Hoskins v. Hoskins

• Decision Date: 20 May 2016
• Docket Number: No. 15–0046,15–0046
• Citation: 497 S.W.3d 490
• Parties: Leonard K. Hoskins, Petitioner, v. Colonel Clifton Hoskins and Hoskins, Inc., Respondents
• Court: Texas Supreme Court

497 S.W.3d 490

Leonard K. Hoskins, Petitioner,

v.Colonel Clifton Hoskins and Hoskins, Inc., Respondents

No. 15–0046

Supreme Court of Texas.

Argued January 13, 2016

OPINION DELIVERED: May 20, 2016

Rehearing Denied September 23, 2016

Audrey Mullert Vicknair, Law Office of Audrey Mullert Vicknair, Robert W. Johnson, Jr., Law Office of Robert W. Johnson, Jr., Corpus Christi TX, for Petitioner.

Ellen B. Mitchell, Melanie Lynn Booker Fry, Phylis J. Speedlin, Dykema Cox Smith, San Antonio TX, for Respondents.

JUSTICE LEHRMANN

delivered the opinion of the Court.

The principal issue in this case is whether a party seeking to vacate an arbitration award under the Texas General Arbitration Act (TAA) may invoke extra-statutory, common-law vacatur grounds. The courts of appeals are divided on the issue, which we have not directly addressed. Here, a party to arbitration sought to vacate the award because the arbitrator manifestly disregarded the law, even though manifest disregard is not a ground for vacatur under the TAA. The court of appeals held that the TAA's enumerated vacatur grounds are exclusive and did not consider the merits of the manifest-disregard arguments. The court also rejected the argument that the party seeking vacatur was deprived of his statutory hearing rights and affirmed the trial court's confirmation of the arbitration award. We agree with the court of appeals and affirm its judgment.

I. Background

This suit originated as a trust dispute involving Hazel Hoskins and two of her sons—Leonard and Clifton. Hazel and her husband, Lee Roy Hoskins Sr., owned multiple family corporations. One of those companies, Hoskins, Inc. (the Company), held title to a parcel of real property known as Tilden Ranch. Lee Roy died in 1985, and Hazel became the executrix of his estate. Lee Roy bequeathed his portion of the couple's community property to a marital trust of which Hazel was the trustee and beneficiary. Hazel thus owned fifty percent of the Company as trustee and fifty percent individually. As both the trustee and beneficiary of the marital trust, Hazel was prohibited under Lee Roy's will from distributing income or principal to herself from the trust, which included the fifty percent of the Company held in her capacity as trustee. In his will, Lee Roy named his descendants as the trust's residuary beneficiaries.

After Lee Roy's death, property disputes led to litigation among the Hoskins family members and corporations. One of the family corporations filed for bankruptcy, and in April 2002, Leonard, Clifton, and Hazel agreed to settle their claims. The agreement included a provision stating that the parties would attempt to settle any disputes over the agreement's performance and interpretation by mediation and, if unsuccessful, by binding arbitration. The bankruptcy court's order approving the settlement contained a permanent injunction prohibiting the parties from suing each other “on subjects pertaining to the subject matter of this litigation” without first obtaining authority to do so from the bankruptcy court.¹

In 2008, Leonard sued Clifton, Hazel, and the Company, challenging the Company's February 2004 conveyance of Tilden Ranch to Clifton. Leonard alleged that the conveyance was fraudulent, that it was orchestrated by Clifton as de facto trustee, and that Hazel had breached her fiduciary duties to the residuary beneficiaries by failing to properly maintain the trust. Leonard also filed a motion in the probate court to remove Hazel as trustee. In light of the bankruptcy court's injunction, Leonard nonsuited his claims and requested permission from the bankruptcy court to file suit. The bankruptcy court denied the request and ordered the parties to mediation and arbitration in accordance with the settlement agreement. Following an unsuccessful mediation attempt, the bankruptcy court appointed an arbitrator, and in September 2011, the parties signed an arbitration agreement in which they “agreed to a resolution through arbitration pursuant to the provisions of the Texas General Arbitration Act.”

Leonard subsequently filed his Complaint in Arbitration, alleging that the Company's conveyance of Tilden Ranch to Clifton “was a choreographed, fraudulent conveyance for substantially less than the fair market value,” that the conveyance “should be set aside and declared to be and void,” and that Hazel, aided and abetted by Clifton, breached her fiduciary duties to the Company's owners and the trust's beneficiaries. In addition to declarations that the sale was void due to inadequate consideration, Leonard sought an accounting of all activity by the Company and the trusts created by Lee Roy's will since the settlement, removal of Hazel as executrix of Lee Roy's estate and as trustee of any trusts created by Lee Roy's will, an order setting aside the conveyance, damages, and attorney's fees and costs.

