Shelter Properties II, L.P., Insignia Management Group, L.P., and The Aetna Casualty and Surety Company v. STTI Construction, Inc., and Stabilizing Technology of Texas, Inc.--Appeal from 408th Judicial District Court of Bexar County

No. 04-00-00839-CV

SHELTER PROPERTIES II, L.P., Insignia Management Group, L.P.,

and The Aetna Casualty & Surety Company,

Appellants
v.
STTI CONSTRUCTION and Stabilizing Technology of Texas, Inc.,
Appellees
From the 408th Judicial District Court, Bexar County, Texas
Trial Court No. 2000-CI-03652
Honorable Janet P. Littlejohn, Judge Presiding

Opinion by: Karen Angelini, Justice

Sitting: Tom Rickhoff, Justice

Paul W. Green, Justice

Karen Angelini, Justice

Delivered and Filed: March 7, 2001

AFFIRMED

Shelter Properties II, L.P., Insignia Management Group, L.P., and The Aetna Casualty & Surety Company complain of the trial court's denial of their motion to compel arbitration of STTI Construction's claims against Aetna. We affirm the trial court's order.

Factual and Procedural Background

Shelter Properties owns an apartment complex in Houston. After Shelter was unable to settle an insurance dispute with Aetna Casualty and Surety, it entered into a contract with STTI Construction, Inc., and Stabilizing Technology of Texas, Inc. The contract provided that STTI would assist Shelter in "perfecting" its claims against Aetna. In return, STTI would receive 21% of the settlement Shelter received from Aetna.

Shelter and Aetna eventually settled their dispute. STTI, however, was not paid for its services. STTI, therefore, filed suit against Shelter and Insignia Management Group, L.P. for breach of contract. (1) STTI joined Aetna as a defendant, claiming Aetna made misrepresentations to STTI that it would provide funding for costs associated with tunneling and accessing plumbing leaks. After the parties were unable to reach a settlement through mediation, Aetna moved to compel arbitration, seeking to take advantage of the arbitration clause contained in the contract between Shelter and STTI. (2) After a hearing, the trial judge ordered the parties to arbitration. However, the trial judge granted STTI's motion to reconsider, ordering Shelter and Insignia to arbitration, and sending STTI's claims against Aetna to trial.

Accelerated Appeal or Mandamus?

A trial court's order denying arbitration under the Texas Arbitration Act is reviewable by interlocutory appeal. Tex. Civ. Prac. & Rem. Code Ann. 171.001 et seq. (Vernon Supp. 2000); EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 88 (Tex. 1996); Pennzoil Co.v. Arnold Oil Co., 30 S.W.3d 494, 497 (Tex. App.-San Antonio 2000, orig. proceeding). However, relief from the denial of arbitration sought under the Federal Arbitration Act must be pursued by mandamus. 9. U.S.C.A. 1, et seq (West 2000); EZ Pawn Corp., 943 S.W.2d at 88; Pennzoil Co., 30 S.W.3d at 497. The arbitration clause here invokes neither the Texas Arbitration Act nor the Federal Arbitration Act, and the trial court, in its ruling, does not indicate which Act applies.

The Federal Arbitration Act applies to any arbitration agreement "evidencing a transaction involving commerce ..." 9 U.S.C.A. 2 (West 2000). A contract "evidenc[es] a transaction involving commerce" if it in fact involves interstate commerce.'" Pennzoil Co., 30 S.W.3d at 497 (citing Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 277-281, 115 S. Ct. 834, 130 L. Ed. 2d 753 (1995)).

Aetna sought review of the trial court's order by mandamus, in compliance with the Federal Arbitration Act, and by accelerated appeal, in compliance with the Texas Arbitration Act. In its petition, Aetna asserts that the federal act applies because the contract, here, affects interstate commerce. Specifically, it claims that the STTI construction companies are "undoubtedly receiving and using equipment through the channels of interstate commerce. Insignia and Aetna are companies conducting dealings throughout the nation, thereby affecting interstate commerce." Aetna, however, offers no proof that the statements contained in its petition are true.

The contract, here, does not affect interstate commerce. On the contract itself, Shelter Properties lists a Dallas, Texas address. STTI lists its address in Converse, Texas. Additionally, the services STTI was to provide Shelter under the contract do not involve interstate commerce. Those services include obtaining and funding outside experts, engineers, and consultants; documenting damages; submitting claims to the insurance company; explaining claims to the property owner; and discussing the work and cost estimates with the property owner. Accordingly, because the agreement does not involve interstate commerce, mandamus is not the proper remedy.

Arbitration Agreement

Aetna asserts it may take advantage of the arbitration agreement contained in the Shelter/STTI contract and, therefore, STTI should be compelled to arbitrate its claims against Aetna. STTI, however, claims that it had no contractual relationship with Aetna and should not be compelled to arbitrate its claims against Aetna.

