Service Corporation International and SCI Texas Funeral Services, Inc., D/B/A Buena Vista Burial Park and D/B/A Funeraria Del Angel Buena Vista v. Maria Ruiz ( 2018 )

NUMBER 13-16-00699-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
SERVICE CORPORATION INTERNATIONAL
AND SCI TEXAS FUNERAL SERVICES, INC.,
D/B/A BUENA VISTA BURIAL PARK AND
D/B/A FUNERARIA DEL ANGEL BUENA VISTA, Appellants,
v.
MARIA RUIZ, Appellee.
On appeal from the 138th District Court
of Cameron County, Texas.
MEMORANDUM OPINION
Before Justices Rodriguez, Benavides, and Longoria
Memorandum Opinion by Justice Rodriguez
In this appeal, appellants Service Corporation International and its Texas-based
subsidiary, SCI Texas Funeral Services, Inc. (collectively “SCI”) challenge the denial of
its motion to compel arbitration. By what we treat as five issues, SCI asserts that none
of the grounds raised by appellee Maria Ruiz offer a valid basis to deny arbitration. We
reverse and remand.
I. BACKGROUND
A. Ruiz’s Petition
Mary Ruiz filed this suit against SCI. Ruiz described Service Corporation as a
company that operates more than 1,500 funeral homes and 400 cemeteries in 43 states
and foreign countries. According to Ruiz’s petition, SCI Texas Funeral Services does
business in Brownsville as “Funeria Del Angel Buena Vista” 1 (a funeral home) and
“Buena Vista Burial Park” (a cemetery). Ruiz alleged that SCI committed fraud in
handling the funeral services and burial of Ruiz’s deceased brother, Ernesto Eguia.
Ruiz describes the underlying events as follows. After Ernesto’s unexpected
death, an autopsy was performed by the medical examiner. The medical examiner put
Ernesto’s organs in a plastic bag and then placed the bag back into the body cavity,
stitched up the incision, and released the body to SCI’s Buena Vista funeral home. SCI
employees embalmed Ernesto’s remains. Ruiz asserts that she never consented to the
embalming.
While making arrangements for the funeral services, Ruiz toured the mausoleum
where the service was to be held, and she noted a “musty smell” and a lack of air-
conditioning. She was assured by an SCI employee that these problems would be
resolved before the service.
1 Various documents in the record refer to “Funeraria Del Angel Buena Vista” rather than “funeria.”
A Spanish-to-English dictionary defines “funeraria” as a “funeral parlor.” COLLINS COMPLETE SPANISH
ELECTRONIC DICTIONARY, “Funeraria” (2017), https://www.collinsdictionary.com/dictionary/spanish-
english/funeraria. Our research did not reveal any language which recognizes “funeria” as a word.
2
On the day of the service, Ruiz arrived at the funeral home early. She and her
son approached the casket and found “Ernesto’s face, ears and chest . . . covered with
what looked like gnats but could have been small flies.” During the service, the air-
conditioning did not function, and friends and family were forced to “fan[] away the ever-
present haze of insects.”
Three days after the service, an SCI employee contacted Ruiz to arrange a
meeting with SCI’s general manager, “Mr. Guerra.” At the meeting, Mr. Guerra revealed
that, by mistake, the bag containing Ernesto’s organs had not been buried with his
remains. Mr. Guerra explained that there were two options: (1) disinter Ernesto’s
remains, place the organs next to Ernesto’s body, and re-inter the casket; or (2) cremate
the organs and inter them near Ernesto’s burial plot.
Ruiz alleges that the actions of SCI’s employees constituted fraud by
nondisclosure. Ruiz alleged that SCI breached its duty to disclose material facts related
to the funeral which were known only to SCI. According to Ruiz, SCI knew and failed to
disclose at the time of contracting: that Ernesto’s remains were received in a condition
that would cause insect infestation, that the remains had suffered a mishap or would be
mishandled by SCI in a manner that would cause insect infestation, and that the remains
were to be buried without internal organs, among other allegations. Based on these
allegations, Ruiz’s petition asserts fraud as both a claim for relief and as an affirmative
defense to arbitration.
