Opinion
No. 04-17-00672-CV
05-09-2018
FAMSA, INC., Appellant v. BEXAR APPRAISAL DISTRICT, Appellee
MEMORANDUM OPINION
From the 45th Judicial District Court, Bexar County, Texas
Trial Court No. 2017-CI-06465
Honorable Antonia Arteaga, Judge Presiding Opinion by: Sandee Bryan Marion, Chief Justice Sitting: Sandee Bryan Marion, Chief Justice Karen Angelini, Justice Irene Rios, Justice AFFIRMED
Famsa, Inc. ("Famsa") appeals the trial court's judgment confirming an arbitration award issued under Chapter 41A of the Texas Property Tax Code. We affirm the trial court's judgment.
BACKGROUND
Famsa protested the appraisal of its property before the Bexar County Appraisal Review Board ("ARB"). The ARB heard Famsa's protest and issued a no-change order. Pursuant to Chapter 41A of the Property Tax Code, Famsa elected to appeal the ARB order through binding arbitration. The Texas Comptroller of Public Accounts appointed an arbitrator, and the arbitrator sent a letter to Famsa and Appellee Bexar Appraisal District (the "District") advising them of his appointment and detailing the procedures that would govern the proceeding. Under the heading "Hearing Procedures," the letter stated:
The burden of proof shall be on the property owner [Famsa]. The property owner shall have the right to open and close (to be heard first and last) the evidence and the right to open and close the argument, if any.The parties agreed to a documents-only hearing. There is no evidence in the record before us that Famsa raised any objection to the arbitrator's assignment of the burden of proof to Famsa.
After the hearing, the arbitrator issued an Arbitration Determination and Award (the "Award"). The Award is a single-page form stamped with the seal of the Texas Comptroller of Public Accounts. The Award states the arbitrator's determination as follows:
Value assigned by the arbitrator . . . $465,160.00
Dollar difference between value ordered by the appraisal review board and value determined by arbitrator . . . $0.00
Dollar difference between value provided by property owner and value determined by arbitrator . . . $264,351.00
Amount of Arbitrator fee not to exceed 450.00 . . . $450.00
Famsa subsequently filed suit in the trial court seeking vacatur of the arbitrator's valuation determination. Famsa filed a traditional motion for summary judgment arguing the arbitrator's assignment of the burden of proof to Famsa exceeded his powers and was misconduct or willful misbehavior that prejudiced Famsa's rights. The District filed traditional and no-evidence motions for summary judgment seeking confirmation of the Award. After hearing the parties' motions, the trial court entered an order granting the District's traditional and no-evidence motions. This appeal followed.
ARBITRATION AWARDS AND STANDARD OF REVIEW
An arbitrator's award under Chapter 41A of the Property Tax Code is final and may not be appealed except as permitted under the Texas Arbitration Act ("TAA"). TEX. TAX CODE § 41A.09(b)(4). The TAA provides that upon application, the trial court shall confirm an arbitration award unless a party demonstrates:
(1) the award was obtained by corruption, fraud, or other undue means;
(2) the rights of a party were prejudiced by:
A. evident partiality by an arbitrator appointed as a neutral arbitrator;
B. corruption in an arbitrator; or
C. misconduct or wil[l]ful misbehavior of an arbitrator;
(3) the arbitrators:
A. exceeded their powers;
B. refused to postpone the hearing after a showing of sufficient cause for the postponement;
C. refused to hear evidence material to the controversy; or
D. conducted the hearing, contrary to Section 171.043, 171.044, 171.045, 171.046, or 171.047, in a manner that substantially prejudiced the rights of a party; or
TEX. CIV. PRAC. & REM. CODE § 171.088(a).
(4) there was no agreement to arbitrate, the issue was not adversely determined in a proceeding under Subchapter B, and the party did not participate in the arbitration hearing without raising the objection.
"Because Texas law favors arbitration, judicial review of an arbitration award is extraordinarily narrow." E. Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010). A trial court may confirm, vacate, or modify an arbitration award but may not substitute its judgment for the arbitrator's merely because it would have reached a different conclusion. Crossmark, Inc. v. Hazar, 124 S.W.3d 422, 429 (Tex. App.—Dallas 2004, pet. denied). The trial court also may not set aside an arbitration award for a mere mistake of fact or law. Id.
An application to confirm, vacate, or modify an arbitration award shall be heard in the same manner and on the same notice as a motion in a civil case. TEX. CIV. PRAC. & REM. CODE § 171.093. While a summary judgment motion is not required, if the parties choose to follow summary judgment procedure, they assume the traditional burdens and requirements of summary judgment practice. See Mariner Fin. Grp., Inc. v. Bossley, 79 S.W.3d 30, 35 (Tex. 2002) (holding that while party seeking vacatur based on evident partiality had ultimate burden of proof, party asserting traditional motion for summary judgment had burden to negate evident partiality defense as a matter of law); Crossmark, 124 S.W.3d at 430.
The standard of review applicable to a judgment confirming an arbitration award depends on the nature of the proceedings in the trial court. Crossmark, 124 S.W.3d at 430. We review the trial court's entry of summary judgment confirming an arbitration award using the standards of review applicable to summary judgments generally. Id.
Here, the trial court granted the District's traditional and no-evidence motions for summary judgment. Therefore, we apply the traditional and no-evidence summary judgment standards of review. See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004) (no-evidence summary judgment); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985) (traditional summary judgment).
DISCUSSION
As it did below, Famsa argues the arbitrator exceeded his powers and engaged in misconduct or willful misbehavior by assigning the burden of proof to Famsa. The District argues there is no evidence in the record that the arbitrator relied on the burden of proof in making his decision and Famsa waived any error by not objecting to the arbitrator's assignment of the burden of proof. The District also argues the arbitrator did not exceed his authority or engage in misconduct or willful misbehavior.
