IQ Holdings, Inc., Yohanne Gupta and Saroj Gupta v. Villa D'Este Condominium Owner's Association, Inc. and Lee Blask

Opinion issued March 13, 2014
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00914-CV
———————————
IQ HOLDINGS, INC., YOHANNE GUPTA, AND SAROJ GUPTA,
Appellants
V.
VILLA D’ESTE CONDOMINIUM OWNER’S ASSOCIATION, INC. AND
LEE BLASK, Appellees
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Case No. 2010-04815
OPINION
The parties to this appeal executed a Rule 11 settlement agreement at
mediation in which they agreed, among other things, to (1) execute final settlement
documents to be drafted after the conclusion of the mediation and (2) return to the
mediator to have her arbitrate, resolve and render a final decision in disputes
“regarding the drafting of the [final settlement] agreement and interpretation of the
intent of the parties.” A dispute regarding the intent of the parties arose during the
drafting of the final settlement agreement, and the parties submitted it to the
arbitrator, who issued a final award regarding the meaning of the disputed terms
and directed the parties to sign final settlement documents incorporating them.
Appellants IQ Holdings and Yohane and Saroj Gupta (collectively “Gupta
Parties”) moved to vacate and modify portions of the award. The Gupta Parties
complained that the arbitrator ascribed too broad a meaning to the term “Covenant
of Mutual and Peaceable enjoyment” and that the Covenant she directed the parties
to sign acted as a prior restraint on speech. They also objected that the arbitrator
did not require the parties to “expunge” a lis pendens and instead ruled that the
parties would satisfy the Rule 11 agreement by having the lis pendens “terminated,
released and cancelled” such that it would “have no further legal force or effect.”
Appellees Villa D’Este Condominium Association and Lee Blask
(collectively “the Association”) moved to confirm the award and asserted a claim
for breach of the Rule 11 agreement, seeking specific performance (the execution
of the final settlement documents in accordance with the arbitrator’s award) and
attorney’s fees.
2
The trial court confirmed the award. It also granted summary judgment in
favor of the Association on its breach of contract claim, ordering specific
performance (the execution of the final settlement documents), but denying the
Association’s request for attorney’s fees.
Both sides appealed. We modify portions of the judgment and affirm the
judgment as modified.
Background
IQ Holdings bought a condominium unit at the Villa D’Este Condominiums
in 2006. In 2009, IQ Holdings sold the unit to Yohanne Gupta, who is its
shareholder and CEO, and Saroj Gupta, who is Yohanne’s mother. That same
year, IQ Holdings sued the Association to obtain access to its books and records.
The Association countersued, challenging the sale of the unit by IQ Holdings to the
Guptas on the basis that IQ Holdings failed to provide proper notice of the sale,
and thus deprived the Association of the opportunity to exercise its right of first
refusal. The Association filed a notice of lis pendens on the condominium unit in
the Harris County real property records.
The parties mediated the case on January 31, 2011. In the early morning
hours of February 1, they executed a one-page Rule 11 settlement agreement, the
relevant terms of which are:
3
The Parties have agreed to the material terms of a settlement that shall
be documented in formal settlement documents that will be prepared
in draft form by the Association’s counsel. The material terms are:
....
3. Covenant of Mutual and Peaceable enjoyment.
....
6. Dismissal with prejudice and expungement of the lis pendens.
7. The Parties agree to return to [the mediator] to Arbitrate and
resolve any disputes regarding the drafting of the agreement and
interpretation of the intent of the Parties. [The arbitrator’s] decisions
shall be final.
After the mediation, a dispute arose regarding the drafting of the final
settlement documents. Counsel for the Association proposed a draft final
settlement agreement, but the Gupta Parties rejected it as inconsistent with the Rule
11 agreement. The Association requested that the arbitrator resolve the dispute,
and the Gupta Parties consented, submitting to the arbitrator a set of proposed draft
final settlement documents.
