contractual proceeding by which parties-in order to obtain a speedy and inexpensive final disposition of disputed matters-consent to have controversies resolved by an arbitrator. See In re Phelps Dodge Magnet Wire Co., 225 S.W.3d 599, 605 (Tex. App.-El Paso 2005, no pet.) (citing Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 268 (Tex. 1992)). A party seeking to compel arbitration has the burden to prove that a valid arbitration agreement exists and that disputed claims fall within the agreement's scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011).

If the moving party meets its burden of establishing a valid agreement, the burden shifts to the party opposing arbitration to raise a valid defense against its enforcement. See In re McKinney, 167 S.W.3d 833, 835 (Tex. 2005) (per curiam). Absent evidence of a valid defense, the trial court must compel arbitration. Hogg v. Lynch, Chappell & Alsup, P.C., 480 S.W.3d 767, 780 (Tex. App.-El Paso 2015, no pet.) (citing J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003)). As a defense, the nonmovant may assert the movant waived its right to compel arbitration by substantially invoking the judicial process to the nonmovant's detriment or prejudice. See 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 (Tex. 2008).

"We review the trial court's denial of a motion to compel arbitration for an abuse of discretion." Truly Nolen of Am., Inc. v. Martinez, 597 S.W.3d 15, 21 (Tex. App.-El Paso 2020, pet. denied). "Under this standard, we defer to the trial court's factual determinations that are supported by the record and review legal questions de novo." Id. We may uphold the trial court's decision on any appropriate legal theory urged below. F.T. James Constr., Inc. v. Hotel Sancho Panza, LLC, 657 S.W.3d 623, 629 (Tex. App.-El Paso 2022, no pet.).

Waiver

In their second issue, the Rivas Defendants assert Molina failed to prove they waived their right to seek arbitration. Molina responds in her briefing by claiming that waiver is the "sole issue for review." Accordingly, we address waiver first as we agree it is dispositive when properly established. See Tex. R. App. P. 47.1. Because the parties raise no dispute over any of the relevant facts, the waiver issue presents a question of law that we review de novo. Perry Homes, 258 S.W.3d at 598.

A. Applicable law

"Like any other contract right, arbitration can be waived if the parties agree instead to resolve a dispute in court." Id. at 593. That is, "waiver can be implied from a party's conduct, although that conduct must be unequivocal." Id. The Supreme Court explained:

Since 1846, Texas law has provided that parties to a dispute may choose to arbitrate rather than litigate. But that choice cannot be abused; a party cannot substantially invoke the litigation process and then switch to arbitration on the eve of trial.

Id. at 584. Even so, the Court counseled there existed a strong, yet rebuttable presumption against waiver of arbitration.^[2] Id. ("There is a strong presumption against waiver of arbitration, but it is not irrebuttable and was plainly rebutted here."); see also Truly Nolen, 597 S.W.3d at 22-23. ("[T]he purpose of the presumption against finding a waiver of contractual arbitration is to preserve the purpose of the parties' agreement to obtain a speedy and inexpensive final disposition of the disputed matter.").

Thus "a party waives an arbitration clause by substantially invoking the judicial process to the other party's detriment or prejudice." Perry Homes, 258 S.W.3d at 589-90. In short, a party asserting a waiver must prove both of the following: (1) substantial invocation of the judicial process; and (2) prejudice.^[3] See id. at 593. For "substantial invocation," the amount of litigation and extent of discovery depends on the context of each...