Gold Rush, Inc., South East Amusements, Inc., and Larry Simmons, Individually v. James Wayne

• Court: Court of Appeals of Texas
• Decided: July 27, 2006
• Docket: 13-05-00497-CV
• Status: Published

Opinion

                             NUMBER 13-05-497-CV

                         COURT OF APPEALS

               THIRTEENTH DISTRICT OF TEXAS

                  CORPUS CHRISTI - EDINBURG

GOLD RUSH, INC., SOUTH EAST AMUSEMENTS,

INC., AND LARRY SIMMONS, INDIVIDUALLY,             Appellants,

                                           v.

JAMES WAYNE,                                                       Appellee.

On appeal from the 24th District Court of Victoria County, Texas.

                     MEMORANDUM OPINION

Before Justices Hinojosa, Rodriguez, and Garza

Memorandum Opinion by Justice Rodriguez

This is an appeal from an arbitration award in a written lease dispute between appellee, lessor James Wayne, and appellants, lessees Gold Rush, Inc., Southeast Amusements, Inc., and Larry Simmons, individually.^[1]  Appellants filed suit, and the case was ordered to arbitration.  Following a three-day arbitration hearing, the arbitrator entered an award against appellants and in favor of appellee.^[2]  Appellants moved to vacate the arbitration award, and appellee filed an original petition to enforce it.  The trial court entered judgment affirming the arbitration award and denied appellants' motion for new trial.  By three issues, appellants challenge the arbitration award.  We affirm.

I.  Standard of Review and Applicable Law

Texas has long favored arbitration as a means of disposing of pending disputes.  Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896, 898 (Tex. 1995); Brazoria County v. Knutson, 142 Tex. 172, 176 S.W.2d 740, 743 (1943).  Generally, an arbitration award is given the same effect as a final judgment of a court of last resort.  See Nuno v. Pulido, 946 S.W.2d 448, 452 (Tex. App.BCorpus Christi 1997, no writ); House Grain Co. v. Obst, 659 S.W.2d 903, 905‑06 (Tex. App.BCorpus Christi 1983, writ ref'd n.r.e.).  "Arbitration awards are favored by the courts to dispose of pending disputes; therefore, every reasonable presumption will be indulged to uphold the arbitration proceeding."  Nuno, 946 S.W.2d at 452.  While the trial court must review an arbitrator's award with great deference, see Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.BDallas 2004, pet. denied), we review a trial court's vacation, modification or confirmation of an arbitration award de novo.  Henry v. Halliburton Energy Servs., Inc., 100 S.W.3d 505, 508 (Tex. App.BDallas 2003, pet. denied).

Our review of an arbitration award is "extraordinarily narrow."  Faulconer, Inc. v. HRI, Ltd. P'ship, 970 S.W.2d 36, 39 (Tex. App.BTyler 1998, no pet.).  Absent specific common law or statutory grounds for vacating, modifying, or correcting an award, the reviewing court must confirm it.  See Tex. Civ. Prac. & Rem. Code Ann. ' 171.087 (Vernon 2005); Callahan & Assocs. v. Orangefield Indep. Sch. Dist., 92 S.W.3d 841, 844 (Tex. 2002); J.J. Gregory Gourmet Servs. v. Antone's Import Co., 927 S.W.2d 31, 33 (Tex. App.BHouston [1st Dist.] 1995, no writ) (concluding that in the absence of a statutory or common law ground to vacate or modify an arbitration award, a reviewing court lacks jurisdiction to review other complaints, including the sufficiency of the evidence to support the award).

The Texas General Arbitration Act permits courts to set aside arbitration awards only in limited circumstances.  See Tex. Civ. Prac. & Rem. Code Ann. '' 171.001-.098 (Vernon 2005).  A court may vacate an arbitration award on statutory grounds if  (1) the award was procured by fraud, corruption, or other undue means, (2) a party was prejudiced by the evident partiality, or by the corruption, misconduct, or willful behavior of the arbitrator, (3) the arbitrator exceeded his power, (4) the arbitrator refused to postpone the hearing, refused to hear evidence material to the controversy, or otherwise conducted the hearing in a manner so as to substantially prejudice the rights of a party, or (5) if there was no valid arbitration agreement, the issue was not adversely determined in a proceeding to compel or stay arbitration, and the complaining party did not participate in the arbitration hearing without raising an objection.  Id. ' 171.088(a); Crossmark, 124 S.W.3d at 430.

