Robin Rouse and Sabrina Rouse v. Thomas Campbell, Foster Management, L.L.C., Foster Timber, Ltd., and Christy W. Kolva ( 2022 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
__________________
NO. 09-21-00023-CV
__________________
ROBIN ROUSE AND SABRINA ROUSE, Appellants
V.
THOMAS CAMPBELL, FOSTER MANAGEMENT, L.L.C., FOSTER
TIMBER, LTD., AND CHRISTY W. KOLVA, Appellees
__________________________________________________________________
On Appeal from the 284th District Court
Montgomery County, Texas
Trial Cause No. 18-12-15871-CV
__________________________________________________________________
MEMORANDUM OPINION
This is an appeal from a trial court’s order confirming an Arbitrator’s Award.
Appellants Robin Rouse and Sabrina Rouse, individually and as the personal
representative of the Estate of Terrill Scatena, filed this appeal to challenge the trial
court’s Final Judgment, and they argue that the trial court erred by modifying the
Arbitrator’s Award in a manner not authorized by statute. See Tex. Civ. Prac. &
Rem. Code Ann. § 171.091. For the reasons explained below, we sustain their issue
1
on appeal and remand the matter to the trial court. We overrule the issues raised by
Appellees Thomas Campbell, Foster Management, L.L.C., Foster Timber, Ltd., and
Christy Kolva on cross-appeal for lack of jurisdiction.
Background
The underlying dispute in this case is about the dissolution of a family timber
business. We have previously described background facts and certain aspects of the
dispute among the parties in other rulings from this Court. 1 In the interest of clarity,
we provide an overview of the parties and entities involved, but we limit our
discussion to events that are relevant to the issues in this appeal. The underlying
facts as to the structure and ownership of the business entities at issue are not
disputed.
The individuals in this lawsuit are family members and descendants of
Thomas S. Foster, as depicted in the family tree below:
1
See JPMorgan Chase Bank, N.A. v. Campbell, No. 09-20-00161-CV, 2021
Tex. App. LEXIS 5001 (Tex. App.—Beaumont June 24, 2021) (mem. op.); In re
Campbell, No. 09-20-00153-CV, 2020 Tex. App. LEXIS 9637 (Tex. App.—
Beaumont Dec. 10, 2020, orig. proceeding). The underlying litigation has also
resulted in other appeals to this Court, but we do not include herein the details of
those appeals. See In re Campbell, No. 09-21-00274-CV, 2021 Tex. App. LEXIS
9488 (Tex. App.—Beaumont Nov. 24, 2021, orig. proceeding); Rouse v. Campbell,
No. 09-21-00023-CV, 2021 Tex. App. LEXIS 2828 (Tex. App.—Beaumont Apr.
15, 2021, no pet.) (mem. op.); In re Campbell, No. 09-20-00153-CV, 2020 Tex. App.
LEXIS 4356 (Tex. App.—Beaumont June 10, 2020, orig. proceeding).
2
Thomas S. Foster began acquiring timberlands in the early 1900s, and when he died,
half of his interest in the timberlands passed to his daughter Letitia Foster Campbell.
JPMorgan Chase Bank, N.A. v. Campbell, No. 09-20-00161-CV, 2021 Tex. App.
LEXIS 5001, at *1 (Tex. App.—Beaumont June 24, 2021) (mem. op.). In 1946,
Letitia transferred her interest to the Letitia Foster Campbell 46 Trust (“the Trust”
a/k/a “LFC46 Trust”), and her son Neil Sr. was named as Trustee. 2 Id. at **1-2. After
Letitia’s children Neil Sr. and Jean died, the beneficial interest in the Trust was
allocated to Letitia’s grandchildren as follows: 25% for Robin S. Rouse, 25% for
Terrill Scatena Peterson, 16.66% for Neil Campbell Jr., 16.66% for Christy Kolva,
2
The parties allege that the Trust assets also include real estate, mineral
interest, stocks, and marketable securities in addition to timberlands. See, e.g.,
Campbell, 2021 Tex. App. LEXIS 5001, at *18.
3
and 16.66% for Thomas Campbell. Id. at *2. The Trust was to terminate upon the
death of the last to die of Christy, Neil, Robin, and Terrill. 3 Id.In 1995, Neil Sr., Thomas, Christy, Neil, Terrill, and Robin formed Foster
Management, L.L.C. (“Foster Management” or “the Company”) and Foster Timber,
Ltd. (“Foster Timber” or “the Partnership”) to avoid the need to appoint a corporate
trustee for the Trust following Neil Sr.’s death. Id. The Trustee contributed the Trust
timber property to Foster Timber. Foster Management is the general partner of
Foster Timber and owns 1% of the Partnership, and the Trust is a limited partner and
owns 99% of the Partnership. Id. at **2-3. Thomas has served as President of Foster
Management, Christy served as Treasurer from 1995 until 2018, and Sabrina
(Robin’s daughter) has served as Treasurer since Christy resigned her position in
2018. Under Foster Timber’s Partnership Agreement, Trustee JPMorgan, “shall not
take any part in the management or control of the business, or transact any business
of the Partnership or have any power to sign for or to bind the Partnership.” Foster
Management manages the assets and day-to-day operations. After Neil Sr.’s death,
the ownership of Foster Management was allocated as follows: 16.66% owned by
Neil Jr., 16.66% owned by Thomas, 16.66% owned by Christy, 25% owned by
Robin, and 25% owned by Terrill.
