Court Opinion

ID: 4454190
Source: CourtListenerOpinion
Date Created: 2019-11-07 23:14:50.072103+00
Date Added: 2024-06-11T14:25:29.698915
License: Public Domain

Motion to Dismiss Denied; Affirmed and Majority and Dissenting Opinions
filed November 7, 2019.

                                      In The

                     Fourteenth Court of Appeals

                               NO. 14-17-00739-CV

     CENTER ROSE PARTNERS, LTD., INDIVIDUALLY AND
DERIVATIVELY AS A MEMBER OF ROSE ACQUISITION LLC, DAVID
      FELT, NICOLE FELT, AND LLOYD HALL, Appellants

                                         V.

           JERRY W. BAILEY AND DAVID SONNIER, Appellees

                     On Appeal from the 61st District Court
                             Harris County, Texas
                       Trial Court Cause No. 2014-32793

                      MAJORITY OPINION
      In this case involving appeals from a judgment rendered on an arbitration
award, the appellees move to dismiss on the grounds that (1) one of the appellants
lacks standing to appeal; (2) another appellant is estopped from challenging the
trial court’s judgment on appeal; and (3) all appellants waived their right to appeal
the judgment. We deny the appellees’ motion to dismiss.
      On the merits of the appeals, we conclude that appellant Lloyd Hall did not
challenge the arbitration award in a timely manner and that appellants Center Rose
Partners, Ltd., Individually and Derivatively as a Member of Rose Acquisition,
LLC, David Felt, and Nicole Felt have not shown that the trial court erred in
denying their applications to vacate the arbitration award. We affirm.

                  I. FACTUAL AND PROCEDURAL BACKGROUND

      Appellant/plaintiff Center Rose Partners, Ltd., (“Center Rose Partners”)
appellees/defendants Jerry W. Bailey and David Sonnier (collectively the “Bailey
Parties”), and appellant/defendant Lloyd Hall are members of Rose Acquisition,
LLC (“Rose Acquisition”), a Texas limited liability company. In Rose
Acquisition’s Articles of Organization, Bailey and L.J. Black are named as Rose
Acquisition’s managers.      According to the Bailey Parties, Black stopped
performing his job responsibilities and by 2007, several Rose Acquisition members
had become unhappy with Black’s behavior.         In 2008, Center Rose Partners
purchased Black’s 330 units in Rose Acquisition. To finance this purchase, Center
Rose Partners obtained a $2,650,000 loan from Capital One, N.A. (the “Loan”).
Center Rose Partners signed a Promissory Note in favor of the bank (the “Note”).
After Center Rose Partners’s purchase of Black’s interest in Rose Acquisition,
Bailey became the sole manager of Rose Acquisition. The Bailey Parties claimed
that Center Rose Partners and David Felt promised that Center Rose Partners
would pledge 100 of the units it bought from Black to Bailey as an added
inducement for Bailey to remain with Rose Acquisition. According to the Bailey
Parties, Center Rose Partners promised that if Rose Acquisition allowed Center
Rose Partners to receive 55% of the distributions to Rose Acquisition members
(even though Center Rose Partners owned only a 45% interest in Rose
Acquisition), Center Rose Partners would use the distributions received from Rose
                                         2
Acquisition to pay off the Loan. The Bailey Parties later discovered that Center
Rose Partners had defaulted on the Loan, and Bailey purchased the Loan from
Capital One, N.A. to avoid a possible foreclosure by Capital One on assets of Rose
Acquisition that had been pledged as collateral for the Loan.

       In 2014, appellant/plaintiff Center Rose Partners, Ltd., a Texas limited
partnership, Individually and Derivatively as a Member of Rose Acquisition, LLC
(“Center Rose”)1 filed suit in the trial court below against Bailey, Sonnier, and
Hall, asserting various claims relating to Bailey’s management of Rose
Acquisition. Center Rose sought various declarations under the Texas Declaratory
Judgments Act and also asserted breach-of-contract, breach-of-fiduciary-duty, and
quantum-meruit claims against Bailey. Center Rose also demanded an accounting
and asked the trial court to impose a constructive trust.

       In 2015, Bailey filed a separate lawsuit against Center Rose Partners and
Nicole Felt seeking to recover the amount Center Rose Partners owed under the
Note and against Nicole Felt as a guarantor.

       In the trial court below, after Bailey, Sonnier, and Hall answered, the Bailey
Parties filed a motion to compel arbitration of Center Rose’s claims based on an
arbitration provision contained in the Membership Agreement, executed in 1999 by
all of the parties who were then members of Rose Acquisition.                       Under the
Membership Agreement, the parties agreed that if they were unable to resolve “any
dispute or controversy arising out of this [Membership Agreement], then any such
dispute or controversy shall be settled by arbitration in Houston, Texas by a panel
of three arbitrators in accordance with the rules of the American Arbitration

1
  In this opinion, we use the defined term “Center Rose Partners” to refer to Center Rose
Partners, Ltd., and we use the defined term “Center Rose” to refer to Center Rose Partners, Ltd.,
a Texas limited partnership, Individually and Derivatively as a Member of Rose Acquisition,
LLC.

                                               3
Association, whose decisions shall be final, binding[,] and non-appealable.” The
Bailey Parties asserted that all of Center Rose’s claims fell within the scope of this
arbitration provision.

      The trial court granted the motion to compel arbitration, ordered Center
Rose, the Bailey Parties, and Hall to submit their dispute to arbitration in
accordance with the Membership Agreement’s arbitration provision, and stayed the
case pending completion of the arbitration.

      The Bailey Parties, individually and derivatively as members of Rose
Acquisition, filed a demand for arbitration with the American Arbitration
Association (“AAA”) asserting claims for fraud, breach of fiduciary duty,
conversion, and unjust enrichment against Center Rose Partners, David Felt, and
Nicole Felt. The Bailey Parties alleged that the Felts were agents of Center Rose
Partners. The Bailey Parties also sought declaratory relief and the imposition of a
constructive trust. Though the trial court had compelled arbitration under the
Membership Agreement’s arbitration provision, the Bailey Parties did not base
their arbitration demand on that provision. Instead, the Bailey Parties sought
arbitration under section 11.15 of Rose Acquisition’s Regulations. Under that
provision, if the parties were unable to resolve “any dispute or controversy arising
out of these Regulations, then any such dispute or controversy shall be settled by
arbitration in Houston, Texas by a panel of three arbitrators in accordance with the
rules of the [AAA], whose decisions shall be final, binding[,] and non-appealable.”

