Harvey Vorwerk, by and Through His Representative Jane Vorwerk v. Williamson County Grain, Inc. ( 2012 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-10-00549-CV
Harvey Vorwerk, deceased, by and through his representative Jane Vorwerk, Appellant
v.
Williamson County Grain, Inc., Appellee
FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 26TH JUDICIAL DISTRICT
NO. 08-1072-C26, HONORABLE BILLY RAY STUBBLEFIELD, JUDGE PRESIDING
MEMORANDUM OPINION
Appellant Harvey Vorwerk, by and through his representative Jane Vorwerk, appeals
the trial court’s judgment confirming an arbitration award in favor of appellee Williamson County
Grain, Inc. in a breach-of-contract dispute. In two issues on appeal, Vorwerk argues that the trial
court erred in confirming the arbitration award because: (1) the arbitration panel engaged in
procedural misconduct by conducting an ex parte communication with Williamson County Grain,
and (2) the arbitration award violated public policy because it conflicts with several provisions of
the Texas Business and Commerce Code. We will affirm the trial court’s judgment.
BACKGROUND
On April 11, 2007, Harvey Vorwerk entered into a contract with Williamson County
Grain providing that Vorwerk would deliver 60,000 bushels of grain by the end of August 2008 in
exchange for $3.90 per bushel.1 The contract established that Vorwerk would be paid a discounted
price per bushel for loads with an aflatoxin level between 21 and 300 parts per billion.2 Also on
April 11, 2007, Williamson County Grain contracted to sell 53,571 bushels of grain to Bee
Agricultural Company for $4.16 per bushel.3 Williamson County Grain alleges that it was relying
on its contract with Vorwerk to supply the grain to fulfill its contract with Bee Agricultural
Company. According to Williamson County Grain, by September 6, 2008, Vorwerk had delivered
only 3,457.46 bushels of grain that met the quality standard specified in the contract, leaving
undelivered 56,542.54 bushels of the agreed-upon 60,000.4 Williamson County Grain asserts that
it was unable to purchase grain locally on the open market at the contract price of $4.16 per bushel
when Vorwerk failed to deliver. Instead, it was forced to buy back its contract, i.e., the 53,571
1
The facts recited herein are taken from the record on appeal, including the testimony and
exhibits admitted at the hearings on various motions. We accept as true facts stated in the briefs that
are uncontradicted by another party. Tex. R. App. P. 38.1(g).
2
The agreed price was $3.80 per bushel for grain with an aflatoxin level between 21 and 100
parts per billion and $3.70 per bushel for grain with an aflatoxin level between 101 and 300 parts
per billion. The contract specified that grain with an aflatoxin level of more than 300 parts per
billion would not be accepted.
3
The contract between Williamson County Grain and Bee Agricultural contained the same
ten-cent per-bushel discount for grain with an aflatoxin level between 21 and 100 parts per billion
and twenty-cent per-bushel discount for grain with an aflatoxin level between 101 and 300 parts per
billion, which would reduce the per-bushel prices Bee Agricultural paid for the grain to $4.06 and
$3.96, respectively.
4
Although Williamson County Grain asserted that the grain delivered by Vorwerk totaled
3,457.46 bushels, leaving undelivered 56,542.54 bushels, the arbitration award indicates that the
arbitration panel concluded that Vorwerk delivered 3,467.86 bushels, leaving undelivered 56,532.14
bushels. We will use Williamson County Grain’s numbers when setting forth the factual background
because those numbers are the basis for Williamson County Grain’s damages claim, but will note
where they differ from the numbers relied upon by the arbitration panel.
2
bushels that it had contracted to provide to Bee Agricultural, from Bee Agricultural at the then
current price of $5.67 per bushel.5
Williamson County Grain sued Vorwerk for actual damages and attorney’s fees
based on his breach of the April 2007 contract. It sought damages in the amount of $100,080.30,
which is equal to the $1.77 difference in the $3.90 per-bushel price of the Vorwerk contract and the
$5.67 per-bushel market price multiplied by Williamson County Grain’s calculation of 56,542.54
undelivered bushels. Vorwerk, appearing pro se, filed an answer and motion to abate, requesting
that the matter be arbitrated by the Texas Grain and Feed Association (TGFA).6 Williamson County
Grain agreed to arbitration, and the trial court abated proceedings pending arbitration. The TGFA
held an arbitration hearing on December 15, 2009. Representatives and witnesses for Williamson
County Grain were present, but neither Vorwerk nor any representative on his behalf attended
the hearing.
