Leonard K. Hoskins v. Colonel Clifton Hoskins and Hoskins Inc. ( 2014 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-13-00859-CV
Leonard K. HOSKINS,
Appellant
v.
Colonel Clifton HOSKINS and
Colonel Clifton HOSKINS and Hoskins, Inc.,
Appellees
From the 438th Judicial District Court, Bexar County, Texas
Trial Court No. 2013-CI-03136
Honorable Peter A. Sakai, Judge Presiding
Opinion by: Catherine Stone, Chief Justice
Sitting: Catherine Stone, Chief Justice
Karen Angelini, Justice
Rebeca C. Martinez, Justice
Delivered and Filed: October 15, 2014
AFFIRMED
Pursuant to an order of a bankruptcy court, Leonard K. Hoskins, Colonel Clifton Hoskins,
and Hoskins, Inc. (the “Company”) were all parties to an arbitration proceeding. After a final
arbitration award was entered with regard to Leonard’s claims against Clifton and the Company,
Leonard filed a motion to vacate the arbitration award, while Clifton and the Company filed a
motion to confirm the arbitration award. Leonard now appeals the trial court’s judgment
confirming the arbitration award in accordance with its order granting the motion to confirm and
denying the motion to vacate. We affirm the trial court’s judgment.
04-13-00859-CV
BACKGROUND
When Lee Roy Hoskins, Sr. died in 1985, his wife, Hazel Hoskins, became the executrix
of his estate and the trustee of a marital trust created under Lee Roy’s will. Upon Lee Roy’s death,
Hazel became the owner of one-half of the stock of the Company, and the other half was owned
by the marital trust. Hazel is the sole beneficiary of the marital trust during her life, and the trustee
is authorized to distribute all income and such principal as necessary to “maintain and support
[Hazel] in health and in reasonable comfort;” however, because Hazel is both the trustee of the
trust and a beneficiary, she does not have the power to distribute income or principal to herself.
Upon Hazel’s death, the trust will terminate, and its corpus will be distributed to Lee Roy’s
descendants.
Leonard and Clifton are two of Lee Roy and Hazel’s children. 1 In 2002, Hazel, Leonard,
and Clifton were parties to a settlement agreement which was approved by a bankruptcy court. In
addition to approving the settlement, the bankruptcy court also entered a permanent injunction
prohibiting any of the parties from bringing or continuing any litigation against any of the other
parties without first applying for authority to do so from the bankruptcy court.
In 2008, Leonard filed a lawsuit against Clifton and Hazel, alleging various causes of action
relating to the Company’s conveyance of the Tilden Ranch to Clifton. Leonard subsequently non-
suited the lawsuit due to the permanent injunction. After various motions were filed with the
bankruptcy court regarding the new dispute, the bankruptcy court ultimately ordered Clifton,
Hazel, and Leonard to arbitration in August of 2011. The Company voluntarily joined the
arbitration. Prior to proceeding with the arbitration, the parties signed an agreement to arbitrate
under the Texas Arbitration Act.
1
Lee Roy and Hazel’s third child is not involved in this proceeding.
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In September of 2011, Leonard filed his complaint in arbitration challenging a 2002
promissory note from the Company to Clifton and the sale of the Tilden Ranch by the Company
to Clifton. The complaint also asserted that Hazel allowed property of the estate and marital trust
to be improperly transferred to Clifton, and that Clifton:
… has been serving as a defacto trustee and has effectively controlled the Estate
and Trusts created under the Will of Lee Roy Hoskins, Sr. Accordingly, Cliff’s
actions also constitute a breach of fiduciary duty to … the beneficiaries of the Estate
of Lee Roy Hoskins, Sr.
In his prayer for relief, Leonard requested a declaration that the note and the conveyance of the
Tilden Ranch were void and “an order setting aside any conveyance of Hoskins, Inc. or Estate
property to and for the benefit of [Clifton] or anyone on his behalf, which was made for less than
fair market consideration.” Clifton and the Company filed a joint reply to the complaint, and
Leonard filed a response to the reply.
