Hamm v. Millennium Income Fund, L.L.C.

• Decision Date: 28 July 2005
• Docket Number: No. 01-03-01209-CV.,01-03-01209-CV.
• Citation: 178 S.W.3d 256
• Parties: W. Dow HAMM III and Dow Hamm III Corporation, Appellants, v. MILLENNIUM INCOME FUND, L.L.C., Appellee.
• Court: Texas Supreme Court

178 S.W.3d 256

W. Dow HAMM III and Dow Hamm III Corporation, Appellants, v. MILLENNIUM INCOME FUND, L.L.C., Appellee.

No. 01-03-01209-CV.

Court of Appeals of Texas, Houston (1st Dist.).

July 28, 2005.

COPYRIGHT MATERIAL OMITTED

Jeff Nobles, Beirne, Maynard & Parsons, L.L.P., Houston, for Appellants.

William P. Maines, Paul J. Franzetti, McDade, Fogler, Maines, L.L.P., Houston, for Appellee.

Panel consists of Justices TAFT, ALCALA, and HIGLEY.

OPINION

TIM TAFT, Justice.

Appellants, W. Dow Hamm III and Dow Hamm III Corporation (together, "the Hamm parties"), appeal the trial court's final judgment in favor of appellee, Millennium Income Fund, L.L.C. ("Millennium"), entered upon confirmation of an arbitration award. The Hamm parties simultaneously challenge the confirmation of the arbitration award and the denial of their post-judgment motion to vacate or to modify the arbitration award. We determine whether the Hamm parties' motion to vacate the arbitration award was untimely, so that the trial court erred neither in overruling the motion nor in confirming the arbitration award. We affirm.

Background¹

In the late 1990s, Millennium and the Hamm parties formed seven limited partnerships for the purpose of developing seven hotels. Dow Hamm III Corporation was the general partner, and W. Dow Hamm III and Millennium were limited partners. The partnership agreements contained identical arbitration provisions.

The parties' relationship eventually deteriorated, Millennium alleged (and the Hamm parties denied) because the Hamm parties had made unauthorized payments to Dow Hamm III Corporation. In March 2003, Millennium sued the Hamm parties, seeking a temporary restraining order and temporary and permanent injunctive relief to prevent the Hamm parties from "making further unauthorized payments to themselves and others" while the parties pursued the arbitration required by their partnership agreements.

Arbitration proceeded, with the arbitration hearing taking place from July 14, 2003 until July 17, 2003. The arbitrator rendered his award, and the award was transmitted to the parties, on August 25, 2003. Among other things, the arbitrator ordered an accounting of the partnerships, expelled Dow Hamm III Corporation as the general partner, permanently enjoined the Hamm parties from taking certain actions, ordered the Hamm parties to pay actual damages of $700,000 and exemplary damages of $150,000, ordered the limited partners to agree on a new general partner within 90 days or face dissolution of the partnerships, and ordered that each party bear its own attorney's fees and arbitration expenses.

On August 29, 2003, Millennium moved to confirm the arbitration award. The confirmation hearing was set for September 5, 2003. On September 2, 2003, the Hamm parties moved for a continuance of the confirmation hearing,² stating, in pertinent part, as follows:

[The Hamm parties] respectfully request a continuance on Millennium's application for confirmation of the arbitration award because they intend to prepare and present motions to vacate and/or modify the arbitration award pursuant to Texas Civil Practice and Remedies Code, Sections 171.088 and 171.091. These statutes allow applicants to contest arbitration awards within ninety (90) days of the date the applicant receives a copy of the award.

Although Respondents do not anticipate needing ninety (90) days to properly contest the arbitration award, they do request a reasonable amount of time to do so. Arbitration in this matter was lengthy, lasting four (4) days. Numerous witnesses testified. Four (4) volumes of transcribed testimony were generated and over one thousand (1,000) pages of exhibits were introduced. Respondents contend there are substantial factual and legal errors in the award and would respectfully request thirty (30) days to properly prepare their motions to contest the arbitration award prior to it[s] being confirmed by this Court under Section 171.087.

