Roberto Melendez v. David and Helen De Lemos

• Court: Court of Appeals of Texas
• Decided: May 22, 2008
• Docket: 01-07-00115-CV
• Status: Published

Opinion

Opinion issued May 22, 2008

In The

Court of Appeals

For The

First District of Texas

NO. 01-07-00115-CV

ROBERTO MELENDEZ D/B/A HOU-TEX READY MIX CONCRETE & MATERIALS, Appellant

V.

DAVID AND HELEN DE LEMOS, Appellees

On Appeal from the 189th District Court

Harris County, Texas

Trial Court Cause No. 2006-44449

MEMORANDUM OPINION

Appellant, Roberto Melendez, individually and d/b/a Hou-Tex Ready Mix Concrete & Materials (Hou-Tex), appeals a traditional summary judgment and order of severance in favor of appellees, David and Helen De Lemos. Hou-Tex sued the De Lemoses personally, seeking payment for cement delivered to a construction site on the order of a subcontractor to the general contractor hired by the De Lemoses to construct a residence. In two points of error, Hou-Tex challenges the summary judgment on the grounds that the trial court erred by refusing to compel arbitration and by severing Hou-Tex's and the De Lemoses' claims from Hou-Tex's lawsuit against their general contractor. We affirm.

Factual and Procedural Background

In October 2005, the De Lemoses entered into a written contract with Michael Randel Homes, LLC (Randel Homes) to construct a new residence on the De Lemoses' existing home site. Michael Landry signed the contract on behalf of Randel Homes, and both David and Helen De Lemos signed the contract. The contract identified the De Lemoses as owner and identified Randel Homes as contractor. The terms of the contract included a provision by which these parties agreed (1) to address construction-defect claims through the administrative procedures established by the Texas Residential Construction Commission Act and (2) to waive jury trial because

all controversies, claims[,] or matters in question arising out of or relating to (i) this Contract, (ii) any breach thereof, (iii) the construction of the Residence, (iv) the sales transaction reflected in the Contract, and/or (v) any representations or warranties, express or implied, relating to the Property and/or the Residence (herein referred to collecting as a "Dispute") shall be subject to binding arbitration.

(Emphasis added.) ⁽¹⁾ Additional provisions of the contract afforded independent-contractor status to Randel Homes, to which the De Lemoses delegated all control over scheduling and progress of the project by individual subcontractors. This provision further specified that "All subcontractors shall perform their functions independently, not as agent, employee, servant, or representative of the Contractor or the Owner."

The original residence on the construction site was demolished in November 2005. In the course of construction of the new residence, Randel Homes, as general contractor, hired a subcontractor to perform certain concrete services, who, in turn, requested delivery of ready-mix concrete from Hou-Tex. On January 31, 2006, Hou-Tex delivered 150 yards of ready-mix concrete to the construction site and presented an invoice for $11,772.19 to the subcontractor. The subcontractor issued a check to Hou-Tex on February 3, 2006, but the check was dishonored and returned to Hou-Tex for insufficient funds. In the meantime, the De Lemoses had been receiving notices that some subcontractors hired by Randel Homes were not being paid. On April 3, 2006, the De Lemoses notified Randel Homes to stop construction of the new residence, and Randel Homes abandoned the project. ⁽²⁾

On May 10, 2006, Hou-Tex filed a notice of mechanics and materialmen's lien against the De Lemoses' residence, who then filed this action as plaintiffs seeking to remove the lien on the grounds that it was invalid for lack of compliance with several provisions of the enabling statute, chapter 53 of the Property Code, which governs mechanic's, contractor's, and materialmen's liens. ⁽³⁾ See Tex. Prop. Code Ann. §§ 53.001-.260 (Vernon 2007). Hou-Tex responded initially by asserting a quantum-meruit counterclaim for the ready-mix cement delivered to the De Lemoses' worksite, but then added a counterclaim seeking to compel arbitration of its claim against the De Lemoses based on the arbitration provisions of their contract with Randel Homes. The De Lemoses filed two motions for traditional summary judgment. In their first motion, they argued that they had no contract with Hou-Tex, that Hou-Tex had released its lien on the same day that Hou-Tex filed its answer to the De Lemoses' petition, that Hou-Tex could not recover against them in the absence of a perfected lien or privity of contract, and that Hou-Tex's proper recourse was against Randel Homes, because the De Lemoses had no personal liability to Hou-Tex. In response, Hou-Tex filed an amended petition, which provided additional exhibits to support Hou-Tex's initial claim for payment. In addition, Hou-Tex moved to abate, pending arbitration of its claim against the De Lemoses, and filed a response and objection to the De Lemoses' motion for summary judgment. Hou-Tex attached to its response a copy of the contract between the De Lemoses and Randel Homes, an affidavit by Roberto Melendez, and a copy of the deposition of Helen De Lemos.

