the Verlander Family Limited Partnership v. Verlander, Sharon Janell

• Court: Court of Appeals of Texas
• Decided: February 13, 2003
• Docket: 08-02-00135-CV
• Status: Published

Opinion

Criminal Case Template

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

THE VERLANDER FAMILY LIMITED PARTNERSHIP, Appellant, v. SHARON JANELL VERLANDER, Appellee.

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No. 08-02-00135-CV Appeal from the 388th Judicial District Court of El Paso County, Texas (TC# 2000CM5988)

M E M O R A N D U M O P I N I O N

This is an accelerated, interlocutory appeal from the denial of Appellant's, The Verlander Family Limited Partnership ("the Partnership"), Motion for Stay of Litigation and to Compel Arbitration in a divorce proceeding. For the reasons stated, we dismiss for lack of jurisdiction.

I. SUMMARY OF THE EVIDENCE

John M. Verlander ("John") and Appellee, Sharon Janell Verlander ("Sharon"), were married on September 29, 1979. In August of 1991, John and Sharon entered into the Partnership Agreement of Verlander Family Limited Partnership ("the Agreement"). The Agreement was amended and restated on August 20, 1999. The purpose of the Partnership was "to make a Profit, increase wealth, and provide a means for the Family to become knowledgeable of, manage, and preserve Family Assets." John was named the initial General Partner and a Limited Partner, while Sharon was named the other Limited Partner.

In September of 2000, Sharon filed her Petition for Divorce. On February 1, 2002, she amended the divorce petition, naming the Partnership as a party. Sharon alleged that John breached his fiduciary duty to her "by diluting, diminishing, encumbering, restricting and limiting her community property interests in the stock owned by him and their community estate in El Apple, Inc. and Verlander Enterprises, Inc. and other similarly related business entities in which the parties have interest." She also alleged that John committed actual and constructive fraud. Sharon requested that the court find the Partnership to be the alter ego of John and "divide the alleged 'partnership' assets as the Court deems just and right."

On February 26, 2002, John's counsel sent a letter to Sharon's counsel invoking the ADR provisions contained in Article 18 of the Agreement. Sharon's counsel responded via letter dated February 28, 2002, and maintained that the allegations in her First Amended Petition for Divorce did not relate to the Agreement and thus the ADR provisions of the Agreement were inapplicable. Sharon stated that her current claims against John were related to his duties as a husband, not as a General Partner, and that she was not making a claim or invoking a right as a limited partner under the Agreement. The Partnership moved to stay litigation and compel arbitration. In its motion to compel, the Partnership asserted that the

Federal Arbitration Act governed because some of the assets it owned were located in New Mexico. Further, in his affidavit in support of the motion to compel, John stated that "[t]he business of the Family Partnership includes the management of properties located both in the State of Texas and in the State of New Mexico." After a hearing, the trial court denied arbitration, finding that "[f]or the purposes of the divorce litigation, whether the Family Partnership is the alter ego of John M. Verlander is not subject to the ADR provisions of the Partnership Agreement." The court deferred ruling on the remaining disputes until the alter ego issue was resolved.

Accordingly, the Partnership filed a Petition for Writ of Mandamus under the Federal Arbitration Act. See In re The Verlander Family Limited Partnership, No. 08-02-00134-CV, 2002 WL 731895, (Tex. App.--El Paso, April 25, 2002, pet. denied)(orig. proceeding)(not designated for publication). Out of an abundance of caution, the Partnership also brought an interlocutory appeal of the trial court's order in the event we determined that the Texas General Arbitration Act rather than the FAA applied. See Russ Berrie and Company, Inc. v. Gantt, 998 S.W.2d 713, 714-15 (Tex. App.--El Paso 1999, no pet.)(a litigant seeking enforcement of an arbitration provision under the FAA must pursue relief through mandamus proceeding, whereas a party asserting a right to arbitration under the Texas Arbitration Act may seek relief through an interlocutory appeal). In the mandamus action, this Court held that based on the record before us, the trial court did not clearly abuse its discretion and the relief requested in the petition for mandamus was denied. Id. at *1.

II. DISCUSSION

In its sole issue on appeal, the Partnership argues that the trial court abused its discretion in denying its Motion for Stay of Litigation and to Compel Arbitration because there was no evidence to support the denial. Appellee argues that the appeal should be dismissed for lack of jurisdiction because 1) this Court has already accepted mandamus jurisdiction under the Federal Arbitration Act and ruled on the merits in the companion mandamus proceeding; and 2) Appellant moved for arbitration in the trial court solely under the Federal Arbitration Act. To determine subject matter jurisdiction over and thus the proper disposition of the matter before us, we must first determine whether the FAA or the TGAA applies.

