Hoskins v. Hoskins

• Citation: 498 S.W.3d 78
• Decision Date: 15 October 2014
• Docket Number: No. 04–13–00859–CV.,04–13–00859–CV.
• Parties: Leonard K. HOSKINS, Appellant v. Colonel Clifton HOSKINS and Hoskins, Inc., Appellees.
• Court: Court of Appeals of Texas

498 S.W.3d 78

Leonard K. HOSKINS, Appellant

v.Colonel Clifton HOSKINS and Hoskins, Inc., Appellees.

No. 04–13–00859–CV.

Court of Appeals of Texas, San Antonio.

Oct. 15, 2014.

Ellen B. Mitchell, C. David Kinder, Cox Smith Matthews Incorporated, San Antonio, TX, for Appellant.

Robert W. Johnson Jr., Corpus Christi, TX, for Appellees.

Sitting: CATHERINE STONE, Chief Justice, KAREN ANGELINI, Justice, REBECA C. MARTINEZ, Justice.

MEMORANDUM OPINION

Opinion by: CATHERINE STONE

, Chief Justice.

Pursuant to an order of a bankruptcy court, Leonard K. Hoskins, Colonel Clifton Hoskins, and Hoskins, Inc. (the “Company”) were all parties to an arbitration proceeding. After a final arbitration award was entered with regard to Leonard's claims against Clifton and the Company, Leonard filed a motion to vacate the arbitration award, while Clifton and the Company filed a motion to confirm the arbitration award. Leonard now appeals the trial court's judgment confirming the arbitration award in accordance with its order granting the motion to confirm and denying the motion to vacate. We affirm the trial court's judgment.

BACKGROUND

When Lee Roy Hoskins, Sr. died in 1985, his wife, Hazel Hoskins, became the executrix of his estate and the trustee of a marital trust created under Lee Roy's will. Upon Lee Roy's death, Hazel became the owner of one-half of the stock of the Company, and the other half was owned by the marital trust. Hazel is the sole beneficiary of the marital trust during her life, and the trustee is authorized to distribute all income and such principal as necessary to “maintain and support [Hazel] in health and in reasonable comfort;” however, because Hazel is both the trustee of the trust and a beneficiary, she does not have the power to distribute income or principal to herself. Upon Hazel's death, the trust will terminate, and its corpus will be distributed to Lee Roy's descendants.

Leonard and Clifton are two of Lee Roy and Hazel's children.¹ In 2002, Hazel, Leonard, and Clifton were parties to a settlement agreement which was approved by a bankruptcy court. In addition to approving the settlement, the bankruptcy court also entered a permanent injunction prohibiting any of the parties from bringing or continuing any litigation against any of the other parties without first applying for authority to do so from the bankruptcy court.

In 2008, Leonard filed a lawsuit against Clifton and Hazel, alleging various causes of action relating to the Company's conveyance of the Tilden Ranch to Clifton. Leonard subsequently non-suited the lawsuit due to the permanent injunction. After various motions were filed with the bankruptcy court regarding the new dispute, the bankruptcy court ultimately ordered Clifton, Hazel, and Leonard to arbitration in August of 2011. The Company voluntarily joined the arbitration. Prior to proceeding with the arbitration, the parties signed an agreement to arbitrate under the Texas Arbitration Act.

In September of 2011, Leonard filed his complaint in arbitration challenging a 2002 promissory note from the Company to Clifton and the sale of the Tilden Ranch by the Company to Clifton. The complaint also asserted that Hazel allowed property of the estate and marital trust to be improperly transferred to Clifton, and that Clifton:

... has been serving as a defacto trustee and has effectively controlled the Estate and Trusts created under the Will of Lee Roy Hoskins, Sr. Accordingly, Cliff's actions also constitute a breach of fiduciary duty to ... the beneficiaries of the Estate of Lee Roy Hoskins, Sr.

In his prayer for relief, Leonard requested a declaration that the note and the conveyance of the Tilden Ranch were void and “an order setting aside any conveyance of Hoskins, Inc. or Estate property to and for the benefit of [Clifton] or anyone on his behalf, which was made for less than fair market consideration.” Clifton and the Company filed a joint reply to the complaint, and Leonard filed a response to the reply.

In November of 2011, Clifton and the Company filed a motion for summary judgment, asserting Leonard's claims regarding the conveyance of the Tilden Ranch were barred by limitations and Leonard lacked standing to challenge the conveyance by the Company because he was not a shareholder of the Company. Leonard filed a response, asserting the discovery rule and tolling as defenses to the limitations argument. With regard to standing, Leonard argued that Hazel's dealings with the stock of the Company were burdened by her fiduciary duty to Leonard as a beneficiary of the marital trust. After a hearing on January 19, 2012, the arbitrator granted the summary judgment in part. The order, which was signed by the arbitrator on February 14, 2012, expressly stated that the order did not dispose of Clifton and the Company's claims for attorney's fees. The summary judgment order dismissed any and all claims by Leonard against Clifton and the Company; however, the order retained the arbitrator's jurisdiction over numerous claims against Hazel.