B. SCI’s Motion to Compel Arbitration and Subsequent Proceedings
Shortly after receiving Ruiz’s petition, SCI filed a motion to compel arbitration and
to abate proceedings in the trial court. SCI relied on the arbitration clauses in two
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contracts between Ruiz and SCI, which we refer to as the Interment Agreement and the
Funeral Agreement, or together, the Agreements.
Both Agreements include arbitration provisions in which Ruiz agreed that any
claims she had relating to the respective Agreement, including any dispute about the
interpretation of its arbitration clause, would be submitted to arbitration under the rules of
the American Arbitration Association (“AAA”). The arbitration clauses purported to apply
to any claim Ruiz had against “the Seller,” any third-party beneficiary to the Agreements,
and any companies affiliated with “the Seller,” as well as their employees. SCI made no
similar promise to arbitrate any claims against Ruiz.
Beyond these arbitration provisions, the Agreements differed in their consideration
and terms. Under the Interment Agreement, the primary consideration exchanged was
that Ruiz would obtain from SCI the right to inter remains in a plot, and SCI would obtain
a total price of $3,279 from Ruiz. Ruiz agreed to many terms favorable to SCI, such as
SCI’s disclaimer of warranties. For its part, SCI agreed to maintain the funeral grounds
and to make deposits into a trust fund for grounds maintenance.
Under the Funeral Agreement, Ruiz was to receive various goods and services
from SCI, including embalming the remains, delivering a particular casket, providing
funeral services, etc. In exchange, SCI would receive the total price of $5,295.75 from
Ruiz. Ruiz further agreed to other provisions favorable to SCI, such as SCI’s disclaimer
of warranties and consequential damages.
Based on these Agreements and the arbitration clauses they contained, SCI
moved to compel arbitration. Ruiz opposed SCI’s motion, claiming the Agreements and
their arbitration clauses were not enforceable for multiple reasons. First, Ruiz argued
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that the arbitration provisions were unconscionable. Second, Ruiz cited fraud as an
affirmative defense against arbitration. Third, Ruiz asserted that her sole claim for
relief—a claim for fraud—fell outside the scope of the arbitration clauses. Fourth, Ruiz
argued they were unenforceable because no valid consideration supported the arbitration
clauses.
The trial court denied SCI’s motion to compel arbitration. In its order, the trial
court agreed with and relied upon Ruiz’s theory that her fraud claim did not fall within the
scope of the arbitration clauses. According to the order, Ruiz’s petition alleged “the
Defendant’s employees knew that the decedent’s body was not only not well taken care
of but was also buried without the organs,” and failed to disclose this fact. Ruiz’s claim
for fraud “could and should not be contemplated within an agreement to arbitrate.” The
trial court did not reach the parties’ arguments concerning unconscionability, Ruiz’s fraud
defense against arbitration, or illusory consideration.
SCI filed this interlocutory appeal challenging the denial of its motion to compel
arbitration.
II. STANDARD OF REVIEW
We review an order denying a motion to compel arbitration under an abuse of
discretion standard. In re Labatt Food Serv., LP, 279 S.W.3d 640, 642–43 (Tex. 2009)
(orig. proceeding). Under that standard, 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. Id. at 643. It is an abuse of discretion for the trial court to rule
arbitrarily, unreasonably, without regard to guiding legal principles, or without supporting
evidence. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). Whether the parties
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reached an agreement to arbitrate in the first instance is a question of fact. Parker
Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 72 (Tex. App.—Houston [14th Dist.]
2010, pet. denied). The question of whether an arbitration agreement is enforceable is
subject to de novo review. Labatt, 279 S.W.3d at 643.
III. FEDERAL ARBITRATION ACT
The trial court’s order did not specify whether the arbitration agreements in this
case were governed by the Federal Arbitration Act (“FAA”) or another body of authority.
See 9 U.S.C.A. §§ 1–16 (West, Westlaw through P.L. 115-89). As an initial matter, SCI
asserts that the Agreements are governed by the FAA, whereas Ruiz asserts that the
FAA does not apply.