In November of 2011, Clifton and the Company filed a motion for summary judgment,
asserting Leonard’s claims regarding the conveyance of the Tilden Ranch were barred by
limitations and Leonard lacked standing to challenge the conveyance by the Company because he
was not a shareholder of the Company. Leonard filed a response, asserting the discovery rule and
tolling as defenses to the limitations argument. With regard to standing, Leonard argued that
Hazel’s dealings with the stock of the Company were burdened by her fiduciary duty to Leonard
as a beneficiary of the marital trust. After a hearing on January 19, 2012, the arbitrator granted
the summary judgment in part. The order, which was signed by the arbitrator on February 14,
2012, expressly stated that the order did not dispose of Clifton and the Company’s claims for
attorney’s fees. The summary judgment order dismissed any and all claims by Leonard against
Clifton and the Company; however, the order retained the arbitrator’s jurisdiction over numerous
claims against Hazel.
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In June of 2012, Leonard filed a supplemental complaint. Without conducting any
additional hearings, the arbitrator signed a final arbitration award on February 20, 2013, which
again dismissed all claims by Leonard against Clifton and the Company and awarded them
attorneys’ fees. On March 13, 2013, the arbitrator signed an order severing the claims against
Clifton and the Company from the pending claims against Hazel. 2
As previously noted, Clifton and the Company filed a motion to confirm the arbitration
award, and Leonard filed a motion to vacate the arbitration award. 3 The trial court held a hearing
on the motion and allowed the parties to file post-hearing briefs. After considering the motions
and the briefs, the trial court granted the motion to confirm the arbitration award and denied the
motion to vacate.
STANDARD OF REVIEW
“We review the trial court’s confirmation of [an] arbitration award de novo.” City of
Laredo v. Mojica, 399 S.W.3d 190, 194-95 (Tex. App.—San Antonio 2012, pet. denied).
“Arbitration awards are entitled to great deference by the courts, so we must include all reasonable
presumptions in favor of the award, and indulge none against it.” Id. at 195.
“Because Texas law favors arbitration, judicial review of an arbitration award is
extraordinarily narrow.” East Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex.
2010). “A mere mistake of law or fact is insufficient to set aside an arbitration award.” Grand
Homes 96, L.P. v. Loudermilk, 208 S.W.3d 696, 705 (Tex. App.—Fort Worth 2006, pet. denied);
see also City of Laredo, 399 S.W.3d at 195 (“Review is so limited that an arbitration award may
not be vacated even if there is a mistake of fact or law.”).
2
The arbitrator appointed a receiver for the trusts in April of 2013.
3
The receiver also filed a motion to vacate; however, the receiver did not appeal.
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04-13-00859-CV
PERMISSIBLE GROUNDS FOR VACATING AWARD
In seven of the issues Leonard raises on appeal, he contends the arbitration award should
be vacated because the arbitrator acted in “manifest disregard for the law.” Clifton and the
Company counter that “manifest disregard for the law” is not a proper ground for vacating an
arbitration award under the Texas Arbitration Act. 4
As recognized by this court, the United States Supreme Court’s holding in Hall Street
Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008), precludes the continued use of “manifest
disregard for the law” as a ground for vacating an award in cases in which the Federal Arbitration
Act applies. See Chandler v. Ford Motor Credit Co., LLC, No. 04-08-00100-CV, 2009 WL
538401, at *3 (Tex. App.—San Antonio Mar. 4, 2009, no pet.). The question presented in this
appeal is whether “manifest disregard for the law” provides a non-statutory common law ground
for vacating an award in cases where the TAA, as opposed to the FAA, applies.