3
Thomas Campbell is not a measuring life under the Trust. Campbell, 2021
Tex. App. LEXIS 5001, at *2 n.2.
4
Terrill died in October 2020 after the Arbitrator’s Award issued, and the parties sent
a communication to the trial court stating “all of Terrill’s interests in the Foster
Entities were simply transferred to []Robin Rouse, an existing Defendant.”
Underlying Claims and Arbitration
In December 2018, Plaintiffs Thomas Campbell, Christy Kolva, Foster
Management, and Foster Timber filed an Original Petition and Application for
Temporary Injunction against Defendants Neil Campbell Jr., 4 Robin Rouse, Terrill
Scatena, and Sabrina Rouse. The petition also named JPMorgan Chase Bank, N.A.,
Trustee of the Letitia Foster Campbell Trust U/A/D May 14, 1946 (“JPMorgan”) as
a “[n]ominal [d]efendant [and] necessary party to this litigation and the ADR
4
Although Neil was originally one of the Appellants, he filed a motion to
dismiss his appeal, which this Court granted. See Rouse v. Campbell, No. 09-21-
00023-CV, 2021 Tex. App. LEXIS 5662 (Tex. App.—Beaumont July 15, 2021, no
pet.) (mem. op.). We discuss him herein only as necessary.
5
[p]rocess.”5 The petition alleged that the parties had experienced “more than a
decade of dysfunction, dissension, and deadlock in the strategic management and
day-to-day operations of Foster Timber and Foster Management.” The petition
stated that Plaintiffs did not seek relief on the merits but only sought limited
declaratory and injunctive relief to preserve the status quo and prevent irreparable
harm while the ADR process moved forward.
In January of 2019, Defendants Robin, Terrill, and Sabrina filed a Special
Appearance challenging the trial court’s personal jurisdiction over them. Robin,
Terrill, and Sabrina also filed a Motion to Compel Arbitration, Motion to Stay
Pending Arbitration, and Plea to the Jurisdiction. The motion alleged that section
13.1 of the governing Regulations of Foster Management require that any disputes
relating to the Regulations must be submitted to mediation before initiating any
additional proceedings. On February 11, 2019, Thomas and Christy as Claimants
filed a Demand for Arbitration before the American Arbitration Association, and the
trial court then ordered the parties to arbitration and stayed proceedings in an order
signed April 12, 2019.
5
JPMorgan was originally one of the Appellants, but it filed a motion to
dismiss its appeal, which this Court granted. See Rouse, 2021 Tex. App. LEXIS
2828. We discuss JPMorgan herein only as necessary.
6
The Arbitrator’s Award
After arbitration, the arbitrator issued a Final Award (“Arbitrator’s Award”)
on March 23, 2020. In the arbitrator’s Findings of Fact, the arbitrator found that the
family members had experienced disagreement and dissension for years, and this
state of affairs had interfered with the ability of Foster Management to operate
effectively, and the Foster Management Regulations require that certain major
business decisions can only be taken with the approval of members owning 75% of
the Company. 6 The arbitrator noted that the family members had discussed ways to
divide their business interests voluntarily, but they were unable to agree upon a plan.
The arbitrator stated that he considered whether an involuntary winding up
and termination of Foster Management was warranted under section 11.314 of the
Texas Business and Organizations Code, which provides that a district court may
order the winding up and termination of a limited liability company if:
(1) the economic purpose of the entity is likely to be unreasonably
frustrated;
(2) another owner has engaged in conduct relating to the entity’s
business that makes it not reasonably practicable to carry on the
business with that owner; or
(3) it is not reasonably practicable to carry on the entity’s business in
conformity with its governing documents.
Tex. Bus. Orgs. Code Ann. § 11.314. The arbitrator found the Claimants (Thomas
and Christy) had met their burden of proof on all three statutory requirements and
6
Citing Article 6.1(b) of the Regulations of Foster Management, L.L.C.
7
determined that Foster Management and Foster Timber “shall be dissolved in
accordance with Section 11.314 of the Texas Business Organizations Code[.]” The
arbitrator further ordered that the two entities “shall be liquidated[]”:
Under both the Foster Management Regulations and the Foster Timber
Limited Partnership Agreement, liquidation follows automatically and
promptly after an Order of dissolution under Section 11.314 of the
Texas Business Organizations Code. Article 12.2 of the Foster
Management Regulations states the following: “On dissolution of the
Company, a Majority in Interest shall appoint one or more Members as
Liquidator.” The remainder of Article 12 describes the duty of the
Liquidator (or Liquidators) and the steps to follow in completing
liquidation of the Company. Similarly, Article 12.1 of the Foster
Management Limited Partnership Agreement states the following: “If
the Partnership is dissolved under Section . . . 11.l(c) [through an Order
of dissolution under Section 11.314 of the Texas Business
Organizations Code], . . . the General Partner or, if necessary, a person
or committee selected by a Majority in Interest of the Limited Partners
(“Liquidator”) shall commence to wind up the affairs of the Partnership
and to liquidate and sell its properties.” In this case, because Foster
Management as the General Partner of Foster Timber will have been
dissolved, JPMorgan as the Trustee of the LFC46 Trust will
presumably select the liquidator to distribute the assets of the
Partnership and to wind up its affairs. The remainder of Article 12.1
and Article 12.2 describe the duties and powers of the Liquidator.
