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Pasadera Builders, LP v. Hughes

Court of Appeals of Texas, Fourth District, San Antonio

December 13, 2017

PASADERA BUILDERS, LP, Appellant
v.
Todd HUGHES, Appellee

         From the County Court at Law, Kendall County, Texas Trial Court No. 15-559CCL Honorable Bill R. Palmer, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice, Karen Angelini, Justice, Patricia O. Alvarez, Justice.

          MEMORANDUM OPINION

          Karen Angelini, Justice.

         Pasadera Builders, LP appeals the trial court's order granting Todd Hughes's motion to confirm an arbitration award and denying Pasadera's motion to vacate a portion of the arbitration award. Pasadera contends the trial court erred in refusing to vacate the portion of the arbitration award finding neither party was a prevailing party entitled to attorney's fees, expenses, and arbitration costs under the arbitration agreement. We affirm the trial court's order.

         Background

         Pasadera and Hughes entered into a construction contract pursuant to which Pasadera constructed a custom-built home for Hughes. After the construction was completed, the home experienced water intrusion in June 2014 and May 2015. The parties disagreed on the nature of the warranty work Pasadera was obligated to undertake, and offers and counter-offers were sent under the Texas Residential Construction Liability Act ("RCLA"). Ultimately, Hughes filed a lawsuit, and the trial court ordered the parties to submit all of their claims to arbitration based on the arbitration provisions contained in the construction contract. The construction contract contained a provision regarding attorney's fees which provided: "The prevailing party in any action to enforce the terms of this Agreement shall be entitled to receive from the non-prevailing party all reasonable attorney's fees and all expenses and court or arbitration costs."

         After a nine-day arbitration proceeding, the arbitration panel issued a written award finding the water intrusions and resulting mold constituted a breach of the express limited warranty by Pasadera. The panel did not find Pasadera liable on Hughes's DTPA, negligence, and rescission claims. Similarly, the panel did not find Hughes liable on Pasadera's DTPA and RCLA counterclaims. Finally, the panel found Pasadera's offer and supplemental offer of settlement which were made under the RCLA were reasonable. Because Hughes rejected the offer, the panel concluded Hughes could not recover an amount in excess of the fair market value of Pasadera's last offer of settlement and could recover only the reasonable and necessary costs and attorney's fees Hughes incurred before the offer was rejected. Based on this conclusion, the panel awarded Hughes $103, 340.26 in damages, attorney's fees, expenses, and interest.

         With regard to the attorney's fees provision in the construction contract, the panel found the following:

Prevailing Party: The remaining issue is whether [Hughes] or [Pasadera] is the prevailing party with respect to this claim. In Fitzgerald v. Schroder Ventures II, LLC, 345 S.W.3d 624, 628-29 (Tex. App.-San Antonio 2011, no writ), the Fourth Court of Appeals concluded that the analysis in Intercontinental Group Partnership v. KB Homes Lone Star, L.P., 295 S.W.3d 650 (Tex. 2009) (requiring an affirmative recovery) was inapposite to a claim for attorney's fees by a defendant in litigation. The Court concluded that a defendant that obtained a judgment in its favor (take-nothing) is the prevailing party and is therefore entitled to attorney's fees. In this case, [Pasadera] did not obtain a take-nothing award. [Pasadera] could have drafted "prevailing party" in a way that could have provided it prevailing party status[1] but did not do so. Accordingly, the panel concludes that Respondent was not a "prevailing party."
However, since the panel has found that [Hughes] rejected a reasonable offer, he is not a prevailing party either and is only entitled to recover those reasonable and necessary attorney's fees and necessary costs incurred before the offer was rejected. See Tex. Prop. Code §27.004(e)(2).

         As previously noted, Hughes filed a motion to confirm the arbitration award while Pasadera filed a motion to vacate the portion of the arbitration award finding neither party was a prevailing party entitled to attorney's fees, expenses, and arbitration costs. The trial court granted Hughes's motion and denied Pasadera's motion. Pasadera appeals, asserting the arbitration panel exceeded its authority by failing to determine it was the prevailing party and by failing to award it $601, 525.25 in attorney's fees and $184, 060.26 in expenses and arbitration costs.

         Standard of Review and Governing Law

         We apply a de novo standard in reviewing a trial court's decision to confirm or vacate an arbitration award; however, judicial review of an arbitration award is extraordinarily narrow.[2] East Tex. Salt Water Disposal Co. v. Werline, 307 S.W.3d 267, 271 (Tex. 2010); D.R. Horton-Tex., Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex. App.-Houston [14th Dist.] 2014, pet. denied); City of Laredo v. Mojica, 399 S.W.3d 190, 194-95 (Tex. App.-San Antonio 2012, pet. denied). Under the Texas General Arbitration Act, a trial court must confirm an arbitration award unless grounds are offered for vacating, modifying, or correcting an award under section 171.088 or 171.091 of the Act. Tex. Civ. Prac. & Rem. Code Ann. § 171.087 (West 2011). A party seeking to vacate an arbitration award "may avoid confirmation only by demonstrating a ground expressly listed in section 171.088." Hoskins v. Hoskins, 497 S.W.3d 490, 495 (Tex. 2016). In this case, Pasadera relies on section 171.088(a)(3)(A) which requires an award to be vacated if "the arbitrators exceeded their powers." Tex. Civ. Prac. & Rem. Code Ann. § 171.088(a)(3)(A).

         In DiAthegen, LLC v. Phyton Biotech, Inc., this court addressed the legal standard governing an assertion that the ...


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