Bob Thompson Homes, Inc. v. Peters, Rick & Anne Peters

f AFFIRMED; Opinion filed April 28,1999

In The

Court of Appeals Jfiftfj IHstrttt nf tttexas at Uallas

No. 05-97-00674-CV

BOB THOMPSON HOMES, INC., Appellant V.

RICK PETERS AND ANNE PETERS, Appellees

On Appeal from the 199th District Court Collin County, Texas Trial Court Cause No. 199-139-97

OPINION

Before Justices Lagarde, Moseley, and Bridges Opinion By Justice Lagarde

Bob Thompson Homes, Inc. (Thompson) appeals an interlocutory order denying its motion

to compel arbitration. In one point oferror, itasserts that the trial court erred in denying arbitration because its contract with appellees Rick and Anne Peters (collectively Peters) requires arbitration of any dispute arising out of the contract. We affirm the trial court's order.

On March 3, 1994, Thompson and Peters signed acontract, under which Thompson would construct a single-family residence for Peters. The contract designated Caperton/Johnson as the architect. The contract was a form contract, provided by Thompson. The form contained the following provision:

All claims or disputes between the Contractor [Thompson] and the Owner [Peters] arising out of or relating to the Contract Documents, or the breach thereof, shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise and subjectto an initial presentation of the claim or dispute to the Architect as required under Paragraph 15.5. Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen. The award rendered by the arbitrator or arbitrators shall be final andjudgment may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. . . . The agreement herein among the parties to the Agreement and any other written agreement to arbitrate referred to herein shall be specifically enforceable under applicable law in any court having jurisdiction thereof.

Before Peters signed the form contract, however, Thompson crossed this provision out and Rick Peters initialed the strike-out to indicate his assent. In an affidavit later filed with the court, Thompson explained that the deletions "represent changes that [Thompson] has made to this standard form and incorporated in essentially all contracts with its customers through the date of the Peters contract. These standard changes were made by [Thompson] in the initial draft submitted to Peters and represent [Thompson's] changes."1

As construction progressed, Peters became dissatisfied with Thompson's performance. Peters complained of major plumbing leaks, faulty electrical wiring, improper and defective installation of fixtures, appliances, and carpeting, and the like. When Thompson did not remedy the defects to Peters's satisfaction, Peters stopped making the contracted installment payments. Thompson sued Peters for payment. Peters counterclaimed for various claims in contract and in tort.

Neitherpartyarguedin itsbriefthat the contractat issuecontainedany ambiguity. Afteroralargument.Thompson submitteda letterbrief arguingthat if there is any ambiguity,it must be resolvedin favor of arbitration because of the publicpolicyfavoringarbitration. It analogizesthe argumentto the principlethat, when the languageof an insurance policy is ambiguous, the construction that affords coverage will be adopted. We donotagreewithThompson'sconclusion. Where an ambiguity existsin a contract, the contractlanguage willbe construed strictly againstthe party who drafted it. since the drafter is responsible for the language used. Gonzalez v.XfissionAm, Ins. Co., 795 S.W.2d 734,737 (Tex. 1990). Because insurersare almostinvariably, if not always,the draftersof their policies,the specificrule about insurancepoliciesissimplya corollaryof the more generalrule. Inthiscase,Thompsondraftedthe formcontract,andThompson,not Peters,struckout the generalarbitration clause. Thereis no reason we should not apply the general contract principle and construe the effect of striking out the general arbitration clause against Thompson.

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Thompson moved the trial court to compel arbitration; Peters objected to arbitration. Despite the deletion of the arbitration clause, Thompson contended that other provisions, taken together, meant that, in the event ofadispute between the parties, the architect, Caperton/Johnson, would serve as arbitrator. It relied principally on three provisions:

In case of a dispute between Owner and Contractor as to whether any part of an application for payment should be paid, Architect shall make the final decision on the amount that should be paid.

The Architect will interpret and decide matters concerning performance under and requirements of the Contract Documents on written request of either the Owner or Contractor. The Architect will make initial decisions on all claims, disputes orother matters in question between the Owner and Contractor. The Architect's decisions in matters relating to aesthetic effect will be final if consistent with the intent expressed in the Contract Documents.

The Architect will have authority to reject Work which does not conform to the Contract Documents.

Because the architect was given this authority, Thompson concludes that the contract contemplated Caperton/Johnson as arbitrator.

Peters responds that the striking ofthe formal arbitration clause means that he did not agree to the arbitration process. At most, he argues, the contract gave Caperton/Johnson the authority to decide the amount that should be paid ifthe parties disagreed whether any amount ofan application for payment should bepaid. Inquestions ofperformance under the contract, Caperton/Johnson had the authority to make "initial decisions on all claims, disputes orother matters in question"; Peters, stressing the word "initial," contends that Caperton/Johnson was explicitly given authority to make

final decisions only in matters relating to aesthetic effect. While Caperton/Johnson had the authority to reject work that did not conform to the contract between the parties, Peters asserts that nothing in the contract gave Caperton/Johnson the exclusive right to do so.