ACCELERATED APPEAL OR MANDAMUS?

A trial court's order denying arbitration under the Texas Arbitration Act is subject to interlocutory appeal. Tex. Civ. Prac. & Rem. Code Ann. 171.098(a) (Vernon Supp. 2002). However, relief from a denial of arbitration sought under the Federal Arbitration Act must be pursued by mandamus. 9 U.S.C.A. § 1, et seq. (West 1999); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex. 1996). The contractual arbitration clause in this case does not specifically invoke either the Texas Arbitration Act or the Federal Arbitration Act, and the trial court made no ruling on which Act applies.

Where the parties designate in the arbitration agreement which arbitration statute they wish to have control, the court should apply their choice. D. Wilson Constr. Co. v. Cris Equipment Co., 988 S.W.2d 388, 392 (Tex. App.--Corpus Christi 1999, orig. proceeding).

Here, the parties did not state which act they were to apply, but in Article 19 of the Agreement, the parties state that the Agreement shall be governed by the applicable laws of the State of Texas. For purposes of our subject matter jurisdiction, however, jurisdiction cannot be conferred by the parties' agreement. Russ Berrie & Co., 998 S.W.2d at 715. Accordingly, the agreement and record before us are first examined under the federal act to see if there is evidence of a transaction affecting interstate commerce. See In re Godt, 28 S.W.3d 732, 737 (Tex. App.--Corpus Christi 2000, orig. proceeding) (federal act will not be applied if the contract does not relate to interstate commerce).

The FAA applies to all suits in state or federal court when the dispute concerns a contract evidencing a transaction involving "commerce." Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269-70 (Tex. 1992); In re Gardner Zemke Company, 978 S.W.2d 624, 626 (Tex. App.--El Paso 1998, orig. proceeding). "Commerce" is broadly construed and encompasses contracts relating to interstate commerce. Gardner Zemke, 978 S.W.2d at 626. The issue is not whether the parties' dispute affects interstate commerce, but whether their dispute concerns a transaction that affects interstate commerce. See Jack B. Anglin, 842 S.W.2d at 272; In re Education Management Corp., 14 S.W.3d 418, 423 (Tex. App.--Houston [14th Dist.] 2000, orig. proceeding). The FAA does not require a substantial effect on interstate commerce; rather, it requires only that commerce be involved or affected. In re L & L Kempwood Assoc., L.P., 9 S.W.3d 125, 127 (Tex.1999) (orig. proceeding). When, as here, there is no express agreement to arbitrate under the FAA, the question of whether the parties' transaction affects interstate commerce is one of fact. In re Profanchik, 31 S.W.3d 381, 384 (Tex. App.-- Corpus Christi 2000, orig. proceeding). The existence of interstate commerce may be shown in a variety of ways: location of headquarters in another state; transportation of materials across state lines; manufacture of parts in a different state; billings prepared out of

state; interstate mail and telephone calls in support of a contract. Id. at 384-85, (citing Jack B. Anglin, 842 S.W.2d at 270).

We have examined the record of the hearing on the motion to compel arbitration and the only mention of either act is by counsel for Appellant. After the trial court announced its ruling, counsel stated, "Your Honor, I think the Court is aware that the Texas statute provides that if the Court denies the Motion to Compel Arbitration, I have a right to an interlocutory appeal, which, if the Court grants the Motion to Compel, there is no appeal." However, as noted earlier, Appellant asserted that the Federal Arbitration Act governed because some of the assets it owned were located in New Mexico. Further, in his affidavit in support of the motion to compel, John states that "[t]he business of the Family Partnership includes the management of properties located both in the State of Texas and in the State of New Mexico." In her response to the motion to compel, Appellee argued that Texas law governed the arbitration issue, but admitted that even if federal law governed, the result would be the same because the claims she asserted against John were outside of the scope of the Agreement and thus outside the scope of the arbitration clause.

Therefore, based on the record before us, we find that the arbitration clause is governed by the Federal Arbitration Act, and the trial court's order denying arbitration is not subject to interlocutory appeal. 9 U.S.C.A. § 2; EZ Pawn, 934 S.W.2d at 91. Accordingly, we dismiss the

interlocutory appeal for want of jurisdiction. Pennzoil Company v. Arnold Oil Company, Inc., 30 S.W.3d 494, 498 (Tex. App.--San Antonio 2000, orig. proceeding).

February 13, 2003

___________________________________________ RICHARD BARAJAS, Chief Justice

Before Panel No. 5

Barajas, C.J., Chew, J., and Preslar, C.J. (Ret.)

Preslar, C.J. (Ret.) sitting by assignment