Hou-Tex then filed its first amended answer, in which it asserted counterclaims based on alternative theories against the De Lemoses, including accord and satisfaction, estoppel, release, and failure of consideration, all of which Hou-Tex premised on assertions that Helen De Lemos had promised to pay Hou-Tex's claim, and that Hou-Tex had released its lien against the De Lemoses in exchange for that promise. Hou-Tex also supplemented its quantum-meruit claim by claiming that the De Lemoses had been unjustly enriched, had breached a contract to pay, and had not complied with section 53.101 of the Property Code by retaining funds pending construction. ⁽⁴⁾ In addition, Hou-Tex asserted a claim for declaratory relief to determine its rights to arbitrate its claims under the arbitration provisions of the contract between Randel Homes and the De Lemoses.

The De Lemoses answered these claims by general denial and the affirmative defense that the statute of frauds barred Hou-Tex's claims for payment of a third-party debt. The De Lemoses responded to Hou-Tex's objections to their original motion for summary judgment, but also filed an additional motion, seeking final summary judgment as a matter of law on the following grounds: (1) the Hou-Tex lien was invalid because it had not been properly perfected; (2) but the lien issue was moot regardless because Hou-Tex had released the lien; (3) the De Lemoses were not personally liable to Hou-Tex because (4) they had no contract with Hou-Tex, and (5) they did not promise to pay Hou-Tex; (6) any alleged promise by the De Lemoses to pay the Randel Homes debt was barred by the statute of frauds; and (7) Hou-Tex had no cause of action for the De Lemoses' alleged failure to retain funds under the Property Code because any obligation to retain ended 30 days after they terminated their contract with Randel Homes, which had simultaneously abandoned construction, and Hou-Tex did not assert its lien until after the 30 days had expired.

The trial court signed an interlocutory summary judgment order that dismissed Hou-Tex's claims against the De Lemoses. Five days later, Hou-Tex sought leave to add Randel Homes as a third-party defendant and necessary party to Hou-Tex's invoking the arbitration clause of its contract with the De Lemoses. Afer the trial court granted the requested leave, Hou-Tex filed a motion for leave to vacate the summary judgment and or to compel mediation or arbitration. After conducting a hearing, the trial court rendered summary judgment in favor of the De Lemoses by ordering that Hou-Tex take nothing on its claims from them, pending severance of those claims, and then severed those claims, thus rendering the summary judgment final. See Diversified Fin. Sys., Inc. v. Hill, Heard, O'Neal, Gilstrap & Goetz, P.C., 63 S.W.3d 795, 795 (Tex. 2001) (citing Farmer v. Ben Keith Co., 907 S.W.2d 495, 496 (Tex. 1995) ("As a rule, the severance of an interlocutory judgment into a separate cause makes it final.")

Denial of Application to Compel Arbitration

Hou-Tex's first point of error challenges the trial court's refusal to compel arbitration of its claims against the De Lemoses pursuant to the provisions of their contract with Randel Homes. We first address preliminary issues concerning our jurisdiction and the standard of review before proceeding to the merits of this issue.