The day after the arbitration hearing, a telephone call took place between Joe Mueck,
the general manager of Williamson County Grain, and Ben Boerner, the president of the TGFA. It
is undisputed that, following this call, Mueck faxed Boerner a summary showing his calculation that
Vorwerk had delivered 3,457.46 bushels of grain that were accepted under the contract and that
5
Williamson County Grain stated in its arbitration petition that the $5.67 market price upon
which it based its calculations did not “include the ‘in and out fee’ of $0.25, which was deducted
from the buy back price.” The arbitration award, however, indicates that the arbitration panel
included the $0.25 in-and-out fee in the market price upon which it based its calculations, resulting
in its use of $5.92 per bushel as the market price for Williamson County Grain’s buy back of the Bee
Agricultural contract.
6
The contract contained a provision specifying that “this contract is subject to the rules and
regulations of the Texas Grain and Feed Association.” It is undisputed that the TGFA’s rules and
regulations allow disputes arising out of grain transactions to be arbitrated.
3
the price differential of $1.77 per bushel multiplied by 56,542.54 undelivered bushels equals
$100,080.30.7 The parties disagree, however, as to the facts surrounding this communication.
According to Williamson County Grain, Mueck called Boerner to ask whether the arbitration panel
had reached a decision, and Boerner informed him that the arbitration panel had not yet done so.
Boerner then requested that Mueck fax him a summary of the amount Williamson County Grain
owed Vorwerk for the grain that had been delivered and accepted, so that the amount owed could
be subtracted from the arbitration award.8 Conversely, Vorwerk contends that the panel, acting
through Boerner, initiated a call to Mueck to request more information about the amounts, times, and
dates of the deliveries. The parties also disagree as to whether the information in the fax was new
to the arbitration panel or merely a summary of information presented at the arbitration hearing. On
December 21, 2009, the arbitration panel issued an award in favor of Williamson County Grain for
monetary damages in the amount of $106,056.26.
Williamson County Grain subsequently filed a motion to confirm the arbitration
award with the district court, citing the Texas General Arbitration Act (TAA). See Tex. Civ. Prac.
& Rem. Code Ann. § 171.087 (West 2011) (providing that court shall confirm arbitration award
upon party’s application unless grounds are offered to vacate, modify, or correct award). It attached
to its motion the parties’ executed TGFA form agreements to arbitrate, the notice of arbitration
hearing sent to Vorwerk, and the arbitration award. The arbitration panel determined that the Vorwerk
7
The appellate record includes this fax. The fax indicates that 3,457.46 bushels of grain had
been delivered and accepted, but it does not state the total dollar amount owed to Vorwerk.
8
Boerner was not a member of the arbitration panel. Williamson County Grain, therefore,
contends that the record does not support the inference that the fax was actually seen by the
arbitration panel itself.
4
contract cancellation resulted in an amount of $114,194.92 due to Williamson County Grain, which
was calculated by multiplying 56,532.14 undelivered bushels by $2.02 (the cancellation differential
of $5.92 per bushel purchased from Bee minus the Vorwerk contract price of $3.90 per bushel). The
panel also deducted $13,112.47 from the award for the four loads of grain that Vorwerk had
delivered and that had been accepted, but not paid for, by Williamson County Grain.9 The panel then
added on four-percent interest due to Williamson County Grain and deducted four-percent interest
due to Vorwerk to arrive at its total of $106,056.26.
A hearing on the motion to confirm the arbitration award was held as scheduled,
on February 19, 2010.10 Vorwerk, who had been battling cancer since 2006 and was undergoing
treatment for his condition at the time of these proceedings, did not appear at the hearing or file a
response to Williamson County Grain’s motion. The trial court confirmed the arbitration award in
favor of Williamson County Grain.