      In the arbitration, Center Rose Partners and the Felts filed an answer and
claims for affirmative relief, in which they submitted to “the jurisdiction of the
arbitration proceedings for those matters that are required to be arbitrated.” They
sought all of the relief Center Rose sought in the lawsuit and requested additional
declaratory relief. Though Hall was a defendant in Center Rose’s lawsuit, Hall did

                                          4
not file any claims in the arbitration, and no claimant in the arbitration named Hall
as a respondent.

       The arbitration panel based the arbitration on the arbitration provision
contained in section 11.15 of Rose Acquisition’s Regulations. In January 2017, the
arbitration panel issued a unanimous award. Two months later the arbitrators
issued an amended award (the “Award”) to correct typographical errors in the
original award. In the Award, the arbitration panel made findings, including the
following:

    • The parties failed to adhere to the governance sections of the Articles of
      Organization of Rose Acquisition, the Membership Agreement, and the
      Regulations of Rose Acquisition, LLC.
    • On July 2, 2008, Center Rose Partners entered into a Letter Agreement with
      Capital One Bank to borrow $2,650,000 to be used to purchase the 330
      units2 of “Buzz” Black in Rose Acquisition.
    • Capital One and Center Rose Partners entered into the Note and a Deed of
      Trust and Security Agreement for the $2,650,000 secured by .9147 acres on
      Center Street.
    • The Note was to be paid from distributions allocated to Center Rose Partners
      for the 330 units.
    • Pursuant to a Trust Agreement, 100 units of the 330 units were held in trust
      for Bailey.
    • During the approximately sixty months that Center Rose Partners was
      paying on the Note, it received approximately $2,315,005 in distributions
      attributed to the 330 units in Rose Acquisition.
    • Center Rose Partners failed to introduce any documentary evidence to
      support its contention that it paid income taxes at a rate of 33% on the
      distributions received attributable to the 330 units.

2
  Though the arbitration panel sometimes used the term “shares” instead of “units,” reading these
terms in context, it is clear that the panel was referring to units in Rose Acquisition when using
the term “shares.” Therefore, we use the term “units” throughout this opinion.

                                                5
   • Though Bailey received several salary increases without the appropriate vote
     of the members, the members acquiesced to these raises.
   • Center Rose Partners defaulted on the Note. Bailey purchased the Note from
     Capital One for approximately $1,241,966.69.
   • The misconduct of the Bailey Parties, Center Rose Partners, David Felt, and
     Nicole Felt “was neither ‘intentional’ nor a ‘knowing violation of the law.’”
      The arbitration panel determined that Center Rose Partners breached its
agreement to pay Capital One the entire $2,650,000 and that this breach caused a
default on the Note.    The arbitration panel also concluded that Center Rose
Partners held the 330 units it purchased from Black in “a special trust for Rose
Acquisition members.” The arbitration panel granted the following relief in the
Award:

   • Bailey is entitled to receive the 100 units held in trust under the Trust
     Agreement.
   • Because Center Rose Partners breached its agreement to pay Capital One the
     entire $2,650,000, and to prevent unjust enrichment, the remaining 230 units
     shall be held in a constructive trust for the benefit of Rose Acquisition.
   • If Rose Acquisition chooses to sell the 230 units held in constructive trust,
     Rose Acquisition and the members must adhere to the Agreement
     Restricting Transfer of Units (“Restriction Agreement”) in determining the
     value of the units and the selection of an appraiser under section 2 of the
     Restriction Agreement. Center Rose Partners is not entitled to receive any
     of the 230 units except through this procedure.
   • Center Rose Partners shall reimburse Bailey $1,241,966.69 — the amount
     the arbitrators found that Bailey had paid to purchase the Note from Capital
     One.
The arbitration panel made the Award in full settlement of all claims and
counterclaims submitted in the arbitration, stating that the panel denied all claims
not expressly granted in the Award.

      The Bailey Parties filed a motion to confirm the Award under section
171.087 of the Texas Civil Practice and Remedies Code. They asked the trial court

                                         6
to confirm the Award and to render judgment on the Award under section 171.092
of the Texas Civil Practice and Remedies Code. Center Rose opposed this motion
and filed an application to vacate the Award based on several vacatur grounds in
section 171.088 of the Texas Civil Practice and Remedies Code. The Felts filed a
plea in intervention in the lawsuit and filed an application to vacate the Award
under the same statute.

      The Bailey Parties filed a motion to strike the Felts’ plea in intervention and
application to vacate the Award. The trial court did not rule on their motion, and
the Bailey Parties later withdrew the motion after the trial court rendered final
judgment. The trial court denied Center Rose’s application to vacate the Award
and granted the Bailey Parties’ motion to confirm the Award. The trial court
rendered a final judgment on the Award and ruled that the Felts and Center Rose
Partners take nothing as to each counterclaim that they asserted or could have
asserted in the arbitration.

      Hall filed a motion for new trial, asserting that the Award violated Hall’s
rights in various ways. In the motion Hall requested that the trial court set aside
the judgment, grant Center Rose’s application to vacate the Award, and order the
parties to the arbitration to arbitrate again the claims arising under the Regulations.
The trial court denied Hall’s motion.

      The trial court also denied Center Rose’s motion for new trial, Center Rose’s
motion to reconsider the denial of its application to vacate the Award, and the
Felts’ motion to modify the judgment.

      Center Rose, the Felts, and Hall all timely appealed.

                               II. ISSUES AND ANALYSIS
A.    Should this court grant the Bailey Parties’ motion to dismiss?
      The Bailey Parties have filed a motion to dismiss the appeals of Center
                                          7
Rose, the Felts, and Hall. The Bailey Parties note that in the Regulations’
arbitration provision and in the Membership Agreement’s arbitration provision, the
parties agreed that the arbitrators’ decisions shall be “final, binding[,] and non-
appealable.” The Bailey Parties maintain that this agreement constitutes an express
waiver of the right to appeal the trial court’s judgment and that each appellant
either agreed to this waiver or is bound by it. The Bailey Parties also assert that
Center Rose is estopped from pursuing this appeal because Center Rose voluntarily
accepted the benefits of the trial court’s judgment by accepting a $25,600 payment
from Rose Acquisition to reimburse Center Rose for its attorney’s fees, as ordered
in the judgment. The Bailey Parties assert that this court should dismiss Hall’s
appeal because he lacks standing to appeal the trial court’s judgment due to his
failure to timely assert a ground for vacating the Award.        We address each
argument in turn.

