frank-j-schuster-individually-and-as-of-the-estate-of-frank-schuster ( 2014 )

NUMBER 13-13-00474-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
FRANK J. SCHUSTER, INDIVIDUALLY AND
AS EXECUTOR OF THE ESTATE OF
FRANK SCHUSTER, FRANK SCHUSTER
FARMS, INC., FRANK SCHUSTER FARMS
AND FRANK SCHUSTER FARMS, LTD., Appellants,
v.
KATHLEEN WILD, Appellee.
On appeal from the Probate Court
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Benavides and Longoria
Memorandum Opinion by Chief Justice Valdez
Appellants, Frank J. Schuster, individually and as executor of the estate of Frank
Schuster, Frank Schuster Farms, Inc., Frank Schuster Farms and Frank Schuster Farms,
Ltd., appeal from the trial court’s refusal to confirm the arbitrator’s order and its vacatur
of that award. By two issues, appellants contend that appellee, Kathleen Wild, did not
meet her burden of showing that the arbitrator exceeded his power.1 We reverse the trial
court’s order vacating the arbitration award and render judgment confirming the
arbitrator’s decision.
I. BACKGROUND
Frank Schuster died in 1977, leaving an estate that included land, mineral
interests, stock in a farming corporation, and other personal property. According to Wild,
disputes arose during the administration of the deceased’s estate, and on April 29, 1986,
all interested parties entered into four agreements “to effect a full and final partition of the
property of the Estate[:] a Family Agreement, an Addendum to Family Agreement (the
“Family Agreement”), an Arbitration Agreement and an Addendum to Arbitration
Agreement. The Four (4) documents all together express the intention and agreement of
the parties and are to be construed and considered together [(the “Settlement
Agreement”)].”
Due to further disputes regarding the Settlement Agreement, the cause went to
arbitration with the arbitrator, Thomas Latter.2 Latter issued his “Report and Decision of
Arbitration” dated December 15, 1986 (the “Latter Arbitration”). Latter’s report and
decision was confirmed by the County Court at Law No. 2 of Hidalgo County, Texas in
1987. However, according to Wild, more than two decades later, the parties discovered
that certain properties were not explicitly addressed by Latter’s Report and Decision.
1 Wild is one of the deceased’s daughters.
2 The Latter Arbitration is not at issue in this appeal.
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According to Wild, administration of the deceased’s estate was not closed, and the
parties could not agree upon proper distribution of assets from the deceased’s
testamentary trust. Appellants filed suit in the Hidalgo County Probate Court, and Wild
filed a suit in the district court. The two cases were consolidated in the trial court, which
according to appellants, “ordered ‘the parties to arbitrate the disputes set out in the
parties’ pleadings in the consolidated cause as the issues stated therein are within the
scope of the arbitration agreement found in the Family Agreement.’” In a rule 11
agreement, the parties agreed to arbitrator J. Scott McLain. According to appellants, the
parties further agreed that “[o]nce the arbitrator [made] his decision on the issues, the
parties [would] be entitled to have the Court enter an award confirming the arbitration.”
The second arbitration hearing, (the “McLain Arbitration”), which is the subject of
this appeal, was held on August 28 and 29, 2012. Wild states that McLain “took no
evidence at the hearing on other issues in the Wild’s pleadings including attorney’s fees.”
According to appellants, the McLain Arbitration involved numerous parcels of real
property not explicitly addressed by Latter’s Report and Decision. Appellants contended
that the deceased and his wife, Helen B. Schuster, intended to convey those properties
to Frank Schuster Farms, Inc., prior to the death of the deceased. Wild, on the other
hand, contended that those properties had not actually been conveyed to Frank Schuster
Farms, Inc. and that, therefore, Latter’s Report and Decision did not explicitly address
them. Thus, according to Wild, those properties were part of “the Estate of Frank
Schuster,” and she is entitled to an undivided interest in them as an heir to his estate.