The FAA applies to arbitration clauses in contracts that affect interstate commerce,
and the FAA thus extends as far as the Commerce Clause of the United States
Constitution will reach. Fredericksburg Care Co., LP v. Perez, 461 S.W.3d 513, 517
(Tex. 2015), cert. denied sub nom. Perez v. Fredericksburg Care Co., LP, 136 S. Ct. 798
(2016). Under Commerce Clause jurisprudence, the applicability of the FAA is not
limited to transactions that individually have a “substantial effect on interstate commerce.”
Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (per curiam). Rather, the FAA
may extend to individual cases without showing any specific effect upon interstate
commerce if, in the aggregate, the economic activity in question would represent “a
general practice . . . subject to federal control.” Id. at 56–57.2
2 On appeal, Ruiz implies that the Texas Arbitration Act (TAA) governs the Agreements, and she
contends that the FAA only applies if the Agreements satisfy a four-part test to determine whether the FAA
preempts the TAA, citing In re D. Wilson Construction Co. 196 S.W.3d 774, 780 (Tex. 2006) (orig.
proceeding). However, as that opinion makes clear, the FAA and TAA are not mutually exclusive, and the
“FAA only preempts contrary state law, not consonant state law.” Id. at 779 (emphasis in original). The
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Multiple aspects of the record confirm that the FAA applies to the Agreements.
SCI submitted the affidavit of Abelardo Perez, who attested that SCI Texas Funeral
Services, Inc. sold goods to Texas residents, including Ruiz, that were purchased or
manufactured out of state. See id. at 57 (“[T]he Commerce Clause gives Congress the
power to regulate local business establishments purchasing substantial quantities of
goods that have moved in interstate commerce . . . .”). Perez further testified that in
providing services, SCI Texas Funeral Services relied on goods and materials purchased
or manufactured outside of Texas, such as the equipment SCI used to dig graves. See
Serv. Corp. Int’l v. Lopez, 162 S.W.3d 801, 807 (Tex. App.—Corpus Christi 2005, no pet.)
(“A party who alleges interstate commerce may show it in several ways [including]
transportation of materials across state lines [and] manufacture of parts in a different
state . . . .”); see also SCI Tex. Funeral Servs., Inc. v. Leal, No. 13-09-00050-CV, 2009
WL 332043, at *3 (Tex. App.—Corpus Christi Feb. 12, 2009, no pet.) (mem. op.) (per
curiam) (combined appeal & orig. proceeding) (relying on SCI’s use of “goods purchased
or manufactured outside of Texas in its business” to conclude that the FAA governed
SCI’s arbitration agreement).
In addition, Ruiz’s petition alleged that SCI operated more than 1,500 funeral
homes and 400 cemeteries in 43 states and foreign countries, and the Funeral Agreement
reflects that SCI offered Ruiz the services of a third-party affiliate based outside of Texas.
See Citizens Bank, 539 U.S. at 57 (finding that loan agreements were governed by the
fact that the TAA may apply to the Agreements does not prevent the FAA from applying as well. Id.
Moreover, Ruiz does not identify any way in which the rules of the FAA would conflict with the TAA, and in
her petition, Ruiz expressly denied the applicability of the TAA in the first place. Accordingly, we proceed
to determine whether the FAA applies, based on an evaluation of whether the Agreements fall within the
reach of the Commerce Clause. See Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003) (per curiam).
7
FAA in part because they supported and implicated the defendant’s “business throughout
the southeastern United States”).
Finally, in aggregate, the provision of funeral goods and services can be said to
have a substantial effect on interstate commerce. See Lopez, 162 S.W.3d at 807 n.5
(citing Serv. Corp. Int’l v. Fulmer, 883 So. 2d 621, 629 (Ala. 2003)) (“[T]he provision of
funeral goods and services is within Congress’s commerce power[.]”); see also SCI Tex.