A. Jurisdiction and Standard of Review

Because the trial court severed the issues between Hou-Tex and the De Lemoses, thus rendering final the summary judgment rendered in favor of the De Lemoses, our jurisdiction in this case derives from section 51.012 of the Civil Practice and Remedies Code, which governs appeals from final judgments of district and county courts. See Tex. Civ. Prac. & Rem. Code Ann. § 51.012 (Vernon 1997); City of Dallas v. Jennings, 142 S.W.3d 310, 316 (Tex. 2004) ("A judgment that finally disposes of all remaining parties and claims, based on the record in the case, is final, regardless of its language.") (quoting Lehmann v. Har-Con Corp., 39 S.W.3d 191, 200 (Tex. 2001)); cf., Tex. Civ. Prac. & Rem. Code Ann. § 171.098(a)(1) (Vernon 2005) (authorizing interlocutory appeal of proceedings brought pursuant to Texas Arbitration Act); In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005) (recognizing propriety of mandamus relief to enforce arbitration agreements governed by Federal Arbitration Act).

We review summary judgments de novo pursuant to well-settled standards. See Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005). The party seeking summary judgment under rule 166a(c) must demonstrate that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Browning v. Prostok, 165 S.W.3d 336, 344 (Tex. 2005). When, as here, the order granting summary judgment does not specify which of the several grounds asserted formed the basis of the trial court's rendition, we may affirm the summary judgment if any theory presented to the trial court and preserved for appellate review is meritorious. See id.; W. Inv., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005). Therefore, the appealing party must generally demonstrate that none of the proposed grounds is sufficient to support the judgment. See Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Ellis v. Precision Engine Rebuilders, Inc., 68 S.W.3d 894, 898 (Tex. App.--Houston [1st Dist.] 2002, no pet.).

When the appealing party does not challenge a ground on which the movant sought summary judgment in the trial court, settled summary-judgment principles demand that we affirm--without considering whether the summary judgment was rendered properly or improperly on the unchallenged ground--given that we may not reverse without properly assigned error. See Star-Telegram, Inc., 915 S.W.2d at 473; see also Malooly Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970) (affirming summary judgment because "it may have been based on a ground not specifically challenged" on appeal and "there was no general assignment that the trial court erred in granting summary judgment.") (supporting citations omitted); Vawter v. Garvey, 786 S.W.2d 263, 264 (Tex. 1990) (proscribing reversal of summary judgment without properly assigned error); Wilchester W. Concerned Homeowners LDEF, Inc. v. Wilchester W. Fund, Inc., 177 S.W.3d 552, 563, 566 (Tex. App.--Houston [1st Dist.] 2005, pet. denied) (applying stated standard to affirm on unchallenged grounds).

Hou-Tex attacks only the trial court's having implicitly rejected Hou-Tex's motion to compel arbitration. Hou-Tex does not challenge the summary judgment on any of the six alternative grounds on which the De Lemoses relied. Had the trial court granted Hou-Tex's motions to stay and to compel, arbitration would have ensued, rather than rendition of summary judgment in favor of the De Lemoses. By rendering summary judgment in favor of the De Lemoses, therefore, the trial court ruled on the merits of their motion and necessarily, albeit impliedly, rejected Hou-Tex's motions to compel arbitration and to stay pending outcome of arbitration. We therefore address this challenge to the summary judgment.

B. Whether Contract between De Lemoses and Randel Homes Compels Arbitration of Claims by Nonsignatory Hou-Tex

1. General Principles

As the party attempting to compel arbitration, Hou-Tex had to establish at the outset that its dispute falls within the scope of a valid arbitration agreement. See In re Merrill Lynch Trust Co., 235 S.W.3d 185, 187 (Tex. 2007); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). When, as here, the opponent objects to arbitration, the trial court determines as a matter of law whether an agreement to arbitrate exists. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227. This is a question of state contract law that we review de novo. See In re Merrill Lynch, 235 S.W.3d at 187; J.M. Davidson, 128 S.W.3d at 227 (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 1924 (1995) (holding that courts "generally . . . should apply ordinary state-law principles that govern the formation of contracts" in determining whether parties have agreed to arbitrate)).