Although Texas appellate courts have historically applied “manifest disregard of the law”
as a common law ground for vacating arbitration awards, the Texas Supreme Court has never
directly addressed the issue of whether common law grounds are preempted by the TAA. See
Quinn v. Nafta Traders, Inc., 257 S.W.3d 795, 799 n.3 (Tex. App.—Dallas 2008), rev’d on other
grounds, 339 S.W.3d 84 (Tex. 2011). For example, in addressing gross mistake, a Texas common-
law ground for vacating an arbitration award, the Texas Supreme Court “assum[ed] without
deciding that [the appellant could] rely on the gross mistake standard under the common law to
attack the arbitrator’s award.” Callahan & Assocs. v. Orangefield Ind. Sch. Dist., 92 S.W.3d 841,
844 (Tex. 2002); see also Beech Street Corp. v. Baylor Health Care Sys., No. 05-12-01671-CV,
4
As previously noted, the parties agreed to arbitrate under the Texas Arbitration Act.
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2014 WL 3743864, at *2 (Tex. App.—Dallas July 29, 2014, no pet. h.) (noting manifest disregard
is a federal common-law doctrine while gross mistake is a Texas common-law doctrine).
In his reply brief, Leonard argues that manifest disregard remains a viable ground for
vacating an award, citing Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex. 2011), which
rejected the holding in Hall Street that the parties to an arbitration cannot enter into “an agreement
that limits the authority of an arbitrator in deciding a matter and thus allows for judicial review of
an arbitration award for reversible error.” The Texas Supreme Court held that the “TAA presents
no impediment” to such an agreement. Id. In reaching this holding, however, the Texas Supreme
Court did not rely on any common-law ground as a basis for vacating an award. Instead, the court
relied on the statutory ground that the arbitrator would exceed his powers under such an agreement
if the award contained reversible error. Id. at 89-97; see also TEX. CIV. PRAC. & REM. CODE
§ 171.077(a)(3) (providing trial court shall vacate an award if the arbitrators exceeded their
powers). Moreover, the Texas Supreme Court expressly stated: “In construing the TAA, we are
obliged to be faithful to its text.” Nafta Traders, Inc., 339 S.W.3d at 97. Section 171.087 of the
TAA provides: “Unless grounds are offered for vacating, modifying, or correcting an [arbitration]
award under Section 171.088 [Vacating Award] or Section 171.091 [Modifying or Correcting
Award], the court, on application of a party, shall confirm the award.” TEX. CIV. PRAC. & REM.
CODE ANN. § 171.087 (West 2011). Thus, faithfully applying this text, the TAA would appear to
limit the grounds on which an arbitration award can be vacated to those set forth in Section
171.088, thereby preluding any reliance on common law grounds.
Even before the United States Supreme Court’s decision in Hall Street, one of our sister
courts held that manifest disregard was not a standard for vacating an award under the TAA,
reasoning:
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[T]he manifest disregard standard is a federal common law doctrine, the underlying
rationale for which the United States Supreme Court has largely rejected as
reflecting a general suspicion of the desirability of arbitration and competence of
arbitration tribunals that is difficult to reconcile with the Court’s subsequent
decisions involving the Federal Arbitration Act. Moreover, Action Box has cited,
and we have found, no Texas case applying the manifest disregard standard except
in circumstances where the Federal Arbitration Act, rather than the Texas
Arbitration Act, applied. Because there is no allegation in this case that the federal
act applies here, Action Box has not demonstrated that the manifest disregard
standard has any application to this case. Accordingly, we decline to apply it and
overrule Action Box’s second issue, asserting a violation of that standard.
Action Box Co. v. Panel Prints, Inc., 130 S.W.3d 249, 252 (Tex. App.—Houston [14th Dist.] 2004,
no pet.) (internal citations omitted). While not directly addressing manifest disregard, the
Texarkana court has recently stated:
Under the TAA, the trial court must confirm an arbitration award on application of
a party unless grounds are offered pursuant to Section 171.088 for modifying or
correcting the award under Section 171.091 for vacation of it. Unless the parties
otherwise mutually agree, a court’s ability to vacate an arbitration award is limited
to the circumstances expressly identified in the statute.
Estate of Flournoy v. Risner, No. 06-13-00071-CV, 2014 WL 731023, at *2 (Tex. App.—
Texarkana Jan. 9, 2014, pet. denied) (internal citations omitted). We note, however, that the Dallas
court has concluded that “the FAA does not preempt any common-law grounds that might exist to
vacate an award under the TAA.” Beech Street Corp., 2014 WL 3743864, at *2.