Appellants claim that the McLain Arbitration also dealt with “the minerals in, on or
under” certain properties owned or claimed by Frank Schuster Farms, Inc. Appellants
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state in their brief that during the McLain Arbitration, Wild claimed that she was entitled
to a share of those mineral interests. Appellants countered that those mineral interests
belonged to Frank Schuster Farms, Inc. and that any claims made by Wild to those
mineral interests were barred by the statute of limitations.
McLain entered an award (the “McLain Arbitration Award”) in favor of appellants,
which included title to various properties, and determined that the mineral interests to
those properties belonged to Frank Schuster Farms, Inc. On October 9, 2012, appellants
filed a motion to confirm the arbitration award in the trial court; however, Wild filed a
motion to vacate the McLain Arbitration Award on the basis that McLain exceeded his
powers. See TEX. CIV. PRAC. & REM. CODE ANN. § 171.088 (West, Westlaw through 2013
3d C.S.).
The trial court then held a hearing on March 26, 2013, to determine whether
McLain exceeded his powers as alleged by Wild. At this hearing, appellants’ attorney
stated that a two-day evidentiary arbitration hearing was held by McLain and then asked
the trial court to confirm McLain’s Arbitration Award. Appellants’ attorney argued that
because no record existed regarding the arbitration proceeding, the trial court must make
all assumptions in favor of the ruling. Appellants’ attorney stated that it was Wild’s burden
to bring forth a record showing that McLain exceeded his authority and that she could not
do so without the reporter’s record, which included all of the exhibits McLain considered.
Stating that it would consider the parties’ extensive briefing and listed authorities on the
matter, the trial court took the cause under advisement. Throughout her motion to vacate,
Wild cited Latter’s report for her contention that McLain exceeded his powers by awarding
the mineral interests to appellants. Wild did not claim that the arbitration agreement
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between her and appellants did not authorize McLain to determine who owned the mineral
interests of the disputed properties.
On August 6, 2013, the trial court denied appellants’ motion to confirm the McLain
Arbitration Award on the sole basis that McLain “exceeded his authority by awarding
mineral interest[] to [appellants] that were not even requested by [them], thereby
exceeding his authority.”3 The trial court ordered a rehearing before a new arbitrator
chosen in accordance with the agreement to arbitrate. This appeal followed.
II. STANDARD OR REVIEW AND APPLICABLE LAW
“An arbitration award is given the same effect as a judgment of last resort and all
reasonable presumptions are indulged in favor of the award and none against it.” Black
v. Shor, __ S.W.3d __, 2013 WL 1687537, at *3 (Tex. App.—Corpus Christi 2013, pet.
denied). Therefore, our review of a trial court’s decision to vacate or confirm an arbitration
award is de novo, and we review the entire record. Id. (citing Xtria L.L.C. v. Int’l Ins.
Alliance Inc., 286 S.W.3d 583, 591 (Tex. App.—Texarkana 2009, pet. denied); In re
Guardianship of Cantu de Villarreal, 330 S.W.3d 11, 17 (Tex. App.—Corpus Christi 2010,
no pet.); Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 683 (Tex.
App.—Dallas 2010, pet. denied); GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126
S.W.3d 257, 262 (Tex. App.—San Antonio 2003, pet. denied)). “Although we review de
novo a trial court’s judgment confirming an arbitration award, we give ‘strong deference
to the arbitrator with respect to issues properly left to the arbitrator’s resolution.’ Our
3 The grounds for vacating an arbitrator’s award are limited to those set out in section 171.088,
which states in pertinent part that “[o]n application of a party, the court shall vacate an award if” the
arbitrators exceeded their powers. TEX. CIV. PRAC. & REM. CODE ANN. § 171.088 (West, Westlaw through
2013 3d C.S.). The trial court vacated the arbitrator’s award on the sole basis that McLain exceeded his
powers. See id.
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review focuses on the integrity of the process, not the propriety of the result.” Black, 2013
WL 1687537, at *3 (citing Centex/Vestal, 314 S.W.3d at 683; Xtria L.L.C., 286 S.W.3d at
591).
An arbitrator has broad discretion in fashioning an appropriate remedy. Roe v.