The trial court denied the Hamm parties' motion for continuance without specifying grounds on September 5, 2003, the date on which the court also heard Millennium's confirmation motion. We have no reporter's record from the September 5 confirmation hearing, and nothing in our record indicates what the parties and court might have discussed concerning the continuance motion at that hearing. The clerk's record contains no written objection to confirmation of the award, or any motion to vacate or to modify the award, filed by the Hamm parties at that time; of course, as their continuance motion indicated, neither did the Hamm parties file any of the arbitration record at that time. At the September 5 hearing, the trial court entered a final judgment confirming the arbitration award and rendered judgment against the Hamm parties.

On October 3, 2003, the Hamm parties filed a "motion to vacate or modify judgment and arbitration award." They also filed the record and exhibits from the arbitration proceeding on the same date. Millennium responded to the Hamm parties' motion to vacate or to modify the judgment and award, asserting, in part, that that motion was untimely for having been filed after final judgment confirming the award. In their post-judgment motion attacking the judgment and arbitration award, the Hamm parties did not complain about the trial court's denial of their motion for continuance of the confirmation hearing, but instead challenged the merits of the arbitration award on contractual and statutory grounds. See 9 U.S.C.S. §§ 10-11 (West 1997 & Supp.2005) (allowing for vacating, modifying, or correcting arbitration award under certain circumstances); TEX. CIV. PRAC. & REM.CODE ANN. §§ 171.088, 171.091 (Vernon 2005) (same).³ The Hamm parties' motion did not refer to the arbitration record and exhibits, and neither the Hamm parties nor the trial court specifically referred to the arbitration record and exhibits at the brief hearing on the Hamm parties' post-judgment motion. At the end of the hearing, the trial court denied the motion to vacate or to modify the judgment and award without stating its reasons.

Post-Judgment Motion to Vacate or to Modify

In three issues, the Hamm parties attack the merits of the arbitration award on various statutory and contractual grounds.

A. Statutes Governing Confirmation of Arbitration Awards

Concerning confirmation of arbitration awards, the FAA and the TAA provide in pertinent part as follows:

§ 9. Award of arbitrators; confirmation; jurisdiction; procedure

[A]t any time within one year after the award is made any party to the arbitration may apply to the court ... for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title....

9 U.S.C.S. § 9 (West 1997) (emphasis added).

§ 171.087. Confirmation of Award

Unless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm the award.

TEX. CIV. PRAC. & REM.CODE ANN. § 171.087 (Vernon 2005) (emphasis added).

B. Statutes Governing Vacating, Modifying, or Correcting Arbitration Awards

Concerning vacating, modifying, or correcting arbitration awards, the FAA and the TAA provide in pertinent part as follows:

§ 10. Same; vacation; grounds; rehearing

(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration—

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly exercised them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C.S. § 10 (West 1997) (emphasis added).

§ 11. Same; modification or correction; grounds; order

In either of the following cases the United States court in and for the district wherein the award was made may make an order modifying or correcting the award upon the application of any party to the arbitration—

(a) Where there was an evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award.

(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a matter not affecting the merits of the decision upon the matter submitted.

(c) Where the award is imperfect in matter of form not affecting the merits of the controversy.

The order may modify and correct the award, so as to effect the intent thereof and promote justice between the parties.

Id. § 11 (West 1997) (emphasis added).

§ 12. Notice of motions to vacate or modify; service; stay of proceedings Notice of a motion to vacate, modify, or correct an award must be served upon the adverse party or his attorney within three months after the award is filed or delivered....

Id. § 12 (West 1997) (emphasis added).

§ 13. Papers filed with order on motions; judgment; docketing; force and effect; enforcement

...

The judgment so entered shall have the same force and effect, in all respects, as, and be subject to all the provisions of law relating to, a judgment in an action; and it may be enforced as if it had been rendered in an action in the court in which it is entered.

Id. § 13 (West 1997) (emphasis added).

§ 171.088. Vacating Award

(a) On application of a party, the court shall vacate an award if:

(1) the award was obtained by corruption, fraud, or...