An award is also required to be vacated under common law standards when it is tainted with "fraud, misconduct or such gross mistake as would imply bad faith or failure to exercise an honest judgment."  Nuno, 946 S.W.2d at 452; Anzilotti v. Gene D. Linnin, Inc., 899 S.W.2d 264, 266 (Tex. App.BHouston [14th Dist.] 1995, no writ).  However, as this Court has recognized, a mere mistake of fact or law is insufficient to set aside an arbitration award.  Nuno, 946 S.W.2d at 452; see Women's Reg'l Healthcare, P.A. v. Fempartners of N. Tex., Inc., 175 S.W.3d 365, 367-68 (Tex. App.BHouston [1st Dist.] 2005, no pet.) (setting out that review of an arbitration award is so limited that it cannot be vacated "even if there is a mistake of fact or law").

II.  Refusal to Postpone Arbitration Hearing

By their second issue, appellants seek to vacate the arbitration award because the arbitrator refused to postpone the arbitration hearing in Simmons's absence.  Appellants contend that they were greatly prejudiced by Simmons's absence, having a judgment entered against them for a substantial amount of money after a hearing that Simmons was not allowed to attend.  They assert that they were deprived of the basic due process right to be present to face their accuser, to confer with their attorney on strategy during the arbitration, and to testify in person so that credibility could be judged by the arbitrator.

Section 171.088(a)(3)(B) of the civil practices and remedies code provides that "the court shall vacate an award if . . . the arbitrators . . . refused to postpone the hearing after a showing of sufficient cause for the postponement . . . ."  Tex. Civ. Prac. & Rem. Code Ann. ' 171.088(a)(3)(B) (Vernon 2005).^[3]  "Although there are no cases interpreting 'sufficient cause for postponement' under section 171.088(a)(3)(B), the grounds a court would find sufficient to support a motion for continuance in a trial court are instructive in this context."  Hoggett v. Zimmerman, 63 S.W.3d 807, 811 (Tex. App.BHouston [14th Dist.] 2001, no pet.).

A trial court is not required to grant a motion for continuance simply because a party is unable to be present at trial.  Hawthorne v. Guenther, 917 S.W.2d 924, 929 (Tex. App.BBeaumont 1996, writ denied).^[4]  Moreover, Texas courts have repeatedly held that a trial court does not abuse its discretion by denying a motion for continuance on the basis of a party's health, unless there is a supporting affidavit from medical personnel stating it is impossible, from a medical standpoint, for the party to appear in court or that it would endanger the party's health to appear in court.  See Olivares v. State of Tex., 693 S.W.2d 486, 490 (Tex. App.BSan Antonio 1985, writ dism'd) (per curiam) (holding that in the absence of proof in the form of a medical personnel affidavit that it would endanger the party's health to appear in court, the trial court did not abuse its discretion by denying a continuance); Hawthorne, 917 S.W.2d at 929-30 (concluding there was no abuse its discretion when motion for continuance was denied because a party who allegedly could not appear at trial due to "emotion[al] distress and substance abuse" attached no affidavit of a doctor; letters from doctors are insufficient to warrant continuance); see also Tex. R. Civ. P. 251 ("No application for a continuance shall be heard before the defendant files his defense, nor shall any continuance be granted except for sufficient cause supported by affidavit, or by consent of the parties, or by operation of law.").

On Wednesday of the week prior to the arbitration date, counsel for appellants provided the arbitrator and appellee's counsel with the following letter addressed to the case manager of the American Arbitration Association.  The letter, dated July 8, 2004, reads as follows:

Please be advised that I have been informed as of this morning, July 7, 2004, that Mr. Larry Simmons'[s] doctor is refusing permission to allow Mr. Simmons to travel to the arbitration in Texas.  Apparently, Mr. Simmons has a long standing heart/diabetic condition, and his doctor is not allowing any accommodations for travel.

I would ask that we schedule a hearing immediately to discuss the ramifications of this latest tern [sic] of events.  I will be in Houston on July 8, 2004 all day long.  I am available Friday afternoon.  Please contact me at your earliest convenience.

Ps:     In the event that [the arbitrator] has any questions regarding Mr. Simmon's ability to travel, he may wish to contact Mr. Simmon's opthamologist [sic]. . . .

To support their motion for continuance, appellants offered only counsel's letter regarding Simmon's inability to be present at the hearing.  Appellants offered no affidavit establishing Simmons's inability to travel to the arbitration hearing.  Appellants assert the following:

While case law is instructive as to what constitutes good cause, it is not instructive as to the procedures that must be followed in an arbitration.  Parties to an arbitration are certainly not bound by the requirements of affidavits, sworn testimony, and such technicalities as in a court of law, and the Arbitration Act does not provide so.  Otherwise, the informality and efficiency that is the very purpose of arbitration, would be lost.