Between February 28 and April 9, 2011, the arbitrator received evidence and
written submissions from the parties and conducted telephonic hearings with the
parties and counsel. On April 9, 2011, the arbitrator issued an award, attaching the
version of the final settlement documents she determined should be executed by
the parties, which incorporated portions of both sets of competing settlement
documents, along with various exhibits. Exhibit D was the Mutual Covenant of
Peaceable Enjoyment (“Covenant”), while Exhibit E was the Agreed Motion for
4
Dismissal with Prejudice and for Termination, Release and Cancellation of Notice
of Lis Pendens, with a proposed Order.
On April 12, the Gupta Parties requested that the arbitrator “modify, correct,
or clarify the initial award,” because, according to them, the arbitrator (1) included
a Covenant that acted as a prior restraint on their speech and (2) incorrectly failed
to “expunge” the lis pendens as required by the Rule 11 agreement.
On April 13, 2011, the arbitrator made a “Final Arbitration Award.” She
noted that some of the Gupta Parties’ points regarding the use of the word
“communication” in the Covenant were well taken, that she had made some of the
requested revisions to the Covenant, and that the documents should be further
revised to omit Saroj Gupta as a signatory. With respect to the lis pendens, the
arbitrator ruled that the parties did not intend, at the time they entered into the Rule
11, to seek a formal expungement and that their intention was merely to extinguish
the lis pendens, as contemplated by the Agreed Motion for Dismissal with
Prejudice and for Termination, Release and Cancellation of Lis Pendens, Exhibit E
to her award. The arbitrator directed the parties to sign the final settlement
documents reflecting her revisions by 1 p.m. on April 15, 2011. Mr. Gupta and IQ
Holdings did not sign.
The Association moved the trial court to confirm the Final Arbitration
Award. It also supplemented its pleadings, adding a claim that Mr. Gupta and IQ
5
Holdings breached the Rule 11 agreement by refusing to sign the final settlement
documents as directed by the arbitrator. The Association moved for summary
judgment on its breach of contract claim, seeking (1) specific performance in the
form of a judgment requiring Mr. Gupta and IQ Holdings to sign the final
settlement documents and (2) attorney’s fees. The Gupta Parties timely moved to
vacate or modify the award on the grounds that the arbitrator exceeded her powers
and acted in manifest disregard of the law by imposing a prior restraint on speech
and by failing to require expungement of the lis pendens.
After conducting a hearing on the various motions, the trial court denied the
motion to partially vacate or modify the award and granted the motion to confirm.
The trial court also granted the Association’s motion for summary judgment on the
basis that the Gupta Parties breached the Rule 11 agreement. Finding that the
breach caused the Association irreparable injury, the trial court ordered “a decree
of specific performance to compel the Gupta Parties to comply with, perform and
satisfy all of their obligations under the [Rule 11] Agreement, the Award, and the
Final Award.” The trial court denied the Association’s request for attorney fees,
stating it did so “because the Gupta Parties timely sought judicial review of the
Award and the Final Award.”
6
Review of Arbitration Award
We review de novo a trial court’s confirmation of an arbitration award.1
Royce Homes, L.P. v. Bates, 315 S.W.3d 77, 85 (Tex. App.—Houston [1st Dist.]
2010, no pet.). But review of an arbitration award is extraordinarily narrow. Id. at
85–86. Arbitration is favored as a means of dispute resolution; therefore, courts
indulge every reasonable presumption to uphold an award, and none against it. Id.
at 85; Kosty v. S. Shore Harbour Cmty. Ass’n, Inc., 226 S.W.3d 459, 462 (Tex.
App.—Houston [1st Dist.] 2006, pet. denied). An arbitration award is presumed
valid and entitled to great deference. Royce Homes, 315 S.W.3d at 85. A
reviewing court “may not substitute [its] judgment merely because [it] would have
reached a different decision.” Id. at 85; see Kosty, 226 S.W.3d at 463.