Importantly for purposes of this arbitration, Article 12.3 gives the
Liquidator the discretion to liquidate the assets of the Partnership
through either “Cash Distributions” [Article 12.3(a)] or “Distribution
in Kind” [Article 12.3(b)]. Finally, the remaining sections of Article 12
describe the procedures for winding up and terminating the Partnership.
The arbitrator declined to determine the form a liquidation of Foster Timber should
take and concluded that “a qualified and experienced liquidator, as well as the
appropriate judges, would be best equipped to resolve the remaining issues”
8
concerning liquidation of Foster Timber and Foster Management and the future of
the Trust. The arbitrator also stated:
If, within thirty days following the issuance of this Final Award, a
Majority in Interest of the members of Foster Management cannot
decide on the appointment of one or more of its members as Liquidator
under Article 12.2 of the Foster Management Regulations, the
Arbitrator will retain jurisdiction in this arbitration to appoint one or
more members as the Liquidator of Foster Management.
Despite declining to determine how liquidation should occur, the arbitrator stated
that a plan for dividing the timberland into five equally valued segments that had
been developed by the Claimants’ expert “deserves careful consideration[.]” After
awarding certain costs and fees (which are not the subject of this appeal), the
Arbitrator’s Award concluded “[a]ll claims or counterclaims not expressly granted
herein are denied.”
Application to Confirm Arbitrator’s Award
The same day that the Arbitrator’s Award was signed, Plaintiffs filed an
Application to Confirm Arbitrat[or’s] Award and Counterclaim for Trust
Modification. The Plaintiffs characterized the Arbitrator’s Award as “sound, well-
reasoned, and effectuates the common-sense solution apparent to everyone who
encounters the dysfunctional family business that is the subject of these
proceedings.” The Plaintiffs stated that there were “no conceivable grounds for
vacating, modifying, or correcting” the Arbitrator’s Award, and they requested the
trial court issue an order confirming the Arbitrator’s Award “in all respects.”
9
Plaintiffs alleged that since Foster Timber and Foster Management have been
dissolved under the Arbitrator’s Award, “JPMorgan is preparing to implement a
liquidation process that will have disastrous consequences.” According to Plaintiffs,
“JPMorgan has made clear that it intends to sell the Trust assets and invest the
proceeds in marketable securities over which JPMorgan will have complete control.”
Plaintiffs argued that without an order modifying the Trust, the family faces tax
losses “in the tens of millions as a result of JPMorgan’s sale of the timberland
properties[.]” Plaintiffs further argued that a trust modification was the only way to
avoid this outcome because a division of the Trust would allow the family members
to manage their own shares of the timberlands instead of a wholesale sell-off by the
Trustee. Plaintiffs requested “that the Court modify the Trust Agreement to allow
for the division of the existing single Trust into five separate trusts, such that each
beneficiary’s Share will be segregated into a separate and distinct trust set aside in
proportion to such beneficiary’s existing Share of the Trust estate.” Plaintiffs asked
the trial court to issue an order “modifying the [] Trust to achieve family branch
autonomy and fair distribution of Trust assets and/or directing JPMorgan, as Trustee,
to take actions to effectuate this same result.”
Defendants Neil, Terrill, Robin, and Sabrina filed certain objections to
confirmation of the award, but their objections did not relate to the issues in this
10
appeal. 7 None of the parties asked the trial court to modify the Arbitrator’s Award
to provide that JPMorgan shall select the liquidator for Foster Timber.
On May 18, 2020, JPMorgan filed a plea to the jurisdiction as to the
Counterclaim for Trust Modification. JPMorgan argued that the Trust owns no land
but only a partnership interest in Foster Timber; that during arbitration, no one was
asking the arbitrator to modify the Trust; that JPMorgan did not expect that the
members of Foster Management would agree to appoint a liquidator and JPMorgan
believed it should do so upon confirmation of the Arbitrator’s Award; that the Trust
was formed in California and has been administered in Illinois; that JPMorgan had
filed a petition in an Illinois court seeking instructions that would allow JPMorgan
to divide the trust into five subtrusts; and that the trial court could not grant the Trust
modification counterclaim because it lacks jurisdiction over all of its beneficiaries
and the Trustee.
On May 19, 2020, Neil and Benjamin (Ben) Campbell filed a Plea to the
Jurisdiction Regarding Trust Modification. Relevant to the issues in this appeal, Neil
and Ben argued that the Trust is not governed by an arbitration clause; that the
7
Neil objected to confirming the Arbitrator’s Award based on its award of
fees and ruling on indemnity. Terrill, Robin, and Sabrina objected to the Arbitrator’s
Award based in part on an alleged improper relationship between the arbitrator and
Plaintiffs’ counsel, which we have already ruled on. See generally In re Campbell,
2020 Tex. App. LEXIS 9637. Terrill, Robin, and Sabrina also objected to the
Arbitrator’s Award to the extent that it made rulings as to Foster Timber because
Foster Timber was not a party to the arbitration.