Ladymon, 318 S.W.3d 502, 523 (Tex. App.—Dallas 2010, no pet.). An arbitrator’s award
is “legitimate only so long as it draws its essence” from the parties’ agreement. United
Steelworkers of Am. v. Enter. Wheel & Car. Corp., 363 U.S. 593, 597 (1960); Ancor
Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818, 830 (Tex. App.—
Dallas 2009, no pet.). In order to draw its essence from the agreement, the arbitrator’s
award “must have a basis that is at least rationally inferable, if not obviously drawn, from
the letter or purpose of the . . . agreement. . . . [T]he award must, in some logical way,
be derived from the wording or purpose of the contract.” Executone Info. Sys., Inc. v.
Davis, 26 F.3d 1314, 1325 (5th Cir. 1994); see Ancor Holdings, 294 S.W.3d at 830.
However, “[w]here an arbitrator exceeds his contractual authority, vacation or
modification of the award is an appropriate remedy.” Am. Eagle Airlines, Inc. v. Air Line
Pilots Ass’n, Int’l, 343 F.3d 401, 406 (5th Cir. 2001) (quoting Delta Queen Steamboat Co.
v. Dist. 2 Marine Eng’rs Beneficial Ass’n, AFL–CIO, 889 F.2d 599, 602 (5th Cir. 1989)).
An arbitrator exceeds his powers when he decides matters not properly before him by
departing from the arbitration agreement, “and, in effect, dispenses his own idea of justice
that the award may be unenforceable.” Centex/Vestal, 314 S.W.3d at 684 (citing Major
League Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001)). “To determine
whether an arbitrator exceeded his powers, we must examine the language in the
arbitration agreement.” Allstyle Coil Co., L.P. v. Carreon, 295 S.W.3d 42, 44 (Tex. App.—
6
Houston [1st Dist.] 2009, no pet.) (quoting Glover v. IBP, Inc., 334 F.3d 471, 474 (5th Cir.
2003)); see Rapid Settlements, Ltd. v. Green, 294 S.W.3d 701, 707 (Tex. App.—Houston
[1st Dist.] 2009, no pet.) (determining that the arbitrator exceeded his powers in issuing
award against party not subject to arbitration). “The single question is whether the award,
however arrived at, is rationally inferable from the contract.” Anderman/Smith Operating
Co. v. Tenn. Gas Pipeline Co., 918 F.2d 1215, 1219 n. 3 (5th Cir. 1990); see Ancor
Holdings, 294 S.W.3d at 829 (“The award must be derived in some way from the wording
and purpose of the agreement, and we look to the result reached to determine whether
the award is rationally inferable from the contract.”).
When determining whether an arbitrator has exceeded his powers, any doubts
concerning the scope of what is allowed should be resolved in favor of arbitration. See
Myer v. Americo Life, Inc., 232 S.W.3d 401, 408 (Tex. App.—Dallas 2007, no pet.). “A
mistake of fact or law in the application of substantive law is insufficient to vacate an
arbitration award.” Pheng Invs., Inc. v. Rodriquez, 196 S.W.3d 322, 329 (Tex. App.—Fort
Worth 2006, no pet.) (citing Vernon E. Faulconer, Inc. v. HFI, Ltd. P’ship, 970 S.W.2d 36,
39 (Tex. App.—Tyler 1998, no pet.); J.J. Gregory Gourmet Servs., 927 S.W.2d 31, 33
(Tex. App.—Houston [1st Dist.] 1995, no writ)). “An arbitration award has the same effect
as the judgment of a court of last resort; therefore, all reasonable presumptions are
indulged in favor of the award, and the award is conclusive on the parties as to all matters
of fact and law.” Id.
III. MCLAIN’S AUTHORITY
The issue before us is whether the trial court properly vacated the McLain
Arbitration Award on the basis that McLain exceed his powers. By their first and second
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issues, appellants argue that Wild did not show that McLain exceeded his powers. We
agree.
