Opinion
No. 05-07-00438-CV
Opinion issued March 31, 2009.
On Appeal from the 134th District Court, Dallas County, Texas, Trial Court Cause No. 06-05807-G.
Before Justices MOSELEY, BRIDGES, and LANG-MIERS.
Opinion By Justice BRIDGES.
MEMORANDUM OPINION
Gables Central Construction, Inc., appeals the trial court's order granting Atrium Companies, Inc.'s motion to stay arbitration. In eight issues, Gables argues the trial court erred in granting Atrium's motion to stay arbitration. We reverse the trial court's order granting Atrium's motion to stay arbitration and remand this cause for further proceedings.
In 1999, Gables began construction of an apartment complex and contacted Atrium, a supplier of windows and window products. On July 27, 1999, Atrium provided Gables with a proposal to supply all of the windows for the apartment complex. The proposal stated in bold letters that "THIS IS NOT A CONTRACT. THE ABOVE PRICE/PRODUCT INFORMATION IS FOR `CONDITIONAL' OFFER-TO-SELL PURPOSES ONLY. ALL QUOTATIONS ARE SUBJECT TO CREDIT INVESTIGATION AND MANAGEMENT APPROVAL." That same day, Gables sent Atrium a letter "as [Gables'] intent to issue [Atrium] a contract for windows." The letter directed Atrium to indicate its agreement by signing the attachment to the letter and faxing it back to Gables, along with a copy of Atrium's insurance certificate. The letter provided that Atrium's certificate of insurance had to be in Gables' office before any work was performed but stated that the letter was Atrium's "Notice to Proceed" on the project. Atrium never signed the attachment to the letter, faxed the signed attachment, or provided an insurance certificate.
Nevertheless, Atrium made multiple deliveries to the project site between July 27, 1999, and November 10, 1999, delivering approximately twenty-five percent of the total materials detailed in the proposal. On November 10, 1999, Gables sent Atrium two purchase orders reflecting total amounts of $158,556.48 and $6370.36 respectively, including the materials that had already been delivered. The purchase orders were signed by Atrium's president and Gables' project manager. Among other things, the purchase orders provided that, "upon acceptance by the Seller, the Order shall constitute a valid and binding contract between the parties hereto." On the front of each purchase order was the notice that "This purchase order shall be subject to arbitration pursuant to Section 30 hereof and the Texas Arbitration Act, Title 10, Vernon's Annotated Civil Statutes, Article 224." On the back of the purchase order, under the heading "Terms and General Conditions," were thirty-two paragraphs. Paragraph twenty-two provided:
Upon acceptance of this Order, all prior negotiations and communications between the parties, verbal or written, are suspended by and merged in this Order. Evidence of such negotiations or communications prior to such acceptance shall be inadmissible to vary the terms hereof. This writing comprises the full and entire agreement between the parties affecting the work provided for herein. Purchaser has made no inducements or representations to Seller except as expressly stated in this Order.
As to arbitration, paragraph thirty provided:
To the extent that Purchaser is required or elect[s] to participate in any arbitration proceedings, Seller also agrees to participate therein and to be bound by the terms for arbitration as set out in the Contract to the extent that any controversy, claim or dispute arises out of or relates to this Order or Seller's performance hereunder.
Atrium ultimately delivered all the windows specified in the purchase orders.
Gables subsequently experienced leaks from Atrium's windows and notified Atrium of the problem in August 2001. Atrium took no action to fix the problem, and Gables replaced windows and repaired water damage. In February 2004, Gables filed a demand for arbitration against Atrium. During the following two years, the arbitration was delayed by the parties' agreement so that Atrium could attempt to involve Pinnacle Construction Services in the matter. In June 2006, Atrium filed suit seeking a stay of arbitration. On May 27, 2007, the trial court entered its order granting a stay of arbitration. This appeal followed.
Gables sued Pinnacle regarding faulty roofing work. It appears Pinnacle has now gone out of business, and it is not a party to this appeal.
We first address Gables' first, second, fourth, fifth, sixth, and seventh issues in which Gables argues the trial court erred in staying arbitration because the purchase orders entered into by the parties contain valid and enforceable arbitration clauses. Gables asserts the parol evidence rule precludes the admission of evidence of the parties' communications and conduct prior to signing the purchase orders, the prior negotiations did not form a binding agreement, the purchase orders modified any hypothetical prior agreement, and the purchase orders were properly signed by an "officer" of Gables and were not illusory.
Whether a valid arbitration agreement exists is a legal question subject to de novo review. In re D. Wilson Constr. Co., 196 S.W.3d 774, 781 (Tex. 2006). A court may stay an arbitration commenced or threatened on application and a showing that there is not an agreement to arbitrate. Tex. Civ. Prac. Rem. Code Ann. § 171.023(a) (Vernon 2005). However, if a trial court finds that a claim falls within the scope of a valid arbitration agreement, the court has no discretion but to compel arbitration and stay its own proceedings. Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 (Tex. 2008).