The grounds for vacating an arbitration award under the FAA are set forth in
Sections 10 and 11 of the FAA and are similar to those in the TAA. The FAA
permits vacatur “where the arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the subject matter
submitted was not made,” while the TAA states that vacatur is available “where
the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4); TEX. CIV. PRAC. &
1
The parties do not dispute the applicability of either the TAA or the FAA.
Accordingly, we apply both. See In re L&L Kempwood Assocs., L.P., 9 S.W.3d
125, 127–28 (Tex. 1999) (per curiam); Royce Homes, L.P. v. Bates, 315 S.W.3d
77, 85 (Tex. App.—Houston [1st Dist.] 2010, no pet.) (applying FAA and TAA to
the extent TAA is consistent with FAA).
7
REM. CODE ANN. § 171.088(a)(3)(A) (West 2011). An award also may be
corrected or modified, as opposed to vacated, under the FAA and TAA. A court
may modify an award under the FAA where the arbitrators “have awarded upon a
matter not submitted to them.” 9 U.S.C. § 11(b). Similarly, under the TAA, a
court may modify an award if 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 . . . .”
TEX. CIV. PRAC. & REM. CODE ANN. § 171.091(a)(2) (West 2011). The FAA, like
the TAA, mandates confirmation absent grounds for vacatur or correction or
modification. 2 Compare 9 U.S.C. § 9 with TEX. CIV. PRAC. & REM. CODE ANN.
§ 171.087 (West 2011).
However, a party seeking relief from an arbitration award on these bases
bears a heavy burden, as a court may not vacate an award on the grounds that the
arbitrator exceeded her powers even if the award is based upon a mistake in law or
fact. Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068–70 (2013); Royce
Homes, 315 S.W.3d at 86. A unanimous United States Supreme Court
underscored this point in Sutter:
2
One important distinction between the two statutes deserves mention: the TAA,
unlike the FAA, does not preclude parties from agreeing to limit the authority of
an arbitrator so as to allow for judicial review (and vacatur) of an arbitration award
for reversible error. See Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97 (Tex.
1991). But this distinction does not matter here because the parties had no such
agreement.
8
[C]onvincing a court of an arbitrator’s error—even his grave error—is
not enough. So long as the arbitrator was ‘arguably construing’ the
contract—which this one was—a court may not correct his mistakes
under § 10(a)(4). The potential for those mistakes is the price of
agreeing to arbitration.
133 S. Ct. at 2070 (citation omitted).
The Challenge to the Award
The Gupta Parties contend the award should be vacated, modified, or
corrected because the arbitrator exceeded her powers or awarded upon a matter not
submitted to her when she entered an award that, according to them, is an affront to
their constitutional right to speak freely and fails to effect the parties’ bargain with
respect to expungement of the lis pendens. See 9 U.S.C. §§ 10(a)(4), 11(b); TEX.
CIV. PRAC. & REM. CODE ANN. §§ 171.088(a)(3)(A), 171.091(a)(2).
An arbitrator exceeds her power by deciding a matter not properly before
her. Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818,
829 (Tex. App.—Dallas 2009, no pet.); Barsness v. Scott, 126 S.W.3d 232, 241
(Tex. App.—San Antonio 2003, pet. denied). Similarly, in order for modification
or correction to be appropriate under either the FAA or TAA, the arbitrator must
have awarded on a matter that the parties did not agree to submit to her.
Arbitration is a matter of contract, and the power and authority of an
arbitrator depends on the provisions under which he was appointed. Royce Homes,
315 S.W.3d at 86–87; Ancor Holdings, LLC, 294 S.W.3d at 829; see also Glover v.
9
IBP, Inc., 334 F.3d 471, 474 (5th Cir. 2003) (“To determine whether an arbitrator
exceeded his powers, we must examine the language in the arbitration
agreement.”). Where parties bargain for an arbitrator’s construction of their
agreement, an arbitral decision “even arguably construing or applying the contract”
must stand, regardless of a court’s view of its merits or demerits. Sutter, 133 S. Ct.
at 2068; Ancor Holdings, LLC, 294 S.W.3d at 829 (citing Executone Info. Sys., Inc.
v. Davis, 26 F.3d 1314, 1323 (5th Cir. 1994)) (relevant inquiry is whether the
arbitrator “had the authority, based on the arbitration clause and the parties’
submissions, to reach a certain issue, not whether the arbitrator correctly decided
the issue”). We may not vacate an arbitration award under section 10(a)(4) of the
FAA based on the arbitrator’s errors in interpretation or application of the law or
facts. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 671, 130 S.