Funeral Servs., Inc. v. Hijar, 214 S.W.3d 148, 154 (Tex. App.—El Paso 2007, pet. denied)
(op. on reh’g) (discussing the Federal Trade Commission’s “Funeral Rule,” which, under
the aegis of the Commerce Clause and the Federal Trade Commission Act, bars certain
unfair practices in the funeral industry).
Because these Agreements and their arbitration provisions bear a sufficient
relation to interstate commerce, we conclude that they fall within the reach of the FAA.
See Fredericksburg Care, 461 S.W.3d at 517.3
IV. WHO DECIDES QUESTIONS OF ARBITRABILITY?
We next address the issue of who should decide questions of arbitrability: the
trial court or the arbitrator. By its first issue, SCI asserts that the threshold questions of
arbitrability—whether there is a binding arbitration agreement, and whether that
agreement encompasses the claim at issue—must be decided by the arbitrator, not the
trial court.
A party seeking to compel arbitration under the FAA must establish two threshold
questions of arbitrability: (1) that there is a valid arbitration clause, and (2) that the claims
3 A party may bring an interlocutory appeal from an order denying a motion to compel arbitration
under the FAA. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (West, Westlaw through 2017 1st C.S.).
8
in dispute fall within that agreement’s scope. In re Rubiola, 334 S.W.3d 220, 223 (Tex.
2011) (orig. proceeding). These questions of arbitrability must be decided by the courts,
unless the parties clearly and unmistakably agreed to submit these questions to the
arbitrator. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002); In re Weekley
Homes, LP, 180 S.W.3d 127, 130 (Tex. 2005) (orig. proceeding).
SCI cites language in both Agreements which, according to SCI, expressly
requires the arbitrator to resolve these questions. SCI also points out that both
Agreements incorporate the arbitration rules of the AAA. SCI directs our attention to
multiple cases—including cases from this Court—holding that the incorporation of the
AAA rules may serve as “clear and unmistakable” evidence of the parties’ agreement to
delegate questions of arbitrability to an arbitrator. See Saxa Inc. v. DFD Architecture
Inc., 312 S.W.3d 224, 230 (Tex. App.—Dallas 2010, pet. denied); see also In re Rio
Grande Xarin II, Ltd., No. 13-10-00115-CV, 2010 WL 2697145, at *8 (Tex. App.—Corpus
Christi July 6, 2010, pet. dism’d) (mem. op.) (combined appeal & orig. proceeding).
However, our review of the record reveals that SCI did not raise this argument
before the trial court. Instead, SCI invited the trial court to decide all questions of
arbitrability. Accordingly, SCI has not preserved this argument for appellate review.
See TEX. R. APP. P. 33.1(a); Henry & Sons Constr. Co., Inc. v. Campos, 510 S.W.3d 689,
699 & n.5 (Tex. App.—Corpus Christi 2016, pet. denied); Nw. Constr. Co. v. Oak Partners,
LP, 248 S.W.3d 837, 846–47 (Tex. App.—Fort Worth 2008, pet. denied) (combined
appeal & orig. proceeding). We overrule SCI’s first issue.
V. VALIDITY OF THE AGREEMENTS AND THEIR ARBITRATION CLAUSES
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By its second issue, SCI contends that both Agreements and their arbitration
clauses are valid and binding on both parties. In that connection, SCI asserts that the
arbitration clauses and Agreements are supported by valid consideration. SCI
challenges this Court’s opinion in SCI Texas Funeral Services, Inc. v. Leal, which Ruiz
has cited in support of her argument that no valid consideration supports the Agreements.
See 2009 WL 332043, at *6. In Leal, we found a similar arbitration agreement between
SCI and a bereaved plaintiff to be supported only by illusory consideration on SCI’s part
and therefore unenforceable. See id. at *5–6. SCI asserts that Leal is distinguishable
on its facts and was wrongly decided. We agree that Leal is distinguishable. Also in
this section, we address two of Ruiz’s other counterarguments to the validity of the
Agreements.