The elements required for the formation of a valid contract are (1) an offer, (2) acceptance in strict compliance with the terms of the offer, (3) a 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. Roman v. Roman, 193 S.W.3d 40, 50 (Tex.App.-Houston [1st Dist.] 2006, no pet.). Consideration is also a fundamental element of every valid contract. Id. When an arbitration clause is part of an underlying contract, the rest of the parties' agreement provides the consideration. In re AdvancePCS Health, L.P., 172 S.W.3d 603, 607 (Tex. 2005).
Here, the record shows the parties' communications and conduct before the purchase orders were signed included the exchange of a proposal with the notation in bold letters that "THIS IS NOT A CONTRACT" and a letter constituting Gables' "intent to issue . . . a contract" requiring Atrium to sign a document and return it and requiring Atrium to provide a certificate of insurance to Gables' office before Atrium performed any work. Atrium did not sign the document attached to Gables' letter and did not provide a certificate of insurance. Although Atrium proceeded with the delivery of materials to the project site between July and November 1999, there is no evidence Atrium accepted an offer from Gables "in strict compliance" with the offer's terms or that any contract was executed between the parties until the purchase orders of November 10, 1999. See id. The purchase orders, on the other hand, are signed by Atrium's president and Gables' project manager and set forth in detail the offer being accepted and the terms of the parties' agreement. Both purchase orders are supported by consideration, thus providing consideration for the arbitration clause on the front of each order. See In re AdvancePCS, 172 S.W.3d at 607. Thus, the agreements to arbitrate were not illusory promises unsupported by consideration. See id. Accordingly, we need not address Gables' fourth issue asserting the parol evidence rule barred evidence of the parties' conduct and communications prior to execution of the purchase orders.
Atrium contests whether the purchase orders were properly signed by an "officer" of Gables. However, the issue here is whether Atrium is bound by the purchase orders, and Atrium's president signed the orders. A memorandum containing all the particulars of a concluded contract need only be signed by the party against whom it is sought to be enforced. Street v. Johnson, 96 S.W.2d 427, 429 (Tex.Civ.App.-Amarillo 1936, no writ). Because the purchase orders are written agreements signed by the party to be charged, Atrium, they are enforceable against Atrium. See Tex. Bus. Com. Code Ann. § 26.01(a) (Vernon 2002). We sustain Gables' first, second, fifth, sixth, and seventh issues.
In its third issue, Gables argues the trial court also erred by staying arbitration because, regardless of whether there is an agreement to arbitrate, Atrium waived its right to challenge arbitration because it participated in the underlying arbitration proceeding for two years. When it appeared arbitration was imminent, Atrium filed its motion to stay arbitration on the basis that no agreement to arbitrate existed. However, regardless of the waiver claim, we have concluded there is a valid agreement to arbitrate between the parties. We overrule Gables' third issue.
The timing of Atrium's motion did not waive its right to challenge arbitration. See Tex. Civ. Prac. Rem. Code Ann. § 171.088(a)(4) (Vernon 2005) (actual arbitration award may be vacated if no agreement to arbitrate, even if party objects to arbitration but participates in arbitration).
In its eighth issue, Gables argues "the trial court's order staying arbitration should be reversed whether or not the [American Arbitration Association] AAA rules govern under the Texas Arbitration Act" (TAA). At the hearing on the motion to stay, Atrium argued the TAA governed the appointment of arbitrators and provided that, in the absence of a method for appointing arbitrators set forth in the parties' agreement, the court would have the authority to appoint the arbitrators. See Tex. Civ. Prac. Rem. Code Ann. § 171.041(b) (Vernon 2005). Atrium pointed out that Gables had not invoked this method of appointing arbitrators and had only filed a demand for arbitration with the AAA. Regardless of how the arbitrators are to be appointed, there was no justification to stay the arbitration because the TAA provides that a court may stay an arbitration only "on application and a showing that there is not an agreement to arbitrate." Tex. Civ. Prac. Rem. Code Ann. § 171.023(a) (Vernon 2005). We have previously concluded an arbitration agreement existed between the parties, and we conclude Gables' demand under the AAA did not justify the court's decision to stay arbitration. See Houston Village Builders, Inc. v. Falbaum, 105 S.W.3d 28, 30-32 (Tex.App.-Houston [14th Dist.] 2003, pet. denied) (applying provisions of TAA to arbitration conducted pursuant to AAA rules). We sustain Gables' eighth issue.
We reverse the trial court's order granting Atrium's motion to stay arbitration and remand this cause for further proceedings.