International Bank of Commerce-Brownsville v. International Energy Development Corp.

• Decision Date: 18 June 1998
• Docket Number: COMMERCE--BROWNSVILL,A,No. 13-96-298-CV,13-96-298-CV
• Citation: 981 S.W.2d 38
• Parties: INTERNATIONAL BANK OFppellant, v. INTERNATIONAL ENERGY DEVELOPMENT CORP., Appellee. Corpus Christi
• Court: Texas Court of Appeals

Page 38

981 S.W.2d 38

INTERNATIONAL BANK OF COMMERCE--BROWNSVILLE, Appellant, v. INTERNATIONAL ENERGY DEVELOPMENT CORP., Appellee.

No. 13-96-298-CV.

Court of Appeals of Texas,

Corpus Christi.

June 18, 1998.

Rehearing Overruled Dec. 30, 1998.

Gilberto Hinojosa, J.A. Magallanes, Magallanes, Sokat & Hinojosa, Brownsville, Andy A. Tschoepe II, Attorney At Law, David R. Stephens, Akin, Gump, Strauss, Hauer & Feld, San Antonio, for Appellant.

D. Patrick Long, Judith Bagley, Patton Boggs, Attorneys At Law, Rustin Polk, Attorney At Law, Dallas, Tom Fleming, Fleming, Hewitt & Olvera, Brownsville, for Appellee.

Before SEERDEN, C.J., and HINOJOSA and CHAVEZ, JJ.

OPINION

HINOJOSA, Justice.

Appellant, International Bank of Commerce--Brownsville ("IBC"), appeals from the confirmation of an arbitration award in favor of appellee, International Energy Development Corp. ("IEDC"). By five points of error, IBC complains the arbitrators were not duly selected and appointed, the arbitrators exceeded their authority and manifestly disregarded the law, and one arbitrator failed to make vital disclosures of potentially disqualifying information, was not impartial, and engaged in misconduct during the arbitration proceedings. By four additional points, IBC contends the trial court had no authority to modify the arbitration award, violated IBC's due process rights by denying its motion to vacate and/or modify the award, improperly confirmed the untimely rendered arbitration award, and wrongfully excluded some of IBC's arbitration exhibits from the hearing. By one cross-point, IEDC contends the trial court erred by ordering an equitable remittitur of the arbitrators' award without finding there was insufficient evidence to support the award. We affirm the arbitrators' award as originally rendered.

1. BACKGROUND & PROCEDURAL HISTORY

Many of the underlying facts in this case, particularly relating to the loan and credit facility, are in dispute. The following is, therefore, only a summation of uncontested facts.

IEDC ¹ is a Delaware corporation with its principal place of business in Texas. Its business is conditioning and selling liquified petroleum gas ("LPG"), a mixture of propane and butane purchased from assorted suppliers. Propane is moved through pipelines to IEDC's terminal facility in Brownsville, Texas. Butane is brought to the terminal by truck. The propane and butane are mixed into LPG and transferred to tanker trucks through an automated loading system for transport to the purchaser.

IEDC was a start-up company in 1994 when it negotiated with Pemex, the Mexican government-owned oil company, for sales and purchases of LPG. Pemex placed its first order for LPG on June 27, 1994, to be delivered in July 1994. Pemex refused to commit to a contract, other than on a month-to-month purchase order basis, with no minimum purchase amount, and flexible prices. IEDC did not have other customers lined up at any time prior to August 1994.

In January 1994, IEDC opened negotiations with IBC for a $9,000,000 credit facility, consisting of a $2,000,000 standby letter of credit to cover LPG suppliers, $4,000,000 to cover accounts receivable, and $3,000,000 to cover the terminal's construction. The loan was closed in June 1994. IEDC pledged all of its assets to IBC as security. IBC issued irrevocable letters of credit and made advances until August 3, 1994, when it began dishonoring checks presented by IEDC's suppliers and refused to honor the letters of credit.

At that time, IEDC learned that International Bank of Commerce--Brownsville's legal lending limit was $1.35 million and that the Brownsville branch bank had been unsuccessful in engaging the participation of another IBC branch bank to make up the rest of the $9 million credit facility.

IEDC filed suit against IBC on August 23, 1994, alleging various lender liability causes of action including breach of an oral contract to loan IEDC $9 million. IEDC alleged actual damages of $104 million and statutory damages of $312 million. Pursuant to an arbitration clause, IBC moved to compel arbitration of the dispute. The trial court granted the motion on September 13, 1994.

The arbitration agreement provided that the arbitration take place under the auspices of the American Arbitration Association ("AAA") before a three-member arbitration panel appointed in accordance with AAA rules, with preference to be given to qualified retired judges. The agreement also provided that "[t]he Federal Arbitration Act shall govern the interpretation, enforcement, and proceedings pursuant to the arbitration clause in this agreement."

