Graham-Rutledge & Co., Inc. v. Nadia Corp.

• Decision Date: 01 April 2009
• Docket Number: No. 05-07-01579-CV.,05-07-01579-CV.
• Parties: GRAHAM-RUTLEDGE & COMPANY, INC., Appellant, v. NADIA CORPORATION and Riyad Amir Areksoussi, Appellees.
• Court: Texas Court of Appeals

281 S.W.3d 683

GRAHAM-RUTLEDGE & COMPANY, INC., Appellant, v. NADIA CORPORATION and Riyad Amir Areksoussi, Appellees.

No. 05-07-01579-CV.

Court of Appeals of Texas, Dallas.

April 1, 2009.

C.L. Graham, Dallas, TX, for Appellant.

David M. Jones, Bush & Motes, P.C., Donald Wayne Shelton, Bush & Morrison, P.C., Arlington, TX, for Appellees.

Before Justices WRIGHT, BRIDGES, and MAZZANT.

OPINION

Opinion by Justice BRIDGES.

Appellant Graham-Rutledge & Company, Inc. appeals from the trial court's judgment confirming an arbitration award and awarding damages to the appellees, Nadia Corporation and Riyad Amir Areksoussi. In five issues, appellant argues the arbitration award should be vacated because (1) the arbitrator engaged in misconduct; (2) the arbitrator made a gross mistake that would imply bad faith or a failure to exercise honest judgment; (3) the arbitrator exceeded the authority provided in the arbitration agreement; (4) appellant received late notice of a hearing; (5) and the trial court impermissibly modified the arbitration award. We affirm the judgment of the trial court.

Background

In 2006, Graham-Rutledge became interested in leasing property owned by Nadia. In February 2006, Graham-Rutledge entered into an agreement with the initial tenant, Lena Davis, and Nadia for an assignment of the lease from Lena Davis to Graham-Rutledge. Graham-Rutledge allegedly spent approximately $160,000 to remodel and repair the subject property for use as a restaurant. In March of 2006, a commercial lease amendment was executed between Graham-Rutledge and Nadia. Graham-Rutledge contends that, among other things, the amendment conferred to Graham-Rutledge a right of first refusal to purchase the property.¹

Graham-Rutledge later discovered that Nadia had entered into a contract with a third party, Ragan LLC, for the sale of the subject property. Graham-Rutledge contends appellee's failure to honor Graham-Rutledge's right of first refusal forced Graham-Rutledge to file suit against Nadia and Areksoussi, president of Nadia. In its lawsuit, Graham-Rutledge alleged breach of contract, breach of implied warranty of suitability, and statutory fraud in a real estate transaction. Graham-Rutledge also sought injunctive relief to prevent Nadia's sale of the property to Ragan. Along with their original answer, Nadia and Areksoussi filed a plea in abatement and motion to compel arbitration.

The parties submitted their case to the American Arbitration Association ("AAA") for arbitration. After a hearing, the arbitrator rendered her award in favor of Nadia and Areksoussi on April 23, 2007 and modified the award on May 30, 2007.² In the award dated April 23, 2007, the arbitrator denied Graham-Rutledge's claims for (1) breach of implied warranty of suitability, (2) breach of contract, (3) statutory fraud in a real estate transaction, (4) trespass, and (5) enforcement of the right of first refusal provision in the amendment to purchase the property. The arbitrator further denied Nadia's counterclaim. The right to possession of the property remained with Graham-Rutledge, but remained subject to the terms of the lease. Strict compliance with the lease was required by both parties. With regard to Graham-Rutledge's alleged right of first refusal, the arbitrator stated in her award:

Assuming the contract [right of first refusal] provision were [sic] enforceable, I find that ... [Graham-Rutledge's] written offer to purchase the subject land, fails to match or better the terms of the third-party offer [by Ragan]. ... Moreover, if I were to rule on the enforceability of the [right of first refusal] provision as a general matter, without regard to the specific conditional offer made by [Graham-Rutledge] ... I would find the [right of first refusal] provision unenforceably vague based on, among other credible evidence, the testimony of Mr. Graham at pages 189, line 6 through 190, line 15, and the language of the [right of first refusal] provision itself, which, according to the undisputed evidence, was drafted by [Graham-Rutledge].

After finding in favor of Nadia and Areksoussi, the arbitrator split the administrative fees and expenses of the AAA and arbitrator equally among the parties.

Nadia and Areksoussi subsequently filed, in the trial court, a notice of hearing on their motion to confirm arbitration award and motion to cancel lis pendens.³ The trial court granted Nadia and Areksoussi's motion to confirm arbitration award and motion to cancel lis pendens. Graham-Rutledge then filed its amended motion for reconsideration, amended motion for new trial, and amended motion to vacate arbitration award. The trial court denied the amended motion to vacate the arbitration award. This appeal ensued.