A. Applicable Law
Again, a party seeking to compel arbitration must establish the existence of a valid
arbitration agreement between the parties. In re Odyssey Healthcare, Inc., 310 S.W.3d
419, 422 (Tex. 2010) (per curiam) (orig. proceeding). Under the FAA, ordinary principles
of state contract law determine whether there is a valid agreement to arbitrate. In re
Kellogg Brown & Root, Inc., 166 S.W.3d 732, 738 (Tex. 2005) (orig. proceeding).
Like other contracts, arbitration agreements must be supported by the exchange
of consideration. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 676 (Tex. 2006) (orig.
proceeding). Consideration is a bargained for exchange of promises or performance
between the parties. See ULICO Cas. Co. v. Allied Pilots Ass’n, 262 S.W.3d 773, 790
(Tex. 2008). Consideration is composed of benefits and detriments to the contracting
parties. Id. When the consideration consists of mutual promises between the parties,
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the agreement is a “bilateral contract”—one in which there are mutual promises between
two parties to the contract, each party being both a promisor and a promisee. Vanegas
v. Am. Energy Servs., 302 S.W.3d 299, 302 (Tex. 2009).
“When illusory promises are all that support a purported bilateral contract, there is
no contract.” Id. at 301. Promises are illusory and unenforceable if they fail to bind the
promisor, who retains the option of discontinuing performance. Royston, Rayzor,
Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494, 505 (Tex. 2015) (combined appeal
& orig. proceeding); see Vanegas, 302 S.W.3d at 301. Generally, if a party has the
unlimited right to terminate an agreement and avoid its promised obligation without prior
notice, the agreement is based upon an illusory promise and is unenforceable due to its
lack of mutual consideration. Weekley Homes, LP v. Rao, 336 S.W.3d 413, 419 (Tex.
App.—Dallas 2011, pet. denied); see Henry & Sons, 510 S.W.3d at 693.
Where an arbitration agreement stands alone and is based solely on the parties’
mutual promise to arbitrate disputes, the agreement is illusory if it binds one party to
arbitrate, while allowing the other to choose whether to arbitrate. Royston, Rayzor, 467
S.W.3d at 505. But when an arbitration provision is part of a larger, underlying contract,
the consideration supporting the underlying contract may also support the arbitration
clause. Id.
B. Discussion
Here, neither arbitration clause shows a mutual promise to arbitrate disputes. In
each Agreement, Ruiz promised to arbitrate disputes against SCI and its affiliates, but
SCI offered no similar promise in return. See id.
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However, the arbitration clauses in question are not stand-alone agreements; they
are part of larger, underlying contracts: the Interment Agreement and the Funeral
Agreement. See id. Therefore, if there is valid consideration to support these
underlying Agreements, that consideration may also support Ruiz’s obligation to arbitrate
disputes against SCI. See id.
We find that the Interment Agreement and its arbitration clause are supported by
valid consideration in the form of mutual, binding promises. Ruiz agreed to several
benefits in favor of SCI and detriments to herself, including a promise to pay SCI $3,279,
a generous liquidated damages clause in the event of her breach, a limitation on her
ability to assign the contract, and a promise to arbitrate any claims she may have relating
to the Interment Agreement. In return, SCI promised certain benefits to Ruiz and
detriments to itself: to grant her permanent interment rights and to maintain the cemetery
grounds in perpetuity, among others. Neither party had an unchecked means of avoiding
these promises.4 These binding promises support the Interment Agreement as a whole
and the arbitration provision it contained. See id.
Similarly, under the Funeral Agreement, Ruiz was to receive various goods and
services from SCI—embalming, a casket, funeral services—and SCI would receive the
total price of $5,295.75 from Ruiz. Ruiz agreed to other provisions favorable to SCI, but
4 The only means of cancellation discussed in the Interment Agreement was SCI’s right to cancel
the Agreement in the event of a material breach by Ruiz. This provision does not give SCI an unlimited
right to avoid fulfilling its promises, so as to render any promises illusory. Rather, this provision does little
more than memorialize SCI’s right under the common law to discontinue performance after the other party’s
breach. See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam)
(“It is a fundamental principle of contract law that when one party to a contract commits a material breach
of that contract, the other party is discharged or excused from further performance.”).
