Global Financial Services, L.L.C., Ricardo Perusquia, Gerardo A. Chapa and Robert C.A. Benjamin v. Estate of Juan Roberto Brittingham-McLean and John R. Brittingham Aguirre--Appeal from County Court At Law No 1 of Webb County

MEMORANDUM OPINION
No. 04-07-00627-CV

GLOBAL FINANCIAL SERVICES, L.L.C., Ricardo Perusquia,

Gerardo A. Chapa, and Robert C.A. Benjamin,

Appellants
v.
ESTATE OF Juan Roberto Brittingham MCLEAN, Deceased,
Appellee
From the County Court at Law No. 1, Webb County, Texas
Trial Court No. 2000-PB7-000049-L1
Honorable Ben Morales, Judge Presiding

Opinion by: Catherine Stone, Justice

 

Sitting: Catherine Stone, Justice

Karen Angelini, Justice

Phylis J. Speedlin, Justice

 

Delivered and Filed: February 13, 2008

 

REVERSED AND REMANDED

This is the sixth appeal from a probate proceeding involving the assets of a Mexican decedent. (1) The present appeal arises from the trial court's denial of a motion to compel arbitration filed by Global Financial Services, L.L.C., and its managing directors, Ricardo Perusquia, Gerardo A. Chapa, and Robert C. A. Benjamin (collectively "Global") against the Estate of Juan Roberto Brittingham McLean (the "Estate"). We reverse the trial court's order denying Global's motion to compel arbitration and remand the case to the trial court for further proceedings.

Background

Juan Roberto Brittingham McLean ("Brittingham") was a wealthy business man from Mexico. During his lifetime, Brittingham directed two of his business associates, Raul Hernandez and Harold Turk, to form an investment company for the purpose of investing his assets. Hernandez and Turk organized and incorporated Sandfern Limited ("Sandfern") under the laws of the Republic of Ireland in order to acquire, hold, and transfer shares, stocks, bonds, and other securities for Brittingham. Hernandez and Turk served as Sandfern's sole directors.

In December 1996, Sandfern passed a corporate resolution authorizing Hernandez to retain Global as one of the company's securities brokers. Hernandez set up an account and executed a Limited Trading Authorization form (with no powers for money transfers) with Global. He also executed a Customer Agreement with Bear Stearns Securities Corp. ("Bear Stearns") providing that Bear Stearns would serve as the clearing agent for Global.

Brittingham died testate in Monterrey, Mexico on January 14, 1998. (2) A month after Brittingham's death, in February 1998, Hernandez and Turk instructed Global to transfer 95 percent of Sandfern's assets to another entity, Oaknet Limited ("Oaknet"). Global forwarded the instructions to Bear Stearns, which completed the transfer as requested. In April 1998, Hernandez instructed Global to transfer Sandfern's remaining assets into an account held by Sandfern at the International Bank in Laredo, Texas. Global complied with Hernandez's request and transferred the assets as instructed.

In August 2000, Brittingham's widow, Ana Marie de la Fuente de Brittingham, ("Ms. Brittingham") filed an ancillary probate proceeding in Webb County, Texas and was appointed executrix of the Estate. On the Estate's behalf, Ms. Brittingham sued Brittingham's daughters and grandchildren (who, pursuant to Brittingham's will, were the beneficiaries of 95 percent of his residuary estate), accusing them of pillaging the Estate's assets. A year later, Brittingham's only son, John R. Brittingham Aguirre ("Aguirre"), intervened in the ancillary probate proceedings, alleging an interest as a creditor of the Estate. Ms. Brittingham then amended her petition to join Global as defendants, alleging the transfer of assets from Sandfern to Oaknet at the direction of Hernandez was part of Global's conspiracy with the other defendants to pillage the assets of the Estate. Ms. Brittingham subsequently resigned as representative of the Estate and Kevin Michael Mackie became the Estate's successor executor.

In 2004, Aguirre amended his Plea in Intervention to include specific allegations against Global. Global responded by filing a motion to compel arbitration against Aguirre in July 2004, alleging it was a third party beneficiary to the arbitration provision within the Customer Agreement between Bear Stearns and Sandfern. The trial court denied Global's motion on November 9, 2004, and Global filed a petition for writ of mandamus and an interlocutory appeal with this court, claiming, among other things, the trial court erred by: (1) finding Aguirre was not a party to the arbitration agreement; and (2) finding Global waived its right to arbitrate with Aguirre.