      1.    Alleged Waiver of Right to Appeal

      Although parties cannot change by agreement the statutes governing
appellate jurisdiction, parties may waive by express agreement their right to appeal
under those statutes. See Emerson v. Emerson, 559 S.W.3d 727, 734 (Tex. App.—
Houston [14th Dist.] 2018, no pet.). In the Regulations’s arbitration provision and
in the Membership Agreement’s arbitration provision, the parties agreed that the
arbitrators’ decisions shall be “final, binding[,] and non-appealable” (the “Non-
Appealable Language”). The Bailey Parties maintain that the Non-Appealable
Language constitutes an express agreement to waive the right to appeal the trial
court’s judgment and that each appellant either agreed to this waiver or is bound by
it. We presume, without deciding, that each appellant either agreed to the Non-
Appealable Language or is bound by it and that agreeing to the Non-Appealable
Language does not violate Texas public policy.

                                         8
      We now address whether the Non-Appealable Language amounts to an
express agreement to waive the right to appeal the trial court’s judgment. The
parties have not cited, and research has not revealed, any opinion from the
Supreme Court of Texas interpreting this language. The Bailey Parties assert that
two opinions from the Fourteenth Court of Appeals bind this panel to the Bailey
Parties’ interpretation of the Non-Appealable Language.

            a.     The Denbury Case

      In the first case — Denbury Onshore, LLC v. Texcal Energy South Texas,
L.P. — this court held that the parties did not clearly agree to expand judicial
review of the arbitration award.    See 513 S.W.3d 511, 517–19 (Tex. App.—
Houston [14th Dist.] 2016, no pet.). The Denbury court presumed that the parties’
agreement to limit the available grounds for vacatur of the arbitration award to
instances of fraud or corruption was not enforceable, and the court then concluded
that the appellant had not met its heavy burden to demonstrate that the arbitrators
exceeded their powers. See id. at 519–22. In a footnote, the Denbury court stated
that, “[i]n the context of an appeal from a final judgment of disbarment, we have
indicated that public policy does not prohibit enforcing a parties’ [sic] waiver of
the statutory right to appeal a trial court’s judgment confirming an arbitration
award altogether.” See id. at 519, n.6. In Denbury, no party asserted that appellant
had waived its right to appeal the trial court’s judgment confirming the arbitration
award, and this court did not address this waiver issue. See id. at 515–22. The
Denbury case is not on point and is not a binding precedent as to how to construe
the Non-Appealable Language. See id.

      b.    The Bennett Case

      The Bailey Parties also rely on Bennett v. Commission for Lawyer
Discipline, a case in which an attorney appealing a disbarment judgment argued
                                         9
that he did not violate Rule 3.02 of the Texas Disciplinary Rules of Professional
Conduct when he appealed a district court’s judgment confirming an arbitration
award in favor of his former client because the appeal was permitted under the
agreement between the attorney and the former client. See 489 S.W.3d 58, 68
(Tex. App.—Houston [14th Dist.] 2016, no pet.). In Bennett’s appeal from this
judgment, the First Court of Appeals affirmed on the merits and did not dismiss the
appeal because the parties had waived any appeal from the judgment. Id. at 64–65.
In adjudicating the appeal in the attorney-disciplinary proceeding, this court
concluded that, under the plain language of the attorney/client agreement, the
parties agreed to waive the right to appeal from any trial court’s judgment
confirming an arbitration award. Id. at 68–70.

      But the Bennett court limited its analysis to the particular contract at issue in
that case, stating as follows: “Bennett argues that the right to appeal has not been
waived in this particular contract. We address only the particular contractual
language presented here.” Id. at 69 n.1. In Bennett, the attorney and client agreed
to arbitrate any dispute between them under the rules of the Houston Bar
Association Fee Dispute Committee. Id. at 63. Bennett and his client agreed “that
the arbitrator’s decision in any such arbitration shall be binding, conclusive[,] and
non-appealable pursuant to the Rules and Regulations of the Houston Bar
Association Fee Dispute Committee.” Id. at 69. The agreement also provided
“that arbitration may result in the client’s waiver of significant rights, such as . . .
the loss of the right to appeal.” Id. The contractual language in Bennett differed
materially from the Non-Appealable Language at issue today because the parties in
today’s case did not agree that the award would be “non-appealable pursuant to the
Rules and Regulations of the Houston Bar Association Fee Dispute Committee.”
The agreement in the Bennett case was an attorney/client contract, and the Bennett

                                          10
court emphasized that fact, stating that “Bennett’s construction is not reasonable
because a lawyer has a duty to inform a client of all material facts.” Id. at 70. We
conclude that the Bennett opinion is not on point and does not govern our
interpretation of the Non-Appealable Language. See id. at 68–70. The
interpretation of this language appears to be an issue of first impression in this
court.

         c.    The “final, binding” language

         The parties agreed that the arbitrators’ decisions are binding. Parties may
agree to binding arbitration. Or, parties may agree to non-binding arbitration, in
which the arbitration award does not bind the parties but serves as a basis for the
parties’ further settlement negotiations. See Tex. Civ. Prac. & Rem. Code Ann. §
154.027 (West 2019); G.T. Lech Builders, LLC v. Sapphire V.P., L.P., 458 S.W.3d
502, 508 n.1 (Tex. 2015). Thus, by agreeing that the arbitrators’ decisions are
binding, the parties manifested their choice for binding arbitration as opposed to
non-binding arbitration. See Tex. Civ. Prac. & Rem. Code Ann. § 154.027; G.T.
Lech Builders, LLC, 458 S.W.3d at 508 n.1. Under the plain meaning of the
parties’ language, their agreement that the arbitrators’ decisions are final and
binding does not constitute an express agreement to waive the right to appeal a
judgment rendered on the arbitrators’ award. See Dean v. Sullivan, 118 F.3d 1170,
1171 (7th Cir. 1997); Iran Aircraft Indus. v. Avco Corp., 980 F.2d 141, 145 (2d
Cir. 1992); Circle Zebra Fabricators, Ltd. v. Americas Welding Corp., No. 13-10-
00504-CV, 2011 WL 1844443, at *6 (Tex. App.—Corpus Christi Mar. 17, 2011,
no pet.) (mem. op.).

         d.    The “non-appealable” term
         Parties enjoy the contractual freedom to make express agreements to waive
their right to appeal a judgment rendered on an arbitration award, but because this

                                          11
right is a valuable one, we must make sure that the appellants are bound by an
express agreement to waive this right before we dismiss an appeal from this type of
judgment. See Perry Homes, 258 S.W.3d at 585–87, 601; Emerson, 559 S.W.3d at
734.