On March 22, 2010, acting pro se, Vorwerk filed a motion for new trial. Vorwerk
passed away on March 29, 2010. Vorwerk’s estate hired counsel to represent the estate’s interest
in this matter before the hearing on Vorwerk’s motion for new trial, which occurred on May 4, 2010.
After hearing evidence on Vorwerk’s illness at the hearing on his motion for new trial, the trial court
conditionally granted the motion to give Vorwerk the opportunity to respond to Williamson County
9
The panel calculated these bushels at the discounted prices for certain aflatoxin levels:
2,813.93 bushels at $3.80 per bushel and 653.93 bushels at $3.70 per bushel, for a total of 3,467.86
bushels delivered. This number differs slightly from the 3,457.46 bushels that Mueck indicated in
the fax to Boerner was the total number delivered by Vorwerk.
10
The only exhibit admitted into evidence at this hearing was the notice of hearing that
Williamson County Grain sent to Vorwerk.
5
Grain’s motion to confirm the arbitration award. Vorwerk filed a motion to vacate the award a few
days before the second hearing on the motion to confirm the award, which occurred on June 22,
2010.11 With its response to the motion to vacate, Williamson County Grain attached its notice to
Vorwerk of the first confirmation hearing; an April 29, 2010 email from Vorwerk’s wife to Boerner;
the fax from Mueck to Boerner; and its arbitration petition with attached exhibits, including the
contract between the parties, its contract with Bee Agricultural, its receipts showing Vorwerk’s
deliveries of grain that were accepted, and documents showing its buy back of grain from Bee. The
only exhibits admitted into evidence at this hearing were the fax from Mueck to Boerner and a
delivery receipt from Williamson County Grain to Vorwerk showing deliveries of grain by Vorwerk
in December 2007.12 After the hearing, the trial court denied Vorwerk’s motion to vacate and
confirmed the arbitration award.13 Vorwerk now appeals.
11
Vorwerk’s motion to vacate was not included in the record on appeal.
12
Counsel for Vorwerk argued that under a prior contract Williamson County Grain had
accepted late deliveries of grain, and this acceptance of late deliveries was evidence of the parties’
course of dealing.
13
Although the trial court verbally denied the motion at the second hearing on Williamson
County Grain’s motion to confirm the award, no written order denying the motion to vacate appears
in the record. The trial court’s judgment states that after a hearing on the motion to confirm, the
court “is of the opinion that judgment should be rendered for [Williamson County Grain] in
accordance with the Arbitration Award” and “all relief not expressly granted herein is denied.”
Vorwerk appeals from “the trial court order entering Plaintiff’s Motion to Confirm Arbitration
Award.”
6
APPLICABLE LAW
As a threshold matter, we must determine what law governed the arbitration—the
Federal Arbitration Act (FAA) or the TAA or both.14 See 9 U.S.C.A. §§ 1-16 (2009); Tex. Civ.
Prac. & Rem. Code Ann. §§ 171.001-.098 (West 2011). Vorwerk contends that the FAA preempts
the TAA and governed the arbitration, particularly with regard to his assertion of arbitrator
misconduct.15 Williamson County Grain disagrees that the FAA preempts the TAA, but argues that
under either standard, no grounds exist to vacate the arbitration award. The parties do not dispute
that the arbitration agreement was valid and binding, and they agree that the TGFA’s rules
governed the arbitration. The parties also do not dispute that the TGFA’s constitution grants the
TGFA arbitrators all the power and jurisdiction granted to arbitrators by the FAA, the TAA, and
common law.16
14
The record does not indicate whether the arbitration was conducted under the FAA or the
TAA.
15
Although Vorwerk also asserts in his second issue (without citation to any supporting
authority) that the panel’s award violated FAA rules because the panel made “gross mistakes” and
the award violates public policy, there is no provision in the FAA (or in the TAA) that allows an
award to be vacated for “gross mistake” or violation of public policy. See 9 U.S.C.A. § 10 (West
2009). These are both common-law arguments for vacating an award. See CVN Grp., Inc. v.
