Tilson Home Corporation v. Jorge L. Zepeda and Lisa M. Zepeda
14-16-00075-CV
| Tex. App. | Nov 8, 2016Background
- Jorge and Lisa Zepeda contracted Tilson Home Corp. to build a house; the written contract contained an arbitration clause requiring any claim to be filed with the AAA within two years and one day of accrual.
- The completed house encroached on adjoining property; Tilson later purchased that adjoining parcel so the house now sits on land owned by both Tilson and the Zepedas.
- The Zepedas refused to proceed under the contract; on October 5, 2015, Tilson filed suit and simultaneously moved to compel arbitration but did not file a AAA demand within the contract’s two-year-and-one-day deadline.
- The Zepedas moved to dismiss for lack of jurisdiction and opposed the motion to compel, arguing Tilson’s failure to file with the AAA within the contractual deadline barred arbitration.
- The trial court held an ex parte hearing (Tilson did not appear), denied Tilson’s motion to compel arbitration, and concluded the suit was filed after the contractual deadline and thus the court lacked authority to order arbitration.
- Tilson appealed the interlocutory denial under Texas Civil Practice & Remedies Code § 51.016.
Issues
| Issue | Plaintiff's Argument (Tilson) | Defendant's Argument (Zepeda) | Held |
|---|---|---|---|
| Whether Tilson may compel arbitration despite not filing a AAA demand before the contract deadline | Tilson: Valid FAA-governed arbitration agreement exists and claims fall within its scope; the deadline’s compliance is for the arbitrator | Zepeda: Failure to demand arbitration before the contractual deadline bars Tilson’s claims and removes them from arbitration | Court: Reversed — whether the deadline bars arbitration is a question of procedural arbitrability for the arbitrator; compel arbitration |
| Whether Tilson lacked standing because it filed suit and moved to compel arbitration contemporaneously rather than first filing with AAA | Tilson: No standing issue; contemporaneous filing is permissible | Zepeda: Plaintiff should have pursued arbitration first; failure deprives Tilson of standing to compel arbitration | Court: Rejected Zepeda’s standing argument; no authority bars contemporaneous filing |
| Whether the trial court properly denied the motion to compel based on an ex parte hearing without notice to Tilson | Tilson: Trial court erred by conducting ex parte hearing | Zepeda: (implicit) denial was appropriate on merits | Court: Decision on arbitration dispositive; court did not reach this issue as disposition made it unnecessary |
| Whether the trial court lacked jurisdiction because the suit was untimely and therefore moot | Tilson: Timeliness goes to merits (arbitrability), not court jurisdiction | Zepeda: Untimely suit deprived court of authority to order arbitration | Court: Error — timeliness/preconditions to arbitration go to merits, not jurisdiction; court must compel arbitration |
Key Cases Cited
- Global Constr. Co. v. 166 S.W.3d 795 (Tex. App.—Houston [14th Dist.] 2005) (procedural prerequisites to arbitration are for the arbitrator)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (contractual deadlines and procedural/substantive arbitrability distinctions)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) (arbitrability questions about procedural prerequisites are for arbitrators)
- ODL Servs., Inc. v. ConocoPhillips Co., 264 S.W.3d 399 (Tex. App.—Houston [1st Dist.] 2008) (scope of arbitration is substantive arbitrability)
- Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71 (Tex. 2000) (distinguishing jurisdictional defects from merits/standing issues)
- Amir v. Int’l Bank of Commerce, 419 S.W.3d 687 (Tex. App.—Houston [1st Dist.] 2013) (ordering stay of litigation pending arbitration)
Decision: Reversed and remanded with instructions to compel arbitration and stay the litigation pending arbitration.