       As to the agreement that the arbitrators’ decisions are non-appealable, we
deem it significant that the parties agreed that the arbitrators’ decisions are non-
appealable; the parties did not agree that any judgment rendered on a decision of
the arbitrators would be non-appealable. Thus, to use today’s case as an example,
the parties agreed that the Award would be non-appealable, not that the trial
court’s judgment on the Award would be non-appealable. If the parties had agreed
that any judgment rendered on a decision of the arbitrators would be non-
appealable, that provision would constitute an express agreement to waive the right
to appeal the trial court’s judgment in this case. See, e.g., MACTEC, Inc. v.
Gorelick, 427 F.3d 821, 827–30 (10th Cir. 2005) (holding that parties agreed to
waive right to appeal judgment rendered on any arbitration award by agreeing that
“[j]udgment upon the award rendered by the arbitrator shall be final and
nonappealable”). But, the parties did not enter into such an agreement.

       In addition, when a party appeals a judgment rendered on an arbitration
award, the party is not limited to challenging the denial of any application to
vacate, modify, or correct the award. See Perry Homes v. Cull, 258 S.W.3d 580,
585–87, 601 (Tex. 2008). The appealing party also may challenge any
interlocutory order that merged into the trial court’s final judgment, such as an
order granting an opposing party’s motion to compel arbitration. See id. (holding
that appellate courts may review trial-court orders compelling arbitration on appeal
from a final judgment rendered on an arbitration award); Ewing v. Act
Catastrophe–Texas L.C., 375 S.W.3d 545, 552–53 (Tex. App.–Houston [14th

                                        12
Dist.] 2012, pet. denied) (noting that no party had moved to compel or stay
arbitration and that there was no order as to such relief that could be reviewed on
appeal of a final judgment rendered on an arbitration award).

      Though it may not be common for parties to agree to appellate arbitration,
certain arbitration organizations, including the AAA,3 provide appeal tribunals of
appellate arbitrators for review of the merits of an arbitration award if the parties
have agreed that the arbitration award may be appealed.              See Carter v. ZB,
National Association, 578 S.W.3d 613, 620 (Tex. App.—Houston [14th Dist.]
2019, no pet.). The Bailey Parties have submitted a copy of the AAA’s “Optional
Appellate Arbitration Rules” (“Appellate Rules”).          They argue that this court
should not consider the availability of an appeal from an arbitration award because
the AAA promulgated the Appellate Rules effective as of November 2013, yet the
Regulations and the Membership Agreement were effective as of September 1999.
The Bailey Parties assert that there was no way to appeal an arbitration award
before the AAA until the Appellate Rules took effect in November 2013.
Presuming for the sake of argument that we must base our construction of the
arbitration provisions on the facts as of September 1999, the Bailey Parties
incorrectly presume that the absence of the Appellate Rules before November 2013
means that parties could not appeal an award issued in a AAA arbitration before
that point in time.

      The introduction to the Appellate Rules states that appellate arbitration has
been available before the AAA for some years before 2013 and that the AAA has
provided sample clauses for appellate arbitration in its “Drafting Dispute
Resolution Clauses — A Practical Guide.” The AAA states that although parties

3
  In the Regulations’s arbitration provision and in the Membership Agreement’s arbitration
provision, the parties agreed to arbitration before the AAA.

                                           13
have been crafting their own procedures and standards for appellate arbitration in
their arbitration agreements, the AAA adopted the Appellate Rules to provide for
an easier, more standardized process. The AAA’s 1993 guide for drafting dispute-
resolution clauses provided a sample clause for parties who wanted to agree to
appellate arbitration. See American Arbitration Association, Drafting Dispute
Resolution Clauses: A Practical Guide (1993), available in Westlaw file
No. 1993 WL 495383. These provisions show that appellate arbitration before the
AAA was available when the parties agreed to the arbitration provisions in the
Regulations and Membership Agreement. See id. Thus, the parties might have
agreed that an arbitration decision shall be “non-appealable” to confirm that they
were not agreeing to appellate arbitration. See Carter, 578 S.W.3d at 620.

          In addition, appeals ordinarily involve a review of the merits of the appealed
decision. Though an application to vacate, modify, or correct an arbitration award
in a trial court is not actually an appeal, in these applications parties improperly
may seek a review by the trial court of the legal or factual determinations of the
arbitrators as if the application were an appeal. See Casa Del Mar Assoc., Inc. v.
Williams & Thomas, L.P., 476 S.W.3d 96, 101 (Tex. App.—Houston [14th Dist.]
2015, no pet.). Unless the parties have agreed to expanded judicial review of an
arbitration award enforceable under the Texas Arbitration Act,4 judicial review of
an arbitration award is extraordinarily narrow and does not encompass a review of
the award’s merits. See Hoskins v. Hoskins, 497 S.W.3d 490, 494 (Tex. 2016);
Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 97–101 (Tex. 2011). Thus, the
parties might have agreed that an arbitration award is “non-appealable” to confirm
that the parties may not challenge the merits of the arbitration award in court. See
Circle Zebra Fabricators, Ltd., 2011 WL 1844443, at *6; Emerald Aero, LLC v.

