Levy Rentals, LLC and Brian Levy v. TC&C Investments, LLC

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-21-00320-CV

Levy Rentals, LLC and Brian Levy, Appellants

v.

TC&C Investments, LLC, Appellee

FROM THE 21ST DISTRICT COURT OF BASTROP COUNTY NO. 1638-21, THE HONORABLE CARSON TALMADGE CAMPBELL, JUDGE PRESIDING

MEMORANDUM OPINION

In this interlocutory appeal, we affirm the trial court’s order denying a motion to

abate and compel arbitration filed by Levy Rentals, LLC and Brian Levy (collectively, Levy).

In 2019, Levy negotiated with TC&C Investments, LLC to form a joint venture

restaurant and bar business. The parties signed a business operations agreement (BOA), a

commercial property lease, and a management services agreement (MSA). After executing the

agreements, TC&C sued Levy for, among other claims, (1) breach of contract for allegedly

“fail[ing] to be and remain legally organized and operated in a manner consistent with all State

and Federal laws as applicable to the Business” and (2) common law fraud based on alleged false

representations “[d]uring the pre-contract negotiations.”

Levy moved to abate and compel arbitration, relying on a binding arbitration

provision in the MSA. Under the following two headers in its response, TC&C argued that two “state law contract defenses” defeat the arbitration clause: (1) “The Arbitration Clause Itself has

been induced by fraud as the Defendants falsely represented their ability to perform their

contractual obligations in the [MSA],” and (2) “Failure of consideration.” Under the latter

header, TC&C argued that Levy “agreed to provide consideration in the form of providing and

holding the necessary TABC beer and wine sale permits as required under the [MSA]”; that “the

TABC application and permit were so defective, that it made performance of the [MSA] an

impossibility”; and that “[t]he failure of this consideration discharges the duty to of [sic] the

Plaintiff to submit to arbitration as there is not a valid arbitration agreement upon the failure of

said consideration.” Alternatively, TC&C requested that the MSA “should be bifurcated from

the remaining two agreements as the [BOA] and the Commercial Property Lease do not contain

arbitration clauses.” At the hearing on the motion, Levy argued that TC&C “is attacking not the

arbitration agreement itself but . . . the agreement as a whole” and that “[t]he arbitration

agreement itself contains mutuality of obligation and consideration because both parties have

agreed to the binding arbitration.”

The trial court signed an order denying Levy’s motion without specifying the

grounds on which it relied. Levy appeals this interlocutory order, raising what it sets forth as a

single issue:

Whether the Doctrine of Separability, in the absence of nefarious activity relating to the provision itself, applies to a valid mandatory arbitration clause contained in an agreement signed by the parties who would be subject to arbitration. If so, whether the District Court abused its discretion in failing to force arbitration when, though Appellee’s argued fraud in the underlying agreements, the validity of the arbitration provision itself was never called into question?

In its appellant’s brief, Levy argues that “[t]he Separability Doctrine defeats [TC&C]’s sole

defense—fraud relating to the underlying agreements” and that “[TC&C]’s sole argument 2 centers on the assertion that Levy fraudulently induced [TC&C] to enter into the underlying

agreements.” (Emphases added.) Although Levy’s appellate issue and brief discuss TC&C’s

ground of fraud for denying Levy’s motion to abate and compel arbitration, the “failure of

consideration” ground is not addressed, as TC&C notes in its appellee’s brief. Levy did not file

a reply brief in this Court.

“It is well established in Texas that when a trial court issues a ruling adverse to a

party without specifying its grounds for doing so, the party on appeal must challenge each

independent ground that was asserted by the appellees in the trial court.” RSL Funding, LLC

v. Pippins, 424 S.W.3d 674, 687 n.24 (Tex. App.—Houston [14th Dist.] 2014) (collecting

authorities), aff’d, 499 S.W.3d 423, 434 (Tex. 2016) (per curiam) (holding that “court of appeals

erred by holding RSL waived its right to arbitrate by litigation conduct” but agreeing with court

of appeals and affirming “on the alternative basis that RSL did not challenge one ground on

which the [county court at law] could have ruled in denying RSL’s motion to stay the

litigation—RSL failed to join its assignees in the arbitration”). “This proposition is based on the

understanding that if an independent ground fully supports the complained-of ruling or

judgment, but the appellant assigns no error to that independent ground, we must accept the

validity of that unchallenged independent ground,” and “[a]s a result, any error in the grounds

challenged on appeal is harmless because the unchallenged ground fully supports the ruling or

judgment.” The Shops at Legacy (Inland) Ltd. P’ship v. Fine Autographs & Memorabilia Retail

Stores, Inc., No. 05-14-00889-CV, 2015 WL 2201567, at *2 (Tex. App.—Dallas May 8, 2015,

pet. denied) (mem. op.) (citations omitted). Texas courts have applied this principle in appeals

from orders denying motions to compel arbitration. See, e.g., U.S. Lawns, Inc. v. Castillo,

347 S.W.3d 844, 848–49 (Tex. App.—Corpus Christi–Edinburg 2011, pet. denied) (holding that

3 appellant “was required to attack all possible grounds supporting the trial court’s order or risk

waiver of its complaints” when “appellees asserted two possible grounds supporting denial of

[appellant’s] motion to compel arbitration”); Prater v. State Farm Lloyds, 217 S.W.3d 739, 740

(Tex. App.—Dallas 2007, no pet.) (affirming trial court’s denial of motion to compel arbitration

because appellants did not challenge on appeal all independent grounds supporting trial

court’s denial).

Applying this principle here, we affirm the trial court’s order denying Levy’s

motion to abate and compel arbitration.

__________________________________________ Melissa Goodwin, Justice

Before Justices Goodwin, Baker, and Smith

Affirmed

Filed: May 19, 2022