11
proposed Trust modification would pose financial risks and would fundamentally
change who controls the Trust assets in a manner that lacks support in the settlor’s
intent or the 1995 proceedings to amend the Trust; and Illinois has jurisdiction over
the Trust that predates the Plaintiffs’ Counterclaim. Neil and Ben asked the trial
court to decline jurisdiction to modify the Trust.
On May 20, 2020, Defendants Terrill, Robin, and Sabrina filed a Response to
Plaintiffs’ Application for Order in Support of Arbitration Against JPMorgan Under
Tex. Civ. Prac. & Rem. Code § 171.086. Therein, they argued that the Trust was a
California trust, it had never been administered in Texas, and it was currently
administered in Illinois; that the Trust does not require modification or division to
ensure implementation of the Arbitrator’s Award; that Article 12 of the Partnership
Agreement controls the liquidation process, which permits distribution either in case
or in kind; that the trial court’s jurisdiction to render judgment on the Arbitrator’s
Award is a distinctly different matter than its jurisdiction (if any) over the Trust; and
that the trial court lacks jurisdiction over the counterclaim to modify the Trust
because the Trust does not own land in Texas. Defendants Terrill, Robin, and
Sabrina asked the trial court to deny Plaintiffs’ Application and Plaintiffs’ claim for
Trust modification.
12
The Trial Court’s Orders
On June 4, 2020, the trial court signed three orders. In the Order on
Defendants’ Special Appearance, the trial court sustained Robin, Terrill, and
Sabrina’s special appearance and ordered:
. . . all claims raised against Robin S. Rouse, Terrill A. Scatena, and
Sabrina Rouse, including those related to modification of the LFC46
Trust BUT NOT INCLUDING ANY OF THE CLAIMS RELATED
TO THE ARBITRATION OF MATTERS IN THIS CASE, are
dismissed with prejudice for refiling in Texas.
In another order—Order Granting J.P. Morgan Chase’s, Neil Campbell’s and Ben
Campbell’s Pleas to the Jurisdiction—the trial court stated:
. . . The Court finds that it lacks subject matter jurisdiction over the
Trust Modification for the reasons presented in the Pleas to the
Jurisdiction as well as the fact that the issue of Trust modification was
an arbitrable issue, left for the Arbitrator and outside the scope of this
Court’s authority under Chapter 171 of the Civil Practice and Remedies
Code.
IT IS THEREFORE ORDERED that JPMorgan’s Plea to the
Jurisdiction regarding the “Counterclaim for Trust Modification” is in
all things GRANTED. IT IS FURTHER ORDERED that NEIL AND
BEN CAMPBELL’S PLEA TO THE JURISDICTION REGARDING
TRUST MODIFICATION is in al[l] things GRANTED.
IT IS FURTHER ORDERED that the claim for Trust
Modification by Thomas Campbell, Christy Kolva, Isabelle Campbell,
and Ashley Gates is hereby DISMISSED WITH PREJUDICE.
In its third order, the trial court found that “as a matter of law J.P. Morgan Chase
generally appeared in this Court on January 9, 2019 via a filed general denial, as
well as by filing its own Petition for Declaratory Judgment on August 1, 2019.”
Therefore, the trial court denied JPMorgan’s special appearance. In a separate
13
appeal, this Court determined that JPMorgan did not waive personal jurisdiction by
filing a declaratory judgment action, that the trial court erred by denying JPMorgan’s
special appearance, and that the Plaintiffs “failed to meet their burden to establish
that the Texas court had personal jurisdiction over JPMorgan with regard to the trust
modification counterclaim.” See Campbell, 2021 Tex. App. LEXIS 5001, at **5-6,
**26-27.
On January 7, 2021, the trial court signed an Order Confirming Arbitrat[or’s]
Award and Setting Attorney’s Fees Submission Date. Therein, the trial court stated
that “Confirmation of the Arbitrat[or’s] Award is nothing but a ministerial act[,]”
citing sections 171.087 and 171.092(a) of the Texas Civil Practice and Remedies
Code and Temple v. Riverland Co., 228 S.W. 605, 607 (Tex. App.—Amarillo 1921,
no writ) (“The court, in entering the award, performs no judicial function in
pronouncing judgment or in determining the rights of the parties. The entry is purely
a ministerial act which the law commands as a duty.”). The order stated “[t]his Order
incorporates all provisions of the Arbitrat[or’s] Award for all purposes.”
The parties complained about a specific portion of the January 7th Order
confirming the arbitration, wherein the trial court states:
Based on the Arbitrat[or’s] Award, it is further ORDERED,
ADJUDGED, and DECREED that J.P. Morgan Chase as Trustee of the
LFC46 Trust shall select a Liquidator pursuant to Article 12 of the
Foster Management Regulations who shall liquidate Foster
Management, LLC pursuant to the provisions of Article 12 of the Foster
Management Regulations.
