House Grain Co. v. Obst, 13-82-210-CV

• Decision Date: 13 October 1983
• Docket Number: No. 13-82-210-CV,13-82-210-CV
• Citation: 659 S.W.2d 903
• Parties: HOUSE GRAIN COMPANY, Appellant, v. Paul OBST, Karl Obst and Edwin Obst, Appellees.
• Court: Texas Court of Appeals

Page 903

659 S.W.2d 903

HOUSE GRAIN COMPANY, Appellant, v. Paul OBST, Karl Obst and Edwin Obst, Appellees.

No. 13-82-210-CV.

Court of Appeals of Texas Corpus Christi.

Oct. 13, 1983.

Rehearing Denied Nov. 10, 1983.

Richard Smith, Henrichson & Smith, P.C., Edinburg, Wm. M. Schur, Fort Worth, for appellant.

Walter J. Passmore, Ewers & Toothaker, McAllen, for appellees.

Before YOUNG, KENNEDY and GONZALEZ, JJ.

OPINION

KENNEDY, Justice.

This is an arbitration case. Appellant and appellees entered into two contracts for the purchase by appellant from appellees of a quantity of corn. The dispute arose between the parties over the amount of corn contracted for. It was agreed by all parties that the question would be resolved by arbitration before the Texas Grain and Feed Association Arbitration Committee. The Arbitration Committee ruled in appellant's favor and ordered appellees to pay appellant a monetary award. Appellees brought suit ostensibly under the provisions of Tex.Rev.Civ.Stat.Ann. arts. 234, 235 (Vernon Supp.1982) to have the arbitration award set aside. After a trial before the court, the award was vacated. We reverse and render.

Sometime prior to February 5, 1980, Dennis Edwards, an employee of appellant, contacted appellee, Karl Obst, concerning the purchase of a quantity of corn. Karl Obst, acting on his own behalf and on behalf of his partner and brother, Paul Obst, and on behalf of his brother Edwin Obst who was also in the grain business, agreed to sell a quantity of corn to appellant. Subsequently, contracts were forwarded to the parties evidencing the agreements. The contracts were identical forms which specified under the column entitled quantity the term "5 C/L". Pursuant to these contracts, the Obst Brothers shipped one million pounds of corn to appellant. After receiving its last shipment of corn, appellant claimed the order and contract required the appellees to ship two million pounds of corn and demanded the remainder of the shipments. When no agreement could be reached concerning the amount of corn required to be shipped under the contract, the matter was voluntarily submitted to arbitration.

On January 27, 1981, the arbitration hearing was held before the primary arbitration committee of the Texas Grain and Feed Association in Ft. Worth. James House represented appellant. Appellees were represented by Karl Obst and their attorney, Walter Passmore. Both parties offered testimony supporting their positions. The arbitration committee rendered an award for appellants and ordered Edwin Obst to pay $29,599.13 and Paul and Karl Obst $20,134.81 to appellants.

Appellees brought suit in the district court of Hidalgo County to set aside the arbitration award, alleging that the arbitration board had made a "gross mistake" and that the panel was biased and partial to appellant. At the conclusion of the trial, the trial court vacated the arbitration award and made findings of fact and conclusions of law that there was an appearance of an impropriety in the arbitration panel and that the panel made a gross mistake in interpreting C/L to mean jumbo hoppers.

Before discussing the appellant's points of error, we must first establish the legal framework within which a Court becomes involved in voluntary arbitration proceedings. Arbitration is a proceeding favored in Texas Law. Brazoria v. Knutson, 142 Tex. 172, 176 S.W.2d 740 (1944). The award in question is based on a common law arbitration hearing, as opposed to a statutory arbitration hearing, as provided for by Tex.Rev.Civ.Stat.Ann. arts. 224-249 (Vernon Supp.1982). We, therefore, feel, at least as to the grounds for setting aside an award, that Tex.Rev.Civ.Stat.Ann. art. 237 (Vernon 1973), is not applicable. The common law of this state concerning the setting aside of an arbitration award was stated in Carpenter v. North River Insurance Company, 436 S.W.2d 549 (Tex.Civ.App.--Houston [14th Dist.] 1968, writ ref'd n.r.e.). That test is whether or not the award is "tainted with fraud, misconduct, or such gross mistake as would imply bad faith and failure to exercise honest judgment." Carpenter 436 S.W.2d at 551. Statutory arbitration is merely cumulative of the common law. L.H. Lacey Company v. City of Lubbock, 559 S.W.2d 348 (Tex.1977). Since arbitration awards are favored by the courts as a means of disposing of pending disputes, every reasonable presumption will be indulged to uphold the proceeding. City of San Antonio v. McKenzie Construction Company, 136 Tex. 315, 150 S.W.2d 989 (1941); International Brotherhood of Electrical Workers, Local Union Number 59 A.F.L. v. Whitley, 278 S.W.2d 560 (Tex.Civ.App.--Waco 1955, writ ref'd n.r.e.). A mere mistake of fact or law alone is insufficient to set aside an arbitration award. Grand International Brotherhood of Locomotive Engineers v. Wilson, 341 S.W.2d 206 (Tex.Civ.App.--Ft. Worth 1961, writ ref'd n.r.e.); Ferguson v. Ferguson, 93 S.W.2d 513 (Tex.Civ.App.--Eastland 1936, writ dism'd).