4
    The parties in today’s case did not do so.

                                                 14
Kaplan, 215 Cal. Rptr. 3d 5, 21–22 (Cal. Ct. App. 2017); Falls v. 1CI, Inc., 57 A.3d
521, 539–40 (Md. Ct. Spec. App. 2012).5

       Whether the parties intended the Non-Appealable Language to confirm that
they were not agreeing to have appellate arbitrators review the merits of the
arbitration award or whether the parties intended the Non-Appealable Language to
confirm that they may not challenge the merits of the arbitration award in court, we
conclude that the Non-Appealable Language cannot reasonably be construed as a
waiver of the right to ask a trial court to vacate an arbitration award based on one
of the Texas Arbitration Act’s vacatur grounds or as a waiver of the right to appeal
a judgment rendered on an arbitration award. See International Telepassport Corp.
v. USFI, Inc., 89 F.3d 82, 86 (2d Cir. 1996); Osco Motors Co. v. Quality Mark,
Inc., No. 14-887, 2014 WL 4163595, at *5–6 (D. Minn 2014); Circle Zebra
Fabricators, Ltd., 2011 WL 1844443, at *6; Barsness v. Scott, 126 S.W.3d 232,
238 (Tex. App.—San Antonio 2003, pet. denied); Emerald Aero, LLC, 215 Cal.
Rptr.3d at 21–22; Falls, 57 A.3d at 539–40. So, we reject the Bailey Parties’
argument that the Non-Appealable Language constitutes an express agreement to
waive the right to appeal the trial court’s judgment.

       2.     Estoppel Argument Against Center Rose

       In their motion to dismiss, the Bailey Parties assert that Center Rose is
estopped from pursuing this appeal under the acceptance-of-benefits doctrine

5
  The Bailey Parties assert that because Center Rose asserted grounds for vacating the Award
under the Texas Arbitration Act, we should not consider cases decided under the Federal
Arbitration Act in determining whether the parties waived the right to appeal the trial court’s
judgment by agreeing to the Non-Appealable Language. Though there are points on which the
Texas Arbitration Act and the Federal Arbitration Act differ, the analysis of this waiver issue
would be no different under the Federal Arbitration Act. Thus, we cite cases under the Federal
Arbitration Act as persuasive authority. See Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 56,
n.10 (Tex. 2008).

                                              15
because Center Rose cashed a check for $25,600 from Rose Acquisition. This
payment related to two parts of the Award. In one part, the arbitrators stated that
Center Rose should receive $16,335 from Rose Acquisition as reasonable and
necessary attorney’s fees, in addition to the attorney’s fees Rose Acquisition
already had paid under section 8.1 of Rose Acquisition’s Articles of Organization.
In the other part, the arbitrators stated that Rose Acquisition should reimburse
Center Rose the sum of $9,265, representing that portion of the administrative fees
and expenses in excess of the apportioned costs that Center Rose already had
incurred.

      Definitive, bright-line rules seldom appear in matters of equity. Kramer v.
Kastleman, 508 S.W.3d 211, 228 (Tex. 2017). The Supreme Court of Texas has
articulated the following nonexclusive factors to be used in determining whether
estoppel bars a party from appealing a judgment based on the party’s acceptance of
the benefits of that judgment:
      • whether acceptance of benefits was voluntary or was the product of
      financial duress;
      • whether the right to joint or individual possession and control
      preceded the judgment on appeal or exists only by virtue of the
      judgment;
      • whether the assets have been so dissipated, wasted, or converted as
      to prevent their recovery if the judgment is reversed or modified;
      • whether the appealing party is entitled to the benefit as a matter of
      right or by the nonappealing party’s concession;
      • whether the appeal, if successful, may result in a more favorable
      judgment but there is no risk of a less favorable one;
      • if a less favorable judgment is possible, whether there is no risk the
      appellant could receive an award less than the value of the assets
      dissipated, wasted, or converted;
      • whether the appellant affirmatively sought enforcement of rights or
      obligations that exist only because of the judgment;

                                        16
       • whether the issue on appeal is severable from the benefits accepted;
       • the presence of actual or reasonably certain prejudice; and
       • whether any prejudice is curable.

Id. at 228–29. Whether estoppel precludes a party from appealing involves a fact-
dependent inquiry entrusted to the court’s discretion. Id. at 228. One factor is
whether Center Rose Partners affirmatively sought enforcement of rights or
obligations that exist only because of the judgment. Yet, Center Rose Partners
cashed the check for $25,600 from Rose Acquisition more than six weeks before
the trial court rendered its judgment. The obligation to pay this amount exists both
because of the Award and because of the judgment. Further, no party on appeal
asserts that the trial court erred in ordering the payment of these amounts in its
judgment.

       After applying the above factors to the facts of this case, we conclude that
the Bailey Parties have not shown that Center Rose is estopped from appealing the
trial court’s judgment based on its acceptance of this $25,600 payment from Rose
Acquisition.6 See id. at 30–32.

       3.     Hall’s Alleged Lack of Standing to Appeal

       In the motion to dismiss, the Bailey Parties assert that Hall lacks standing to
appeal the trial court’s judgment because he did not file a timely application to
vacate, modify, or correct the Award. See Hamm v. Millenium Income Fund, LLC,
178 S.W.3d 256, 262–72 (Tex. App.—Houston [1st Dist.] 2005, pet. denied). If
Hall lacked standing to appeal the trial court’s judgment, then this court would lack
jurisdiction over Hall’s appeal. See Tex. Ass'n. of Bus. v. Tex. Air Control Bd., 852
6
  Under its third appellate issue, Center Rose argues that it is not estopped from appealing the
trial court’s judgment. Though we agree that Center Rose is not estopped, in neither the issue
nor the argument under it does Center Rose challenge the trial court’s judgment. Therefore, we
do not sustain the issue.

                                              17
S.W.2d 440, 444–45 (Tex. 1993). Even if Hall did not timely ask the trial court to
vacate, modify, or correct the Award, this failure would go to the merits of Hall’s
appeal; it would not deprive Hall of standing to appeal, nor would it deprive this
court of jurisdiction over Hall’s appeal. See Hamm, 178 S.W.3d at 262–72. Thus,
Hall has standing to appeal the trial court’s judgment.

      For the foregoing reasons, we deny the Bailey Parties’ motion to dismiss.