14
Defendants Robin and Sabrina filed a Motion to Set Aside and Alternatively
Motion to Correct Order Confirming Arbitrat[or’s] Award and Informal Bill raising
numerous challenges to the trial court’s Order. In their motion, Robin and Sabrina
argued that the portion of the Order excerpted above “is not contained in the
Arbitrat[or’s] Award and warrants correction[.]” They further argued that the
Arbitrator’s Award makes clear that the liquidator shall be a member of Foster
Management and JPMorgan is not a member. According to Robin and Sabrina, the
Arbitrator’s Award correctly stated that (1) the General Partner of Foster Timber
(that is, Foster Management) has the right to name the liquidator of Foster Timber
and (2) the limited partners (that is, JPMorgan as Trustee) will have the authority to
appoint the liquidator only if the General Partner does not do so.
JPMorgan also filed a Motion Nunc Pro Tunc/To Clarify, stating that the
portion of the Order requiring it to select a liquidator “was entered in error[]”
because the Arbitrator’s Award does not require JPMorgan to select a liquidator for
either Foster Management or Foster Timber and the arbitrator only “presumed” that
JPMorgan—as the limited partner of Foster Timber—would appoint a liquidator for
Foster Timber. JPMorgan explained that the Arbitrator’s Award referred to Article
12.2 of the Foster Management Regulations, which states in relevant part, “On
dissolution of the Company, a Majority in Interest shall appoint one or more
Members as Liquidator.”
15
On February 17, 2021, Plaintiffs filed Notice to the Court Regarding Further
Developments Related to Liquidation & Plaintiffs’ Further Opposition to Matters
Set for Submission on February 19th. Attached as an exhibit thereto is a document
dated January 26, 2021 and titled “Written Consent of the Members of Foster
Management, LLC[.]” This document states, in relevant part, that the Article 12.2 of
the Regulations of Foster Management provides that “On dissolution of the
Company, a Majority in Interest shall appoint one or more Members as Liquidator.”
The document further states:
Pursuant to Section 7.6(a) of the Regulations of Foster
Management, LLC[8] Robin Rouse, Sabrina Rouse, Benjamin Campbell
and Neil F. Campbell, Jr. as a Majority in Interest of Foster
Management, LLC take the following Action by Written Consent:
Should the Arbitrat[or’s] Award and Confirmation Order
become an enforceable final judgment, Sabrina Rouse, a Member, is
8
Section 7.6(a) of the Regulations of Foster Management provides:
Any action required or permitted to be taken at any annual or
special meeting of Members requiring the vote of a Required Interest,
a Majority in Interest, or some lesser percentage of the Sharing Ratios
may be taken without a meeting, without prior notice, and without a
vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by a Required Interest, a Majority in Interest, or
such lesser percentage of the Sharing Ratios as may be required to act
under the Act, the Articles, or these Regulations. Every written consent
shall bear the date of signature of each Member who signs the consent.
A telegram, telex, cablegram or similar transmission by a Member, or
a photographic, photostatic, facsimile or similar reproduction of a
writing signed by a Member, shall be regarded as signed by the Member
for purposes of this Section. Prompt notice of the taking of any action
by Members without a meeting by less than unanimous written consent
shall be given to those Members who did not consent in writing to the
action.
16
appointed as the sole Liquidator of Foster Management, LLC as called
for by Article 12.2 of the Regulations of Foster Management. As
Liquidator, Sabrina Rouse shall continue to operate the Company
properties with all the power and authorities of the Members.
On February 20, 2021, the trial court signed an Order on Motion Nunc Pro
Tunc. The court noted the following:
• The Arbitrat[or’s] Award actually quotes from Art. 12.1 of the
Forest [sic] Timber Limited Partnership Agreement, but mistakenly
attributes the quote to the “Foster Management Limited Partnership
Agreement”:
“If the Partnership is dissolved under Section…[11.1](c) [through
an Order of dissolution under Section 11.31-i of the Texas Business
Organizations Code] . . . the General Partner or, if necessary, a
person or committee selected by a Majority in Interest of the Limited
Partners (‘Liquidator’) shall commence to wind up the affairs of the
Partnership and to liquidate and sell its properties. In this case,
because Foster Management as the General Partner of Foster Timber
will have been dissolved, JPMorgan as the Trustee of the LFC46
Trust will presumably select the liquidator to distribute the assets of
the Partnership and to wind up its affairs.”
• The error by the Arbitrator in the attribution of his quote led this
Court to its January 7, 2021 Order saying JPMorgan is required to
select a liquidator for Foster Management instead of saying it is
required to select a liquidator for Foster Timber.
• It is entirely appropriate for JPMorgan to select the liquidator under
the quoted provision because it held a 99% limited partnership
interest in Foster Timber as the trustee of the LFC46 Trust. Foster
Management had held the other 1% interest.
• Although the Arbitrator did not order JPMorgan to select a
liquidator (see paragraph 12 of the Conclusions of Law in the
Arbitrat[or’s] Award), given that the Arbitrator both dissolved and
liquidated Foster Timber and Foster Management, but did not order
the members to take any action toward liquidating Foster
17
Management (instead retaining jurisdiction to do so if the members
failed to take appropriate action (see paragraphs 12 and 14 of the
Conclusions of Law), the Arbitrator’s intent in this regard is clear,
as is the mistaken reference to Foster Management when intending
Foster Timber.