Delgado, 95 S.W.3d 234, 237 (Tex. 2002) (violation of public policy); House Grain Co. v. Obst, 659
S.W.2d 903, 905 (Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.) (gross mistake).
16
Although Vorwerk included the TGFA’s constitution as an appendix to his brief and
Williamson County Grain also refers in its brief to the constitution attached to Vorwerk’s brief, the
constitution is not part of the appellate record. See Tex. R. App. P. 34.1 (appellate record consists
of clerk’s record, and if necessary to appeal, reporter’s record). The attachment of documents as
exhibits or appendices to briefs is not formal inclusion in the record on appeal, and thus, we cannot
consider the document itself. See Perry v. Kroger Stores Store No. 119, 741 S.W.2d 533, 534
(Tex. App.—Dallas 1987, no writ). However, we accept as true facts stated in the briefs that are
uncontradicted by another party. Id. at 535; see also Tex. R. App. P. 38.1(g). Williamson County
Grain does not dispute Vorwerk’s assertion that the TGFA constitution provides its arbitrators with
7
The TAA applies to written agreements to arbitrate unless the agreement is excluded
from coverage by section 171.002 of the TAA, or the parties agree to proceed under the FAA. See
Tex. Civ. Prac. & Rem. Code Ann. §§ 171.001, .002; see also Volt Info. Scis., Inc. v. Board of Trs.
of Leland Stanford Jr. Univ., 489 U.S. 468, 472 (1989) (parties are free to specify in arbitration
agreement which statute shall apply to proceedings). Vorwerk does not contend that the arbitration
agreement is excluded from coverage under the TAA; instead, he argues that federal law regarding
arbitrator misconduct as a ground for vacating an award should apply in this case.17 But Vorwerk has
not cited any specific provision of the FAA upon which he relies that is contrary to the TAA, and the
FAA preempts only contrary, not consonant, state law. In re D. Wilson Constr. Co., 196 S.W.3d 774,
779 (Tex. 2006) (noting that state law that undermines FAA’s policies and goals is preempted (citing
Volt Info. Scis., Inc., 489 U.S. at 477-78)). Moreover, the FAA only preempts state-law impediments
to arbitration agreements, not all inconsistent state law relating to arbitration. Nafta Traders, Inc. v.
Quinn, 339 S.W.3d 84, 98-100 (Tex. 2011).
When an arbitration agreement provides for arbitration under both the FAA and the
TAA or can be interpreted as invoking both acts, both the FAA and the TAA may apply. Id. at 97
n.64; In re D. Wilson Constr. Co., 196 S.W.3d at 778-79. The FAA preempts the TAA only when
the following four factors are present: (1) the agreement is in writing, (2) it involves interstate
commerce, (3) it can withstand scrutiny under traditional contract defenses, and (4) state law affects
powers and jurisdiction under the FAA; it disputes Vorwerk’s assertion that the FAA preempts the
TAA in this case.
17
Vorwerk, however, relies on Texas law and the TGFA’s rules, in addition to federal law,
to support his contentions concerning arbitrator misconduct.
8
the enforceability of the agreement. In re D. Wilson Constr. Co., 196 S.W.3d at 780. In this case,
the agreement is in writing, and we will assume without deciding that it involves interstate
commerce. See In re Nexion Health at Humble, Inc., 173 S.W.3d 67, 69 (Tex. 2005) (per curiam)
(“The FAA ‘extends to any contract affecting commerce, as far as the Commerce Clause of the
United States Constitution will reach.’”). Neither party has asserted any traditional contract defense
against enforcement of the arbitration agreement. Nor has either party asserted anything in the TAA
that would subvert enforcement of the arbitration agreement, such as an express exemption of the
agreement from coverage or an enforceability requirement in the TAA that is not found in the FAA.
See In re D. Wilson Constr. Co., 196 S.W.3d at 780. Therefore, the FAA does not preempt the TAA
in this case.