12
none of those provisions offered SCI the unfettered right to avoid performance of its
promises. See id.
The Agreements are distinguishable from the contract at issue in Leal, which gave
SCI the
right at any time it finds itself unable to fulfill this Agreement or perform any
service or make any interment because of . . . any other unforeseen
contingency . . . or because of any mistake or error in description, location,
or availability of property . . . to return to the Purchaser all moneys paid
hereunder for the items affected by such and this Agreement shall as to
such affected items become null and void.
2009 WL 332043, at *6. In Leal, we relied, in part, on SCI’s unbridled discretion to cancel
the contract due to any “unforeseen contingency” or “mistake” in holding that
consideration for the contract was illusory. See id. The Agreements here give SCI no
similar discretion. Therefore, the Agreements and their arbitration provisions are
supported by valid consideration. See Royston, Rayzor, 467 S.W.3d at 505.
C. Ruiz’s Other Arguments Against the Validity of the Agreements
Ruiz raises other arguments against the validity of these Agreements. First, Ruiz
objects to Perez’s affidavit, which was introduced to authenticate the Agreements as
evidence. In his affidavit, Perez identified himself as the market manager of SCI Texas
Funeral Services, set out his general qualifications as an affiant, and averred that he had
personal knowledge of all facts stated therein, which he swore to be true. Perez also
asserted that the attached Exhibit A contained true and correct copies of the Interment
Agreement and the Funeral Agreement. A properly sworn affidavit stating that the
attached documents are true and correct copies of the original will authenticate the copies
so they may be considered as evidence. In Estate of Guerrero, 465 S.W.3d 693, 704
13
(Tex. App.—Houston [14th Dist.] 2015, pet. denied) (en banc). Perez’s affidavit provides
a basis “to support a finding that the item is what the proponent claims it is,” for purposes
of the motion to compel arbitration. See TEX. R. EVID. 901(a). We find no material
infirmity in his affidavit that would prevent the trial court from considering it or the
Agreements it sought to authenticate.
Next, Ruiz objects that SCI did not demonstrate that the Funeral Agreement
creates a valid arbitration agreement with regard to SCI; Ruiz notes that by its terms, the
Funeral Agreement is a contract between Ruiz and “Funeraria Del Angel Buena Vista,”
and that the arbitration provision simply states that Ruiz agreed to arbitrate disputes
against “the Seller.” The Funeral Agreement never expressly mentions the companies
we refer to as SCI—Service Corporation International and SCI Texas Funeral Services—
which are the defendants in this suit. Ruiz asserts that there is no valid evidence that
SCI Texas Funeral Services is the same party as Funeraria Del Angel Buena Vista, and
therefore, even if she agreed to arbitrate disputes against Funeraria Del Angel Buena
Vista, she is not obligated to arbitrate her claims against either Service Corporation
International or SCI Texas Funeral Services. We disagree.
In Perez’s affidavit, he averred that SCI Texas Funeral Services does business in
Texas as Funeraria Del Angel Buena Vista, and that the Funeral Agreement was in fact
a contract between Ruiz and SCI Texas Funeral Services. Ruiz made similar allegations
in her own live petition, in which she described one defendant as SCI Texas Funeral
Services “doing business as Funeria [sic] Del Angel Buena Vista and Buena Vista Burial
Park in Brownsville, Texas,” which is an apparent misnomer for Funeraria Del Angel
Buena Vista. Both of these facts suggest that SCI Texas Funeral Services is the same
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party as Funeraria Del Angel Buena Vista, and because Ruiz agreed to arbitrate claims
against Funeraria Del Angel Buena Vista, she necessarily agreed to arbitrate claims
against SCI Texas Funeral Services. See Brown v. Lanier Worldwide, Inc., 124 S.W.3d
883, 896 (Tex. App.—Houston [14th Dist.] 2004, no pet.) (relying on similar evidence to
uphold the enforceability of an arbitration provision); see also Raya v. Rio Mgmt. Co.,
LLC, No. 13-13-00711-CV, 2015 WL 4504696, at *3–4 (Tex. App.—Corpus Christi July
23, 2015, no pet.) (mem. op.) (affirming an arbitral award despite the misnomer of a party
to the arbitration agreement).