The trial court then ordered that its Order of January 7, 2021 be modified by the
Final Judgment to say that “JPMorgan is ordered to determine a liquidator for Foster
Timber instead of Foster Management.”
On February 20, 2021, the trial court signed a Final Judgment, entirely
replacing its January 7, 2021 Order. The trial court stated that, because the Trust
modification claim was dismissed for lack of subject matter jurisdiction, the only
pending matter was confirmation of the Arbitrator’s Award, and “Confirmation of
the Arbitrat[or’s] Award is nothing but a ministerial act.” The trial court ordered that
the Arbitrator’s Award is confirmed, ordered dissolution of both Foster Timber and
Foster Management, and stated, in relevant part:
Based on the Arbitrat[or’s] Award, it is further ORDERED,
ADJUDGED and DECREED that J.P. Morgan Chase as Trustee of the
LFC46 Trust shall select a Liquidator pursuant to Article 12 of the
Foster Timber Regulations who shall liquidate Foster Timber, LLC
pursuant to the provisions of Article 12 of the Foster Management
Regulations.
On April 14, 2021, JPMorgan appointed the Stapleton Group as liquidator of
Foster Timber. 9
9
Our record does not indicate that any party filed a supersedeas bond.
18
Issues
Appellants argue that the trial court erred by modifying the Arbitrator’s
Award to order that JPMorgan select a liquidator for Foster Management. According
to Appellants, the trial court erred in modifying the Arbitrator’s Award in a way that
no party had requested, that was contrary to the terms of the partnership Agreement,
that ignored the appointment of the liquidator who would need to be selected by a
Majority in Interest of the Members of Foster Management, and the trial court’s
order was without reason and not authorized by statute. Appellants also argue that
the trial court should not have taken the dissolution process out of the family’s hands.
Appellants ask this Court to reverse the portion of the trial court’s final judgment
that orders JPMorgan to select a liquidator for Foster Timber and to modify the final
judgment to conform to the arbitrator’s award. Appellants also ask this Court to
. . . acknowledge that, pursuant to Section 12.2 of the Regulations, and
Section 12.1(a) of the Partnership Agreement, Sabrina Rouse, as the
duly appointed liquidator of Foster Management, acts with the power
and authority of the General Partner in connection with the dissolution
of Foster Timber, and that she is therefore charged with the duty and
authority to wind up the affairs of Foster Timber and to liquidate its
assets.
Appellants do not appeal the Arbitrator’s Award or the arbitrator’s holding that the
company and partnership be dissolved and liquidated.
Appellees argue this Court should decline the invitation to appoint Sabrina as
Foster Timber’s liquidator. That said, in two issues in their cross-appeal, Appellees
19
also contend that the trial court erred in denying JPMorgan and Neil Jr.’s pleas to
the jurisdiction and in ruling that it lacked jurisdiction to modify a Texas trust and
divide Texas real property. Appellees also argue that the trial court erred in granting
Robin’s, Terrill’s, and Sabrina’s special appearance and finding that it lacked
personal jurisdiction over them.
Standard of Review
We review de novo a trial court’s order confirming, modifying, or vacating an
arbitration award. See Conn Appliances, Inc. v. Puente, No. 09-18-00326-CV, 2020
Tex. App. LEXIS 6410, at *7 (Tex. App.—Beaumont Aug. 13, 2020, no pet.) (mem.
op.); Constr. Fin. Servs. v. Douzart, No. 09-16-00035-CV, 2018 Tex. App. LEXIS
1551, at *6 (Tex. App.—Beaumont Feb. 28, 2018, pet. denied) (mem. op.) (citing
D.R. Horton-Tex., Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex. App.—Houston
[14th Dist.] 2014, pet. denied)). Texas law favors arbitration, and under Texas law,
the review of arbitration awards is “extraordinarily narrow.” Hoskins v. Hoskins, 497
S.W.3d 490, 494 (Tex. 2016) (citation omitted); Conn Appliances, Inc., 2020 Tex.
App. LEXIS 6410, at *7. An arbitration award has the same effect as a judgment of
a court of last resort, and we indulge all reasonable presumptions in favor of the
award and none against it. See Conn Appliances, Inc., 2020 Tex. App. LEXIS 6410,
at *7; see also CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002); Midani
v. Smith, No. 09-18-00009-CV, 2018 Tex. App. LEXIS 8954, at *10 (Tex. App.—
20
Beaumont Nov. 1, 2018, pet. denied) (mem. op.). An appellate court gives great
deference to an arbitrator’s award, and such awards are presumed to be valid. See
Delgado, 95 S.W.3d at 238. Generally, even where the arbitrator has made a mistake
of law or fact, courts may not vacate or modify the award. See Midani, 2018 Tex.
App. LEXIS 8954, at *10. We consider the entire record in our review. See Conn
Appliances, Inc., 2020 Tex. App. LEXIS 6410, at *7.
“Unless grounds are offered for vacating, modifying, or correcting an award
under Section 171.088 or 171.091 [of the Texas Arbitration Act], the court, on
application of a party, shall confirm the award.” Tex. Civ. Prac. & Rem. Code Ann.