(Emphasis in original.)  Appellants provide no authority for this contention, and we find none.  Nonetheless, even were we to conclude that appellants were not required to provide a medical affidavit, appellants established only that Simmons was unable to be present at the arbitration hearing and that he apparently had a health condition.  As instructed by continuance law, this is not enough to establish sufficient cause.  While stating that Simmons apparently had a long standing health condition, see, e.g., Campbell v. Fort Worth Bank & Trust, 705 S.W.2d 400, 402 (Tex. App.BFort Worth 1986, no writ) (providing that statements made to the best of the witness's knowledge "constitute no evidence at all"), and offering the physician's contact information to the arbitrator, counsel provided no additional information regarding matters such as why the doctor refused to allow Simmons to travel to Texas, why the refusal came only a week before the hearing, or how the travel would endanger his health.

Additionally, "[w]hen a motion for continuance is based on the absence of a party, there must be a showing of diligence in attempting to obtain the required testimony."  Humphrey v. Ahlschlager, 778 S.W.2d 480, 483 (Tex. App.BDallas 1989, no writ).  The matter of Simmons's health was raised approximately one week before the hearing.  According to appellant's counsel, Simmons apparently had long-standing health problems that could have been considered earlier in the arbitration process.  We also note that the arbitrator's offer to have Simmons testify by telephone was refused by appellants' counsel.

Accordingly, we conclude appellants did not establish sufficient cause for the postponement of the arbitration hearing.  Appellants' second issue is overruled.

III.  Prejudiced by Evident Partiality

By their third issue, appellants contend that the arbitrator was partial toward appellee and prejudiced against appellants.  Section 171.088(a)(2)(A) provides that a court shall vacate an arbitration award if the rights of a party were prejudiced by evident partiality by an arbitrator appointed as a neutral arbitrator.  Tex. Civ. Prac. & Rem. Code Ann. ' 171.088(a)(2)(A) (Vernon 2005).

Appellants claim that the source of the prejudice against them was an April 21, 2004 letter sent to the arbitrator by an attorney who had previously represented appellants in the same matter.  The letter was written by appellants' former counsel and to appellants' present counsel.  It was copied to Simmons, appellee's counsel, and the arbitrator.

Reiterating matters with respect to a scheduled April 19, 2004 arbitration hearing, appellants' former counsel wrote to appellants' present counsel that on the morning of April 19, "you told me that Larry Simmons had led you to believe there was only to be a telephone conference, as opposed to the evidentiary hearing, and therefore you were surprised and unaware that an actual hearing was scheduled [for April 19th]."  Appellants' former counsel continued that on April 20th "I was told that you blamed me for misleading you, or failing to advise you of the scheduled hearing. . . ."  He also wrote the following:

The arbitrator, your opposing counsel, your client, and you, all know that is not true, and that I am in no way responsible for whatever confusion resulted in your being surprised and unaware. I heard [the arbitrator] tell Larry Simmons the hearing was scheduled for April 19, but he would postpone it if Larry wanted.  Larry told [the arbitrator] he was going to hire you and asked me to keep the file until I received instructions from him.

Finally, after expressing his concerns and frustrations and detailing what transpired during the transfer of this case, appellants' former counsel concluded the letter as follows:

This will be the last communication I will ever have with you on any subject, whether it be verbal, written, or telepathic.  I cannot speak for everyone else over here, but I can tell you that any further communication with the firm concerning business and client related matters must now be in writing.

The referenced April 19th hearing was re-scheduled, and it is undisputed that the letter was received by the arbitrator prior to the arbitration hearing which began on July 12, 2004.  Because the arbitrator received and reviewed the letter, appellants requested that the arbitrator recuse himself from the case.  He refused to do so.

Appellants contend that such refusal prejudiced appellants throughout the proceedings when the arbitrator: (1) overruled their motion for continuance; (2) admitted appellee's evidence over objections; (3) required appellants to present witnesses out of order and to present their defense before appellee concluded his case-in-chief; (4) excluded appellant's expert report; and, (5) entered a judgment contrary to all evidence.  They argue that the letter was inappropriate outside influence by a third party who had no genuine interest in the case.  Appellants contend that their former attorney's accusation obviously tainted the arbitrator's view of appellants and their credibility.^[5]  We disagree.

While the letter suggests that Simmons made untrue statements concerning a scheduled April 19th arbitration hearing, it is best characterized as a letter expressing one attorney's displeasure with another attorney.  It indicates that animosity existed between appellants' current counsel and their former counsel.  We cannot conclude further that the letter impugned on appellants' character, if at all, in such a manner as to prejudice his rights by evident partiality by the arbitrator.  We overrule appellants' third issue.