A. Failing to Consider and Rule on Issues Ordered by the Trial Court
Wild argues that the trial court could have vacated the McLain Arbitration Award
on the basis that McLain exceeded his powers by not considering her various claims
against appellants. According to Wild, the trial court ordered the parties to arbitrate her
“claims for an accounting, conversion, fraud, unjust enrichment, judgment for quitclaim
deed, mineral deeds, order prohibiting Executor from alienating estate mineral properties
and ordering [appellants] to defend adverse possession claims, breach of contract, and
breach of fiduciary duty.” Wild states that McLain, however, limited the arbitration to two
issues, which did not include any of her claims.
However, we conclude that the evidence presented to the trial court does not
support such a conclusion. In his Arbitration Award, McLain stated that “Generally
speaking, the disputes before the arbitrator stem from two separate issues.” The McLain
Arbitration Award then stated, “The first issue involves numerous parcels of real property
not explicitly addressed by Mr. Latter’s Report and Decision (described in detail in the
Arbitrator’s Decision as Section A properties),” and “[t]he second issue pertains to the
minerals in, on or under certain properties owned by Frank Schuster Farms, Inc.,
(described in detail in the Arbitrator’s decision as Section B Mineral Rights).” The McLain
Arbitration Award then set out McLain’s decision regarding ownership of the disputed
properties and their mineral interests. We conclude that by making this general
statement, McLain did not limit the arbitration to consideration of ownership of the mineral
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interests and the property.4 We construe McLain’s statement as summarizing the
evidence that had been presented to him at the arbitration hearing. We cannot construe
McLain’s statement as evidence that he limited the arbitration to two issues only and failed
to allow Wild to present evidence regarding her other claims against appellants.
Moreover, after a two-day hearing, McLain ruled that “Wild is not entitled to
damages and therefore no second hearing will be necessary” and that “[a]ll claims made
by the parties to this litigation and not specifically addressed in the Arbitrator’s rulings set
forth above are denied.” Thus, McLain ruled that Wild should not prevail on any of her
claims against appellants. Finally, without a transcript of the arbitration proceedings, we
are required to presume that the evidence adequately supported the McLain Arbitration
Award, including his denial of Wild’s claims. See Statewide Remodeling, Inc. v. Williams,
244 S.W.3d 564, 568 (Tex. App.—Dallas 2008, no pet.) (establishing that “[w]hen a non-
prevailing party seeks to vacate an arbitration award, it bears the burden in the trial court
of bringing forth a complete record that establishes its basis for vacating the award” and
when no transcript of the proceedings exist the appellate court must presume that the
evidence supports the arbitrator’s award); see also Willms v. Ams. Tire Co., Inc., 190
S.W.3d 796, 803 (Tex. App.—Dallas 2006, pet. denied) (“[W]hen an appellant fails to
bring a reporter’s record, an appellate court must presume the evidence presented was
sufficient to support the trial court’s order.”). Based upon our de novo review, we cannot
4 It appears to us that the trial court also determined that McLain’s statement was not evidence that
he limited the evidence during the McLain Arbitration. Regarding McLain’s statement, the trial court said,
“What does the word ‘generally speaking,’ how is that to be interpreted? If he says this only involves two
disputes, two separate issues, I could see that be a stronger argument for you, but when he says, ‘generally
speaking,’ that seems to be just kind of in general, in summary. I mean he doesn’t really say that he’s not
considering all the issues.” Thus, we disagree with Wild that the trial court found that McLain exceeded his
powers on that basis.
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conclude that the evidence established that McLain failed to consider and rule on issues
ordered by the trial court. Thus, the trial court could not have found that McLain exceeded
his authority on that basis.
B. Attorney’s Fees
In response to appellants’ claim that she did not demonstrate that McLain
exceeded his powers, Wild argues that McLain exceeded his powers by awarding
attorney’s fees to appellants without evidentiary support.5 Again, without a transcript of
the arbitration proceedings, we must presume that the evidence supported McLain’s
ruling. See Statewide Remodeling, Inc., 244 S.W.3d at 568; see also Willms, 190 S.W.3d
at 803. Here, we must presume that the evidence supports McLain’s determination that
appellants were entitled to $75,000 in attorney’s fees. Thus, upon our de novo review,
we cannot conclude that the trial court properly vacated McLain’s arbitration award on the
basis that McLain exceeded his powers by awarding attorney’s fees.