§ 171.087 (emphasis added). A trial court may modify or correct an arbitration
award only if:
(1) the award contains:
(A) an evident miscalculation of numbers; or
(B) an evident mistake in the description of a person, thing, or
property referred to in the award;
(2) the arbitrators have made an award with respect to a matter not
submitted to them and the award may be corrected without affecting the
merits of the decision made with respect to the issues that were
submitted; or
(3) the form of the award is imperfect in a manner not affecting the
merits of the controversy.
Id. § 171.091.
In the absence of a clear agreement to limit the arbitrator’s authority and
expand the scope of judicial review, on appeal this Court may not exercise expanded
judicial review. See Midani, 2018 Tex. App. LEXIS 8954, at *12 (citing Forest Oil
21
Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 432 (Tex. 2017)). The trial
court that is asked to confirm an arbitration award may not substitute its judgment
for the arbitrator’s nor speculate about the arbitrator’s intent. See Garza v. Phelps
Dodge Ref. Corp., 262 S.W.3d 514, 519 (Tex. App.—El Paso 2008, no pet.); Baker
Hughes Oilfield Operations, Inc. v. Hennig Prod. Co., 164 S.W.3d 438, 447 (Tex.
App.—Houston [14th Dist.] 2005, no pet.) (citing Riha v. Smulcer, 843 S.W.2d 289,
293 (Tex. App.—Houston [14th Dist.] 1992, writ denied)).
The Arbitrator’s Award ordered that Foster Management and Foster Timber
“shall be dissolved” and “shall be liquidated.” Referencing Article 12.2 of the Foster
Management Regulations, the arbitrator wrote that upon dissolution of the company,
“‘a Majority in Interest shall appoint one or more Members as Liquidator.’” The
arbitrator then stated, “because Foster Management as the General Partner of Foster
Timber will have been dissolved, JPMorgan as the Trustee of the [] Trust will
presumably select the liquidator to distribute the assets of the Partnership and to
wind up its affairs.” The arbitrator acknowledged that Article 12.3 gives the
Liquidator discretion whether to liquidate the assets of the Partnership in cash or in
kind, and the arbitrator expressly declined to determine the form that liquidation
should take. Rather, the arbitrator concluded that “a qualified and experienced
liquidator, as well as the appropriate judges, would be best equipped to resolve the
22
remaining issues concerning the liquidation of the Foster Timber Partnership and the
future of the [] Trust.”
While the arbitrator expressly ordered the dissolution and liquidation of Foster
Management and Foster Timber, the arbitrator did not order that JPMorgan should
select a liquidator. Instead, the arbitrator wrote that JPMorgan “will presumably
select the liquidator[.]” (emphasis added) Merriam-Webster defines “presumably”
to mean “by reasonable assumption[.]” See Presumably, Merriam-Webster,
https://www.merriam-webster.com/dictionary/presumably (last visited Nov. 15,
2022). Black’s Law Dictionary defines “presume” to mean “[t]o assume beforehand;
to suppose to be true in the absence of proof.” See Presume, Black’s Law Dictionary
(9th ed. 2009). By contrast, Black’s defines “order” as “[a] command, direction, or
instruction.” See Order, Black’s Law Dictionary (9th ed. 2009). Nothing in the text
of the Arbitrator’s Award orders, commands, directs, or instructs JPMorgan to select
the liquidator.
The trial court knew this, as acknowledged in the Order on Motion Nunc Pro
Tunc (emphasis added):
Although the Arbitrator did not order JPMorgan to select a liquidator
(see paragraph 12 of the Conclusions of Law in the Arbitrat[or’s]
Award), given that the Arbitrator both dissolved and liquidated Foster
Timber and Foster Management, but did not order the members to take
any action toward liquidating Foster Management (instead retaining
jurisdiction to do so if the members failed to take appropriate action
(see paragraphs 12 and 14 of the Conclusions of Law), the Arbitrator’s
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intent in this regard is clear, as is the mistaken reference to Foster
Management when intending Foster Timber.
The trial court erroneously modified the Arbitrator’s Award to add an order
that JPMorgan select the liquidator and in doing so improperly engaged in
speculation about what the arbitrator “intended” when the arbitrator wrote that
JPMorgan “will presumably select the liquidator[.]” This exceeded the scope of the
statutory criteria enumerated in section 171.091. See Tex. Civ. Prac. & Rem. Code
Ann. § 171.091. 10 No party filed an application to modify or correct the Arbitrator’s
Award. See generally id. (explaining that a party must file an application to modify
or correct an award.). A trial court reviewing the award errs by substituting its
judgment for the arbitrator’s or when it speculates about the arbitrator’s intent. See
Garza, 262 S.W.3d at 519; Baker Hughes Oilfield Operations, Inc., 164 S.W.3d at447 (citing Riha, 843 S.W.2d at 293). This Court has already determined that the
trial court lacked personal jurisdiction over JPMorgan. See Campbell, 2021 Tex.
App. LEXIS 5001, at **26-27. Therefore, we conclude that the trial court erred by
including in its Final Judgment language ordering that JPMorgan “shall select a
Liquidator[,]” and this paragraph should be stricken from the Final Judgment. See
Tex. Civ. Prac. & Rem. Code Ann. § 171.087.