Moreover, Ruiz further described Service Corporation International as the parent
company of SCI Texas Funeral Services. Under the terms of the arbitration clause in
the Funeral Agreement, Ruiz expressly agreed to arbitrate disputes against Funeraria Del
Angel Buena Vista as well as any of its “parent, subsidiary, or affiliate corporations.”
Because SCI Texas Funeral Services had a right to enforce the arbitration clause, its
“parent” company Service Corporation International did as well. See In re Kaplan Higher
Educ. Corp., 235 S.W.3d 206, 210 (Tex. 2007) (per curiam) (holding that “arbitration
agreements are enforced according to their terms,” in deciding that a non-signatory parent
company could enforce an arbitration agreement between its subsidiary and the plaintiff).
Under the abuse of discretion standard, these aspects of the record would provide
a sufficient basis for the trial court to conclude that Ruiz agreed to arbitrate any claims
relating to the Funeral Agreement against both of the SCI defendants in this case. See
Labatt, 279 S.W.3d at 642–43.
D. Summary
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Having rejected Ruiz’s counterarguments and having found the Agreements to be
supported by valid consideration, we conclude that the Agreements and their arbitration
clauses are valid and binding. See ULICO Cas., 262 S.W.3d at 790. SCI has therefore
satisfied half of its initial burden: to demonstrate the existence of a valid arbitration
clause. See Rubiola, 334 S.W.3d at 223. We sustain SCI’s second issue.
VI. THE SCOPE OF THE ARBITRATION CLAUSES
By what we construe as its third issue, SCI asserts that it has demonstrated the
other half of its initial burden under the FAA: to show that the claim in dispute falls within
the scope of the arbitration agreements. See id. In that regard, SCI disputes Ruiz’s
argument that her fraud claim could not have been subject to an arbitration agreement.
The trial court apparently agreed with Ruiz and found that her allegations of fraud, by their
very nature, “could and should not be contemplated within an agreement to arbitrate.”
Ruiz’s argument was rejected by the United States Supreme Court in 1967:
In the present case no claim has been advanced by Prima Paint that F & C
fraudulently induced it to enter into the agreement to arbitrate any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof. This contractual language is easily broad enough to
encompass Prima Paint’s claim that both execution and acceleration of the
consulting agreement itself were procured by fraud. Indeed, no claim is
made that Prima Paint ever intended that legal issues relating to the
contract be excluded from arbitration, or that it was not entirely free so to
contract.
Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 406 (1967) (internal
quotations and editorial marks omitted).
Similar to the arbitration clause in Prima Paint, Ruiz stipulated in both Agreements
that “any claim he/she may have relating to the transaction contemplated by this
agreement (including any claim or controversy regarding the interpretation of this
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arbitration clause) shall be submitted to and resolved by mandatory and binding
arbitration in accordance with applicable rules of the American Arbitration Association
(‘AAA’) . . . .” See id.
Just as the Supreme Court decided in Prima Paint, we determine that Ruiz’s fraud
claim falls within the ambit of “any claim relating to the transaction contemplated by this
agreement.” See id. Ruiz’s only basis for involvement with SCI was Ernesto’s funeral
and interment, which was the sole subject of the Agreements. Moreover, each fraud
allegation in Ruiz’s petition refers, in some way, to the contract. Many allegations begin
with a phrase such as “at the time of entering into its contract with Plaintiff,” and the
allegations describe SCI’s breach of a duty to disclose material facts to Ruiz—a duty that,
Ruiz reasoned, was created by the Agreements. We therefore conclude that SCI has
satisfied the other half of its initial burden: to demonstrate that the claim in dispute falls
within the scope of the Agreements’ arbitration clauses. See Rubiola, 334 S.W.3d at
223. We sustain SCI’s third issue.
VII. RUIZ’S CLAIM OF FRAUD AS A DEFENSE TO ARBITRATION
We have determined that Ruiz’s claim for fraud fell within the scope of the
arbitration clause, satisfying SCI’s initial burden. See id. We next address Ruiz’s use
of fraud as a defense to arbitration, which is part of Ruiz’s responsive burden. See
Odyssey Healthcare, 310 S.W.3d at 422. By what we construe as its fourth issue, SCI
asserts that Ruiz’s fraud defense does not justify the denial of arbitration. We agree.