Williamson County Grain sought confirmation of the award under the TAA, and
the TAA’s application is not preempted by the FAA. Moreover, despite his argument that the FAA
should apply, Vorwerk fails to identify any inconsistency in federal law regarding arbitrator
misconduct as grounds for vacating an arbitration award. In addition, the primary legal authority
upon which he relies is a case in which the arbitration was conducted under the TAA, and the
appellate court analyzed the appellant’s allegations of arbitrator misconduct under the TAA and
Texas common law. See IPCO-G. & C. Joint Venture v. A.B. Chance Co., 65 S.W.3d 252, 255-56
(Tex. App.—Houston [1st Dist.] 2001, pet. denied). For all these reasons, we will apply the TAA
and Texas common law to Vorwerk’s arguments on appeal, although we note that the underlying
9
substantive principles of the FAA related to arbitrator misconduct are the same, and thus, the
question of which act governs is ultimately immaterial to the outcome here.18
STANDARD OF REVIEW
Texas law has long favored arbitration of disputes. Prudential Secs. Inc. v. Marshall,
909 S.W.2d 896, 898 (Tex. 1995). An arbitration award is conclusive on the parties as to all matters
of fact and law submitted to the arbitrators because the award has the effect of a judgment of a court
of last resort. See, e.g., CVN Grp., Inc. v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002). We presume
that an arbitration award is valid, and we may not substitute our judgment merely because we
would have reached a different decision. Ancor Holdings, LLC v. Peterson, Goldman & Villani, Inc.,
294 S.W.3d 818, 826 (Tex. App.—Dallas 2009, no pet.). 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.” Xtria L.L.C. v. International Ins. Alliance, Inc.,
286 S.W.3d 583, 591 (Tex. App.—Texarkana 2009, pet. denied) (citing Action Indus., Inc. v. U.S.
Fid. & Guar. Co., 358 F.3d 337, 339-40 (5th Cir. 2004)); see also Centex/Vestal v. Friendship W.
Baptist Church, 314 S.W.3d 677, 683 (Tex. App.—Dallas 2010, pet. denied). Our review focuses
on the integrity of the process, not the propriety of the result. Ancor Holdings, 294 S.W.3d at 826.
18
The standard of review that we apply to a trial court’s judgment confirming an arbitration
award and many of the underlying substantive principles are the same whether the TAA or the FAA
governs the case. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56 n.10 (Tex. 2008). Thus,
where appropriate, this opinion interchangeably relies on cases that discuss the TAA and the FAA.
In addition, we will apply Texas common law where appropriate. See L.H. Lacy Co. v. City of
Lubbock, 559 S.W.2d 348, 351, 353 (Tex. 1977) (explaining that statutory arbitration is cumulative
of common law and whether parties intended statutory or common-law arbitration has been held
immaterial if award could be upheld under either system).
10
Judicial review of arbitration awards is “extraordinarily narrow.” East Tex. Salt Water
Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010). We indulge all reasonable presumptions
in favor of the award, and none against, because arbitration is a favored means of dispute resolution,
and subjecting awards to judicial review diminishes its benefits by adding expense and delay. CVN
Grp., 95 S.W.3d at 238. Review is so limited that a mistake of fact or law or failure to correctly
apply the law will not justify vacating an award. Xtria L.L.C., 286 S.W.3d at 591; Centex/Vestal,
314 S.W.3d at 683.
DISCUSSION
In his first point of error, Vorwerk complains that the trial court erred by confirming
the arbitration award because he asserts that the arbitration panel had engaged in procedural
misconduct by participating in ex parte communication with Mueck, which prejudiced Vorwerk’s
rights. See Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a) (court shall vacate award when arbitrator
misconduct prejudices party’s rights).19 Vorwerk contends that Mueck acted as the panel’s agent by
participating in a substantive communication about the merits that was prejudicial to Vorwerk and
effectively denied him a fair and impartial hearing. Williamson County Grain responds that (1) there
is no evidence that the panel ever saw the fax; (2) the information in the fax is a summary of
information already presented to the panel at the hearing and in its arbitration petition; and (3) the
information contained in the fax was beneficial to Vorwerk and detrimental to Williamson County
19
See also 9 U.S.C.A. § 10(a)(3) (court may vacate arbitration award when arbitrator
misconduct prejudices party’s rights).
11
Grain because it identified the amount of grain delivered by Vorwerk for which Williamson County
Grain owed payment, and the panel deducted the amount owed to Vorwerk from the award.
