Kendall Builders, Inc. v. Chesson

• Decision Date: 12 August 2004
• Docket Number: No. 03-03-00537-CV.,03-03-00537-CV.
• Parties: KENDALL BUILDERS, INC., Appellant, v. Jane CHESSON and Phillip J. Cullen, Appellees.
• Court: Texas Court of Appeals

149 S.W.3d 796

KENDALL BUILDERS, INC., Appellant, v. Jane CHESSON and Phillip J. Cullen, Appellees.

No. 03-03-00537-CV.

Court of Appeals of Texas, Austin.

August 12, 2004.

Stephen Fenoglio and Anatole R. Barnstone, Austin, for appellant.

Richard D. Yeomans, Graves, Dougherty, Hearon & Moody, PC, Austin, for appellees.

Before Justices KIDD, B.A. SMITH and PEMBERTON.

OPINION

BOB PEMBERTON, Justice.

We grant the motion for rehearing in this case, withdraw our opinion and judgment issued on June 24, 2004, and substitute this one in its place.

This appeal arises from a dispute between a married couple, appellees Jane Chesson and Phillip J. Cullen, and a building contractor, appellant Kendall Builders, Inc. (Kendall), whom appellees hired to remodel a home they had purchased in Austin. Before the remodeling was completed, appellees became dissatisfied with Kendall's work and fired the contractor. Appellees and Kendall asserted damage claims against each other, which were arbitrated and then litigated before the district court. Our issues on appeal concern whether the district court erred in (1) setting aside an arbitration award in favor of Kendall on the basis of evident partiality; (2) finding that appellees' Austin property was homestead property exempt from liens Kendall had placed on it; and (3) awarding attorney's fees. We affirm the judgment in part and reverse in part.

BACKGROUND

The dispute

Before moving to Austin, appellees lived in California with their five children. The family sought to relocate to Austin after the company with which Cullen was employed was acquired by Vignette Corporation and he was transferred to Austin. Appellees bought a house in Austin that needed substantial remodeling to accommodate their family. Soon thereafter, appellees contracted with an interior decorator. The interior decorator recommended Kendall to perform the renovation. On November 10, 2000, Chesson entered into a contract with Kendall whereby the contractor would handle the remodeling.

This contract had several features that bear upon our analysis of the issues. First, it contained an arbitration clause, which the parties do not appear to dispute is governed by the Texas Arbitration Act¹ rather than its federal counterpart.² Second, it is undisputed that the manner in which the contract was executed did not satisfy the requirement for fixing liens on Texas homestead property because, among other things, only Chesson, and not Cullen, signed the agreement.³

The family had claimed its California home as a homestead for seven years. During the remodeling, Cullen moved to Austin, initially lived in an apartment away from the Austin property, and then later moved into the garage apartment on the Austin property. Meanwhile, Chesson and the couple's five children remained in California. However, even before entering into the contract with Kendall, in addition to hiring the decorator, appellees registered to vote (and voted) in Austin, obtained Texas driver's licenses, had their car shipped to Austin and registered in Texas, opened a joint checking account in Austin for which they listed the Austin property as their home address, and made donations to Austin charities.

Several months into the remodeling, appellees became dissatisfied with Kendall's work and terminated the contract. After the termination, Kendall claimed that its work had been substantially completed and that appellees owed it $42,897.66 for labor and materials it furnished. Appellees disputed this claim and asserted that it would take $90,000 to fix damage that Kendall had caused. Kendall placed liens on appellees' Austin property to secure the amounts it claimed for labor and materials. See Tex. Prop.Code Ann. § 53.254 (West Supp.2004).

The arbitration

Pursuant to the contract, the parties went to arbitration to resolve their dispute. The parties agreed not to submit to the arbitrator any complaint relating to Kendall's liens. Under the governing American Arbitration Association (AAA) rules, the parties selected a neutral arbitrator from an AAA-approved list. The arbitrator held a hearing spanning three days. Approximately one month later, the arbitrator awarded Kendall most of the sums it sought and nothing to appellees.

Initially, as the parties prepared to go to arbitration, only Chesson and Kendall were parties. This was consistent with the underlying contract, which had been signed by only Chesson and not Cullen. Correspondence and information regarding the arbitration were sent only to Chesson. This included a letter directly from the AAA notifying Chesson of the need to choose an arbitrator and directing her to its website, which outlined AAA rules and procedures for choosing the arbitrator. Cullen was added as a party only later, but prior to the arbitration hearing.