Standard of Review

Arbitration is a proceeding that has long been favored by Texas law. See Brazoria v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943); Home Owners Mgmt. Enters., Inc. v. Dean, 230 S.W.3d 766, 768 (Tex. App-Dallas 2007, no pet.). A review of a trial court's decision to confirm an arbitration award is de novo and the appellate court reviews the entire record. Home Owners, 230 S.W.3d at 768 (citing Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 250 (Tex.App.-Houston [14th Dist.] 2003, pet. denied)). However, "[a]ll reasonable presumptions are indulged in favor of the award, and none against it." CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002).

An arbitration award has the same effect as a judgment of a court of last resort, and a court reviewing the award may not substitute its judgment for that of the arbitrators merely because it would have reached a different decision. Bailey & Williams v. Westfall, 727 S.W.2d 86, 90 (Tex.App.-Dallas 1987, writ ref'd n.r.e). Judicial review of arbitration awards "adds expense and delay, thereby diminishing the benefits of arbitration as an efficient, economical system for resolving disputes." CVN Group, 95 S.W.3d at 238. Thus, arbitration awards are entitled to great deference by the courts "lest disappointed litigants seek to overturn every unfavorable arbitration award in court." Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex.App.-Dallas 2004, pet. denied) (quoting Daniewicz v. Thermo Instrument Sys., Inc., 992 S.W.2d 713, 716 (Tex.App.-Austin 1999, pet. denied)).

Discussion

Issue One

This issue contains two parts. Graham-Rutledge first contends that the arbitration award should be vacated because the arbitrator committed misconduct by limiting Graham-Rutledge's evidence to rebuttal evidence. A trial court may set aside an arbitration award only in limited circumstances; absent specific common-law or statutory grounds for vacating, modifying, or correcting an award, the reviewing court must confirm it. See TEX. CIV. PRAC. & REM.CODE ANN. § 171.087 (Vernon 2005); L.H. Lacy Co. v. City of Lubbock, 559 S.W.2d 348, 351-52 (Tex.1977).

Section 171.088 of the civil practice and remedies code provides the statutory framework for vacating an arbitration award. This section authorizes vacating an arbitration award for "misconduct or wilful misbehavior of an arbitrator." TEX. CIV. PRAC. & REM.CODE ANN. § 171.088(a)(2)(C) (Vernon 2005). Texas common law also provides that a binding arbitration award may be set aside if it is tainted with "fraud, misconduct, or such gross mistake as would imply bad faith, or a failure to exercise honest judgment." Nat'l Auto. & Cas. Ins. Co. v. Holland, 483 S.W.2d 28, 31 (Tex.Civ.App.-Dallas 1972, no writ); Brown v. Eubank, 443 S.W.2d 386, 391 (Tex.Civ.App.-Dallas 1969, no writ).

The record before us does not reveal such misconduct or wilful misbehavior in the arbitrator's decision to limit Graham-Rutledge's evidence to rebuttal evidence. During the hearing, Graham-Rutledge, as the plaintiff, failed to designate its only witness on its witness list for the arbitration hearing. The arbitrator stated, however, that Graham-Rutledge could call its witnesses during rebuttal. The arbitrator further indicated that the rebuttal witnesses would not necessarily be limited to the scope of the other side's case in chief. Graham-Rutledge agreed that Nadia and Areksoussi would present its case-in-chief first and then Graham-Rutledge would present its rebuttal witness.⁴ Therefore, we conclude Graham-Rutledge waived any error by agreeing to the procedure utilized in the hearing. See Kendall Builders, Inc. v. Chesson, 149 S.W.3d 796, 804-05 (Tex.App.-Austin 2004, pet. denied) (a party can waive an otherwise valid objection by proceeding with the arbitration despite knowledge of facts giving rise to such an objection).

In the second part of its first issue, Graham-Rutledge argues the arbitrator committed misconduct by hearing and denying its motion to compel discovery at a time when its attorney was not available. By written ruling, the arbitrator denied Graham-Rutledge's motion to compel due to its "non-attendance at the hearing." In the hearing before the arbitrator, Graham-Rutledge acknowledges it was aware of the subject hearing date. However, Graham-Rutledge does not refer us to any place in the record where it objected to this event or moved for a continuance of the hearing and after a review of the record before us, we have found none. As a general rule, a party is required to present a complaint to the trial judge before being allowed to raise the issue on appeal. See, e.g., In re L.M.I., 119 S.W.3d 707, 711 (Tex.2003) (to preserve issue for appellate review, including constitutional error, party must present to trial court timely request, motion, or objection, state specific grounds therefor, and obtain ruling); Pierce v. Tex. Racing Comm'n, 212 S.W.3d 745, 760 (Tex.App.-Austin 2006, pet. denied) (appellant waived complaint because he did not, orally or in writing, bring to administrative law judge's attention his complaint that burden of proof had been improperly placed on him); Kiefer v. Cont'l Airlines, Inc., 10 S.W.3d 34,...