We agree with the District that the arbitrator did not exceed his authority or engage in misconduct or willful misbehavior.
A. The arbitrator did not exceed his powers.
The trial court "shall vacate an award if . . . the arbitrator[] exceeded [his] powers." TEX. CIV. PRAC. & REM. CODE § 171.088(a)(3)(A). "In determining whether an arbitrator has exceeded his authority, the proper inquiry is not whether the arbitrator decided an issue correctly, but rather, whether he had the authority to decide the issue at all." Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 431 (Tex. 2017). An arbitrator does not exceed his authority simply because he misapplied the law. Forest Oil Corp. v. El Rucio Land & Cattle Co., 446 S.W.3d 58, 81 (Tex. App.—Houston [1st Dist.] 2014), aff'd, 518 S.W.3d 422 (Tex. 2017); Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 686 (Tex. App.—Dallas 2010, pet. denied) ("[A] complaint that the arbitrator decided the issue incorrectly or made a mistake of law is not a complaint that the arbitrator exceeded his powers.").
Here, the arbitrator derived his powers from the Property Tax Code, which establishes the scope of those powers as follows:
An award under this section:TEX. TAX CODE § 41A.09(b). Famsa does not argue the arbitrator exceeded his powers by assigning a value to Famsa's property or setting the arbitrator's fee. Rather, Famsa only argues the arbitrator exceeded his powers by assigning Famsa the burden of proof.
(1) must include a determination of the appraised or market value, as applicable, of the property that is the subject of the appeal;
(2) may include any remedy or relief a court may order under Chapter 42 in an appeal relating to the appraised or market value of property;
(3) shall specify the arbitrator's fee, which may not exceed the amount provided by Section 41A.06(b)(2); . . . .
The statute does not specify which party bears the burden of proof in a Chapter 41A arbitration and the parties offer competing arguments as to how we should interpret the Property Tax Code on this point. Interpreting Chapter 41A is a question of statutory construction. "Statutory construction is a question of law for the court to decide." See Tex. Dep't of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002). Therefore, if there was any error in assigning the burden of proof to Famsa, such error would amount to a mistake of law, which is not a basis for holding an arbitrator exceeded his powers. See Forest Oil, 446 S.W.3d at 81; Centex/Vestal, 314 S.W.3d at 686.
Accordingly, the arbitrator did not exceed his powers in assigning the burden of proof to Famsa, and the trial court did not err by granting summary judgment in the District's favor on this point.
B. The arbitrator did not engage in misconduct or willful misbehavior.
The trial court "shall vacate an award if . . . the rights of a party were prejudiced by . . . misconduct or wil[l]ful misbehavior of an arbitrator." TEX. CIV. PRAC. & REM. CODE § 171.088(a)(2)(C). An award can be vacated on this ground only if the arbitrator's misconduct so affected a party's rights that it deprived him of a fair hearing. GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 263 (Tex. App.—San Antonio 2003, pet. denied). Courts will vacate an award because of misconduct only in extreme cases. Id.
There is little authority in Texas addressing what constitutes misconduct or willful misbehavior under Section 171.088(a)(2)(C) of the TAA. There is, however, a more developed body of law addressing a similar provision of the Federal Arbitration Act ("FAA"), which permits vacatur where a party demonstrates "the arbitrators were guilty of misconduct . . .." 9 U.S.C. § 10(a)(3). Courts applying this section of the FAA have held there is no misconduct unless the arbitrator's determination is "one that is not simply an error of law, but which so affects the rights of a party that it may be said that he was deprived of a fair hearing." Laws v. Morgan Stanley Dean Witter, 452 F.3d 398, 399 (5th Cir. 2006) (quoting El Dorado Sch. Dist. No. 15 v. Continental Cas. Co., 247 F.3d 843, 848 (8th Cir. 2001)).
In Totem Marine Tug & Barge, Inc. v. N. Am. Towing, Inc., 607 F.2d 649, 652-53 (5th Cir. 1979), the Fifth Circuit found vacatur appropriate under the FAA where the arbitrator called counsel for one of the parties, obtained ex parte evidence from that counsel, and adopted the evidence as a basis for computing the award without informing the other party. In contrast, in Weinberg v. Silber, 140 F. Supp. 2d 712, 721 (N.D. Tex. 2001), aff'd, 57 F. App'x 211 (5th Cir. 2003) (unpub'd), the court refused to vacate an award where the arbitrator's procedures were "unstructured and far-sweeping" because there was no evidence to show which arbitration rules should have applied and because arbitration is designed to resolve disputes "without confinement to many of the procedural and evidentiary strictures that protect the integrity of formal trials." The court also noted any procedural errors were waived because there was no objection made before the arbitrator, explaining: "If a party does not protest to the arbitrator, courts generally will not give him a second chance to do so in a motion to vacate." Id.
Here, Famsa argues the arbitrator engaged in misconduct or willful misbehavior by assigning Famsa the burden of proof. We conclude the arbitrator's decision to assign the burden of proof, which was communicated to the parties well in advance of the hearing and to which Famsa did not object, does not constitute misconduct or willful misbehavior under Section 171.088(a)(2)(C). Even if the arbitrator's decision could constitute misconduct or willful misbehavior, Famsa has made no showing of prejudice to warrant vacatur of the Award. Accordingly, the trial court did not err by granting summary judgment in the District's favor on this point.
CONCLUSION
Because the summary judgment record did not demonstrate any grounds for vacatur of the arbitrator's determination in this case, we affirm the trial court's judgment confirming the arbitration award.
Sandee Bryan Marion, Chief Justice