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 ON REHEARING
Before Chief Justice Valdez and Justices Benavides and Longoria
Memorandum Opinion on Rehearing 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. See TEX. CIV. PRAC. & REM. CODE ANN. § 171.098 (West, Westlaw through
2013 3d C.S.) (“A party may appeal a judgment or decree entered under this chapter or
an order . . . confirming or denying confirmation of an [arbitration] award[.]”). By two
issues, appellants contend that appellee, Kathleen Wild, did not meet her burden of
showing that the arbitrator exceeded his power.1 On July 31, 2014, we issued a
memorandum opinion and judgment in this cause, wherein we reversed the judgment and
rendered a confirmation of the arbitrator’s award. Schuster v. Wild, 13-13-00474-CV,
2014 WL 3804834, at *6 (Tex. App.—Corpus Christi July 31, 2014, no. pet. h.). On
August 14, 2014, appellants filed a motion for rehearing requesting that the Court remand
the cause to the trial court so that it can confirm the arbitrator’s award. After reviewing
appellants’ motion for rehearing, we grant it, withdraw our previous memorandum opinion
and judgment, and substitute this memorandum opinion and judgment in their place.2
Accordingly, we reverse the trial court’s order vacating the arbitration award and remand
the cause to the trial court.
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,
1 Wild is one of the deceased’s daughters.
2 On August 18, 2014, this Court requested that Wild file a response to appellants’ motion for
rehearing. Wild filed a response on September 24, 2014. See TEX. R. APP. P. 49.2 (setting out that we
may not grant a motion on rehearing without first requesting a response from the other party).
2
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.3 Latter issued his “Report and Decision of
Arbitration” dated December 15, 1986 (the “Latter Arbitration”). Latter’s report and
decision were 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.
According to Wild, administration of the deceased’s estate was not closed after the
Latter Arbitration, and the parties could not agree upon the proper distribution of the
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 probate 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
3 The Latter Arbitration is not at issue in this appeal.
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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
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
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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 matter under advisement. Throughout her motion to vacate,
Wild cited Latter’s Report and Decision for her contention that McLain exceeded his
powers by awarding the mineral interests to appellants. Wild did not claim that the
arbitration agreement 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[s] to [appellants] that were not even requested by [them], thereby
exceeding his authority.”4 The trial court ordered a rehearing before a new arbitrator
4 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
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chosen in accordance with the agreement to arbitrate. This appeal followed. See TEX.
CIV. PRAC. & REM. CODE ANN. § 171.098 (allowing an appeal from the denial of a motion
to compel arbitration).
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, No. 13-11-00413-cv, __ 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
review focuses on the integrity of the process, not the propriety of the result.” Id. 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
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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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
[such] 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.—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
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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. v. Inc. v. Antone’s
Import Co., 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 exceeded his powers. By their first and second
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 properly vacated the McLain Arbitration Award on
the basis that McLain exceeded his powers by not considering her various claims against
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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, “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 the determination of ownership of the
mineral interests and the property.5 We construe McLain’s statement as summarizing the
5 It appears that the trial court also determined that McLain’s statement did not prove that he limited
the evidence during the McLain Arbitration to limit Wild’s claims. 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 [would] 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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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 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.
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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.6 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.”
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
6 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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favor of appellants. See Pheng Invs., 196 S.W.3d at 329 (“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. See Centex/Vestal, 314 S.W.3d at 684. 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 issues 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 [in] connection with” the Settlement Agreement would go to arbitration. The
Settlement Agreement included the properties at issue in this case. The arbitration
agreement allowed for arbitration of any disputes between the parties not only arising out
the Settlement Agreement, but also required arbitration of any disputes in connection with
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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.7 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 remand to the
trial court for proceedings consistent with this memorandum opinion.
__________________
ROGELIO VALDEZ
Chief Justice
Delivered and filed the
15th day of January, 2015.
7 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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