If the parties have agreed, and if the agreement encompasses the dispute, then the law favors arbitration. In re Merrill Lynch, 235 S.W.3d at 187. But the parties must have agreed. See id. at 192. Arbitration agreements are thus "'as enforceable as other contracts'"; they are not, however, "'more'" enforceable than other contracts. Id. (quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12, 87 S. Ct. 1801, 1806 n.12 (1967)). "[U]nder both Texas and federal law, arbitrability turns on the substance of a claim, not artful pleading." Id. at 190. The dispositive inquiry then, is whether the parties have agreed to arbitration: if they have not, no trial court has discretion to compel that they arbitrate; if they have, no trial court has discretion "to let one wriggle out." Id. at 193.

It is undisputed that Hou-Tex is neither a signatory nor party to the contract between the De Lemoses and Randel Homes. Nonsignatories, or "nonparties," to an agreement containing an arbitration clause may be bound by the provisions of the clause "when the rules of law or equity would bind them to the contract generally." In re Weekley Homes, 180 S.W.3d at 129. Federal arbitration law recognizes several theories of contract and agency law that authorize binding a nonsignatory to an arbitration agreement. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005). For a nonsignatory like Hou-Tex, a "contract theory" must tie the nonsignatory to the arbitration provisions sought to be enforced. See In re Merrill Lynch, 235 S.W.3d at 187, 194. Hou-Tex's contentions in this case invoke the two following, contract-based theories in seeking to compel arbitration with the De Lemoses: that the De Lemoses were equitably estopped from contesting applicability of the arbitration clause in its contract with Randel Homes to Hou-Tex's claims, or, alternatively, that Hou-Tex was a third-party beneficiary of that contract. See id. at 193 (addressing equitable estoppel theory of enforcement); In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex. 2006) (addressing third-party beneficiary theory of enforcement).

2. Equitable, or "Direct Benefits," Estoppel

Hou-Tex contends that the De Lemoses cannot deny, as against Hou-Tex, the enforceability of the arbitration clause in their agreement with Randel Homes. When a nonsignatory to a contract that contains an arbitration provision sues on the contract and seeks a direct benefit from the contract, but claims that the arbitration provision does not apply, the nonsignatory is estopped to deny enforceability of the arbitration provision of the contract that the signatory seeks to enforce. See In re U.S. Home Corp., 236 S.W.3d 761, 765 (Tex. 2007); In re Merrill Lynch, 235 S.W.3d at 192; In re Weekley Homes, 180 S.W.3d at 131-32; In re Kellogg Brown & Root, 166 S.W.3d at 739; see also Meyer v. WMCO-GP, LLC, 211 S.W.3d 302, 307 (Tex. 2006) ("When a party's right to recover and its damages depend on the agreement containing the arbitration provision, the party is relying on the agreement for its claims."); In re FirstMerit Bank, 52 S.W.3d 749, 755 (Tex. 2001) (holding that a litigant who sues based on a contract subjects himself to the contract's terms ).

The preceding cases, which bound a nonsignatory to an arbitration clause contained in the contract based on the doctrine of direct-benefits estoppel, are not applicable here. The supreme court does not apply direct-benefits estoppel when the claimed benefits are "insubstantial" or "indirect." In re Weekley Homes, 180 S.W.3d at 134. Neither does the doctrine apply to bind a nonsignatory to a contract with an arbitration provision if the claim merely "relates" to the contract. In re Kellogg Brown & Root, Inc., 166 S.W.3d at 741. Claims by a nonsignatory that "can stand independently of the underlying contract" should generally not be arbitrated. Id. at 739-40.

In Kellogg Brown & Root, a signatory to a fabrication contract containing an arbitration clause sought to compel Kellogg, Brown & Root (KBR) to arbitrate its quantum meruit claim against that party, on the grounds that KBR's claims for "labor and services were linked inextricably" to the fabrication contract. Id. at 740. Because KBR provided its labor and services pursuant to a different contract and sought its benefits from that contract, and thus sought no benefit from the fabrication contract, the supreme court rejected the claimant's reliance on the doctrine of direct-benefit estoppel in seeking to compel KBR to arbitrate its claim. Id. at 741.