During a break in the arbitration, the arbitrator mentioned to Cullen that he had purchased stock at seven or eight dollars a share from Vignette, Cullen's employer, and asked whether the stock was "ever going to go up." At that time, Vignette's stock was trading for around two dollars a share.⁴ Neither Chesson nor the couple's lawyer was present. Cullen later recounted the exchange to his wife "a couple of days later." Twenty-eight days after the exchange occurred, the arbitrator issued the award.

Only after the unfavorable award was issued did appellees mention to their lawyer Cullen's exchange with the arbitrator. Appellees' lawyer deposed the arbitrator and discovered that the arbitrator had lost over $5,000 due to a decrease in Vignette's stock price, approximately a 1% decrease in the arbitrator's net worth.

Trial court proceedings

After their investigation concerning the arbitrator's interest in Vignette, appellees filed an application to vacate the arbitration award alleging "evident partiality" of the arbitrator. Kendall counterclaimed seeking to confirm the award and foreclose on its liens on appellees' property. Appellees responded with a motion to remove the liens, claiming that their Austin property was their homestead as of the date that the liens were recorded. Because it is undisputed that Kendall did not follow the procedures that would have enabled it to place liens on homestead property, the issue of homestead status alone controlled the validity of the liens. Appellees also sought attorney's fees.

All claims were tried to the court. Two evidentiary issues arose during the bench trial. First, in attempting to demonstrate evident partiality, appellees sought to introduce evidence through Cullen that "[i]nvestors in general were very upset with Vignette" because of the company's stock performance. Kendall objected on hearsay grounds. The trial court permitted the testimony for the limited purpose of establishing "the effect upon Mr. Cullen." Second, after a dispute regarding whether appellees could prove up attorney's fees through their counsel, appellees did not present evidence on attorney's fees but instead urged the trial court to take judicial notice of a reasonable sum.

The district court vacated the arbitration award and awarded appellees attorney's fees without specifying an amount. It also ruled that the Austin property was appellees' homestead as of the time they entered the construction contract with Kendall and removed the liens. Kendall requested findings of fact and conclusions of law, which the trial court entered. Among these, the court found that the arbitrator's failure to disclose his stock losses in Vignette constituted "evident partiality" requiring the court to vacate the award and that appellees did not waive their right to object to the evident partiality of the arbitrator. The district court also found that $23,000 was a reasonable amount for the attorney's fee award. Kendall requested additional findings of fact and conclusions of law, and the trial court entered additional findings of fact but declined to enter additional conclusions of law.⁵ Kendall now appeals.

DISCUSSION

Standard of review

We attach to findings of fact the same weight, force, and dignity that we attach to a jury's verdict upon jury questions. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994); Lawyers Sur. Corp. v. Larson, 869 S.W.2d 649, 653 (Tex.App.-Austin 1994, writ denied). Findings of fact are reviewable for legal and factual sufficiency of the evidence by the same standards used to review jury findings. Westech Eng'g, Inc. v. Clearwater Constructors, Inc., 835 S.W.2d 190, 195 (Tex.App.-Austin 1992, no writ).

In deciding a legal sufficiency challenge, "we must view the evidence in a light that tends to support the disputed finding and disregard evidence and inferences to the contrary." Wal-Mart Stores, Inc. v. Canchola, 121 S.W.3d 735, 739 (Tex.2003) (citing Bradford v. Vento, 48 S.W.3d 749, 754 (Tex.2001)). A legal sufficiency or "no evidence" point will be sustained when (a) there is a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital fact. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1996); Robert W. Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 Tex. L.Rev. 361, 362-63 (1960). More than a scintilla of evidence exists when the evidence supporting the finding, as a whole, "rises to a level that would enable reasonable and fair-minded people to differ in their conclusions." Havner, 953 S.W.2d 706, 711 (quoting Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex.1995); Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex.1994)). If the evidence is so weak as to do no more than create a mere surmise or suspicion of its existence, its legal effect is that it is no evidence. Haynes & Boone v. Bowser Bouldin, Ltd., 896...