in Re Conseco Finance Servicing Corp. F/K/A Green Tree Financial Servicing Corporation ( 2002 )

In The

Court of Appeals

Ninth District of Texas at Beaumont

____________________

NO. 09-02-033 CV ____________________

IN RE CONSECO FINANCE SERVICING CORP., f/k/a GREEN TREE FINANCIAL SERVICING CORPORATION

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Original Proceeding

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OPINION

In this mandamus proceeding, Relator Conseco Finance Servicing Corp., f/k/a Green Tree Financial Servicing Corporation ("Conseco"), seeks relief from an order denying arbitration.  

Background

On August 5, 1997, the real parties in interest, Robert E. Ard and Sheila D. Ard ("Ard"), purchased a manufactured home from Continental Mobile Home Sales in Silsbee, Texas. The purchase was financed by Conseco pursuant to a retail installment contract. The retail installment contract contained an arbitration clause that provided, in part, as follows:

ARBITRATION: All disputes, claims, or controversies arising from or relating to this Contract or the parties thereto shall be resolved by binding arbitration by one arbitrator selected by you with my consent. This agreement is made pursuant to a transaction in interstate commerce and shall be governed by the Federal Arbitration Act at 9 U.S.C. Section 1. . . . THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL EITHER PURSUANT TO ARBITRATION UNDER THIS CLAUSE OR PURSUANT TO A COURT ACTION BY YOU (AS PROVIDED HEREIN) . . . .

The mobile home burned and the insurance company assessed it as a total loss. Ard forwarded the insurance check to Conseco. Conseco began collection efforts for additional amounts allegedly owed by Ard. Alleging improper collection practices, Ard then sued Conseco for, among other things, violations of the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act ("DTPA"). Conseco moved to compel arbitration of Ard's claims, but the trial court refused to order arbitration.   

Arbitration

A party seeking to compel arbitration must establish that an arbitration agreement exists, and that the claims raised fall within the scope of that agreement. See Cantella & Co., Inc. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996). Once the party establishes that a claim is within the arbitration agreement, the trial court must compel arbitration and stay its own proceedings. See In re Oakwood Mobile Homes, Inc., 987 S.W.2d 571, 573 (Tex. 1999). A party who is erroneously denied the right to arbitrate under the Federal Arbitration Act has no adequate remedy at law and is entitled to mandamus relief. Cantella & Co., 924 S.W.2d at 945.

Whether a contract imposes a duty to arbitrate a particular dispute is a matter of contract interpretation, and thus a question of law for the court. See Kline v. O'Quinn, 874 S.W.2d 776, 782 (Tex. App.--Houston [14^th Dist.] 1994, writ denied). Our review is de novo. See Leander Cut Stone Co., Inc. v. Brazos Masonry Inc., 987 S.W.2d 638, 640 (Tex. App.--Waco 1999, no pet.). The law imposes a presumption in favor of arbitration; this presumption is particularly applicable where the arbitration clause is broadly worded, purporting to cover all claims, disputes, and other matters relating to the contract. See Kline, 874 S.W.2d at 782. Where there is a broad arbitration clause, arbitration should not be denied unless it can be said with positive assurance that the clause cannot be interpreted to cover the dispute. Id.

  The Novation Issue

Conseco attached a copy of the installment contract, including the arbitration clause, to its Motion to Compel Arbitration. Ard claims that the insurance check which he sent to Conseco paid the contract in full and thereby terminated the arbitration agreement. Accepting this argument, the trial court found that a novation occurred upon Conseco's acceptance of the insurance check and that the novation served to extinguish the original installment agreement containing the arbitration clause.

Ard asserts that the trial court's finding of novation is unchallenged and is therefore binding on this court. This assertion is incorrect. Conseco's petition challenges the finding on multiple grounds. Conseco asserts that Ard failed to plead novation in writing and failed to present affidavits regarding the alleged novation at the hearing below. More importantly, Conseco contends that, as a matter of law, Ard's claim of novation must itself be resolved by arbitration. We agree with the latter point, and therefore need not address whether novation was properly pleaded or proved.

The Texas Supreme Court has held that the issue of whether a contract containing an arbitration clause has been revoked is itself an issue which should be arbitrated, since it arises from or relates to the contract. See In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758 (Tex. 2001). FirstMerit Bank also provides that "defenses must specifically relate to the Arbitration Addendum itself, not the contract as a whole, if they are to defeat arbitration." Id. at 756. Ard's contention -- that Conseco's acceptance of the insurance check extinguished the original installment agreement -- relates to the "contract as a whole," not specifically to the arbitration agreement, and cannot defeat arbitration.

FirstMerit Bank controls this case. The trial court's finding is an incorrect application of the law to the facts and therefore not binding on this court. While we defer to findings of fact by a trial court, a trial court has no discretion in determining what the law is or in applying the law to the facts. See Walker v. Packer, 827 S.W.3d 833, 839-40 (Tex. 1992).

The Remaining Issues Also

Arise From Or Relate To This Contract

The threshold issue for the arbitrator to decide is the novation issue. If the arbitrator rejects the novation argument, then the remaining issues arise from or relate to this contract. The arbitration clause before us states that "[a]ll disputes, claims, or controversies arising from or relating to this Contract or the parties thereto" are subject to arbitration. Statutory causes of action, such as Ard's DTPA and Debt Collection Act claims, have been held to fall within the scope of arbitration agreements. See Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 270-71 (Tex. 1992) (DTPA claim held subject to arbitration, since Federal Arbitration Act preempts DTPA's non-waiver provisions); see also In re Conseco Finance Servicing Corp., 19 S.W.3d 562, 570-71 (Tex. App.--Waco 2000, orig. proceeding) (Debt Collection Act and DTPA claims subject to arbitration, as they are claims arising from or relating to the contract). Absent the original contract, there would be no reason for Ard to charge Conseco with collection abuses, since the alleged debt is one claimed by Conseco to be owed on the installment contract. Ard's statutory claims arise from or relate to the installment contract, and therefore fall within the arbitration clause.

Ard also sued Conseco for breach of contract; the petition alleged that Conseco failed to perform a contractual obligation to "deliver Plaintiff's title after Plaintiff's contractual obligations were fully performed" and to "deliver Plaintiff's title after the occurrence of . . . conditions precedent[.]" These "contractual obligations" and "conditions precedent" concern the payment of the debt created by the retail installment contract, and fall within the scope of the arbitration agreement. How the claim is labeled does not control; the focus must be on the factual allegations and whether they arise from or relate to the retail installment contract. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Wilson, 805 S.W.2d 38, 39 (Tex. App.--El Paso 1991, no writ); see also Gerwell v. Moran, 10 S.W.3d 28, 31 (Tex. App.--San Antonio 1999, no pet). Ard's claims asserting conversion, fraud, invasion of privacy, defamation, and intentional infliction of emotional distress are all interwoven with the debt collection efforts which arise from or relate to the retail installment contract, and are subject to arbitration. Id.

The trial court was required to compel arbitration and stay its own proceedings. See In re Oakwood Mobile Homes, 987 S.W.2d at 573. We conditionally grant the writ of mandamus. The trial court is directed to order all claims to arbitration. We are confident the trial court will follow this decision; the writ will issue only if the trial court fails to do so.

WRIT CONDITIONALLY GRANTED.

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DAVID B. GAULTNEY

Justice

Submitted on February 6, 2002

Opinion Delivered March 14, 2002

Do Not Publish

Before Walker, C.J., Burgess and Gaultney, JJ.