Because STTI denies that Aetna is bound by the arbitration agreement, the trial court was required to determine whether an arbitration agreement existed between STTI and Aetna. Tex. Civ. Prac. & Rem. Code 171.021(a) (Vernon Supp. 2000); Southwest Texas Pathology Assocs., L.L.P. v. Roosth, 27 S.W.3d 204, 207 (Tex. App.-San Antonio 2000, no pet. h.). The party seeking to compel arbitration must first establish the existence of an arbitration agreement. In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999); ANCO Ins. Services of Houston, Inc. v. Romero, 27 S.W.3d 1, 5 (Tex. App.-San Antonio 2000, pet. denied). This court reviews a trial court's determination regarding the existence of an arbitration agreement for an abuse of discretion. Southwest Texas Pathology, 27 S.W.3d at 207 (citing ANCO Ins. Services of Houston, Inc., 27 S.W.3d at 3). We must uphold the trial court's finding, "unless it is determined that the trial court could reasonably have reached only one decision." Id. Even if this court could have decided the issue differently, we only disturb the trial court's finding if it is shown to be arbitrary and unreasonable. Id. (citing Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992)).

The trial court, here, found that "Aetna is not part of the arbitration agreement between STTI and Shelter." The record supports the trial court's finding. The parties listed on the contract containing the arbitration clause are Shelter Properties and Stabilizing Technology of Texas, Inc. (STTI). Shelter is listed as the owner of the property and STTI as the general contractor. The contract refers only to the owner and the "GC" or general contractor. There is one provision in the contract that states "[t]o ensure payment in accordance with this contract, if and when due, the parties herein agree to have payment by the insurance company made jointly payable to Owner ... and to GC."

We hold the trial court did not abuse its discretion in finding that Aetna was not part of the arbitration agreement. Aetna is not mentioned in the contract. And, the joint check provision is between Shelter and STTI. This evidence alone is enough to support the trial court's decision that Aetna is not bound by the contract or the arbitration agreement contained in it. We overrule Aetna's first issue.

Equitable Estoppel

In its second issue, Aetna claims it may take advantage of the arbitration provision because STTI's claims against Aetna fall within the scope of the arbitration clause. Conversely, STTI claims that Aetna, as a nonsignatory, is not bound by the contract.

Nonsignatories to an arbitration agreement may be bound by that agreement in certain circumstances. ANCO Ins. Services of Houston, 27 S.W.3d at 6. In those cases where the underlying claims asserted by the party resisting arbitration require the party to rely on the terms of the agreement containing the arbitration clause, a nonsignatory may be bound. Id. "In other words, the party resisting arbitration would have no claims [against the nonsignatory] had the agreement containing the arbitration provision not been signed." Id. In this case, Aetna may only be bound by the terms of an arbitration provision in the written agreement if STTI's claims against it require reliance on the terms of the agreement containing the arbitration provision. See id.

STTI's claims against Aetna, as contained in its original petition, are as follows:

"Defendant Aetna represented to Plaintiffs that it would provide coverage to Defendants Insignia and Shelter for accessing plumbing leaks on properties owned and/or managed by Shelter and Insignia;" "After Plaintiffs completed some of the tunneling and/or accessing of plumbing leaks, Defendant Aetna changed its position and/or reniged [sic] on its coverage commitment and refused to provide funding for all tunneling and/or accessing;" and "Defendant Aetna's representations to Plaintiffs that it would provide coverage and funding for the costs of the tunneling and/or accessing amounted to a misrepresentation and/or negligent misrepresentation when Defendant Aetna refused and/or failed to issue payment for such costs."

All of STTI's claims against Aetna relate to alleged representations Aetna made to STTI. STTI's original petition indicates that the alleged representations were made separate from the contract. Under what circumstances those representations were made goes to the merits of the case. Therefore, STTI's claims against Aetna do not require STTI to rely on the terms of the agreement. Accordingly, we overrule Aetna's second issue.

Conclusion We hold that the parties' arbitration agreement is governed by the Texas Arbitration Act, that the trial court did not abuse its discretion in finding no arbitration agreement existed between STTI and Aetna, and that STTI is not relying on the contract in asserting its claims against Aetna. We, therefore, affirm the trial court's order granting STTI's motion to reconsider, sending STTI's claims against Aetna to trial.

Karen Angelini, Justice

DO NOT PUBLISH

1. Insignia owns Shelter and was therefore a defendant in the suit.

2. The arbitration clause in this contract provides:

Any controversy or claim arising out of or relating to this agreement if not first settled by way of negotiation or mediation, shall be submitted to arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules with all proceedings being held in San Antonio, Texas. ...