10
By contrast, modifying the Arbitrator’s Award to change the reference to
Foster Management to Foster Timber is allowable as an “evident mistake in the
description of a person, thing, or property referred to in the award[.]” See Tex. Civ.
Prac. & Rem. Code Ann. § 171.091(a)(1)(B).
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Appellants have also asked that this Court to acknowledge that Sabrina is the
“duly appointed liquidator of Foster Management[.]” We decline to do so because
we are limited to reviewing a trial court’s rulings or judgments, and our record does
not indicate that the trial court made any ruling on this issue. See Tex. R. App. P.
33.1 (an issue on appeal must be preserved in the trial court by a timely objection
and obtaining a ruling thereon).
Cross-Appeal
“A court must have both subject matter jurisdiction over a case and personal
jurisdiction over the parties to issue a binding judgment.” Luciano v.
SprayFoamPolymers.com, LLC, 625 S.W.3d 1, 7-8 (Tex. 2021) (citing Spir Star AG
v. Kimich, 310 S.W.3d 868, 871 (Tex. 2010)). In all proceedings concerning trusts,
the trustee is a necessary party to the action. See Antolik v. Antolik, 625 S.W.3d 530,
538 (Tex. App.—Texarkana 2021, pet. denied) (citing Tomlinson v. Khoury, 624
S.W.3d 601, 608 (Tex. App.—Houston [1st Dist.] Oct. 27, 2020, pet. denied)); Ray
Malooly Trust v. Juhl, 186 S.W.3d 568, 570 (Tex. 2006). That said, this Court has
already ruled that the trial court lacked personal jurisdiction over JPMorgan as to the
counterclaim seeking a modification of the Trust. See Campbell, 2021 Tex. App.
LEXIS 5001, at **26-27. Therefore, Appellees’ Counterclaim for Trust
Modification fails for lack of jurisdiction, and we overrule Appellees’ issues on
cross-appeal.
25
Appellees previously presented an argument that the trial court had in rem
jurisdiction over the Trust in JPMorgan Chase Bank, N.A. v. Campbell, 2021 Tex.
App. LEXIS 5001.11 Appellees made the same argument in this appeal, wherein they
argued “[b]ecause the trial court had in rem jurisdiction over the Trust assets, it did
not need to have in personam jurisdiction over any Trust party[]” and “[t]he trial
court’s personal-jurisdiction rulings are simply immaterial given its in rem
jurisdiction.” In JPMorgan Chase Bank, N.A. v. Campbell, this Court found the trial
court lacked personal jurisdiction over JPMorgan and that personal jurisdiction over
the trustee was material to the claim for trust modification, thereby implicitly
overruling Appellees’ argument about in rem jurisdiction over the Trust assets. Id.
at **26-27.12 We follow our own precedent and reject the Appellees’ in rem
argument.
Appellees also argue that the trial court was wrong when it ruled that it lacked
personal jurisdiction over Robin, Terrill, and Sabrina. Robin, Terrill, and Sabrina
participated in the arbitration. Neither Robin, Terrill, or Sabrina challenges the
11
In JPMorgan Chase Bank, N.A. v. Campbell, the appellant was JPMorgan,
and the appellees were Thomas Campbell, Christy Kolva, Foster Management,
Foster Timber, Neil Campbell, Robin Rouse, Terrill Scatena, and Sabrina Rouse.
See generally 2021 Tex. App. LEXIS 5001.
12
Appellees in JPMorgan Chase Bank, N.A. v. Campbell did not address in
rem jurisdiction in their motion for rehearing filed in that appeal, and they did not
file a petition for review with the Supreme Court of Texas in that matter. The
mandate has issued in that case.
26
Arbitrator’s Award, and all parties agree that the Arbitrator’s Award is binding on
them. Therefore, we need not address the issue of whether the trial court erred in its
ruling that it lacked personal jurisdiction over Robin, Terrill, and Sabrina because
that issue is moot. See Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 642 (Tex. 2005)
(“A case becomes moot if a controversy ceases to exist or the parties lack a legally
cognizable interest in the outcome.”). We overrule Appellees’ issues on cross-
appeal.
Conclusion
Having sustained Appellants’ issue and having overruled Appellees’ issues on
cross-appeal, we affirm the Final Judgment in part, and we reverse that portion of
the Final Judgment that reads:
Based on the Arbitrat[or’s] Award, it is further ORDERED,
ADJUDGED and DECREED that J.P. Morgan Chase as Trustee of the
LFC46 Trust shall select a Liquidator pursuant to Article 12 of the
Foster Timber Regulations who shall liquidate Foster Timber, LLC
pursuant to the provisions of Article 12 of the Foster Management
Regulations.
We remand to the trial court with instructions to modify the Final Judgment to delete
the paragraph excerpted above in accordance with this opinion. See Tex. R. App. P.
43.2(a), (d).
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AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
_________________________
LEANNE JOHNSON
Justice
Submitted on March 24, 2022
Opinion Delivered December 22, 2022
Before Golemon, C.J., Horton and Johnson, JJ.
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