In reaching its decision in Hall Street, the United States Supreme Court considered
language in the FAA which is substantially similar to the language in the TAA, and noted that the
text of the statute compelled a reading of the statutory categories for vacating an award as
exclusive. 552 U.S. at 586. The Court then concluded, “the statutory text gives us no business to
expand on the statutory grounds.” Id. at 589. Similarly, the statutory text in Section 171.087 is
clear and compelling and “gives us no business to expand on the statutory grounds.” Id.Accordingly, based on the language in Section 171.087, we hold that the statutory grounds for
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vacating an arbitration award contained in Section 171.088 are the exclusive grounds for vacating
an award.
RIGHT TO A HEARING
The sole statutory ground asserted by Leonard for vacating the arbitration award was that
the arbitrator conducted the hearing contrary to Section 171.047. See TEX. CIV. PRAC. & REM.
CODE ANN. § 171.088(a)(3)(D) (West 2011) (providing trial court shall vacate an arbitration award
if the arbitrator conducted the hearing contrary to Section 171.047). Under Section 171.047, a
party at an arbitration hearing is entitled to be heard and present evidence material to the
controversy. Id. at § 171.047.
1. Waiver
Clifton and the Company first contend that Leonard waived this issue by not raising it in
his motion to vacate. Clifton and the Company later concede, however, that Leonard raised this
issue in his post-hearing brief. At the conclusion of the hearing, the trial court took the matter
under advisement and expressly invited post-hearing briefing. Moreover, the trial court’s order
states that the trial court considered the parties’ briefs. Accordingly, we hold that Leonard properly
preserved this issue for our review.
2. Claims Requiring a Hearing
With regard to his original complaint, Leonard concedes that his complaint “focused” on
the conveyance of the Tilden Ranch which was the basis of Clifton and the Company’s motion for
summary judgment; however, he asserts that his claims were not limited to that conveyance. In
briefing this issue, however, Leonard asserts the arbitrator violated Section 171.047 by failing to
conduct a hearing on the claims raised in his supplemental complaint. 5 Leonard’s brief concludes
5
In a separate issue, Leonard complains of the arbitrator manifestly disregarding the law by granting more relief than
was requested in the motion for summary judgment. Based on our holding that “manifest disregard for the law” is not
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the issue by stating: “The arbitrator’s dismissal of the claims in the supplemental complaint
without a hearing require reversal and vacating the arbitration award.” Therefore, we focus our
attention on the supplemental complaint.
During oral argument, a focal point of the discussion was on the specific claims asserted
in the supplemental complaint. Having extensively reviewed the supplemental complaint in view
of the arguments presented, we conclude the following. In the supplemental complaint, Leonard
generally requested a rescission of “all transactions entered into by Hazel Hoskins, Trustee or as
an officer of [the Company].” Leonard again challenged the conveyance of the Tilden Ranch by
the Company, but noted that two tracts of land were excepted from that conveyance, namely a
12.28 acre tract of land and a 480.17 acre tract of land. Leonard then also challenged: (1) the
conveyance of the mineral estate in the 12.28 acre tract of land by the Company to Clifton; and (2)
the conveyance of the mineral estate in the 480.17 acre tract of land by Hazel and the Company to
a living trust created by Hazel. Finally, Leonard asserted a claim for breach of fiduciary duty
against Hazel in her capacities as: (1) an officer, director, and shareholder of the Company; (2)
trustee; and (3) executrix. Although Leonard alleged that Clifton is not a bona fide purchaser of
the property conveyed to him, the supplemental complaint does not allege a separate claim against
Clifton. Finally, in his prayer for relief Leonard requested “that all wrongful transfers and sales by
Hazel in her multiple capacities and Hoskins, Inc. be identified, annulled, and voided.” In
a proper ground for vacating an arbitration award, however, we do not separately address this issue. We note, however,
this court must presume adequate reasoning supported an arbitration award in the absence of a transcription of the
arbitration proceedings. See Grand Homes 96, L.P., 208 S.W.3d at 705. In the absence of a record of the arbitration
proceedings in this case, we would be unable to determine whether the arbitrator considered argument at the hearing
regarding the more general allegations contained in Leonard’s original complaint. Even if the arbitrator was required
to adhere to summary judgment principles in conducting the hearing and thereby erred in considering arguments
relating to the more general allegations, this error would likely constitute a mistake of law that would not be sufficient
to set aside the award. Id.; see also City of Laredo, 399 S.W.3d at 195.
