COURT=20
OF APPEALS
SECOND DISTRICT OF=20
TEXAS
FORT =
WORTH
NO.=20
2-04-052-CV
PERRY HOMES, A=20
=
JOINT &n=
bsp; &nb=
sp; &nbs=
p; =
; APPELLANTS
VENTURE; HOME OWNERS
MULTIPLE EQUITY, INC.
D/B/A HOME/RWC OF
TEXAS; AND WARRANTY
UNDERWRITERS INSURANCE=20
COMPANY
V.
ROBERT E. CULL AND S. JANE=20
=
CULL &nb=
sp; &nbs=
p; =
; APPELLEES
------------
FROM THE=20
236TH DISTRICT COURT OF TARRANT =
COUNTY
------------
OPINION
------------
App=
ellees=20
Robert and Jane Cull (=E2=80=9Cthe Culls=E2=80=9D) sued Appellants =
Perry Homes, A Joint=20
Venture (=E2=80=9CPerry Homes=E2=80=9D), Home Owners Multiple =
Equity, Inc. d/b/a Home/RWC=20
of Texas (=E2=80=9CHOME=E2=80=9D), and Warranty Underwriters =
Insurance Company (=E2=80=9CWUIC=E2=80=9D)=20
for the faulty construction of their home. Approximately a year =
after=20
filing suit, the Culls filed a motion to compel arbitration. =
Although=20
Appellants opposed arbitration, the trial court granted the =
Culls=E2=80=99 motion=20
to compel arbitration. After arbitration was completed, the Culls =
filed a=20
motion to confirm the arbitration award, and Appellants filed a =
motion to=20
vacate or alternatively to modify the arbitration award. In its =
final=20
judgment, the trial court confirmed the arbitration award. In six =
issues,=20
Appellants now generally argue that the trial court erred by =
compelling=20
the parties to participate in arbitration, confirming the =
resulting=20
arbitration award, and denying Appellants=E2=80=99 motion to =
vacate or modify that=20
award. Because we hold that (1) the Culls did not waive =
arbitration, (2)=20
the arbitrator was not evidently partial, (3) the arbitrator did =
not act=20
in manifest disregard of the law, and (4) the Culls did not fail =
to meet=20
their summary judgment burden, but (5) the trial court did err by =
failing=20
to modify its award of post-judgment interest that was awarded in =
addition=20
to the interest in the arbitration award, we affirm the trial =
court=E2=80=99s=20
judgment as modified.
Background=20
Facts
In =
1996, the Culls purchased a newly constructed home from Perry =
Homes for=20
$233,730 and also purchased a home warranty from HOME and WUIC. =
After=20
years of struggling with Appellants over repairs required to fix=20
significant structural damage caused by foundation and drainage =
problems,=20
which lowered the appraised value of the home to $41,000, in 2000, =
the=20
Culls filed suit against Appellants. HOME and WUIC filed a motion =
to=20
compel arbitration. The Culls opposed the use of the American =
Arbitration=20
Association (=E2=80=9CAAA=E2=80=9D) as unconscionable, but they =
did not oppose=20
arbitration. The trial court never ruled on this motion. After =
about a=20
year of discovery, the Culls filed a combined motion to compel =
arbitration=20
and plea in abatement four days before trial. The trial court =
granted=20
arbitration.
App=
ellants=20
filed a petition for writ of mandamus, arguing that the Culls =
waived the=20
right to arbitration. In April of 2002, this court denied =
Appellants=E2=80=99=20
petition, and in May of 2002, the Texas Supreme Court denied =
Appellants=E2=80=99=20
petition.
Thi=
s=20
case then proceeded to arbitration. The parties jointly selected =
the=20
arbitrator and did not object even after receiving his disclosure =
that he=20
had litigated residential construction suits for fifteen years, =
was=20
familiar with two of the experts, and had opposed Perry =
Homes=E2=80=99s trial=20
counsel=E2=80=99s firm on multiple occasions but had not had any =
dealings with=20
Perry Homes=E2=80=99s specific counsel. The Culls submitted their =
statement of=20
claims in arbitration. They claimed negligence, gross negligence, =
breach=20
of contract and warranty, violations of the DTPA, common law fraud =
and=20
fraud under the business code, violations of the insurance code, =
and=20
breach of the duty of good faith. In addition to damages, the =
Culls=20
requested attorney=E2=80=99s fees and litigation/arbitration =
expenses including=20
court costs, arbitration costs, and expert =
fees.