B.    Did the trial court err in refusing to vacate the Award on the ground
      that the arbitrators exceeded their powers?
      Under their first issue, Center Rose and the Felts (collectively the “Center
Rose Parties”) assert that the trial court erred in failing to vacate the Award on the
ground that (1) the arbitrators exceeded their powers by adjudicating Bailey’s
claim that Center Rose Partners breached the Note that it signed in favor of Capital
One, N.A., which Capital One later assigned to Bailey, because that claim fell
outside the scope of the Regulations’s narrow arbitration provision and was
governed by contracts that do not have arbitration provisions; and (2) the
arbitrators exceeded their powers because they lacked authority to impose a
constructive trust under Texas law in the absence of a finding of fraud or breach of
fiduciary duty.

      1.     Adjudication of Note Claim

      The Center Rose Parties argue that the arbitrators exceeded their powers by
adjudicating a claim by Bailey that Center Rose Partners breached the Note
because that claim fell outside the scope of the Regulations’s narrow arbitration
provision, in which the parties agreed to arbitrate “any dispute or controversy
arising out of these Regulations.” The Center Rose Parties note that Bailey filed a
separate lawsuit against Center Rose Partners and Nicole Felt seeking to recover
the amount Center Rose Partners owed under the Note and against Nicole Felt as
                                         18
guarantor. When Center Rose Partners sought to have these claims decided in the
arbitration proceeding, Bailey objected and asserted various arguments as to why
his claims in that lawsuit were not subject to arbitration. In response, the trial court
in the other lawsuit ordered the case abated until completion of the arbitration
proceeding.

      Under section 171.088(a)(3)(A), on application of a party, the court shall
vacate an arbitration award if the arbitrators exceeded their powers. Tex. Civ.
Prac. & Rem. Code Ann. § 171.088(a)(3)(A). Arbitrators exceed their powers if
they lack the authority to decide the issues adjudicated in the arbitration award;
arbitrators do not exceed their authority by erroneously deciding an issue. See
Forest Oil Corp. v. El Rucio Land & Cattle Co., 518 S.W.3d 422, 431–32 (Tex.
2017).

      In their arbitration demand, the Bailey Parties did not request that Bailey be
reimbursed for the amount of the Note he purchased from Capital One. In their
answer in the arbitration, the Center Rose Parties did not object that there was no
arbitration agreement or that the Regulations’s arbitration agreement did not cover
any claim.     Instead, they stated that they “submit to the jurisdiction of the
arbitration proceedings for those matters that are required to be arbitrated,” without
stating which matters were required to be arbitrated.

      In the arbitration, the Center Rose Parties asserted as affirmative claims for
relief all claims that Center Rose had asserted in the trial court. In these claims,
the Center Rose Parties asserted that Center Rose Partners and Bailey entered into
an agreement under which Center Rose Partners would use earnings and
distributions resulting from the 330 units in Rose Acquisition to pay the cost of
purchasing the units, including interest and taxes (the “Center Rose/Bailey
Agreement”).      In the trial-court petition, which the Center Rose Parties

                                          19
incorporated into their arbitration pleading, the Center Rose Parties sought relief
under the Texas Declaratory Judgments Act, asking the arbitrators to declare that
Bailey breached the Center Rose/Bailey Agreement and that this agreement was
void.    In their arbitration pleading, the Center Rose Parties also asked the
arbitrators to declare that the “debt to Capital One Bank or its assignees, allegedly
assigned to Bailey” would be cancelled “as a credit against the funds owed to Rose
Acquisition by Bailey, including but not limited to a release of all liens of any kind
or nature related to this debt.” In their arbitration demand the Bailey Parties
asserted that Center Rose Partners promised that Center Rose Partners would use
the distributions received from Rose Acquisition to pay off the Loan. If this were
true, then Center Rose Partners’s breach of the Note also would breach this
promise by Center Rose Partners. The Bailey Parties asserted in their arbitration
demand that Center Rose Partners failed to pay the Loan in full by the maturity
date, and that as a result Bailey was forced to purchase the Loan.

        The Bailey Parties assert that the Center Rose Parties submitted the issue of
the Note to the arbitrators for a ruling and therefore the arbitrators did not exceed
their authority.    The Center Rose Parties claim that they requested that the
arbitrators cancel the Note before the trial court in the other lawsuit declined to
send Bailey’s lawsuit on the Note and guaranty to arbitration, and that after this
action, the Center Rose Parties did not continue to seek cancellation of the Note.
The Bailey Parties assert that the Center Rose Parties never removed this request
from their arbitration pleading or otherwise withdrew this request from the
arbitrators’ consideration.

        Texas courts give arbitration awards great deference and indulge every
reasonable presumption to uphold arbitrators’ decisions. Long Lake, Ltd. v.
Pillittere, No. 14-17-00373-CV, 2018 WL 3911070, at *2 (Tex. App.—Houston

                                          20
[14th Dist.] Aug. 16, 2018, no pet.) (mem. op.). The Center Rose Parties, as non-
prevailing parties seeking to vacate the arbitration award, bear the burden to
produce a complete record of the arbitration proceedings establishing that the
arbitrators exceeded their authority. See id. Absent a complete transcript of the
arbitration proceedings, we are to presume that adequate evidence supports the
Award. See id. The Center Rose Parties have not provided any transcription of the
arbitration proceedings, and the Bailey Parties assert that this failure is fatal to the
Center Rose Parties’ complaint that the arbitrators exceeded their powers in issuing
the Award.

      Without a transcript of the arbitration proceedings, we cannot determine
whether a party asked the arbitrators during the proceedings to decide issues
regarding the Note and its breach. See id. at *3 (concluding that absent a complete
transcription of the arbitration proceedings court would presume that the evidence
gave the arbitrator the power to issue the award that appellant alleged exceeded the
arbitrator’s power); Craft v. Davis, No. 2-07-332-CV, 2008 WL 4180357, at *2
(Tex. App.—Fort Worth Sept. 11, 2008, no pet.) (mem. op.) (holding that appellant
did not prove that arbitrator exceeded his powers because appellant did not submit
transcript of arbitration proceedings and thus court could not determine whether a
party to the arbitration asked the arbitrator during the arbitration to decide the
challenged issues); Klein v. O’Quinn, 874 S.W.2d 776, 783 (Tex. App.—Houston
[14th Dist.] 1994, writ denied) (concluding that without a record of the arbitration
proceedings the court was not able to determine what claims the parties submitted
or what evidence the parties offered). Given the lack of any transcription of the
arbitration proceedings, we conclude that the Center Rose Parties have not
established that the arbitrators exceeded their powers by adjudicating a claim by
Bailey that Center Rose Partners breached the Note. See Pillittere, 2018 WL
21
3911070, at *3; Craft, 2008 WL 4180357, at *3; Klein, 874 S.W.2d at 783.

