Jeff Zeng and Chuan He v. Haiyin Huang and Hanbin Li ( 2022 )

Opinion issued March 10, 2022
In The
Court of Appeals
For The
First District of Texas
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NO. 01-20-00430-CV
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JEFF ZENG AND CHUAN HE, Appellants
V.
HAIYIN HUANG AND HANBIN LI, Appellees
On Appeal from the 333rd District Court
Harris County, Texas
Trial Court Case No. 2018-76958
MEMORANDUM OPINION
Appellants, Jeff Zeng and Chuan He, appeal from the trial court’s denial of
their motion to confirm an arbitration award against appellees, Haiyin Huang and
Hanbin Li. See TEX. CIV. PRAC. & REM. CODE § 171.098(a)(3). We reverse the trial
court’s appealable order and render judgment confirming the arbitration award.
BACKGROUND
The Dispute
In 2015, appellants claimed that Haiyin Huang and Hanbin Li (collectively,
“appellants”), and Hanbin Li’s mother, Hong Li, defrauded them into investing
substantial sums of money in a restaurant business, Tree Tree Grill House, Inc.
Appellants sued appellees in the 234th District Court of Harris County, and they
sued Hong Li and Tree Tree Grill House in the 133rd District Court. Because there
was an arbitration agreement in the investment agreement, both the 133rd District
Court and the 234th District Court ordered the parties to arbitration.
The 234th District Court Case is Dismissed
While the dispute was in arbitration, the case against Huang and Li
languished in the 234th District Court, and, on February 18, 2016, the court
dismissed it for want of prosecution.
The Arbitration Award
On June 29, 2018, the arbitrator entered the following award in appellants’
favor:
Respondents Huang, Hanbin Li, and Hong Li, jointly and severally,
shall pay to Claimants Zeng and He the principal sum of One Hundred
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Sixty-One Thousand Eighty-One and 56/100 Dollars ($161,081.56)
for their breach of contract and fraud claims.
Respondents Huang and Hanbin Li, jointly and severally, shall pay to
Claimants Zeng and He prejudgment interest on the principal sum at
the rate of five percent (550 per annum from June 19, 2015 until the
date this Award is paid or confirmed by a Court of competent
jurisdiction.
Respondents Huang, Hanbin Li, and Hong Li, jointly and severally,
shall pay to Claimants the sum of One Hundred Sixty-Six Thousand
Fifty-Two and 50/100 Dollars ($166,052.50) as reasonable attorney’s
fees and costs incurred by Claimants to collect the sums due and
enforce their rights and remedies under the arbitration agreement.
The administrative fees and expenses of the AAA totaling $7,500.00
and the compensation and expenses of the Arbitrator totaling
$20,825.00 shall be borne as incurred.
Post judgment interest at the highest rate allowed by law shall accrue
on the entire award beginning on the date this Award is confirmed by
a Court of competent jurisdiction until paid.
The above sums shall be paid on or before thirty (30) days from the
date of this Award.
This Award is in full settlement of all claims and counterclaims
submitted to this Arbitration. All claims and counterclaims not
expressly granted herein are hereby denied.
The 133rd District Court Confirms the Arbitration Award
Because the case against Hong Li and the Tree Tree Grill House was still
pending in the 133rd District Court, and the arbitration award remained unpaid,
appellants filed an application in the 133rd District Court to confirm the arbitration
award. Though the suit in the 133rd District Court was originally against Hong Li
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and Tree Tree Grill only, on August 6, 2018, appellants filed a Second Amended
Petition, in which they added appellees as defendants and sought confirmation of
the arbitration award.
On September 10, 2018, the 133rd District Court entered an Order on
Plaintiffs’ Application for Confirmation of Arbitration Award, which provided as
follows:
1. The Final Award of Arbitrator dated June 29, 2018, is hereby
CONFIRMED;
2. Defendant/Respondent Hong Li shall pay directly to the attorneys
for Plaintiff/Claimants attorneys’ fees in the amount of
$166,052.50.
3. Defendant/Respondent Hong Li shall pay directly to the attorneys
for Plaintiffs/Claimants attorney’s fees in the amount of
$166,052.50.
On September 14, 2018, appellants non-suited Tree Tree Grill House as well
as appellees, Huang and Hanbin Li.