Aft=
er=20
the arbitrator heard the case, he awarded the Culls over $800,000 =
in=20
damages, costs, and attorney=E2=80=99s fees. The Culls filed a =
motion to confirm=20
the arbitration award in the trial court. In response, Appellants =
filed a=20
motion to vacate or alternatively to modify the arbitration award. =
Following a hearing, the trial court granted the Culls=E2=80=99 =
motion and=20
confirmed the arbitration award in its final=20
judgment.
Waiver of=20
the Right to Arbitrate
In =
their first issue, Appellants argue that the Culls waived their =
right to=20
arbitrate. We disagree.
Bec=
ause=20
public policy favors arbitration, the Federal Arbitration Act =
(=E2=80=9CFAA=E2=80=9D)=20
imposes a strong presumption against waiver. =
![3DFootnote](3D"")
Waiver of =
an=20
arbitration right must be intentional.
Thus, =
implying waiver=20
from a party=E2=80=99s actions is appropriate only if the facts =
demonstrate that=20
the party seeking to enforce arbitration intended to waive its =
arbitration=20
right.
The party =
seeking to=20
prove waiver bears a =E2=80=9Cheavy burden of proof,=E2=80=9D and =
any doubts regarding=20
waiver are resolved in favor of arbitration. =
Courts =
will not find=20
that a party has waived its right to enforce an arbitration clause =
by=20
merely taking part in litigation unless it has substantially =
invoked the=20
judicial process to its opponent=E2=80=99s =
detriment.
Therefore, the test=20
for determining waiver is two-pronged: (1) did the party seeking=20
arbitration substantially invoke the judicial process; and (2) did =
the=20
opposing party prove that it suffered prejudice as a=20
result?
In =
this case, the parties participated in written and oral discovery, =
presented motions to compel discovery, and received orders =
disposing of=20
those motions. Although Appellants allege that the Culls opposed=20
arbitration early on, the Culls merely opposed the use of the AAA; =
the=20
Culls did not oppose arbitration as a whole. Furthermore, HOME and =
WUIC=20
did not obtain a ruling on their early motion to compel =
arbitration.=20
Additionally, the Culls did not ask the court to make any judicial =
decisions on the merits of their case, for example, by requesting =
summary=20
judgment or participating in trial.
Thus, =
this case is=20
not a case in which a party who has tried and failed to obtain a=20
satisfactory result in court then turns to=20
arbitration.
Eve=
n=20
if we were to assume without deciding that the Culls had =
substantially=20
invoked the judicial process, the second prong of the test would =
defeat=20
Appellants=E2=80=99 claim of waiver. Our review of the record =
shows that=20
Appellants presented no evidence that they suffered prejudice in =
their=20
response to the Culls=E2=80=99 motion to compel arbitration or at =
the hearing on=20
the motion. As the trial court noted at the hearing, =
Appellants=E2=80=99 claim of=20
prejudice was that they have participated in litigation activities =
that=20
may or may not have been required by the=20
arbitrator.
Alt=
hough=20
generally referencing discovery requests and depositions taken, =
Appellants=20
did not provide any evidence of the work done, time spent, or =
costs=20
incurred that would not have been done or incurred in anticipation =
of an=20
arbitration hearing. It was not until after the arbitration had =
been=20
completed that Appellants, in their motion to vacate or, =
alternatively,=20
modify the arbitration award and their response to =
plaintiffs=E2=80=99 motion to=20
confirm arbitration, provided evidence of the work, time, and =
costs to=20
prove they suffered prejudice. In determining whether the Culls =
waived=20
arbitration, however, we review only the evidence that was before =
the=20
trial court when it ruled on the Culls=E2=80=99 motion to compel =
arbitration, not=20
evidence submitted untimely.
Because =
Appellants=20
failed to provide sufficient evidence of prejudice at the proper =
time, we=20
hold that the Culls did not waive arbitration. We overrule =
Appellants=E2=80=99=20
first issue.Grounds for Vacating =
Arbitration=20
Award
Arb=
itration=20
awards can be vacated on limited grounds. The FAA provides four =
grounds=20
for vacating an arbitration award:
(1) where =
the award=20
was procured by corruption, fraud, or undue=20
means;
(2) where =
there was=20
evident partiality or corruption in the arbitrators, or either of=20
them;
(3) where =
the=20
arbitrators were guilty of misconduct in refusing to postpone the =
hearing,=20
upon sufficient cause shown, or in refusing to hear evidence =
pertinent and=20
material to the controversy; or of any other misbehavior by which =
the=20
rights of any party have been prejudiced; =
or
(4) where =
the=20
arbitrators exceeded their powers, or so imperfectly executed them =
that a=20
mutual, final, and definite award upon the subject matter =
submitted was=20
not made.