The same analysis defeats Hou-Tex's reliance on the doctrine in this case. Despite the tangential relationship between Hou-Tex's quantum meruit claims to the construction contract between Randel Homes and the De Lemoses, Hou-Tex claims no direct benefit under that contract--beyond its arbitration clause. Much like the fabrication contract in Kellogg Brown & Root, see id., the contract here disclaimed any "agent, employee, servant, or representative" relationship between any subcontractors, like Hou-Tex, and either Randel Homes or the De Lemoses and further identified all subcontractors as independent contractors. The benefit Hou-Tex seeks through its quantum meruit claims in this case, like the benefits KBR sought in Kellogg Brown & Root, seek payment for services rendered pursuant to a different contract, specifically, Hou-Tex's contract with the subcontractor that requested delivery of the cement mix and later defaulted on payment. See id. That obligation stands alone and is, therefore, separate from the De Lemoses' construction contract with Randel Homes, as that contract expressly states. See id. Hou-Tex's claims deriving from chapter 53 of the Property Code likewise stand alone and seek no benefit from the De Lemoses' contract with Randel Homes. See id.

For these reasons, we hold that the trial court's implied rejection of Hou-Tex's equitable estoppel claims asserted against the De Lemoses was correct as a matter of law, and, therefore, that the trial court properly rejected Hou-Tex's motions to compel and to stay arbitration in rendering summary judgment for the De Lemoses.

3. Third-Party Beneficiary

A stranger to a contract may enforce the contract as a third-party beneficiary if the parties to the contract intended to secure a benefit to that third party and entered into the contract directly for the third party's benefit. In re Palm Harbor Homes, Inc., 195 S.W.3d at 677 (citing Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002); MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999)). The third party in Palm Harbor Homes sought to compel arbitration on the grounds that the agreement inured to the benefit of the manufacturer of the home in question. Id. By the express terms of the agreement, therefore, the parties to the agreement entered into it, at least in part, directly for the third party manufacturer's benefit, who properly claimed third-party beneficiary status. See id.

In contrast, nothing in the construction contract between the De Lemoses and Randel Homes in this case can be construed to inure to Hou-Tex's benefit. Indeed, as addressed above, that contract disclaims any "agent, employee, servant, or representative" relationship on which a third-party beneficiary claim might be premised. We therefore hold that the trial court's implied rejection of Hou-Tex's third-party beneficiary contentions asserted against the De Lemoses was correct as a matter of law, and, therefore, that the trial court properly rejected Hou-Tex's motions to compel and to stay arbitration in rendering summary judgment for the De Lemoses.

We overrule Hou-Tex's first point of error.

Severance

Hou-Tex's second point of error purports to challenge rendition of summary judgment in favor of the De Lemoses on the narrow ground that they are "necessary parties" to resolution of its dispute, by virtue of the trial court's having granted Hou-Tex leave to add Randel Homes as a third-party defendant. Hou-Tex provides neither authorities nor citations to the record to support its contentions, as required by Tex. R. App. P. 38.1(h), and has therefore waived any error. Holloway-Houston, Inc. v. Gulf Coast Bank & Trust Co., 224 S.W.3d 353, 361 n.3 (Tex. App.--Houston [1st Dist.] 2006, no pet.).

We overrule Hou-Tex's second point of error.

Conclusion

We affirm the judgment of the trial court.

Sherry Radack

Chief Justice

Panel consists of Chief Justice Radack and Justices Alcala and Bland.

1. Other provisions of this "arbitration clause" required that the owner and contractor attempt to resolve their dispute "through informal discussions" and to submit the dispute to non-binding mediation. Binding arbitration, however, was owner's and contractor's final recourse.

2. The De Lemoses later negotiated with a different contractor to complete construction of the new residence.

3. It is undisputed that Hou-Tex filed its mechanic's and materialmen's lien more than 30 days after Randel Homes abandoned the construction contract and, thus, after the deadline imposed by section 53.103(2) of the Property Code.

See Tex. Prop. Code Ann. § 53.103(2) (Vernon 2007).

4. See Tex. Prop. Code Ann. § 53.101 (Vernon 2007).