Sometime in 2006, Global discovered that it had inadvertently failed to file a motion to compel the Estate to arbitration. Upon discovering its oversight, Global filed a motion to compel the Estate to arbitration on May 4, 2006. Because this court had yet to issue a decision on whether the trial court properly denied Global's motion to compel Aguirre to arbitration, the trial court declined to consider Global's motion to compel the Estate to arbitration until we issued our decision in the appellate proceedings involving Global and Aguirre.

On June 20, 2007, this court issued our decision and reversed the trial court's denial of Global's motion to compel Aguirre to arbitration. See Global Fin. Servs., L.L.C. v. Estate of McLean, Nos. 04-04-00854-CV & 04-05-00074-CV, 2007 WL 1759940, *1 (Tex. App.--San Antonio 2007, no pet.). We recognized that the language within the Customer Agreement between Sandfern and Bear Stearns "binds Global, as a third party beneficiary to the agreement, and further binds the Estate." Id. at 5. We stated that:

the Customer Agreement specifically provides that its terms, including the arbitration provision, shall be applicable to all matters between Global and the Estate and further that any controversies arising between Global and the Estate shall be determined by arbitration. Additionally, as Aguirre is pursuing his claims based on the relationship created by the Customer Agreement, he must pursue all his claims, both tort-based and contract-based, in arbitration.

 

Id. at 6. We further rejected Aguirre's contention that Global had waived its right to arbitrate because Aguirre failed to: (1) demonstrate Global had substantially invoked the judicial process by, among other things, participating in discovery; and (2) prove that Global's actions were prejudicial to him. Id. at 7.

On July 31, 2007, the trial court heard arguments on Global's motion to compel the Estate to arbitration. The Estate asserted that Global had waived its right to arbitrate by waiting more than four years to file its motion to compel arbitration. It also claimed that Global had waived its right to arbitrate because Global had participated in the litigation process during the more than four-year delay and caused the Estate to incur substantial litigation expenses during such time. After hearing the parties' arguments, the trial court found "the delay between the Global defendants first receiving Notice of the Estate's claim and the Global Defendant's filing of their first Motion to Compel the Estate to Arbitration is four (4) years and nine (9) months" and concluded that "four (4) years and nine (9) months is clearly prejudicial per se and clearly evident that the Global Defendants substantially invoked the judicial process before filing their Motion to Compel the Estate to Arbitration." The trial court therefore denied Global's motion to compel the Estate to arbitration.

Discussion

The sole issue on appeal is whether the trial court abused its discretion in denying Global's motion to compel the Estate to arbitration on the ground of waiver. The question of whether a party has waived its right to arbitrate presents a question of law that we review de novo. In re Bruce Terminix Co., 988 S.W.2d 702, 703-04 (Tex. 1998). Because public policy favors arbitration, there is a strong presumption against finding that a party has waived its right to arbitrate; the burden to prove waiver is thus a heavy one. Id. at 704; EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex. 1996). Any doubts regarding waiver are resolved in favor of arbitration. In re Bruce Terminix, 988 S.W.2d at 705.

Whether waiver occurs depends on the individual facts and circumstances of each case. Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, 703 (Tex. App.--Fort Worth 2006, pet. filed). Waiver may be express or implied, but it must be intentional. EZ Pawn Corp., 934 S.W.2d at 89. A court may find waiver only when (1) the party seeking arbitration has substantially invoked the judicial process and (2) the party opposing arbitration suffers actual prejudice as a result. In re Bruce Terminix, 988 S.W.2d at 704.

Substantially Invoking the Judicial Process

The judicial process is substantially invoked when the party seeking arbitration has actively tried, but failed, to achieve a satisfactory result in litigation before turning to arbitration. Loudermilk, 208 S.W.3d at 704. "Examples include moving for summary judgment or seeking a final resolution of the dispute." Id. The Estate contends Global substantially invoked the judicial process in this instance by filing a motion to transfer venue and a motion to abate on the ground that mandatory venue of the action lies in another county. We are unpersuaded by the Estate's contention.