The TAA establishes limited grounds for vacating an award.20 See id. § 171.088; see
also Blue Cross Blue Shield of Tex. v. Juneau, 114 S.W.3d 126, 134 n.5 (Tex. App.—Austin 2003,
no pet.) (noting that award that is not within requirements of act may still be valid if it complies with
more restrictive common-law procedures for vacating award). A court will vacate an award because
of misconduct only in extreme cases. GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257,
263 (Tex. App.—San Antonio 2003, pet. denied). The conduct must so affect “the rights of the party
that it may be said to deprive him of a fair hearing.” Id. (citing Mullinax, Wells, Baab & Cloutman,
P.C. v. Sage, 692 S.W.2d 533, 536 (Tex. App.—Dallas 1985, writ ref’d n.r.e.)). Courts have held
that neither an arbitrator’s receipt of ex parte affidavits or ex parte documents nor an arbitrator’s ex
parte telephone call to a party’s counsel constitute arbitrator misconduct. See IPCO, 65 S.W.3d at
257-58 (holding that arbitrator’s telephone call was not misconduct); Mullinax, 692 S.W.2d at 536
(holding that no misconduct occurred when arbitration committee received back-up documentation
after hearing and provided it to complaining party simultaneously with notification of award).
When a party seeks to modify or vacate an arbitration award, it has the burden of
bringing forth a complete record and establishing any basis that would warrant vacating the award.
GJR Mgmt., 126 S.W.3d at 263. The record before us does not contain a transcript of the arbitration
hearing nor is there evidence in the record regarding whether Boerner acted on behalf of the
20
See also id. (establishing similarly limited grounds for vacating award under federal
statute).
12
arbitration committee when he requested information from Williamson County Grain. As a result,
we do not know whether the fax communication from Mueck to Boerner included new information
not already presented to the panel or merely summarized information conveyed at the hearing.21
Further, Vorwerk has provided no evidence, other than his bare allegation, that Boerner gave the
information in the fax to the arbitration panel.
As the party seeking to vacate the arbitration award, Vorwerk bears the burden
of establishing arbitrator misconduct that would warrant vacating the award. See GJR Mgmt., 126
S.W.3d at 263 (upholding trial court’s denial of motion to vacate because no record supporting
claims of arbitrator misconduct). Without a record, we cannot conclusively determine the basis for
the arbitrator’s award, whether new information was conveyed to the panel in the fax, and if it
was, whether it deprived Vorwerk of a fair hearing. See id.; see also Statewide Remodeling, Inc. v.
Williams, 244 S.W.3d 564, 569-70 (Tex. App.—Dallas 2008, no pet.) (affirming judgment
confirming award when no arbitration hearing record brought forward to support party’s claim that
award was inconsistent with evidence). The narrow scope of appellate review of arbitration awards
requires us to indulge every reasonable presumption in favor of upholding the arbitration award.
Statewide Remodeling, 244 S.W.3d at 569-70. Without evidence to the contrary, we must presume
that no misconduct occurred, the information in the fax was a summary of information previously
21
Although the actual arbitration record was never admitted into evidence, we note that
Williamson County Grain submitted its arbitration petition including exhibits with its response to
Vorwerk’s motion to vacate. Vorwerk has not contested that Williamson County Grain submitted
this information to the arbitration panel or that he submitted a response to the petition. See Tex. R.
App. P. 38.1(g). One of the attachments to Williamson County Grain’s arbitration petition included
Williamson County Grain’s receipts for Vorwerk’s grain deliveries.
13
conveyed to the panel, and the fax communication did not operate to deprive Vorwerk of a fair
hearing. Therefore, we cannot conclude that the trial court erred by confirming the award despite
Vorwerk’s allegation of arbitrator misconduct. Vorwerk’s first point of error is overruled.
In his second issue on appeal, Vorwerk asserts that the trial court erred in confirming
the arbitration award because the award violated public policy.22 See CVN Grp., 95 S.W.3d at 239
(holding that arbitration award may be set aside on public-policy grounds only in extraordinary case).