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summary, the supplemental complaint alleged: (1) wrongful acts by Hazel; (2) wrongful transfers
by Hazel in multiple capacities; and (3) wrongful transfers by the Company of two mineral estates.
3. Analysis
The issue thus presented for our review is whether Leonard was deprived of his right to be
heard on the claims added in the supplemental complaint as summarized above. With regard to
the claims against Hazel, those claims have been severed, remain pending before the arbitrator,
and are not before us in this appeal. With regard to the Company’s conveyance of the two mineral
estates, “summary judgment may be properly granted on later-pleaded causes of action if the
grounds actually asserted [in the motion] show that the plaintiff could not recover on the later-
pleaded causes of action.” American Zurich Ins. Co. v. Barker Roofing, L.P., 387 S.W.3d 54, 67
(Tex. App.—Amarillo 2012, no pet.). Stated differently, if the movant has conclusively disproved
an element common to the claim addressed in the motion and the added claim, summary judgment
may be granted on the added claim. Ritter v. Las Colonitas Condominium Ass’n, 319 S.W.3d 884,
891 (Tex. App.—Dallas 2010, no pet.); Wilson v. Davis, 305 S.W.3d 57, 73 (Tex. App.—Houston
[1st Dist.] 2009, no pet.). Moreover, upholding a summary judgment as to an added claim would
appear to be even more appropriate where the element common to the claims is the lack of
standing, which can even be raised for the first time on appeal. Tex. Ass’n of Business v. Tex. Air
Control Bd., 852 S.W.2d 440, 445 (Tex. 1993); see also Lapiner v. Maimon, 429 S.W.3d 816, 825-
26 (Tex. App.—Houston [14th Dist.] 2014, pet. filed) (Frost, C.J., concurring) (noting former
shareholder’s lack of standing could be raised for first time on appeal); Somers ex rel. EGL, Inc.
v. Crane, 295 S.W.3d 5, 13 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (addressing
plaintiff’s lack of standing to sue derivatively on corporation’s behalf). In this case, the only
difference between Leonard’s original complaint relating to the Company’s conveyance of the
Tilden Ranch and the claims in his supplemental complaint relating to the Company’s conveyance
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of the mineral estates is the property conveyed. Therefore, Leonard’s lack of standing to challenge
conveyances by the Company, which was a ground asserted in Clifton and the Company’s motion
for summary judgment, is an element common to all of the claims, and the arbitrator could properly
have dismissed Leonard’s claims in the supplemental complaint relating to the Company’s
conveyance of the two mineral estates on the ground that Leonard lacked standing to assert the
claims. 6
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In his final issue, Leonard complains about the trial court’s findings of fact and conclusions
of law. First, we agree with Clifton and the Company that the issue is not properly briefed as it
contains no citations to authority. In addition, we review the trial court’s ruling under a de novo
standard. City of Laredo, 399 S.W.3d at 194-95. Even assuming the trial court made erroneous
findings of fact or conclusions of law, they did not affect our review. See Statewide Remodeling,
Inc. v. Williams, 244 S.W.3d 564, 567 (Tex. App.—Dallas 2008, no pet.) (noting appellate court
reviews entire record and applies de novo standard of review).
CONCLUSION
The trial court’s judgment is affirmed.
Catherine Stone, Chief Justice
6
Leonard does not challenge the ruling that he lacked standing in this appeal.
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