Peters also argued thatCaperton/Johnson would notbe animpartial arbitrator, because it and Thompson enjoyed a long professional relationship andThompson often used Caperton/Johnson as its architect. In response, Thompson cites authority for the proposition that an engineer, working on a project, may be delegated the authority to actas an arbitrator. City ofSan Antonio v. McKenzie Constr. Co., 150 S.W.2d 989, 995-96 (Tex. 1941). Butin thatcase thesupreme court emphasized the critical language: the engineer"shall determine all questions in relation to said work, and the construction thereof. He shall in all cases decide every question which may arise relative to the execution of this contract on the part of said Contractor." City ofSan Antonio, 150 S.W.2d at 996. We do not dispute that parties to a contract can designate another party to the same contract as an arbitrator, if they chooseto do so. Caperton/Johnson is not disqualified from being an arbitrator in the Peters' home building contract simply because it is the architect on the project. The real issue is whether the contract in this case gave Caperton/Johnson the authority to make final, binding decisions in any matter except claims for payment or matters relating to aesthetic effect.

Arbitration is a creature of contract, and a clause requiring arbitration will be interpreted under contract principles. Belmont Contractors, Inc., v. LyondellPetrochemicalCo., 896 S.W.2d 352, 357 (Tex. App.-Houston [1st Dist] 1995, no writ). Thompson argued to the trial court that its "intent was to create an agreement whereby disputes such as the one between [Thompson] and [Peters] would be referred to the Architect for final resolution." Yet the parties' objective, not subjective, intent controls. Hasty, Inc., v. Inwood BuckhornJoint Venture, 908 S.W.2d 494, 499 (Tex. App.-Dallas 1995, writ denied). We do not ask about the subjective intent of the parties. Hasty, Inc., 908 S.W.2d at 499. Circumstances surrounding the execution of a contract should be considered, but the circumstances are merely an aid in the construction of the contract's language.

-4-Moreover, the circumstances to be considered are not the parties' statements ofwhat they intended the contract to mean. KM Continental Offshore Prod Co. v. ACFPetroleum Co., 746 S.W.2d 23 8, 241 (Tex. App.-Houston [1st Dist] 1987, writ denied). We may consider all the circumstances before and contemporaneous with the execution of a contract, "other than oral statements by the parties of what they intended it to mean." City ofPinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex. 1968) (emphasis added). Thompson's subjective intent, therefore, is of no assistance.

Finally, Thompson points out that state lawstrongly favors arbitration. Courts mustresolve anydoubts about an agreement to arbitrate infavor of arbitration. Cantella &Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996) (percuriam). Once a party seeking to compel arbitration establishes that an agreement toarbitrate exists and that the claims raised are within the agreement's scope, the trial court has no discretion but to compel arbitration. Goodwin, 924 S.W.2d at 944. We do not disagree with these principles. Yet"[although doubts regarding the scope of an arbitration clause are to be resolved in favor of arbitration, there must be an initial showing by the party seeking arbitration that the parties agreed to arbitration." Solis v. Evans, 951 S.W.2d 44, 51 (Tex. App.-Corpus Christi 1997, orig. proceeding). Arbitration cannot be ordered in the absence of such an agreement. Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994) (per curiam).

Turning to thecontract inthis case, we see thatCaperton/Johnson did not have theauthority to make final decisions concerning Thompson's performance; therefore, Caperton/Johnson could not resolve the dispute that arose between the parties in this case through the process of binding arbitration. In matters of performance, Caperton/Johnson was explicitly given authority to make only initial decisions; the contract is completely silent on who will make the final decisions.

Therefore, the contract does not prevent Peters from seeking afinal, and binding, decision from a court oflaw. To the contrary, ifthe contract itself does not give anyone the authority to make a final and binding decision, a court is the only entity left that can make a final decision and enforce it.

We conclude that Thompson did not meet its burden ofinitially showing that the parties agreed to arbitration. Accordingly, we affirm the trial court's order denying Thompson's motion to compel arbitration.

OjlS

Do Not Publish Tex. R. App. P. 47 970674F.U05

3-aiaciU

(Baurt at Appeals JTfftl| jBtstrtrt of Gkxas at lallas No. 05-97-00674-CV

BOB THOMPSON HOMES, INC., Appeal from the 199th District Court of Appellant Collin County, Texas. (Tr.Ct.No. 199-139- 97). Opinion delivered by Justice Lagarde, Justices Moseley and Bridges participating. RICK PETERS AND ANNE PETERS, Appellees

JUDGMENT

In accordance with this Court's opinion of this date, the judgment of the trial court is AFFIRMED. It is ORDERED that appellees Rick Peters and Anne Peters recover their costs of this appeal from appellant Bob Thompson Homes, Inc. and from the cash deposit in lieu of cost bond. After all costs have been paid, the clerk of the district court is directed to release the balance, if any, of the cash deposit to McManemin & Smith, P.C., as counsel for appellant Bob Thompson Homes, Inc.

Judgment entered April 28, 1999.

SUE LAGARDE JUSTICE

Fifth Court of Appeals Case Party & Attorney Address List Page: 1 Date Printed: 04/28/1999

Case Number: 05-97-00674-CV Date Filed: 04/24/1997

Style: Bob Thompson Homes, Inc. v.

Peters, Rick & Anne Peters

Trial Judge: Roach, John R. Trial Court Reporter: Trial Court: 199TH DISTRICT COURT Trial County: COLLIN

ANT Daniel P. Callahan ATT 003648700 Godwin & Carlton, SMITH, PC. 1600 PLAZA OF THE AMERICAS 600 N. PEARL STREET, LB. 175 Dallas, TX 75201 Phone 214/953-1321 Fax 214/953-0695

APE Bruce H. White ATT 021288850 Dixon Dixon & Jessup Ltd, Lip 1445 Ross Ave Ste 5500 Dallas, Tx 75202-2801 Phone 214/754-0155 Fax / -

Author of opinion Justice Lagarde Trial Court Judge Roach Rehear denied

**THIS OPINION IS RELEASED FOR PUBLICATION YES / NO