Ct. 1758, 1767 (2010) (“It is not enough for petitioners to show that the
[arbitration] panel committed an error—or even a serious error.”).
A. Mutual Covenant of Peaceable Enjoyment
The Gupta Parties contend the award should not have been confirmed
because the Covenant acts as a prior restraint on free speech in violation of their
constitutional rights. See U.S. CONST. amend. I (“Congress shall make no law . . .
abridging the freedom of speech”); TEX. CONST. art. I, § 8 (“Every person shall be
at liberty to speak, write or publish his opinions on any subject, being responsible
10
for the abuse of that privilege . . . .”). More specifically, they urge that the
arbitrator erred in directing the parties to execute the Covenant because “[n]either
IQ nor Gupta agreed to any restraint on speech in this Covenant as part of the Rule
11 Agreement.”
Our review of an arbitration award, however, is confined to the question of
whether the arbitrator was authorized by the parties’ agreement to perform the task
of interpreting the parties’ contract; if she was so authorized, and if she arguably
did interpret the parties’ contract, we cannot vacate the award on the basis that she
performed her task poorly or rendered an erroneous award. Sutter, 133 S. Ct. at
2069. We thus analyze the parties’ arbitration agreement and the task the arbitrator
performed to determine whether the arbitrator arguably did what the contract
authorized her to do. Id.
The Rule 11 agreement provides: the parties “agree to return to [the
mediator] to Arbitrate and resolve any disputes regarding the drafting of the [final
settlement] agreement and interpretation of the intent of the parties. [The
arbitrator’s] decisions shall be final.” Not long after the mediation, the Association
proposed a draft form of settlement agreement, as the Rule 11 agreement required,
and the Gupta Parties refused to sign it, because, according to them, it did not
correctly reflect the Rule 11 agreement’s terms. The Association requested that the
arbitrator resolve the dispute, asking her to “exercise your authority to review the
11
attached settlement documents and determine that they comply with the Rule 11
Settlement Agreement.”
On March 7, 2011, the Gupta Parties made their own submission to the
arbitrator, which included their proposed draft settlement agreement, with exhibits,
which they asserted “more closely mirrored the Rule 11 agreement,” along with
objections to the Association’s proposed drafts, which they contended “attempt[ed]
to impose on IQ Holdings burdens far beyond the scope of that agreement.”
Although the record of the arbitration is not before us, the parties do not dispute
that the arbitrator received their submissions and held telephonic conferences with
them and their counsel to resolve their dispute.
On April 9, the arbitrator issued her initial award, which was a draft
settlement agreement, with exhibits, which she determined embodied the terms of
the Rule 11 agreement. Her cover email stated that “the general issues we have
arbitrated were embedded in the two drafts. So, my award as arbitrator provides
you with an executable basic document, unless you attorneys agree to changes.”
On April 12, counsel for the Gupta Parties requested modifications to
comport with the terms of the Rule 11 agreement. Counsel wrote the arbitrator: “I
know you attempted to craft a Proposed Award which balanced the positions of
both sides, yet I feel that several provisions submitted by the opposing side
exceeded the parties’ agreement in the Rule 11.” The letter complained about a
12
supposed prior restraint and various other issues, but nowhere suggested that the
arbitrator had acted without authority or decided a matter that the parties had not
agreed to submit to her.