On October 8, 2018, the 133rd District Court signed a Final Judgment
incorporating the terms of its September 10, 2018 order as follows:
1. Defendant Hong Li shall pay to the Plaintiffs, Jeff Zeng and Chuan
He, the amount of $161,081.56 for breach of contract and fraud;
and
2. Defendant Hong Li shall pay directly to the attorneys for Plaintiffs
attorneys’ fees in the amount of $166,052.50.
3. Pre-judgment interest shall accrue at the rate of 5% per annum
from June 19, 2015, until the date of this order; and post-judgment
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interest shall accrue at the rate of 5% per annum on the entire
award beginning on the date of this order until date paid.
4. This judgment is final and disposes of all claims and all parties.
5. The Court ORDERS execution to issue for this judgment.
Though the 133rd District Court confirmed the arbitration award in its
entirety, the resulting judgment was only against Hong Li.
Appellants File Suit in the 333rd District Court
On October 23, 2018, appellants filed suit against appellees in the 333rd
District Court seeking to “confirm the arbitration award entered by arbitrator
Lamar McCorkle on June 29, 2018, in favor of Plaintiffs and against Defendants,
Haiyin Huang and Hanbin Li.”
After obtaining substituted service of process on appellees, and there being
no answer by appellees, on September 11, 2019, the trial court signed a default
judgment against appellees. However, on October 17, 2019, the trial court granted
appellees a new trial.
On March 6, 2020, appellants filed a Motion to Confirm Arbitrator’s Award,
“seek[ing] to have the Court confirm the arbitrator’s award, and to turn it into a
judgment.” In their motion, appellants, as they argue on appeal, contended that (1)
appellees’ opposition to the confirmation was untimely, and (2) the confirmation of
the arbitrator’s award was not “something that can only happen once[.]” Indeed,
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appellants argued that the trial court could do nothing but confirm the arbitrator’s
award.
Appellees filed a response to the motion to confirm, arguing (1) that only the
133rd District Court had jurisdiction to confirm the award because it had a pending
case from the time arbitration was entered and that (2) “since Haiyin Huang,
Hanbin Li and Hong Li are joint and severally liable to the plaintiff under the Final
Arbitration Award, Haiyin Huang and Hanbin Li are compulsory parties to that
cause of action so Plaintiffs should have included Haiyin Huang and Hanbin Li as
parties to the confirmation of that arbitration award.” Appellees requested that the
trial court deny plaintiffs motion to confirm the arbitration award and grant their
motion to dismiss the case for lack of jurisdiction.
On May 8, 2020, the trial court ordered that “plaintiffs’ motion to confirm
arbitration award was previously confirmed, therefore said motion shall be
DENIED.” The trial court did not grant appellees’ motion to dismiss for want of
jurisdiction.
This appeal followed.
DENIAL OF MOTION TO CONFIRM ARBITRATION AWARD
In three related issues on appeal, appellants contend that (1) appellants
cannot challenge the confirmation of the arbitration award, having missed the
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deadline to do so, (2) there are no statutory grounds for denying the confirmation,
and (3) the arbitration award was not previously confirmed as to appellees.
Standard of Review
The Texas Supreme Court has “long held that ‘an award of arbitrators upon
matters submitted to them is given the same effect as the judgment of a court of
last resort. All reasonable presumptions are indulged in favor of the award, and
none against it.’” CVN Group, Inc.v. Delgado, 95 S.W.3d 234, 238 (Tex. 2002)
(quoting City of San Antonio v. McKenzie Constr. Co., 150 S.W.2d 989, 996 (Tex.
1941) (“The courts will not overthrow an award such as this, except in a very clear
case.”)). Review of an arbitration award is so limited that an award may not be
vacated even if there is a mistake of fact or law. Univ. Comp. Sys., Inc. v. Dealer
Solutions, L.L.C., 183 S.W.3d 741, 752 (Tex. App.—Houston [1st Dist.] 2005, pet.
denied); Stieren v. McBroom, 103 S.W.3d 602, 605 (Tex. App.—San Antonio
2003, pet. denied); Vernon E. Faulconer, Inc. v. HFI, Ltd. P'ship, 970 S.W.2d 36,
39 (Tex. App.—Tyler 1998, no pet.). The arbitrator’s award is “conclusive on the
parties as to all matters of fact and law.” Pheng Invs., Inc. v. Rodriquez, 196
S.W.3d 322, 328 (Tex. App.—Fort Worth 2006, no pet.). Where there is no
allegation of a statutory ground to vacate or modify the arbitration award, we lack
jurisdiction to review the arbitrator’s decision. See Fogal v. Stature Constr.,
Inc., 294 S.W.3d 708, 721 (Tex. App.—Houston [1st Dist.] 2009, pet.