Vorwerk claims that the award violates several provisions of the Texas Business and Commerce
Code and that these mistakes are so repugnant to public policy that they require vacating the arbitration
award. In essence, Vorwerk contends that the arbitration panel ignored certain affirmative defenses
available to him under chapters 1 and 2 of the Uniform Commercial Code, which is incorporated into
Texas law in title 1 of the Texas Business and Commerce Code.23 See Tex. Bus. & Com. Code Ann.
§§ 1.303(a) (course of performance), 2.209 (waiver), .508 (seller’s right to cure when delivery has
been rejected by buyer and time for performance has not yet expired) (West 2009); see also id.
22
He also contends in this issue that the award should be vacated for “gross mistake.” Gross
mistake is a common-law ground for vacating an award. See, e.g., House Grain Co., 659 S.W.2d
at 906. Gross mistake is a mistake which implies bad faith or failure to exercise honest judgment.
Again, without a record, “we have no way to judge whether bad faith or failure to exercise honest
judgment in fact occurred.” GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257, 264
(Tex. App.—San Antonio 2003, pet. denied).
23
Vorwerk also argues that sections 2.103(a)(2) and 2.208 of the business and commerce
code provide additional public-policy grounds for overturning the trial court’s decision to confirm
the arbitration award. However, these sections were repealed in 2003. See Act of May 19, 1965,
59th Leg., R.S., ch. 721, § 2-103(1)(b), 1965 Tex. Gen. Laws 1, 14, repealed by Act of May 22,
2003, 78th Leg., R.S., ch. 542, § 2, 2003 Tex. Gen. Laws 1840, 1851 (repealing Tex. Bus. & Com.
Code Ann. § 2.103(a)(2)); Act of May 19, 1965, 59th Leg., R.S., ch. 721, § 2-208, 1965 Tex. Gen.
Laws 1, 19, repealed by Act of May 22, 2003, 78th Leg., R.S., ch. 542, § 20, 2003 Tex. Gen. Laws
1840, 1854 (repealing Tex. Bus. & Com. Code Ann. § 2.208).
14
§ 1.103 (West 2009) (code is supplemented by common-law principles). It was Vorwerk’s burden
to present his affirmative defenses to the panel. See Tex. R. Civ. P. 94; see also, e.g., RM Crowe
Prop. Servs. Co. v. Strategic Energy, L.L.C., 348 S.W.3d 444, 449 (Tex. App.—Dallas 2011, no pet.)
(arguing modification of contract and waiver of contract right based on course of dealing and course
of performance as affirmative defenses); Mobile Hous., Inc. v. Stone, 490 S.W.2d 611, 615-16 (Tex.
Civ. App.—Dallas 1973, no writ) (intent to cure as affirmative defense).
An arbitration award may only be vacated on public-policy grounds when the award
clearly violates well-defined, fundamental policy. CVN Grp., 95 S.W.3d at 239. To demonstrate
that this award contravenes public policy, Vorwerk must show that the arbitration panel wholly
disregarded statutory and constitutional requirements related to his affirmative defenses by ruling
in favor of Williamson County Grain. See id. He has failed to do so. The panel’s purported failure
to consider Vorwerk’s affirmative defenses does not satisfy the high standard required to vacate
the arbitration award. There is no statutory or constitutional requirement for the panel to decide in
Vorwerk’s favor based upon defenses that Vorwerk did not argue and prove at the hearing. But even
if the panel had considered and erroneously rejected the defenses—something that is impossible
for us to determine without a complete arbitration record—we would not vacate the award for a
mere mistake of fact or law. See id. (noting that when the facts are disputed, “an arbitrator’s mere
disagreement with a judge does not violate public policy”); Xtria L.L.C., 286 S.W.3d at 591;
Centex/Vestal, 314 S.W.3d at 683. Consequently, the trial court did not err by confirming the
arbitration award. Vorwerk’s second point of error is overruled.
15
CONCLUSION
Because the trial court did not err in confirming the arbitration award in favor of
Williamson County Grain, we affirm the trial court’s judgment.
_______________________________________
Diane M. Henson, Justice
Before Chief Justice Jones, Justices Henson and Goodwin
Affirmed
Filed: February 23, 2012
16