In =
addition to the=20
four grounds the FAA provides, federal common law allows for =
vacating an=20
arbitration award when the arbitrator manifestly disregards the=20
law.
A.=20
Evident Partiality
In =
their third issue, Appellants argue that the trial court erred by =
refusing=20
to vacate the arbitration award because the arbitrator=E2=80=99s =
failure to=20
disclose that he represented homeowners in residential =
construction cases=20
constituted evident partiality. We =
disagree.
The=
=20
trial court must vacate an award if a neutral arbitrator exhibits =
=E2=80=9Cevident=20
partiality.=E2=80=9D
A neutral =
arbitrator=20
selected by the parties or their representatives exhibits evident=20
partiality if he does not disclose facts that might create a =
reasonable=20
impression of the arbitrator=E2=80=99s partiality to an objective=20
observer.
Courts =
have=20
recognized that parties agree to arbitrate because they prefer a =
panel=20
with expertise regarding the subject matter of dispute, and this =
expertise=20
often comes from experience in the field, which may have involved =
personal=20
dealings with the parties.
Information regarding=20
a relationship with a party=E2=80=94such as representation or =
familial or close=20
social ties=E2=80=94should be disclosed, but a neutral arbitrator =
need not=20
disclose relationships or connections that are=20
trivial.
In =
this case, the arbitrator disclosed that he knew a lot of the =
attorneys in=20
Perry Homes=E2=80=99s trial counsel=E2=80=99s firm, that he had =
represented clients in=20
which Perry Homes=E2=80=99s trial counsel=E2=80=99s firm =
represented the opposing party,=20
and that he did not know the attorney in this case. He disclosed =
that he=20
had litigated residential construction cases for about fifteen =
years, so=20
=E2=80=9Ca number of the witnesses [were] familiar to [him] or [he =
had] heard of=20
them.=E2=80=9D He further disclosed that one of the witnesses =
=E2=80=9Cdid a report on=20
[his] client=E2=80=99s property=E2=80=9D and that another witness =
=E2=80=9Cdid a foundation=20
analysis on [his] client=E2=80=99s home and was being paid by the=20
builder.=E2=80=9D
Des=
pite=20
the arbitrator=E2=80=99s statements that he had fifteen =
years=E2=80=99 experience in the=20
residential construction field, implying that he had represented=20
residential homeowners in these cases, and that Appellant Perry =
Homes=E2=80=99s=20
trial counsel=E2=80=99s firm had actually litigated against him in =
previous cases,=20
Appellants allege that because they discovered after arbitration =
that the=20
arbitrator had represented homeowners in five cases, the =
arbitrator was=20
evidently partial. We disagree and hold that the arbitrator =
properly=20
disclosed information that might indicate bias before the =
arbitration=20
began. Appellants did not object.
Add=
itionally,=20
although Appellants allege that the arbitrator represented =
homeowners in=20
five residential construction cases, they did not produce any =
withheld=20
evidence (1) of the total number of cases that the arbitrator =
handled=20
during his practice of at least fifteen years or the percentage of =
cases=20
that he handled on behalf of homeowners versus builders, (2) that =
he knew=20
any of the parties in this case, or (3) that he had an association =
with=20
anyone or a membership anywhere that would create a reasonable =
impression=20
of the arbitrator=E2=80=99s partiality to an objective=20
observer.
Thus, we =
hold that=20
the undisclosed information complained about was trivial. We =
overrule=20
Appellants=E2=80=99 third issue.
B.=20
Manifest Disregard of the =
Law
In =
their fifth issue, Appellants argue that the arbitrator acted in =
manifest=20
disregard of the law by awarding the Culls expert witness fees and =
disregarded the argument that the Culls had waived arbitration. We =
disagree.
An =
arbitrator=E2=80=99s interpretation of the law is not subject to =
review for error=20
unless the arbitrator manifestly disregarded the law in his=20
decision.
=E2=80=9CManifest disregard=20
of the law=E2=80=9D is a judicially-created ground for vacating =
arbitration=20
awards.
Manifest =
disregard of=20
the law is more than mere error or misunderstanding with respect =
to the=20
law.
Under =
this standard,=20
the arbitrator clearly recognizes the applicable law, but chooses =
to=20
ignore it.
=E2=80=9CTo adopt a less=20
strict standard of judicial review would be to undermine our=20
well-established deference to arbitration as a favored method of =
settling=20
disputes when agreed to by the =
parties.=E2=80=9D
Therefore, the=20
court=E2=80=99s =E2=80=9Creview for manifest disregard of the law =
does not open the door=20
to extensive judicial review.=E2=80=9D
Accordingly, judicial=20
review under this standard is =E2=80=9Cextremely =
limited.=E2=80=9D
The party =
seeking to=20
vacate an arbitration award bears the burden of demonstrating the=20
arbitration panel acted in manifest disregard of the=20
law.