IV.  Arbitrator Misconduct

By their first issue, appellants assert that the arbitrator's award constitutes misconduct.  Section 171.088(a)(2)(C) provides that the trial court "shall vacate an award if the rights of a party were prejudiced by misconduct or wilful misbehavior of an arbitrator."  Tex. Civ. Prac. & Rem. Code Ann. ' 171.088(a)(2)(C) (Vernon 2005).  Under common law standards, an award must be vacated when it is tainted with misconduct.  Nuno, 946 S.W.2d at 452.  "Statutory arbitration is merely cumulative of the common law."  Anzilotti, 899 S.W.2d at 266.

Appellants contend that the arbitrator erroneously interpreted the lease by implicitly concluding that it authorized Wayne to accelerate the rent upon appellants' failure to timely pay the May 2003 rent.  They assert that they did not breach the lease but rather complied with the lease and were not in default after the attempted cure.  Appellants contend that this so affected their rights that it deprived them of a fair hearing.

"An award can be vacated based on misconduct only if the conduct so affects the rights of the party that it may be said to deprive him of a fair hearing.  Only in extreme cases will a court vacate an award because of misconduct." GJR Mgmt. Holdings, L.P. v. Raus, 126 S.W.3d 257, 262 (Tex. App.BSan Antonio 2003, pet. denied).  However, "[a] mere mistake of fact or law is insufficient to set aside an arbitration award; only those errors of fact or law that result in a fraud or some great and manifest wrong and injustice warrant setting aside an arbitration award."  Nuno, 946 S.W.2d at 452.

It is undisputed that appellants failed to timely pay the rent that was due on May 1st.  Appellants received appellee's notice of default on May 11th.  On or about May 12th, appellants attempted to cure the default by offering tender of the May rent, the late charge, and penalties.  Appellee refused the amount tendered.  Rather, he declared the lease in default and accelerated future rents in the amount of $36,500.00.

The lease provides, in relevant part, the following:

14.     TENANT DEFAULT AND REMOVAL OF ABANDONED PROPERTY.  If tenant abandons the premises or otherwise defaults in the performance of any obligations or covenants herein, Landlord may enforce the performance of this lease in any manner provided by law.  This lease may be terminated at Landlord's discretion if such abandonment or default continues for a period of 10 days after Landlord notifies Tenant of such abandonment or default and of Landlord's intention to declare this lease terminated.  Such notice shall be sent by Landlord to Tenant at Tenant's last known address by certified mail.  If Tenant has not completely removed or cured default within the 10-day period, this lease shall terminate. . . .  Upon abandonment or default by the Tenant, the remaining unpaid portion of the rental from paragraph 4^[6] herein, shall become due and payable. . . .

* * * * *

14.     TENANT DEFAULT AND REMOVAL OF ABANDONED PROPERTY.  Continuation.  Notwithstanding any of the other provisions of paragraph 14, to the contrary, failure to pay any installment of rent, and such failure shall continue for ten (10) days shall be a default; and, Landlord shall have the immediate right, without any notice, to immediately terminate the lease and/or exercise any, other rights or remedies which he may have by contract or operation of law.

(Emphasis added.)

The continuation paragraph 14 of the lease specifically defines default as a ten day delinquency in making a rent payment.  It expressly provides, notwithstanding other provisions of paragraph 14, that upon such default appellee shall have the right to terminate the lease without any notice.  Paragraph 14 also provides that appellee has the right to accelerate the remaining rent upon such default.  The lease gave appellee the right to accelerate the rent upon appellants' failure to timely pay its May 2003 rent.  The arbitrator did not find this operating agreement ambiguous, and we likewise agree that it is not.  Therefore, we conclude that because the arbitrator correctly interpreted the lease, there was no misconduct on his part that so affected the rights of appellant that it deprived him of a fair hearing.^[7]  See GJR Mgmt., 126 S.W.3d at 262; see also Seagull Energy E&P, Inc. v. Eland Energy, Inc., 2006 Tex. LEXIS 550, at *5‑*6 (Tex. 2006) (setting out that a contract is not ambiguous merely because the parties disagree on its meaning and that an ambiguity exists only if the contract language is susceptible to two or more reasonable interpretations); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983) ("If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.").

Challenging the sufficiency of the evidence, appellants also contend that even if appellee had the right to accelerate future rents, he failed to show any causation between the alleged damages to the leasehold and any responsibility on behalf of appellants.  We have found no statutory or common law ground to vacate this arbitration award; therefore, we lack jurisdiction to review other complaints, including the sufficiency of the evidence to support the award.  See J.J. Gregory, 927 S.W.2d at 33; Nuno, 946 S.W.2d at 452.  Accordingly, we overrule appellants' first issue.