      2.     Imposition of Constructive Trust

      Under their first issue, the Center Rose Parties also assert that the arbitrators
exceeded their powers because in the absence of a finding of fraud or breach of
fiduciary duty, under Texas law they lacked the authority to impose a constructive
trust. In their first amended arbitration demand, the Bailey Parties alleged that the
Center Rose Parties committed fraud and breached fiduciary duties. The Bailey
Parties also sought the imposition of a constructive trust on the 330 units in Rose
Acquisition at issue to prevent the alleged unjust enrichment of the Center Rose
Parties at the Bailey Parties’ expense.

      The Center Rose Parties assert that though parties may draft contracts to
empower arbitrators to impose equitable remedies beyond what the law permits,
the parties in today’s case did not do so. According to the Center Rose Parties, the
parties to the Regulations limited the arbitrators’ powers by agreeing that Texas
law would govern the Regulations. The Center Rose Parties assert that, under
Texas law, courts may not impose a constructive trust absent a breach of fiduciary
duty, actual fraud, or constructive fraud. The arbitrators imposed a constructive
trust without an express finding of any fraud or breach of fiduciary duty. In
addition, the arbitrators found that “[t]he misconduct of the Parties was neither
‘intentional’ nor a ‘knowing violation of the law.’”

      The Center Rose Parties correctly acknowledge that a mistake of law by the
arbitrators does not mean that the arbitrators exceeded their powers. See Forest
Oil Corp., 518 S.W.3d at 431–32. Instead, the Center Rose Parties assert that by
agreeing that Texas law governs the Regulations, the parties to the Regulations
limited the power of the arbitrators to impose a constructive trust so that the
arbitrators only have that power under circumstances in which Texas law permits
                                          22
imposition of a constructive trust. The Center Rose Parties cite no case in which a
court has held that a choice-of-law provision limits an arbitrator’s powers.

      Absent a complete transcription of the arbitration proceedings, we conclude
that the Center Rose Parties have not established that the arbitrators exceeded their
powers by imposing a constructive trust. See Pillittere, 2018 WL 3911070, at *3;
Craft, 2008 WL 4180357, at *3; Klein, 874 S.W.2d at 783. In any event, we
conclude that the Center Rose Parties’ legal argument lacks merit. The Supreme
Court of Texas in Nafta Traders held that parties to an arbitration agreement
governed by the Texas Arbitration Act may agree that the arbitrators have no
power to render a decision that contains a reversible error or to apply a remedy that
existing law does not expressly provide. See Nafta Traders, Inc., 339 S.W.3d at
90–97. Nonetheless, an agreement that Texas law governs the contract containing
the arbitration provision does not constitute an agreement limiting the powers of
the arbitrators in either of these ways. See id.; Jones v. Carlos & Parnell, M.D.,
P.A., No. 5-17-00329-CV, 2017 WL 4930896, at *3–4 (Tex. App.—Dallas Oct.
31, 2017, pet. denied) (mem. op.).

C.    Did the Arbitrators fail to address the Center Rose Parties’ statute-of-
      limitations defense in the Award?

      Under the first issue, the Center Rose Parties argue that the trial court erred
in refusing to vacate the Award on the ground that the arbitrators completely failed
to address the Center Rose Parties’ statute-of-limitations defense to the Bailey
Parties’ claims. The Center Rose Parties claim that this failure would mean that
the arbitrators conducted the hearing contrary to section 171.047 by denying the
Center Rose Parties their right to be heard, in a manner that substantially
prejudiced their rights. See Tex. Civ. Prac. & Rem. Code Ann. §§ 171.047,
171.088(a)(3)(D). The Center Rose Parties assert that the arbitrators said nothing

                                         23
about this defense and that they did not address this defense or the Bailey Parties’
arguments against it in the Award.

      We presume, without deciding, that a complete failure to address the Center
Rose Parties’ statute-of-limitations defense would mean that the arbitrators
conducted the hearing contrary to section 171.047 by denying the Center Rose
Parties their right to be heard, in a manner that substantially prejudiced their rights.
See Tex. Civ. Prac. & Rem. Code Ann. §§ 171.047, 171.088(a)(3)(D). Without a
complete transcription of the arbitration proceedings, we must conclude that the
Center Rose Parties have not established that the arbitrators completely failed to
address this defense because the arbitrators may have addressed it during the
arbitration proceeding. See Pillittere, 2018 WL 3911070, at *3; Craft, 2008 WL
4180357, at *3; Klein, 874 S.W.2d at 783. In the alternative, the arbitrators stated
in the Award that “[t]his Award is in full settlement of all claims and
counterclaims submitted to this Arbitration. All claims not expressly granted
herein are hereby denied.” The Center Rose Parties acknowledge this part of the
Award but argue that it does not address their statute-of-limitations defense
because the arbitrators refer to “claims” and “counterclaims” but not to “defenses.”
We conclude that this language suffices to constitute a ruling on the statute-of-
limitations defense, and thus, the arbitrators addressed and rejected this defense in
a general manner in the Award. The Center Rose Parties cite no authority that
would suggest otherwise.

      The trial court did not err in refusing to vacate the Award on the ground that
the arbitrators completely failed to address this defense and thus conducted the
hearing contrary to section 171.047 by denying the Center Rose Parties their right
to be heard, in a manner that substantially prejudiced their rights. See Tex. Civ.
Prac. & Rem. Code Ann. §§ 171.047, 171.088(a)(3)(D).

                                          24
       Having rejected all of the Center Rose Parties’ independent arguments under
the first issue, we overrule the first issue.