In =
this case, Appellants rely only on the general rule that although =
the=20
prevailing party will recover all court costs, costs of experts =
are=20
incidental expenses in preparation for trial and not=20
recoverable.
This =
rule, however,=20
does not apply where a statute or contract provides for recovery =
of=20
witness fees.
While the =
contracts=20
between the Culls and Appellants do not discuss expert witness =
fees, Texas=20
law permits recovery of expert witness fees for statutory fraud in =
real=20
estate claims.
Furthermore, the AAA=20
rules authorize the arbitrator to =E2=80=9Cgrant any remedy or =
relief that the=20
arbitrator deems just and equitable.=E2=80=9D =
Thus, the =
arbitrator=20
did not act with manifest disregard of the law when he awarded =
expert=20
fees.
Add=
itionally,=20
because we have already held that the Culls did not waive their =
right to=20
arbitrate the claims in this case, the arbitrator did not act with =
manifest disregard of the law by ruling that the Culls did not =
waive=20
arbitration. Consequently, we overrule Appellants=E2=80=99 fifth =
issue.Burden of=20
Proof
In =
their fourth issue, Appellants alternatively argue that the Culls =
failed=20
to meet their summary judgment burden to negate =
Appellants=E2=80=99 defense of=20
evident partiality. We disagree.
A=20
defendant is entitled to summary judgment on an affirmative =
defense if the=20
defendant conclusively proves all the elements of the affirmative=20
defense.
To =
accomplish this,=20
the defendant-movant must present summary judgment evidence that=20
establishes each element of the affirmative defense as a matter of =
law.
In this =
case, it was=20
Appellants=E2=80=99 burden to prove their defense, and, although =
the Culls could=20
have filed a reply to Appellants=E2=80=99 response to their motion =
to confirm the=20
arbitration award, the Culls were not required to put on =
evidence=20
to negate Appellants=E2=80=99 defense. As set forth above, =
Appellants did not=20
conclusively prove that the arbitrator was evidentially partial. =
We=20
overrule Appellants=E2=80=99 fourth =
issue.
Modification of the Trial =
Court=E2=80=99s=20
Judgment
In =
their sixth issue, Appellants argue that the trial court erred by =
refusing=20
to modify its judgment to correct errors in the arbitration award =
that=20
resulted in contradictory deadlines for complying with the =
injunctive=20
relief, an award of interest above what the arbitrator awarded, an =
award=20
of post-confirmation attorney=E2=80=99s fees, and an award of =
costs taxed on=20
parties that the Culls had previously =
nonsuited.
Fir=
st,=20
Appellants argue that the award of post-arbitration =
attorney=E2=80=99s fees=20
exceeded the arbitrator=E2=80=99s authority. We disagree. Although =
a trial court=20
may not add post-arbitration attorney=E2=80=99s fees to the =
arbitration award that=20
includes such fees in its final judgment, the arbitrator may award =
such=20
fees in the arbitration award.
Additionally,=20
attorney=E2=80=99s fees are allowed in cases such as this one =
involving DTPA and=20
fraud in real estate claims.
Thus, the =
trial court=20
did not err by confirming the arbitrator=E2=80=99s award of =
post-arbitration=20
attorney=E2=80=99s fees in its final =
judgment.
Sec=
ond,=20
Appellants argue that the trial court=E2=80=99s judgment should be =
modified=20
because it awards costs on parties that the Culls previously =
nonsuited. We=20
disagree. Because Jerald W. Kunkel, P.E., and Jerald W. Kunkel, =
P.E.,=20
Inc., d/b/a Jerald W. Kunkel Consulting Engineers, Inc. had been =
nonsuited=20
before the final judgment, the trial court=E2=80=99s reference to =
=E2=80=9Cdefendants=E2=80=9D in=20
its final judgment refers to the remaining defendants in this case =
regardless of the fact that the nonsuited defendants remained in =
the style=20
of the case. Appellants were the only remaining defendants at the =
time of=20
the trial court=E2=80=99s judgment, and thus, the trial =
court=E2=80=99s judgment makes=20
them and only them responsible for the =
fees.