V.  Conclusion

The judgment of the trial court is affirmed.

NELDA V. RODRIGUEZ

Justice

Memorandum Opinion delivered and

filed this the 27^th day of July, 2006.

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^[1]Adam Foust and Infinity Communications Technologies, Inc., defendant and plaintiff respectively, are named below but are not identified as parties to this appeal.

^[2]Paragraph A of the lease's arbitration clause reads, in relevant part, as follows:

Any controversy or claims arising from or related to this Lease or the breach thereof and/or any Property subject to this Lease shall be settled by binding arbitration administered by the American Arbitration Association under its Arbitration Rules for the Real Estate Industry and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  If any party to this Lease has a controversy relating to the interpretation of this Lease or relating to any other claim, between them, they agree to submit the dispute to arbitration in accordance with the procedures of the American Arbitration Association in Houston, Texas, then in effect, and the parties covenant that the arbitration proceedings shall be conducted in Victoria County, Texas.

The lease also provides that Texas law applies.  Neither party disputes the Texas General Arbitration Act is controlling.  See Tex. Civ. Prac. & Rem. Code Ann. '' 171.001-.098 (Vernon 2005).

^[3]Rule 28 of the American Arbitration Association's Arbitration Rules for the Real Estate Industry provides that an arbitrator may postpone any hearing "for good cause shown."  American Arbitration Association, Arbitration Rules for the Real Estate Industry, Rule 28.

^[4]Rule 32 of the American Arbitration Association's Arbitration Rules for the Real Estate Industry similarly provides the following:

32.  Arbitration in the Absence of a Party or Representative

Unless the law provides to the contrary, the arbitration may proceed in the absence of any party or representative who, after due notice, fails to present or fails to obtain a postponement.  An award shall not be made solely on the default of a party.  The arbitrator shall require the party who is present to submit such evidence as the arbitrator may require for the making of an award.

American Arbitration Association, Arbitration Rules for the Real Estate Industry, Rule 32.

^[5]Appellants also contend that the arbitrator's refusal to recuse himself constitutes misconduct or wilful misbehavior that prejudiced appellants throughout the proceedings.  Appellants rely on Mullinax, Wells, Baat and Cloutman v. Sage, 692 S.W.2d 533 (Tex. App.BDallas 1985, writ ref'd n.r.e.), to support this contention.  Sage involved alleged arbitrator "misconduct" wherein the clients complained that an award of attorney's fees was made before they were afforded the opportunity to contest certain evidence or to cross-examine the attorneys on this evidence.  See id. at 535.  Sage did not involve a claim of "evident partiality."  In this issue, other than the use of the word "misconduct" and "wilful misbehavior," there is no suggestion by appellants that the arbitrator engaged in misconduct or wilful behavior with respect to the letter; conduct or behavior that would justify vacation of the arbitration award.  See id.  Thus, under the facts of this case appellants' reliance on Sage is misplaced.

^[6]Paragraph 4 provides the following:

RENT.  Tenant agrees to and shall pay Landlord . . . as rent for the leased premises, the total sum of $45,125.00, payable without demand in equal monthly payments of $[3,125.00], each in advance on or before the 1st day of each month, commencing on FEBRUARY 4, 2002, and continuing thereafter until the total sum shall be paid. . . .  Rent received after the first day of the month shall be deemed delinquent.  If rent is not received by Landlord by the 5th of each month, Tenant shall pay a late charge of $350.00 plus a penalty of $35.00 per day until rent is received in full.

^[7]Appellants also contend that the arbitrator's award for unpaid rents and damages to the leasehold constitutes a gross mistake, compelling its vacation.  Having concluded, however, that there was no misconduct on the part of the arbitrator, assuming without deciding appellants could rely on "gross mistake" to attack the arbitrator's award, we would also conclude there was no gross mistake under the facts of this case.  See Callahan & Assoc. v. Orangefield Indep. School Dist., 92 S.W.3d 841, 844 (Tex. 2002) (per curiam) (citing Teleometrics Int'l, Inc. v. Hall, 922 S.W.2d 189, 193 (Tex. App.‑Houston [1st Dist.] 1995, writ denied) for the proposition that gross mistake, as a common law ground for setting aside an arbitration award, is a mistake that implies bad faith or failure to exercise honest judgment, the supreme court assumed without deciding that OISD may rely on the gross mistake standard under the common law to attack the arbitrator's award and concluded that an arbitrator does not violate the common law simply by failing to award damages).