In June of 2012, Leonard filed a supplemental complaint. Without conducting any additional hearings, the arbitrator signed a final arbitration award on February 20, 2013, which again dismissed all claims by Leonard against Clifton and the Company and awarded them attorneys' fees. On March 13, 2013, the arbitrator signed an order severing the claims against Clifton and the Company from the pending claims against Hazel.²

As previously noted, Clifton and the Company filed a motion to confirm the arbitration award, and Leonard filed a motion to vacate the arbitration award.³ The trial court held a hearing on the motion and allowed the parties to file post-hearing briefs. After considering the motions and the briefs, the trial court granted the motion to confirm the arbitration award and denied the motion to vacate.

STANDARD OF REVIEW

“We review the trial court's confirmation of [an] arbitration award de novo.” City of Laredo v. Mojica, 399 S.W.3d 190, 194–95 (Tex.App.-San Antonio 2012, pet. denied)

. “Arbitration awards are entitled to great deference by the courts, so we must include all reasonable presumptions in favor of the award, and indulge none against it.” Id. at 195.

“Because Texas law favors arbitration, judicial review of an arbitration award is extraordinarily narrow.” East Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex.2010)

. “A mere mistake of law or fact is insufficient to set aside an arbitration award.” Grand Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, 705 (Tex.App.-Fort Worth 2006, pet. denied) ; see also

City of Laredo, 399 S.W.3d at 195 (“Review is so limited that an arbitration award may not be vacated even if there is a mistake of fact or law.”).

PERMISSIBLE GROUNDS FOR VACATING AWARD

In seven of the issues Leonard raises on appeal, he contends the arbitration award should be vacated because the arbitrator acted in “manifest disregard for the law.” Clifton and the Company counter that “manifest disregard for the law” is not a proper ground for vacating an arbitration award under the Texas Arbitration Act.⁴

As recognized by this court, the United States Supreme Court's holding in Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 128 S.Ct. 1396, 170 L.Ed.2d 254 (2008)

, precludes the continued use of “manifest disregard for the law” as a ground for vacating an award in cases in which the Federal Arbitration Act applies. See

Chandler v. Ford Motor Credit Co., LLC, No. 04–08–00100–CV, 2009 WL 538401, at *3 (Tex.App.-San Antonio Mar. 4, 2009, no pet.). The question presented in this appeal is whether “manifest disregard for the law” provides a non-statutory common law ground for vacating an award in cases where the TAA, as opposed to the FAA, applies.

Although Texas appellate courts have historically applied “manifest disregard of the law” as a common law ground for vacating arbitration awards, the Texas Supreme Court has never directly addressed the issue of whether common law grounds are preempted by the TAA. See Quinn v. Nafta Traders, Inc., 257 S.W.3d 795, 799 n. 3 (Tex.App.-Dallas 2008)

, rev'd on other grounds, 339 S.W.3d 84 (Tex.2011). For example, in addressing gross mistake, a Texas common-law ground for vacating an arbitration award, the Texas Supreme Court “assum[ed] without deciding that [the appellant could] rely on the gross mistake standard under the common law to attack the arbitrator's award.” Callahan & Assocs. v. Orangefield Ind. Sch. Dist., 92 S.W.3d 841, 844 (Tex.2002) ; see also

Beech Street Corp. v. Baylor Health Care Sys., No. 05–12–01671–CV, 2014 WL 3743864, at *2 (Tex.App.-Dallas July 29, 2014, no pet. h.) (noting manifest disregard is a federal common-law doctrine while gross mistake is a Texas common-law doctrine).

In his reply brief, Leonard argues that manifest disregard remains a viable ground for vacating an award, citing Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex.2011)

, which rejected the holding in Hall Street that the parties to an arbitration cannot enter into “an agreement that limits the authority of an arbitrator in deciding a matter and thus allows for judicial review of an arbitration award for reversible error.” The Texas Supreme Court held that the “TAA presents no impediment” to such an agreement. Id. In reaching this holding, however, the Texas Supreme Court did not rely on any common-law ground as a basis for vacating an award. Instead, the court relied on the statutory ground that the arbitrator would exceed his powers under such an agreement if the award contained reversible error. Id. at 89–97 ; see also Tex. Civ. Prac. & Rem. Code § 171.077(a)(3) (providing trial court shall vacate an award if the arbitrators exceeded their powers). Moreover, the Texas Supreme Court expressly stated: “In construing the TAA, we are obliged to be faithful to its text.” Nafta Traders, Inc., 339 S.W.3d at 97. Section 171.087 of the TAA provides: “Unless grounds are offered for vacating,...