C. Award of the Mineral Rights
Appellants argue that McLain did not exceed his powers by awarding the mineral
interests to them. Wild claims that the “[t]he separate property mineral interests and one-
half of the community mineral interests of Frank Schuster passed through his will to a
trust which upon termination were to pass in equal shares to his three children, Kathleen
Wild ([a]ppellee), Frank Schuster ([a]ppellant) and Frances Rebecca Schuster.”
5 Wild did not contend to the trial court that McLain was barred by the Settlement Agreement from
awarding attorney’s fees. Instead, she complained that the evidence that appellants relied on for support
of attorney’s fees had been redacted and thus was insufficient to support the award. However, appellants’
attorney informed the trial court that he had testified at the McLain Arbitration, and we have no record of
that proceeding. Accordingly, we are required to presume that the evidence presented to McLain supported
the award of attorney’s fees. See Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564, 568 (Tex.
App.—Dallas 2008, no pet.); see also Willms v. Ams. Tire Co., Inc., 190 S.W.3d 796, 803 (Tex. App.—
Dallas 2006, pet. denied).
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However, whether the mineral interests passed through the will or were conveyed to
Frank Schuster Farms, Inc. is a question of fact that McLain must have determined in
favor of appellants. See Pheng Invs., Inc. v. Rodriquez, 196 S.W.3d 322, 329 (Tex.
App.—Fort Worth 2006, no pet.) (“A mistake of fact or law in the application of substantive
law is insufficient to vacate an arbitration award.”). And we are required to presume that
the evidence supports McLain’s award of the mineral interests. See Statewide
Remodeling, Inc., 244 S.W.3d at 568; see also Willms, 190 S.W.3d at 803.
Moreover, if McLain awarded property within the scope of the arbitration
agreement, he did not exceed his powers. Wild did not allege to the trial court that the
properties at issue were not subject to the arbitration agreement. Wild’s challenge to
McLain’s Arbitration Award was instead that McLain decided the issue incorrectly.
However, “[a] complaint that the evidence does not support the arbitrator’s award . . . is
not a complaint that the arbitrator exceeded his powers.” Pheng Invs., Inc., 196 S.W.3d
at 330. Thus, even assuming, without deciding, that McLain’s decision is incorrect, this
does not support a conclusion that he exceeded his powers. See id. at 329 (providing
that a mistake of fact or law does not support a claim that the arbitrator exceeded his
powers).
Finally, the Texas Supreme Court has stated that the “authority of arbitrators is
derived from the arbitration agreement and is limited to a decision of the matters
submitted therein either expressly or by necessary implication.” Gulf Oil Corp. v. Guidry,
327 S.W.2d 406, 408 (Tex. 1959). Here, the arbitration agreement stated that “[a]ll
disputes and controversies of every kind and nature between the parties hereto arising
out of or connection with” the Settlement Agreement would go to arbitration. The
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Settlement Agreement included the properties at issue in this case. The arbitration
agreement allowed for any disputes between the parties not only arising out the
Settlement Agreement, but also required arbitration of any disputes in connection with the
Settlement Agreement. Thus, we conclude that any disagreement regarding ownership
of those properties, including ownership of the mineral estates, which are connected with
the properties, was subject to arbitration.6 In addition, Wild asked McLain to award the
mineral interests in the properties to her. We sustain appellants’ first and second issues.
IV. CONCLUSION
We reverse the trial court’s order vacating the arbitrator’s award and render
judgment confirming the award.
/s/ Rogelio Valdez
ROGELIO VALDEZ
Chief Justice
Delivered and filed the
31st day of July, 2014.
6 We note that at the hearing to vacate the arbitrator’s award, Wild’s trial attorney acknowledged
that at the McLain Arbitration, each party presented evidence regarding who owned the mineral rights to
the disputed properties.
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