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denied); Providian Bancorp Servs. v. Thomas, 255 S.W.3d 411, 415 (Tex. App.—
El Paso 2008, no pet.); Pettus v. Pettus, 237 S.W.3d 405, 418 (Tex. App.—Fort
Worth 2007, pet. denied).
Applicable Law
The Texas Civil Practice and Remedies Code dictates that, unless grounds
are offered for vacating, modifying, or correcting an award under other specified
sections of the code, the court, on application of a party, shall confirm the
award. See TEX. CIV. PRAC. & REM. CODE § 171.087. Thus, “confirmation is the
default result unless a challenge to the award has been or is being
considered.” Hamm v. Millennium Income Fund, L.L.C., 178 S.W.3d 256, 262
(Tex. App.—Houston [1st Dist.] 2005, pet. denied). The grounds for vacating an
award under the code are set out in section 171.088(a), which states:
On application of a party, the court shall vacate an award if:
(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 willful misbehavior of an arbitrator;
(3) the arbitrators:
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(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
(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.
TEX. CIV. PRAC. & REM. CODE § 171.088(a).
These grounds reflect severe departures from an otherwise proper arbitration
process and are of a completely different character than ordinary legal
error. Centex/Vestal v. Friendship W. Baptist Church, 314 S.W.3d 677, 684 (Tex.
App.—Dallas 2010, no pet.).
The grounds for modifying or correcting an award are set out in section
171.091(a), which states:
On application, the court shall modify or correct an award if:
(1) the award contains:
(A) an evident miscalculation of numbers; or
(B) an evident mistake in the description of a person, thing, or
property referred to in the award;
(2) the arbitrators have made an award with respect to a matter not
submitted to them and the award may be corrected without affecting
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the merits of the decision made with respect to the issues that were
submitted; or
(3) the form of the award is imperfect in a manner not affecting the
merits of the controversy.
TEX. CIV. PRAC. & REM. CODE § 171.091(a).
The First Confirmation Judgment
Before considering the 333rd District Court’s denial of appellants’ motion to
confirm, we first consider the 133rd District Court’s grant of appellant’s motion to
confirm and resulting judgment against Hong Li, who is not a party to this appeal.
In doing so, we find the case of White v. Siemens, 369 S.W.3d 911 (Tex. App.—
Dallas 2012, no pet.) to be helpful.
In White, the arbitrator awarded Siemens damages against four defendants—
MWE, MWF, Mullins, and White—jointly and severally. Id. at 913. Siemens filed
an application to confirm the arbitration award with the trial court, asking the trial
court to enter a final judgment in his favor confirming the arbitration award in its
entirety. Id. MWF, MWE, and Mullins moved to modify or vacate the arbitration,
arguing that the arbitrator exceeded his powers. Id. Thereafter, Siemens settled
with MWE, MWF, and Mullins, who agreed to pay the full amount of the award on
behalf of all defendants, including White, who was not a party to the settlement.
Id. Additionally, Siemens agreed to release MWF after an initial payment of
$500,000, agreeing to look to MWE, Mullins, and White for the balance. Id. The
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trial court then ordered that the arbitration award was confirmed and entered a final
judgment against MWE, Mullins, and White, jointly and severally. Id. at 914. The
final judgment ordered that all claims against MWF were dismissed with prejudice.
Id.On appeal, White argued that the trial court’s judgment erroneously
modified the arbitration award to exclude MWF as a judgment defendant. Id. The
court of appeals agreed, holding that “[b]y dismissing with prejudice all claims
against MWF, the trial court’s judgment had the effect of completely negating the
arbitration award against a party the arbitration panel found to be jointly and
severally liable” and “the trial court’s judgment, in effect, modified the arbitration
award by dismissing a jointly and severally liable party.” Id. at 915. The court of
appeals held that, in seeking to confirm the arbitration award against select parties,
Siemens had failed to meet his burden of proving the grounds required for a
modification. Id. at 916. “Because we find no statutory grounds allowing the trial
court to modify the arbitration award in this case, we conclude the trial court erred
by modifying the arbitration award to dismiss all claims against a jointly and
severally liable party.” Id. Accordingly, the court of appeals reversed the trial
court’s judgment and rendered judgment confirming the final award issued by the
arbitrator. Id. at 917.
