PETER MINKOFF, Appellant v. JERRY HICKS AND LISA WINSTON, Appellee

REVERSE and REMAND and Opinion Filed October 21, 2010
 
 
 
In The
Court of Appeals
Fifth District of Texas at Dallas
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No. 05-10-00606-CV
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PETER MINKOFF, Appellant
V.
JERRY HICKS AND LISA WINSTON, Appellee
.............................................................
On Appeal from the County Court at Law No. 1
Dallas County, Texas
Trial Court Cause No. CC-10-00566-A
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MEMORANDUM OPINION
Before Justices O'Neill, Francis, and Lang
Opinion By Justice O'Neill
        In this interlocutory appeal, appellant Peter Minkoff appeals the trial court's denial of his motion to compel arbitration. The trial court denied the motion to compel because the agreement to arbitrate was modified making it “not mandatory.” For the following reasons, we reverse the trial court's judgment.
        In July 2002, Minkoff and appellees Jerry Hicks and Lisa Winston entered into a contract in which Minkoff agreed to build a residence for appellees. The contract contained an arbitration provision requiring any dispute arising under the contract be submitted to binding arbitration “with an arbitrator selected by the parties within seven (7) days of the receipt of notice of such a dispute.”         On December 11, 2009, appellees sent a letter to Minkoff informing him they were terminating the contract. On January 20, 2010, Minkoff responded with a letter notifying appellees that he had tendered performance and they owed him $97,000 under the contract. Minkoff stated he would be willing to settle for $75,000, but gave formal notice of dispute for purposes of the arbitration agreement. Minkoff gave appellees seven days to either accept the settlement offer or to agree on an arbitrator. Seven days later, appellees responded with a letter informing Minkoff that if he wanted to arbitrate the dispute he should have responded to the December 11, 2009 termination letter within seven days. The following day, on January 28, 2010, Minkoff sent appellees a letter notifying them he intended to pursue his claim. He stated:
 
        As we also discussed, I would appreciate direction from you, on a prompt basis, concerning whether [appellees] wish to have this matter promptly resolved by binding arbitration per the terms of [the contract] or whether, instead, they wish to waive their right to arbitrate and have this matter filed in state district court.
 