Thi=
rd,=20
Appellants allege that the judgment is inconsistent in two =
respects. The=20
judgment provides that the closing shall take place within sixty =
days=20
after the date of the judgment, but it also provides that the =
actions are=20
to be taken and sums paid on or before thirty days from the date =
of the=20
judgment. Although Appellants have not clearly specified the =
modification=20
in the dates of the judgment requested, the Culls agree to a =
modification=20
of the judgment to state that the closing shall take place within =
sixty=20
days after the date of the final judgment and that all other sums =
not=20
related to paragraph (a) shall be due thirty days after the date =
of the=20
final judgment. Because this modification appears to represent =
Appellants=E2=80=99=20
requested modification and will resolve any alleged inconsistency =
in the=20
judgment, we modify the judgment to reflect those=20
changes.
Fin=
ally,=20
Appellants argue that the trial court erred by awarding interest =
in=20
addition to what the arbitrator awarded. Because the trial =
court=E2=80=99s=20
judgment regarding this additional interest is ambiguous, we agree =
with=20
Appellants. The trial court=E2=80=99s judgment states that =
=E2=80=9Cthe judgment here=20
rendered shall bear post-judgment interest at the rate of 10% per =
annum=20
from the date of signing until paid.=E2=80=9D This interest could =
be interpreted=20
to add 10% interest on the interest awarded by the arbitrator, =
which was=20
=E2=80=9Cten percent (10%) per annum from thirty (30) days after =
the date of this=20
Award until paid.=E2=80=9D We find no statutory or case law in =
support of this=20
modification.
Thus, the =
trial court=20
should not have included this additional interest in its judgment. =
We=20
therefore further modify the trial court=E2=80=99s judgment to =
delete =E2=80=9Cthat the=20
Judgment here rendered shall bear post-judgment interest at the =
rate of=20
10% per annum from the date of signing until paid=E2=80=9D and =
overrule the=20
remaining arguments Appellants raised in their sixth=20
issue.
Findings=20
of Fact
Alt=
ernatively,=20
Appellants argue in their second issue that the trial court erred =
by=20
failing to enter findings of fact and request that this case be =
abated to=20
the trial court for entry of findings of fact. According to Rules =
296 and=20
297 of the Texas Rules of Civil Procedure, a trial judge must =
prepare=20
findings of fact in cases tried in the district court or county =
court=20
without a jury, that is, where there has been an evidentiary =
hearing to=20
the court or a bench trial on the merits.
When a =
trial court=20
grants summary judgment relief, however, findings of fact have no =
place in=20
the proceeding because the summary judgment proceeding has not =
been=20
=E2=80=9Ctried=E2=80=9D within the scope of Rule =
296.
Although =
Appellants=20
argue in this issue that the motion to vacate hearing was an =
evidentiary=20
hearing requiring findings of fact, they contradictorily argue in =
their=20
fourth issue that their motion to vacate the arbitration award was =
their=20
response to the Culls=E2=80=99 motion to confirm the arbitration =
award, which was=20
a summary judgment proceeding. Our review of the record shows that =
this=20
hearing was not a bench trial on the merits of the case. The =
hearing was=20
held in the form of a summary judgment hearing; only arguments =
were given,=20
no live testimony was given, and the only evidence presented was =
not=20
offered or admitted at the hearing but was attached to the =
parties=E2=80=99=20
motions. Thus, because findings of fact have no place in summary =
judgment=20
proceedings,
we =
overrule=20
Appellants=E2=80=99 second issue.
Conclusion
Hav=
ing=20
held that the trial court erred by awarding post-judgment interest =
in=20
addition to the interest awarded by the arbitrator, we modify the =
trial=20
court=E2=80=99s judgment by removing the following, =
=E2=80=9C[T]hat the Judgment here=20
rendered shall bear post-judgment interest at the rate of 10% per =
annum=20
from the date of signing until =
paid.=E2=80=9D
Hav=
ing=20
held that the trial court=E2=80=99s judgment is ambiguous =
regarding the time=20
periods by which Appellants must comply with the judgment, we =
modify the=20
paragraph following paragraph g. of the trial court=E2=80=99s =
judgment to state,=20
=E2=80=9CThe action are to be taken and sums are to be paid as set =
forth in=20
paragraphs b., c., d., e., f., and g., herein, on or before thirty =
(30)=20
days from the date of this Final =
Judgment.=E2=80=9D
We =
affirm the trial court=E2=80=99s judgment as =
modified.
&nbs=
p; =
; =
&=
nbsp; &n=
bsp; LEE=20
ANN DAUPHINOT
&nbs=
p; =
; =
&=
nbsp; &n=
bsp; JUSTICE
PANEL=20
B: DAUPHINOT, HOLMAN, and WALKER,=20
JJ.
DELIVERED: August 31,=20
=
2005 |