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Thus, applying the reasoning of White, we conclude that the 133rd District
Court erred when it confirmed the arbitration award as to some, but not all, joint
and several defendants. However, appellees were not a party to that judgment and
that case was never appealed. Thus, we must now decide whether the 133rd
District Court’s judgment prohibits appellants from bringing a second motion to
confirm the arbitration award against the two defendants who were erroneously
omitted from the 133rd Court’s judgment.
Effect of 133rd District Court’s Judgment on 333rd District Court’s Judgment
In this case, appellants contend that the arbitration award was never
confirmed and reduced to judgment against appellees, and that no grounds exist to
prohibit the 333rd District Court from confirming the arbitration award as to the
defendants who were erroneously omitted from the 133rd District Court’s
judgment. In response, appellees argue that the 333rd District Court properly
denied appellants’ motion to confirm based res judicata, collateral estoppel, and the
prohibition against double recovery. We agree with appellants that none of the
grounds urged by appellees are reasons given under the relevant statutes to deny an
application to confirm an arbitration award against appellees.
The Texas Arbitration Act (“TAA”) states that the court, on application of a
party, “shall confirm” an arbitration award “[u]nless grounds are offered for
vacating, modifying, or correcting [it] under Section 171.088 or 171.091.” TEX.
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CIV. PRAC. & REM. CODE § 171.087. A party seeking to avoid confirmation of an
arbitration award under the TAA may do so “only by demonstrating a ground
expressly listed in section 171.088.” Hoskins v. Hoskins, 497, S.W.3d 490, 495
(Tex. 2016). “The statutory text [of the TAA] could not be plainer: the trial court
‘shall confirm’ an award unless vacatur is required under one of the enumerated
grounds in section 171.088.” Id. at 494. “[T]he TAA leaves no room for courts to
expand on those grounds[.]” Id.
Appellees’ grounds for avoiding confirmation here—res judicata, collateral
estoppel, and the prohibition against double recovery—are not statutory grounds
for vacating, modifying, or correcting an arbitration award. See TEX. CIV. PRAC. &
REM. CODE § 171.088(a) (listing statutory grounds for vacatur) and TEX. CIV.
PRAC. & REM. CODE § 171.091(a) (listing statutory grounds for correcting or
modifying award).1
An action for confirmation of an arbitration award is intended to be a
summary proceeding, the purpose of which is to implement the arbitrator’s award
by making the award a final, enforceable judgment of the court. Guerra v. L & F
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In the event that appellants attempt to obtain a “double-recovery” by executing
fully on both a judgment against Hong Li and a judgment against appellants, the
issue can be raised in that subsequent action. There is persuasive authority under
the FAA for treating the confirmation of an award as a proceeding separate and
distinct from an action to enforce the award. See Zeiler v. Deitsch, 500 F.3d 157,
169 (2nd Cir. 2007) (“A district court confirming an arbitration award does little
more than give the award the force of a court order. At the confirmation stage, the
court is not required to consider the subsequent question of compliance.”).
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Distributors, LLC, 521 S.W.3d 878, 885 (Tex. App.—San Antonio 2017, no pet.).
It is undisputed that there is no trial court judgment making the arbitration award
final and enforceable against appellees; the 133rd District Court’s judgment is only
against Hong Li.
Appellees have cited no authority, and we can find none, holding that
confirming a judgment against one joint-and-several defendant to an arbitration
award prevents a separate judgment confirming the same award against other joint-
and-several defendants erroneously omitted from the first confirmation judgment.
Because there were no statutory grounds proven for vacating, modifying, or
correcting the arbitration award, the trial court had no jurisdiction to do anything
other than confirm the arbitration award against appellees. Accordingly, we reverse
the judgment of the trial court and render judgment confirming the June 29, 2018
Final Award of Arbitrator.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Countiss and Farris.
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