Clifton and the Company moved for summary judgment, arguing that Leonard's claims, which arose out of the 2004 Tilden Ranch conveyance, were barred by limitations and that Leonard lacked standing to challenge the conveyance because he was not a shareholder in the Company and was not a party to the transaction. After a hearing, the arbitrator granted the motion, dismissing all claims against Clifton and the Company and all claims concerning the 2004 sale of Tilden Ranch. The arbitrator also dismissed all claims against Hazel except for those seeking Hazel's removal as executrix and trustee and an accounting of the trusts' activity, as well as the requests for damages and attorney's fees. The arbitrator signed a written order to that effect on February 14, 2012, which he sent to the parties along with a letter stating that his ruling was “based both on the statute of limitations and the lack of standing arguments.”

In June 2012, before the arbitrator issued a final award, Leonard filed a supplement to his arbitration complaint, reiterating his claims against Hazel and challenging the validity of two more property conveyances by the Company (one to Clifton, the other to a living trust). No new motions were filed with respect to the supplemental complaint, and the arbitrator held no additional hearings. In February 2013, the arbitrator signed a final arbitration award that dismissed all claims against Clifton and the Company with prejudice² and awarded them attorney's fees and costs. He also granted Clifton and the Company's motion to sever Leonard's claims against them from the claims that remained pending against Hazel.

Clifton and the Company filed a petition in the trial court to confirm the arbitration award pursuant to the TAA, and Leonard filed a motion to vacate the award. His stated grounds for vacatur in the trial court were: the arbitrator lacked authority to enter the award because the bankruptcy court's order compelling arbitration was void; the award was obtained by corruption, fraud, or other undue means; Leonard's rights were violated by the arbitrator's evident partiality; the arbitrator exceeded his power because it was derived from a void court order; the hearing was conducted contrary to statutory requirements; the parties had no agreement to arbitrate; and the arbitrator demonstrated a manifest disregard of the law by ignoring the bankruptcy court's injunction, deciding questions of fact in a summary judgment proceeding, dismissing claims against Clifton that were not pled or argued, and “disregarding established Texas law.” The trial court granted Clifton and the Company's petition, denied Leonard's motion to vacate,³ and confirmed the arbitration award. The trial court also entered findings of fact and conclusions of law, holding in part that “its authority to vacate the Arbitrator's award is limited to the circumstances stated in section 171.088 of the TAA.”

In the court of appeals, Leonard abandoned the majority of his statutory grounds for vacatur, focusing his arguments on the arbitrator's alleged manifest disregard of the law. He did, however, argue that the arbitrator's dismissal of his supplemental claims without holding a hearing provided a statutory ground for vacatur of the award. The court of appeals affirmed, holding that manifest disregard is not a valid ground to vacate an arbitration award under the TAA and that Leonard was not entitled to a second hearing on his supplemental complaint. 498 S.W.3d 78, 82–85, 2014 WL 5176384, at *4–5 (Tex.App.–San Antonio 2014)

. We granted Leonard's petition for review to resolve a split in the courts of appeals on whether the TAA permits vacatur of an arbitration award on common-law grounds not enumerated in the statute.⁴

II. Vacating Arbitration Awards under the TAA

The parties first ask us to determine whether the enumerated grounds for vacatur delineated in the TAA are exclusive,⁵ which, as the court of appeals recognized, presents a statutory-interpretation issue of first impression. 498 S.W.3d at 82, 2014 WL 5176384, at *3

(noting that this Court “has never directly addressed the issue of whether common law grounds are preempted by the TAA”). “Statutory construction is a legal question we review de novo.” City of Rockwall v. Hughes, 246 S.W.3d 621, 625 (Tex.2008). “In construing the TAA, we are obliged to be faithful to its text.” Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex.2011). When statutory text is clear and unambiguous, we construe that text according to its plain and common meaning unless a contrary intention is apparent from the statute's context. City of Hous. v. Bates, 406 S.W.3d 539, 543–44 (Tex.2013)

. Finally, we have recognized that “[b]ecause Texas law favors arbitration, judicial review of an arbitration award is extraordinarily narrow.” E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex.2010).

The TAA states that the court, on application of a party, “shall confirm” an arbitration award “[u]nless grounds are offered for vacating, modifying, or correcting [it] under Section 171.088 or 171.091.”⁶ Tex. Civ. Prac. &...