In response, on April 13, the arbitrator issued her final award, which
reflected some correction and clarification of her initial award. For example, she
agreed that Saroj Gupta should not be a signatory. She also noted that some
suggested corrections to her use of the word “communication” in the Covenant
were well taken, and she revised the Covenant accordingly. She closed by noting
she did not anticipate any additional substantive changes and directing the parties
to complete the closing by 1:00 p.m. on April 15.
The complained-of portion of the Covenant, which is in fact mutual, states:
(c) The Parties covenant and agree that any actions and encounters
between them and their respective agents should not be
unprofessional, unduly annoying, alarming or cause personal
embarrassment, and the Parties shall refrain from any such conduct.
(d) The Parties covenant and agree that they will mutually respect the
right of the other to peaceably enjoy the occupancy and/or the work
environment of Villa d’Este, and the Parties agree, for themselves and
their representatives, to work cooperatively with respect for the rights
and duties of the other Party. The communication between the Parties
shall be for a legitimate purpose.
(e) The Parties covenant and agree to have a constructive and not
antagonistic environment and will endeavor in good faith to handle
business matters in a respectful manner and to handle disagreements
in a constructive and civil manner, so that the Parties may truly enjoy
the peace and benefit of an amicable settlement.
13
The Gupta Parties maintain that these provisions constitute a prior restraint
on speech 3 and assert that an arbitrator cannot trump free speech rights when the
parties never agreed “to any restraint on speech in this Covenant as part of the Rule
11 agreement.” But this frames the question incorrectly. The question is not
whether the Gupta Parties consented, in advance, to, for example, communicate
only for a legitimate purpose, as the Covenant requires. Rather, as Sutter teaches,
the question is only whether the arbitrator had authority—derived from the parties’
contract—to perform the task of construing the Rule 11 agreement, and, if so,
whether she “arguably” did so. The Gupta Parties nowhere contend that the
arbitrator lacked authority to decide what the parties meant when they agreed to a
“Covenant of Mutual and Peaceable Enjoyment”—they complain only that she
ascribed too broad a meaning to the term. 4 Moreover, the record demonstrates that
4 While the argument has some superficial appeal, it ignores paragraph 4(b) of the
Covenant, which expressly reserves the parties’ constitutional rights:
By this Covenant, no Party is seeking to, or agreeing to, waive,
abridge, impair or limit the rights assured by the Declaration,
the Texas Uniform Condominium Act, or the laws and
constitution of the State of Texas or of the United States.
(Emphasis added.) In any event, whether the Covenant actually abridges the
Gupta Parties’ free speech rights is a question we do not reach.
4
Specifically, the Gupta Parties contend that, although the Rule 11 agreement
reflects that the parties agreed to a “Covenant of Mutual and Peaceable
enjoyment,” they actually intended to agree only to a “covenant of quiet
enjoyment,” which is a covenant implied in favor of tenants in leases. See HTM
Rest., Inc. v. Goldman, Sachs & Co., 797 S.W.2d 326, 328 (Tex. App.—Houston
14
the arbitrator performed the task the parties bargained to have her perform.
Because the arbitrator interpreted the disputed provisions of the parties’ Rule 11
agreement, and the Rule 11 agreement gave her the authority to do just that, we
hold that the arbitrator, in rendering the award, decided the matter submitted to her
and therefore did not exceed her powers. See Sutter, 133 S. Ct. at 2070–71; Ancor
Holdings, LLC, 294 S.W.3d at 830 (arbitrator’s powers determined by examining
the arbitration clause to which parties agreed); Centex/Vestal v. Friendship W.
Baptist Church, 314 S.W.3d 677, 684 (Tex. App.—Dallas 2010, pet. denied)
(noting arbitrator’s authority is derived from arbitration agreement and holding
complaint that arbitrator erred by making legally incorrect determination was not
complaint that arbitrator exceeded powers); Allstyle Coil Co. v. Carreon, 295
S.W.3d 42, 44 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (scope of
arbitrator’s authority depends on agreement). It follows from this conclusion that
[14th Dist.] 1990, writ denied) (“In every lease of land , in the absence of express
language to the contrary, there is an implied covenant that the lessee shall have the
quiet, peaceful enjoyment of the leased premises.”). But the Rule 11 agreement
does not use the words “covenant of quiet enjoyment.” Nor do the Gupta Parties
harmonize the Rule 11 agreement’s use of the word “mutual” with their contention
that the parties meant only to create a unilateral “covenant of quiet enjoyment” in
the Gupta Parties’ favor.