Once the party seeking arbitration has satisfied its initial burden, it becomes the
burden of the party resisting arbitration to prove its defenses against enforcing an
otherwise valid arbitration provision. Id. Generally applicable contract defenses, such
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as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements
without contravening the FAA. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687
(1996). However, these defenses must specifically relate to the arbitration provision
itself, not the contract as a whole, if they are to defeat arbitration. Lopez, 162 S.W.3d at
809. If a fraudulent-inducement claim attacks the broader contract, then the arbitrator,
not a court, considers the matter. Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 & n.13
(Tex. 2008).
In her petition, Ruiz made multiple allegations of fraud against SCI that relate to
the Agreements as a whole—for instance, that SCI knew and failed to disclose at the time
of contracting that Ernesto’s remains were received in a condition that would cause insect
infestation, in violation of its duty to disclose. None of the allegations in Ruiz’s petition
imply that SCI fraudulently induced her to agree to arbitrate her claim. Furthermore,
when Ruiz amended her petition, Ruiz attached an affidavit in which she averred that
when she made funeral arrangements with SCI’s employees, “[a]t no time was arbitration
discussed.”5
Ruiz’s fraud allegations relate to the Agreements as a whole, and not to the
arbitration clause in particular. See id. Therefore, if Ruiz’s affirmative defense of fraud
is to be addressed, it is the arbitrator, and not the trial court, that must address it. See
id. The trial court could not have relied on Ruiz’s affirmative defense of fraud to deny
arbitration. We sustain SCI’s fourth issue.
VIII. UNCONSCIONABILITY
5Ruiz does not contend that SCI had a duty to disclose the arbitration provisions or that she lacked
an opportunity to discover these provisions.
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Finally, in what we construe as its fifth issue, SCI challenges Ruiz’s last remaining
ground for resisting arbitration: the defense of unconscionability. Unlike Ruiz’s fraud
defense to arbitration, Ruiz’s unconscionability argument plainly relates to the arbitration
provisions themselves. See id. This defense therefore could have been validly
addressed by the trial court. See id. However, the trial court did not set out in its order
that it reached this ground denying SCI’s motion to compel arbitration.
In reviewing arbitration orders, we have held that appellate courts have discretion
to consider alternative grounds to affirm the order when those grounds were presented
to the trial court but not ruled upon, when the parties raise them for review, and when the
record is well developed with regard to those grounds. In re Brock Specialty Servs., Ltd.,
286 S.W.3d 649, 656–57 (Tex. App.—Corpus Christi 2009, orig. proceeding). When the
record is not fully developed with respect to the alternative grounds, appellate courts
should refrain from addressing issues beyond the trial court’s express basis for its ruling.
Id. at 657.
In this case, the trial court did not reach the merits of Ruiz’s unconscionability
defense, and the undeveloped record does not permit us to reach the merits of that
defense. Accordingly, we decline to address the merits of that defense, and we leave
this issue for the trial court’s resolution. See id.
IX. CONCLUSION
We have sustained SCI’s issues relating to whether consideration was sufficient
and whether the instant claim fell within the scope of the Agreements’ arbitration
provisions. We have also sustained SCI’s challenge to Ruiz’s affirmative defense of
fraud. Accordingly, we reverse the trial court’s order and remand the matter to the trial
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court for further proceedings consistent with this opinion, including the resolution of Ruiz’s
unconscionability defense.
NELDA V. RODRIGUEZ
Justice
Delivered and filed the
25th day of January, 2018.
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