Although appellee stated in his pleadings that this suit was brought under art. 237, a review of the document indicates he actually pled for common law relief. We will, therefore consider this a common law arbitration case.

In his first point of error, appellant challenges the sufficiency of the evidence to support the trial court's findings and conclusions that the arbitration panel committed a "gross mistake" in interpreting the term C/L to mean jumbo hopper cars. In considering a "no evidence" or "insufficient evidence" point of error, we will follow the well established test set forth in Glover v. Texas General Indemnity Company, 619 S.W.2d 400 (Tex.1981); Garza v. Alviar, 395 S.W.2d 821 (Tex.1965); Allied Finance Company v. Garza, 626 S.W.2d 120 (Tex.Civ.App.--Corpus Christi 1981, writ ref'd n.r.e.); CALVERT, No Evidence and Insufficient Evidence Points of Error, 38 Tex.L.Rev. 359 (1961).

The first question raised by appellant's first point of error is what constitutes a "gross mistake" so as to justify the setting aside of a common law arbitration award. A "gross mistake" is a mistake which implies bad faith or failure to exercise honest judgment. City of San Antonio v. McKenzie Construction Company, 136 Tex. 315, 150 S.W.2d 989 (Tex.1941); National Automobile and Casualty Insurance Company v. Holland, 483 S.W.2d 28 (Tex.Civ.App.--Dallas 1972, no writ); Brown v. Eubank, 443 S.W.2d 386 (Tex.Civ.App.--Dallas 1969, no writ); Albert v. Albert, 391 S.W.2d 186 (Tex.Civ.App.--San Antonio 1965, writ ref'd n.r.e.); Bullard v. Austin Real Estate Board, Inc., 376 S.W.2d 870 (Tex.Civ.App.--Austin 1964, writ ref'd n.r.e.); Smith v. Barnett, 373 S.W.2d 762 (Tex.Civ.App.--Dallas 1963, no writ); Johnson v. American Can Company, 361 S.W.2d 451 (Tex.Civ.App.--Houston 1962, no writ).

It should be noted here that no transcription of the arbitration proceedings was offered into evidence. Therefore, we must presume adequate evidence to support the award. City of San Antonio v. McKenzie Construction Company, 150 S.W.2d at 996. The arbitration committee's decision recites that the contracts were subject to the rules of the L.A. Grain Exchange. The L.A. Grain Exchange Rules provide that grain was to be loaded in jumbo hopper cars. Apparently, it is understood within the grain trade that a jumbo hopper car is the equivalent of 200,000 pounds. Therefore, the arbitration panel found the contracts between the parties to have called for the shipment of 10 jumbo hopper cars or two million pounds of corn. The appellees offered extensive testimony to the effect that the application of the L.A. Grain Exchange Rules by the arbitration committee was incorrect. All three of the Obst brothers testified that, in their opinion, the term C/L meant a car load, or 100,000 pounds, and that this was the definition given the term by the Texas Grain and Feed Association Rules. They additionally testified that they had always used the Texas rules in their past dealings with appellant. B.G. Muller, a grain broker who had previously brokered grain sales between the parties, also testified that the term C/L meant car load, or 100,000 pounds. He further testified that, in his opinion, the contract between the parties was subject to the Texas rules. Tom Dawson, a local grain elevator operator, also testified that the term C/L meant car load.

The contract between the parties provides that "[t]his contract is made subject to...