15
we reject the Gupta Parties’ challenge to the award under sections 10(b) and 11(b)
of the FAA and Sections 171.088(a)(2)(A) and 171.091(a)(2) of the TAA. 5
The Gupta Parties also argue that the award should be vacated based on the
common-law doctrine of manifest disregard of the law. But we previously have
held that Hall Street forecloses that claim. Royce Homes, 315 S.W.3d at 90 (citing
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584, 128 S. Ct. 1396, 1403
(2008)); see Ancor Holdings, LLC, 294 S.W.3d at 829 (citing Hall St. Assocs. and
stating, “[M]anifest disregard of the law and gross mistake are not grounds for
vacating an arbitration award under the FAA . . . .”); see also Citigroup Global
Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009) (holding “manifest
disregard of the law” is not independent ground for vacating arbitration award
because it is not contained in FAA); Callahan & Assocs. v. Orangefield Indep. Sch.
Dist., 92 S.W.3d 841, 844 (Tex. 2002) (statutory grounds for allowing court to
modify award are limited to those TAA expressly identifies). And, even if that
were a viable theory for vacatur, there is no indication in the record that the
arbitrator acknowledged and deliberately flouted the law. See Prestige Ford v.
Ford Dealer Comp. Servs., Inc., 324 F.3d 391, 395 (5th Cir. 2003) (manifest
disregard by arbitrator requires that arbitrator recognized clearly governing
5
The Gupta Parties’ reliance on Brammer v. KB Home Lone Star, L.P., 114 S.W.3d
101 (Tex. App.—Austin 2003, no pet.) is unavailing because, while it analyzes
free speech claims, it does not involve an arbitration agreement.
16
principle and ignored it), overruled by Hall St. Assocs., 552 U.S. at 585, 128 S. Ct.
at 1403–04. Accordingly, we will not disturb the award based on an alleged
manifest disregard of the law.
Finally, the Gupta Parties contend that the Convention on the Recognition
and Enforcement of Foreign Arbitral Awards of June 10, 1958, provides a basis for
vacatur, modification, or correction. U.N. Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330
U.N.T.S. 3 [hereinafter Convention]; see also 9 U.S.C. §§ 201–208. We disagree.
The purpose of the Convention is to leave to the country in which or under the law
of which the award was made—the country of primary jurisdiction—the decision
whether to set aside an award. Gulf Petro Trading Co. v. Nigerian Nat’l Petroleum
Corp., 512 F.3d 742, 746 (5th Cir. 2008). The Gupta Parties rely on two
provisions in the Convention’s Article V, but those govern recognition and
enforcement in countries in which the award was not made and thus do not govern
this case.6 Gulf Petro Trading Co., 512 F.3d at 746–47; see also Karaha Bodas
Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274,
6
The first is similar to provisions of the FAA and TAA that we have already
decided were not satisfied. See Convention, art. V(a)(1)(c) (permitting a country
of secondary jurisdiction to refuse recognition and enforcement if the award
“contains decisions on matters beyond the scope of the submission to arbitration”).
The second permits a country having secondary jurisdiction to refuse recognition
and enforcement if the award would be contrary to the public policy of that
country. See Convention, art. V(a)(2)(b).
17
287–88 (5th Cir. 2004) (noting courts of a primary jurisdiction country apply their
own domestic laws in evaluating a request to annul or set aside an arbitral award).
Here, there is no dispute that the United States is the country having primary
jurisdiction over the award. Accordingly, under the Convention, the award may be
set aside or modified only in accordance with applicable Texas or federal law,
neither of which permits vacatur, modification, or correction in this instance.