The filing of a motion to transfer venue by a proponent of arbitration is not considered an act that substantially invokes the judicial process. Granite Constr. Co. v. Beaty, 130 S.W.3d 362, 367 (Tex. App.--Beaumont 2004, no pet.). Likewise, we do not believe the filing of a motion to abate, which does not address the merits of the underlying case, constitutes an act that substantially invokes the judicial process. The filing of a motion to abate on the ground that mandatory venue lies in another county is not an act that is inconsistent with the right to arbitrate as it does not seek a final determination of the underlying litigation. Cf. id. Because "this is not a case in which a party who has tried and failed to obtain a satisfactory result in court then turns to arbitration," see In re Bruce Terminix, 988 S.W.2d at 704, we conclude the Estate has failed to establish waiver.

 
Actual Prejudice

Even if we assume Global's actions substantially invoked the judicial process, the Estate nonetheless failed to demonstrate that it suffered prejudice from Global's actions. (3) The record shows that the Estate made nothing more than generalized protestations about the time and resources it expended as a result of Global's delay at the hearing on the motion to compel arbitration. Although the Estate explained that it expended "606 hours of attorney time and . . . close to $9,000 on litigating this case" from February 2005 through July 2007, it made no effort to show what portion of the 606 hours of attorney time and $9,000 in costs was attributable to the actions of Global as opposed to the actions of the other parties involved in the litigation. By not showing how much of the time and resources it expended were actually attributable to Global's conduct, as opposed to the actions of the multiple other parties involved in the case, the Estate failed to carry its burden of showing actual prejudice. See Williams Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d 131, 140 (Tex. App.--Houston [1st Dist.] 2003, no pet.) (concluding no prejudice shown where the party opposing arbitration failed to establish "how much of th[eir alleged] fees were attributable to [the proponent's] complained of actions, as opposed to the actions of other parties; or whether the fees and costs . . . were for matters that could be used in arbitration"); Pennzoil Co. v. Arnold Oil Co., 30 S.W.3d 494, 499 (Tex. App.--San Antonio 2000, no pet.) (concluding generalized protestations about the costs of delay, without evidence in support, are insufficient to show prejudice). We therefore conclude the Estate failed to establish waiver. (4)

Conclusion

We conclude the Estate has not carried the "heavy burden of proof" required to establish a waiver of arbitration rights because it failed to demonstrate that Global substantially invoked the judicial process to the Estate's detriment. Accordingly, we hold the trial court abused its discretion in denying Global's motion to compel arbitration. We therefore sustain Global's appellate complaint and reverse the trial court's order and remand the case to the trial court for further proceedings consistent with this opinion.

 

Catherine Stone, Justice

1. See Ayala v. Brittingham, 131 S.W.3d 3 (Tex. App.--San Antonio 2003), rev'd, De Ayala v. Mackie, 193 S.W.3d 575 (Tex. 2006); Brittingham-Sada de Powers v. Ancillary Estate of Brittingham-McLean, 158 S.W.3d 518 (Tex. App.--San Antonio 2004, pet. denied); Ayala v. Mackie, 158 S.W.3d 568 (Tex. App.--San Antonio 2005, pet. denied); Tijerina v. Mackie, No. 04-05-00213-CV, 2006 WL 397936 (Tex. App.--San Antonio 2006, no pet.) (mem. op.); Global Fin. Servs., L.L.C. v. Estate of McLean, Nos. 04-04-00854-CV & 04-05-00074-CV, 2007 WL 1759940 (Tex. App.--San Antonio 2007, no pet.).

2. His will was admitted to probate in a Mexican court, and two executors, Hernandez and Turk, were named.

3. We note the trial court determined Global's delay of "four (4) years and nine (9) months" before invoking its right to arbitrate was "prejudicial per se." The supreme court, however, has recognized that "'[a] party does not waive arbitration merely by delay; instead, the party urging waiver must establish that any delay resulted in prejudice.'" In re Serv. Corp. Int'l, 85 S.W.3d 171, 174 (Tex. 2002) (citations omitted).

4. Nevertheless, the record suggests that a significant portion of the alleged time and expenses incurred by the Estate concerned matters unrelated to Global. The record shows that between February 2005, when current counsel for the Estate was retained, and July 2007, when the trial court heard Global's motion to compel arbitration, counsel for the Estate participated in the following: (1) multiple hearings regarding the removal of Ms. Brittingham as Executrix and the confirmation of Kevin Michael Mackie as the Estate's successor administrator; (2) appellate briefing and argument regarding the probate court's order overruling the objection of Roberto Tijerina regarding the appointment of a successor administrator; and (3) briefing and argument to the supreme court regarding the subject matter jurisdiction of the probate court.