The AAA provided IBC and IEDC with a list of fifteen potential arbitrators and a brief background of each candidate. Each party struck five names, ranked the remainder numerically, then submitted its list to the AAA. The strike lists were not exchanged between the parties. In November 1994, the AAA informed IBC and IEDC that Wallace Ward, III, retired federal District Judge John V. Singleton, and Robert Bussian had been selected as the arbitrators.

The Notice of Appointment sent to each arbitrator calls upon the arbitrator to disclose past or present relationships:

with the parties or their counsel, direct or indirect, whether financial, professional, social or any other kind. If any relationship arises during the course of the arbitration ... it must also be disclosed. Any doubt should be resolved in favor of disclosure.

Judge Singleton made no disclosures at any stage of the arbitration proceedings.

The arbitration hearing commenced on July 19, 1995, and concluded on August 2, 1995. On September 21, 1995, the arbitrators announced their decision. The arbitrators found that IBC had breached the contract and awarded IEDC damages in the amount of $3,246,754 and attorneys' fees in the amount of $568,000. On IBC's counterclaim, the arbitrators found that IEDC had breached the contract and awarded IBC damages in the amount of $804,016.28 and attorneys' fees in the amount of $200,000. The arbitrators found that IBC was entitled to an offset for its damages.

IEDC returned to the trial court and moved to confirm the award. IBC filed a motion to vacate the award or, alternatively, to substantially modify it. After a hearing lasting several days, the trial court denied IBC's motions and rendered judgment confirming the award. IBC subsequently filed a motion for new trial which the court also denied, but its denial was conditioned on IEDC's acceptance of a remittitur.

2. STANDARD AND SCOPE OF REVIEW

An arbitration award has the same effect as the judgment of a court of last resort, and a trial court reviewing the award may not substitute its judgment for the arbitrators' merely because it would have reached a different conclusion. J.J. Gregory Gourmet Serv., Inc. v. Antone's Import Co., 927 S.W.2d 31, 33 (Tex.App.--Houston [1st Dist.] 1995, no writ). The parties' arbitration agreement specifically invokes the Federal Arbitration Act ("FAA"), 9 U.S.C. § 1, et seq. (1970). Judicial review of a commercial arbitration award is extraordinarily narrow, and is limited to the provisions of sections 10 and 11 of the FAA. Forsythe Int'l, S.A. v. Gibbs Oil Co. of Tex., 915 F.2d 1017, 1020 (5th Cir.1990); Babcock & Wilcox Co. v. PMAC, Ltd., 863 S.W.2d 225, 229 (Tex.App.--Houston [14th Dist.] 1993, writ denied). The issue upon review of an arbitrator's award is whether the arbitration proceedings were fundamentally unfair. Forsythe, 915 F.2d at 1020; Babcock, 863 S.W.2d at 229. Fundamental fairness essentially requires that each party have an adequate opportunity to present its evidence and arguments. See Boston Celtics Ltd. Partnership v. Shaw, 908 F.2d 1041, 1047 (1st Cir.1990) (citing Hoteles Condado Beach v. Union De Tronquistas Local 901, 763 F.2d 34, 39 (1st Cir.1985)). Although our review is de novo, we must give strong deference to the arbitrator and are not free to correct the arbitration award. See McIlroy v. PaineWebber, Inc., 989 F.2d 817, 819-22 (5th Cir.1993) (citing Forsythe, 915 F.2d at 1020-21)); Babcock, 863 S.W.2d at 229.

3. FINDINGS OF FACT AND CONCLUSIONS OF LAW

In all but one of its points of error, IBC challenges specific findings of fact and conclusions of law made by the trial court. Findings of fact entered in a case tried to the bench are of the same force and dignity as a jury's finding. Guerra v. Garza, 865 S.W.2d 573, 575 (Tex.App.--Corpus Christi 1993, writ dism'd w.o.j.); City of Clute v. City of Lake Jackson, 559 S.W.2d 391, 395 (Tex.Civ.App.--Houston [14th Dist.] 1977, writ ref'd n.r.e.). The trial court's findings are reviewable for legal and factual sufficiency of the evidence to support them. Southern States Transp., Inc. v. Texas, 774 S.W.2d 639, 640 (Tex.1989); Blanco v. Gracia, 767 S.W.2d 896, 897 (Tex.App.--Corpus Christi 1989, no writ); see also House Grain Co. v. Obst, 659 S.W.2d 903, 906, 907 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.) (challenges to trial court's findings of fact made in vacation of arbitration committee's award construed as no evidence/insufficient evidence points).

When we review a "no evidence" or legal sufficiency of the evidence point, we consider only the evidence and reasonable inferences that tend to support the finding, and disregard all evidence and inferences to the contrary. Responsive Terminal Sys., Inc. v. Boy Scouts of Am., 774 S.W.2d 666, 668 (Tex.1989). We overrule the point and uphold the finding if we find any evidence to support the finding. Southern States Transp., 774 S.W.2d at 640. However, "[w]hen the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence." Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983).

When we review an "insufficient evidence" or factual sufficiency of the evidence point, we consider, weigh, and examine all of the...