        The letter also asked appellees to let Minkoff know if they would prefer to arbitrate before a Houston arbitrator or in the Harris County district courts.
        Appellees did not respond to Minkoff's letter. Instead, they sued him in Dallas County Court. They alleged several claims against Minkoff, including a declaratory judgment action which concerned Minkoff's claim referenced in the January 28 letter. They also alleged affirmative claims for negligent misrepresentation, Deceptive Trade Practices, conversion, breach of contract, slander, and tortious interference. They sought actual and exemplary damages. The only reference to the arbitration provision in their petition was their contention that Minkoff had waived his right to arbitrate by not invoking the clause within seven days of receiving appellees' notice of termination.         Minkoff answered and filed a motion to compel arbitration and to stay further proceedings. In his motion, Minkoff alleged there was a binding arbitration clause in the contract and that he did not waive his right to arbitrate. He requested the trial court to appoint an arbitrator and stay the proceedings. In appellees response, they asserted Minkoff could not rely on the arbitration provision because he materially breached it by failing to submit his claim to an arbitrator within seven days of the date he received the letter terminating the contract. Following a hearing on the motion, the trial court requested briefing on whether Minkoff's January 28, 2010 letter constituted an offer such that there was a novation or modification the contract when appellees sued in state court. There were no pleadings before the court to support a claim of novation or modification.   See Footnote 1 
        Appellees conceded the law of novation, which applies when the parties enter into an entirely new contract, was not applicable. Appellees nevertheless asserted - for the first time - the contract was modified to allow appellees to decide whether to proceed with arbitration or litigation in state court. Specifically, they asserted the January 28, 2010 letter constituted an “offer” to modify the contract. They maintained they “accepted” this offer when they sued Minkoff in state county court. The trial court agreed and denied Minkoff's motion to compel arbitration. We conclude the trial court erred in doing so.
        The parties do not dispute that there is a valid agreement to arbitrate and that the claims alleged fall within the scope of that agreement. See Holmes, Woods & Diggs, 2009 WL 2152562 *2 (Tex. App.-Dallas July 21, 2009, no pet.). Thus, the burden shifted to appellees to establish a valid defense to the agreement. Id. The basis for the trial court's ruling and the only defense asserted on appeal is modification. It was appellees burden to establish this affirmative defense. Intex Sys., Inc. v. Lowrey, 230 S.W.3d 913, 918 (Tex. App.-Dallas 2007, no pet.). A modification of a contract must satisfy the elements of a contract. Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 228 (Tex. 1986). The elements of a valid contract include: (1) an offer; (2) acceptance; (3) meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Cessna Aircraft Co. v. Aircraft Network, LLC, 213 S.W.3d 455, 465 (Tex. App.-Dallas 2006, pet. denied). The term “meeting of the minds” refers to the parties' mutual understanding and assent to the expression of their agreement. Weynard v. Weynard, 990 S.W.2d 843, 846 (Tex. App.-Dallas 1999, pet. denied).
        Minkoff asserts the trial court erred in denying the motion to compel because appellees did not meet their burden to show the contract was modified. We agree. At the time Minkoff sent the letter, Minkoff had notified appellees that he had a claim in excess of $100,000 against them. The letter states he was seeking “direction” from appellees as to whether they wanted Minkoff to sue them in state district court or proceed with arbitration. The issue is whether this request for information was an “offer.”
        To prove a valid offer, a party must show (1) the offeror intended to make an offer, (2) the terms of the offer were clear and definite, and (3) the offeror communicated the essential terms to the offeree. Chubb Lloyds Ins. Co. of Tex. v. Andrew's Restoration, Inc., 2010 WL 3278234, *8 (Tex. App.-Dallas August 20, 2010, no pet.); KW Const. v. Stephens & Sons Concrete Contractors, Inc., 165 S.W.3d 874, 883 (Tex. App.-Texarkana 2005, pet. denied). After reviewing the letter, we cannot agree that it shows Minkoff intended it to operate as an offer. Rather, we construe the letter as a mere request for information to enable the parties to discuss a possible modification. Indeed, it does not appear from our review of the letter that Minkoff had yet even contemplated whether he would waive any of his rights under the contract if that was appellees' preference. Moreover, the terms of any supposed offer were not clear and definite. The letter referred to arbitration in Dallas as well as litigation in state district court. The letter also made reference to both arbitration and litigation in district court in Houston. Thus, we cannot determine what the clear and definite terms of any offer were from the letter.
        Additionally, even if there was an offer, we cannot conclude there was a valid acceptance. An acceptance must be identical to the offer or there is no binding contract. Weynard v. Weynard, 990 S.W.2d 843, 846 (Tex. App.-Dallas 1999, pet. denied). It is clear that the letter had anticipated Minkoff would be the plaintiff and the party filing suit if a suit was filed. If the letter could be construed as an offer, it was at most an offer for Minkoff to file suit against appellees in state district court instead of insisting on arbitration, not for appellees to sue in county court. Further, appellees' suit did not concern just the Minkoff claim that was the subject of the January 28 letter but appellees also raised several affirmative claims against Minkoff. We conclude appellees action in filing suit against Minkoff in county court was not identical to any purported offer.
        Finally, and perhaps most importantly, a fundamental element of contract is a meeting of the minds. As previously noted, the letter did not establish Minkoff's intent to agree to state court litigation. It is also clear from the record that appellees themselves did not perceive Minkoff's letter as an offer to modify the arbitration provision. To the contrary, the only basis for avoiding the arbitration clause mentioned in their petition, the filing of which is the very act that supposedly accepted the “offer,” was that Minkoff had waived his right to arbitrate. Moreover, in their second amended petition and in their response to the motion to compel arbitration, appellees still did not suggest the parties had reached a new bargain regarding the arbitration clause. Instead, they asserted their January 27th letter revoked their agreement to arbitrate and thus no agreement existed. This contradicts any argument that they perceived Minkoff's January 28th letter to be an offer to modify the arbitration agreement or that they had reached a meeting of the minds in that regard. It was not until after the hearing on the motion to compel arbitration that appellees began to argue they and Minkoff had reached a mutual agreement.   See Footnote 2 
        We conclude appellees have not met their burden to show the arbitration clause of the contract was modified. Therefore, the trial court erred in denying appellees' motion to compel arbitration. Minkoff asks that this Court appoint an arbitrator in this case. He relies on section 171.041 of the Texas Civil Practice & Remedies Code. Chapter 171.041 allows a trial court to appoint a qualified arbitrator upon application of a party if the agreement either does not provide a method for determining appointment or the method provided in the contract fails. See Tex. Civ. Prac. & Rem. Code Ann. § 171.041(b) (Vernon 2005). Chapter 171.014(b) does not give this Court authority to appoint an arbitrator. We reverse the trial court's judgment and remand this case to the trial court for further proceedings consistent with this opinion.
 
 
                                                          
                                                          MICHAEL J. O'NEILL
                                                          JUSTICE
 
 
100606F.P05
 
Footnote 1 We have concerns about a trial court apparently raising an affirmative defense that was not pleaded or raised by appellees in their response to the motion to compel. However, Minkoff did not object to the trial court's action.
Footnote 2 Appellees' argument is a thinly veiled waiver argument. Waiver is a valid defense to arbitration. Holmes, Woods & Diggs, 2009 WL 2152562 at *3. However, because Minkoff's January 28 letter did not expressly waive the arbitration provision and did not invoke the judicial process to appellees' detriment, appellees cannot rely on a waiver defense. See Perry Holmes v. Cull, 258 S.W.3d 580, 591 (Tex. 2008).