We conclude that the trial court did not err in rejecting each theory for
vacating, modifying or correcting the arbitration on the basis that it acts as a prior
restraint on speech.
B. Lis Pendens
The Gupta Parties also argue that the arbitration award should be vacated,
modified, or corrected because the arbitrator failed to require that the Association
abide by its agreement in the Rule 11 agreement to secure the “Dismissal with
prejudice and expungement of the lis pendens,” which, according to the Gupta
Parties, requires expungement as provided in Texas Property Code § 12.0071.7
(Emphasis added.) The agreed order that the Association proposed—and that the
7
See TEX. PROP. CODE § 12.0071(a) (West Supp. 2013) (describing procedures to
be used in applying to court to expunge a notice of lis pendens); § 12.0071(c)
(West Supp. 2013) (noting court shall order the notice of lis pendens expunged if
it determines that (1) the pleading upon which it is based does not contain a real
property claim; (2) the claimant fails to establish by a preponderance of the
evidence the probable validity of the real property claim; or (3) the person who
filed the notice did not effect service as required by (d)).
18
arbitrator approved in her award for filing with the court—ordered that the lis
pendens was “hereby TERMINATED, RELEASED AND CANCELLED for all
purposes and the said Lis Pendens shall have no further legal force or effect.” It
did not use the term “expunged” despite the fact that the Rule 11 agreement
reflected the parties’ agreement that the lis pendens be dismissed with prejudice
and expunged.
But the question, as discussed above, is not whether the arbitrator resolved
the parties’ dispute correctly. It is whether she arguably construed the contract the
parties agreed to have her construe. Sutter, 133 S. Ct. at 2070. Her award makes
clear that she did; it explained:
The use of the word “expungement” [in the Rule 11] was casual, not
formal, and there was no intent that it be taken literally. There was no
intention of the parties to agree to findings of fact, fault or comment
on whether there had been, at any time, any proper or improper filing
of the list [sic] pendens. The record of the arbitration has
demonstrated that the Exhibits A, B, C, and E, fully accomplish the
intentions of the Parties at the time of the Rule 11 Agreement and that
no purpose is served by a statutory Expungement. The word
“expungement” was a generic statement that the lis pendens would
have no further life at the conclusion of the dismissal with prejudice.
The parties did not agree that the lis pendens would be adjudicated,
directly or indirectly, or by implication. The April 8th Exhibits A, B,
C, and E correctly meet and accomplish the intentions of the Parties.
Because the arbitrator construed the contract the parties bargained for her to
construe, we conclude the trial court did not err in refusing to vacate, modify, or
correct the award on the grounds that the arbitrator did not require a formal
19
expungement as provided in Texas Property Code § 12.0071. We also conclude
that the trial court did not err by failing to sign an order for expungement of the lis
pendens. See Sutter, 133 S. Ct. 2070–71; Ancor Holdings, LLC, 294 S.W.3d at
830 (arbitrator’s powers determined by examining the arbitration clause to which
parties agreed); Centex/Vestal, 314 S.W.3d at 684 (same); Allstyle Coil Co., 295
S.W.3d at 44 (same).
Breach of Settlement Agreement
In their first and third issues, the Gupta Parties contend the trial court erred
in granting summary judgment in favor of the Association on its claim that the
Gupta Parties breached the Rule 11 agreement by failing to sign the final
settlement documents. In the sole issue in its appeal, the Association argues that,
because the trial court granted summary judgment on the breach of contract claim,
it erred by denying the Association’s request for attorney’s fees.
A. Summary Judgment Standard of Review
We review a summary judgment de novo. Travelers Ins. Co. v. Joachim,
315 S.W.3d 860, 862 (Tex. 2010). We consider the evidence presented in the light
most favorable to the nonmovant, crediting evidence favorable to the nonmovant if
reasonable jurors could, and disregarding evidence contrary to the nonmovant
unless reasonable jurors could not. Mann Frankfort Stein & Lipp Advisors, Inc. v.
Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We indulge every reasonable
20
inference and resolve any doubts in the nonmovant’s favor. 20801, Inc. v. Parker,
249 S.W.3d 392, 399 (Tex. 2008). In a traditional summary-judgment motion, the
movant has the burden to show that no genuine issue of material fact exists and
that the trial court should grant judgment as a matter of law. TEX. R. CIV. P.
166a(c); KPMG Peat Marwick v. Harrison Cnty. Hous. Fin. Corp., 988 S.W.2d
746, 748 (Tex. 1999); Martin v. New Century Mortg. Co., 377 S.W.3d 79, 83 (Tex.
App.—Houston [1st Dist.] 2012, no pet.).
B. Analysis
The Gupta Parties contend the trial court erred in finding that the Gupta
Parties’ election to seek judicial review of the award, rather than sign the final
settlement documents by the deadline imposed by the award, was a breach of the
Rule 11 agreement. The Association responds that the trial court correctly found a
breach based on their failure to sign the final settlement documents by 1 p.m. on
April 15, 2011, as the arbitrator’s award directed, and it argues that the trial court
erred in awarding attorney’s fees to the Association.
The Gupta Parties’ argument finds support in Babcock & Wilcox Co. v.
PMAC, Ltd., 863 S.W.2d 225 (Tex. App.—Houston [14th Dist.] 1993, writ
denied). In that case, an arbitration award required B&W to pay $1 million to
PMAC within thirty days of the award, but B&W did not pay and instead moved to
vacate or modify the award. Id. at 229. PMAC moved to confirm, asserted that
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B&W’s failure to pay by the arbitrator’s deadline was a breach of the parties’
agreement that the award would be final, and sought attorney’s fees under Section
38.001 of the Civil Practice and Remedies Code. Id. at 236. The Fourteenth Court
of Appeals concluded that the parties’ agreement that the award be final did not
preclude them from challenging the award under the FAA. Id. Accordingly, there
was no breach, and the award of attorney’s fees was improper. Id.
This case is the same. The only breach of contract claimed by the
Association is that the Gupta Parties did not sign the final settlement documents by
April 15, the deadline set by the arbitrator. But the Rule 11 agreement did not
require anyone to sign by that time, nor did it waive any party’s right to seek
judicial review of the award. Accordingly, we conclude, as did the Babcock court,
that the Gupta Parties’ election to seek judicial review of the award before
complying with it did not constitute a breach of the Rule 11 agreement. We
therefore hold that the trial court erred by granting summary judgment on the
Association’s breach of contract claim and awarding specific performance. See id.
(“Where the parties anticipate a dispute and provide a contractual method for its
resolution, invocation of that method is not a breach of contract.”); see also
Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 436 (Tex. App.—Dallas 2004, pet.
denied) (reversing trial court’s award of attorney’s fees for enforcement of award).
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Because we have held that the trial court improperly granted summary
judgment on the Association’s breach of contract claim, and that claim was the
Association’s sole basis for recovering attorney’s fees, we need not address the
Association’s cross-appeal regarding attorney’s fees. See MBM Fin. Corp. v.
Woodlands Operating Co., 292 S.W.3d 660, 666 (Tex. 2009) (to recover fees
under section 38.001(8) “a litigant must . . . prevail on a breach of contract claim
. . . .”); see also Cytogenix, Inc., 213 S.W.3d at 489 (stating attorney’s fees may be
recovered by “party who prevails on a breach of contract claim”).
Conclusion
The trial court correctly confirmed the arbitration award but incorrectly
granted summary judgment and awarded specific performance on the breach of
contract claim. We modify the judgment to delete the summary judgment and
order of specific performance, 8 and we affirm the judgment as modified.
Rebeca Huddle
Justice
Panel consists of Justices Keyes, Sharp, and Huddle.
8
The judgment is modified to delete the last sentence of paragraph 9, the last
sentence of paragraph 10, the entirety of paragraphs 11 and 12, the last paragraph
on page 5, the entirety of page 6, and the first paragraph on page 7.
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