Rodney McGaffey v. Carolina Properties, LLC

Affirm and Opinion Filed November 16, 2022

In The Court of Appeals Fifth District of Texas at Dallas No. 05-21-00985-CV

RODNEY MCGAFFEY, Appellant V. CAROLINA PROPERTIES, LLC, Appellee

On Appeal from the 134th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-20-13709

MEMORANDUM OPINION Before Chief Justice Burns, Justice Nowell, and Justice Smith Opinion by Justice Nowell Rodney McGaffey appeals the trial court’s order denying a motion to compel

arbitration. We affirm the trial court’s order.

Carolina Properties, LLC sued McGaffey and his company, Boss Exotics, LLC. Carolina Properties alleged it agreed to buy a 2017 McLaren 570GT from Boss Exotics for $138,000. To that end, it paid a $5,000 deposit and later paid another $133,000 to Boss Exotics. Carolina Properties also executed a Bill of Sale:

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A dispute arose between Boss Exotics and Carolina Properties about whether an accessory was included in the sales price of the vehicle. Carolina Properties alleges that, when the parties could not come to an agreement, Boss Exotics decided to “cancel the transaction” and returned $133,000 to Carolina Properties; however, Boss Exotics retained $5,000, which it deemed a non-refundable deposit.

Carolina Properties sued Boss Exotics and McGaffey for breach of contract, unjust enrichment, conversion, and violations of the Texas Deceptive Trade Practices Act. Boss Exotics and McGaffey filed a motion to compel arbitration and attached the Bill of Sale, which states in part:

The buyer agrees that if any legal proceedings in relation to this transaction ever were to arise that it would have to be filed in the county of Dallas, Texas only. However, the buyer agrees that if any disputes were to arise on their behalf related to the vehicle or this contract that they agree to waive their right to file legal suit in court and instead seek arbitration which would be at their costs only and not shared by the seller.1

The trial court denied the motion. The case proceeded to a bench trial, and a final judgment was entered in favor of Carolina Properties. On appeal, McGaffey challenges the trial court’s denial of the motion to compel arbitration; Boss Exotics is not a party to the appeal.

A party seeking to compel arbitration must establish two things: (1) the existence of a valid, enforceable arbitration agreement and (2) that the disputed

1 All errors in original text. –3–

claim falls within the scope of that agreement. See Seven Hills Commercial, LLC v. Mirabal Custom Homes, Inc., 442 S.W.3d 706, 718 (Tex. App.—Dallas 2014, pet. denied); see also Wagner v. Apache Corp., 627 S.W.3d 277, 282 (Tex. 2021). As part of this initial burden, the movant must prove either he is a party to the arbitration agreement at issue or he otherwise has the right to enforce the agreement against the nonmovant. Alarcon Constr. Group LLC v. Santoyo, No. 05-21-00885-CV, 2022 WL 4923461, at *2 (Tex. App.—Dallas Oct. 4, 2022, no pet. h.) (mem. op.) (citing VSR Fin. Servs., Inc. v. McLendon, 409 S.W.3d 817, 827 (Tex. App.—Dallas 2013, no pet.)). As a general rule, “an arbitration clause cannot be invoked by a non-party to the arbitration contract.” GT Leach Builders LLC v. Sapphire VP LP, 458 S.W.3d 502, 524 (Tex. 2015) (quoting Grigson v. Creative Artists Agency, L.L.C., 210 F.3d 524, 532 (5th Cir. 2000)); see also Santoyo, 2022 WL 4923461, at *2 (same). Texas courts have recognized six theories that allow non-signatories to enforce arbitration agreements: (1) incorporation by reference; (2) assumption; (3) agency; (4) alter ego; (5) equitable estoppel; and (6) third-party beneficiary. Jody James Farms, JV v. Altman Group, Inc., 547 S.W.3d 624, 633 (Tex. 2018).

When deciding whether the parties have agreed to arbitrate, we do not resolve doubts or indulge a presumption in favor of arbitration. Constant v. Gillespie, No. 05-20-00734-CV, 2022 WL 1564555, at *4 (Tex. App.—Dallas May 18, 2022, no pet.) (mem. op.). Although there is a strong presumption favoring arbitration, that presumption arises only after the party seeking to compel arbitration proves that a

–4– valid arbitration agreement exists. Id. (citing McLendon, 409 S.W.3d at 827); see also Seven Hills Commercial, LLC, 442 S.W.3d at 715.

We review a trial court’s order denying a motion to compel arbitration for abuse of discretion. Wagner, 627 S.W.3d at 283. Under this standard of review, we defer to the trial court’s factual determinations if they are supported by evidence, but we review the trial court’s legal determinations de novo. Constant, 2022 WL 1564555, at *5 (citing Redi-Mix, LLC v. Martinez, No. 05-17-01347-CV, 2018 WL 3569612, at *2 (Tex. App.—Dallas July 25, 2018, no pet.) (mem. op.)). Where, as here, the trial court makes no written findings of fact or conclusions of law in support of its ruling, all facts necessary to support the judgment and supported by the evidence are implied. Constant, 2022 WL 1564555, at *5 (citing Redi-Mix, LLC, 2018 WL 3569612, at *2).

McGaffey asserts he met his initial burden to prove the existence of a valid, enforceable arbitration agreement by providing the Bill of Sale, which contains the arbitration provision. Carolina Properties raises several arguments in response, including McGaffey is not a party to the contract and he failed to establish his entitlement to enforce the arbitration provision. We agree with Carolina Properties.

“The question is not whether [Carolina Properties] agreed to arbitration with someone, but whether a binding arbitration agreement exists between [Carolina Properties] and [McGaffey].” Jody James Farms, JV, 547 S.W.3d at 632. The Bill of Sale appears to be signed only by a representative of Carolina Properties and is

–5– on the letterhead of Boss Exotics. McGaffey provides no explanation how he, as a non-signatory, could independently enforce the arbitration provision against Carolina Properties; McGaffey does not argue that any of the six theories that allow non-signatories to enforce arbitration agreements applies here. The motion to compel also did not raise any of the six theories and instead stated the Bill of Sale is a binding and enforceable contract that was signed by Carolina Properties, the document includes an arbitration provision, Carolina Properties’ claims are within the scope of the arbitration provision, and Carolina Properties cannot prove a defense to arbitration. These arguments are not enough to satisfy McGaffey’s burden, which “required him to show both that [Carolina Properties’] claims against him fell within the scope of the [] arbitration agreement and that he had the legal right to enforce the agreement against [Carolina Properties]. In the absence of evidence and argument establishing an exception to the general rule that non-parties cannot enforce an arbitration agreement, the trial court did not err by denying the motion to compel as to [McGaffey].” Santoyo, 2022 WL 4923461, at *2. We overrule McGaffey’s issue.

We affirm the trial court’s order denying the motion to compel arbitration.

/Erin A. Nowell// 210985f.p05 ERIN A. NOWELL JUSTICE

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Court of Appeals Fifth District of Texas at Dallas JUDGMENT

RODNEY MCGAFFEY, Appellant On Appeal from the 134th Judicial District Court, Dallas County, Texas No. 05-21-00985-CV V. Trial Court Cause No. DC-20-13709. Opinion delivered by Justice Nowell. CAROLINA PROPERTIES, LLC, Chief Justice Burns and Justice Smith Appellee participating.

In accordance with this Court’s opinion of this date, the trial court’s August 20, 2021 Order Denying Defendants’ Motion to Compel Arbitration is AFFIRMED.

It is ORDERED that appellee Carolina Properties, LLC recover its costs of this appeal from appellant Rodney McGaffey.

Judgment entered this 16th day of November 2022.

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