D.     Were the Felts parties to the litigation in the trial court when the trial
       court rendered judgment against them?
       In the second issue, the Center Rose Parties complain that the trial court
erred in rendering judgment against the Felts because they were not parties to the
litigation in the trial court. The Felts were parties to the arbitration proceeding, but
the Felts had not been parties to this litigation before the arbitrators issued the
Award. When Center Rose filed its application to vacate the Award based on
grounds in section 171.088 of the Texas Civil Practice and Remedies Code, the
Felts filed a plea in intervention in the trial court and filed an application to vacate
the Award under the same statute. The Bailey Parties filed a motion to strike the
Felts’ plea in intervention and application to vacate the Award. Though the Bailey
Parties submitted that motion to the trial court for ruling, the trial court never ruled
on the motion to strike.

       The trial court denied Center Rose’s application to vacate the Award and
granted the Bailey Parties’ motion to confirm the Award. The trial court rendered
a final judgment on the Award. After the trial court rendered judgment, the Bailey
Parties filed a notice that they were withdrawing their motion to strike.

       Rule 60 of the Texas Rules of Civil Procedure states that “[a]ny party may
intervene by filing a pleading, subject to being stricken out by the court for
sufficient cause on the motion of any party.” Tex. R. Civ. P. 60. The rule
authorizes a party with a justiciable interest in a pending suit to intervene in the
suit as a matter of right. Nghiem v. Sajib, 567 S.W.3d 718, 721 (Tex. 2019). An
intervenor is not required to secure the trial court’s permission to intervene; any
party who opposes the intervention has the burden to challenge it by a motion to

                                            25
strike. Id. If any party to the pending suit moves to strike the intervention, the
intervenor has the burden to show a justiciable interest in the pending suit. Id.

      On appeal, the Center Rose Parties assert that because the Bailey Parties
filed a motion to strike, the Felts had the burden to show a justiciable interest in the
pending suit and any presumption that the Felts were proper parties was erased.
Though this may be a correct statement of the legal standards that would have
applied had the trial court ever ruled on the motion to strike, the Center Rose
Parties appear to assert that the mere pendency of a motion to strike — even if the
trial court never rules on the motion — deprives an intervenor of any status as a
party to the litigation. This is not a correct statement of Texas law. Intervenors are
parties until the trial court grants a motion to strike. See Main Rehab. & Diagnostic
Ctr., LLC v. Liberty Mut. Ins. Co., 376 S.W.3d 825, 828 (Tex. App.–Dallas 2012,
no pet.) (concluding that the Workers’ Compensation Division was a party to the
case because the appellants did not file a motion to strike and obtain a ruling from
the trial court striking the intervention); Bell v. Craig, 555 S.W.2d 210, 211–12
(Tex. Civ. App.—Dallas 1977, no writ) (holding that appellant was a party to the
litigation because he filed a petition in intervention and because the appellees
never obtained a ruling on their motion to strike the intervention).

      When the trial court rendered judgment, the Felts were parties to the
litigation with a pending application to vacate the Award. Though the trial court
did not expressly rule on the Felts’ application to vacate, by rendering a final
judgment on the Award, the trial court implicitly denied the Felts’ application to
vacate the Award. See Kreit v. Brewer & Pritchard, P.C., 530 S.W.3d 231, 236,
n.6. (Tex. App.—Houston [14th Dist.] 2017, pet. denied).

      We overrule the second issue.

                                          26
E.    Did Hall timely file an application to vacate the Award?

      In Hall’s appeal, Hall asserts that the trial court erred by confirming the
Award and refusing to vacate a part of the Award.          A party must make an
application to vacate an arbitration award under section 171.088 not later than the
90th day after the date of delivery of a copy of the award to the party. Tex. Civ.
Prac. & Rem. Code Ann. § 171.088(b). A party must make an application under
subsection (a)(1) of section 171.088 not later than the 90th day after the date the
grounds for the application are known or should have been known. Id. We
presume for the sake of argument that Hall filed his motion for new trial seeking
vacatur within 90 days after the date on which a copy of the Award was first
delivered to Hall. The record reflects that Hall was served with copies of the
Bailey Parties’ motion to confirm the Award and the notice of oral hearing on this
motion.   Hall did not respond in opposition to the Bailey Parties’ motion to
confirm the Award. Nor did Hall file an application asking the trial court to
vacate, modify, or correct the Award until after the trial court granted the Bailey
Parties’ motion and rendered judgment on the Award. If the pending applications
to vacate are denied and a motion to modify or correct the award is not pending,
the trial court must confirm the award. See Tex. Civ. Prac. & Rem. Code Ann. §
171.088(c). Hall did not seek vacatur of the Award until after the trial court denied
the Center Rose Parties’ applications to vacate, confirmed the Award, and rendered
final judgment. Thus, Hall’s application to the trial court to vacate the Award was
untimely, and Hall waived his right to seek vacatur of the Award. See Human
Biostar, Inc. v. Celltex Therapeutics Corp., 514 S.W.3d 854, 851 (Tex. App.—
Houston [14th Dist.] 2017, pet. denied); Hamm, 178 S.W.3d at 262–72. Therefore,
we overrule Hall’s sole appellate issue.

                                           27
                                    III. CONCLUSION
          The Non-Appealable Language does not constitute an express agreement to
waive the right to appeal the trial court’s judgment. The Bailey Parties have not
shown that Center Rose is estopped from appealing the trial court’s judgment
based on its acceptance of a $25,600 payment from Rose Acquisition. Hall has
standing to appeal the trial court’s judgment. Thus, we deny the Bailey Parties’
motion to dismiss the appeals.

          The Center Rose Parties have not established that the arbitrators exceeded
their authority.     The Center Rose Parties have not shown that the arbitrators
completely failed to address the Center Rose Parties’ statute-of-limitations defense
and thus conducted the hearing contrary to section 171.047 by denying the Center
Rose Parties their right to be heard, in a manner that substantially prejudiced their
rights.

          When the trial court rendered judgment, the Felts were parties to the
litigation with a pending application to vacate the Award. The trial court did not
render judgment against a person not a party to the litigation.

          Hall’s appeal lacks merit because he waived his right to obtain vacatur of the
Award by failing to timely file his application in the trial court to vacate the
Award.

          We affirm the trial court’s judgment.

                                          /s/     Kem Thompson Frost
                                                  Chief Justice

Panel consists of Chief Justice Frost and Justices Spain and Poissant (Spain, J.,
dissenting).

                                            28