Texas SC upholds appointment of arbitrator in fraud case

By Steve Korris | Jun 6, 2011


AUSTIN – Appellate judges elevated form over substance when they upheld a judge's appointment of an arbitrator, the Supreme Court of Texas ruled on May 27.

The justices found that Fourth District appellate judges in San Antonio made a mistake when they decided they lacked jurisdiction to review the appointment.

All nine justices adopted the position of former Justice Scott Brister, lead counsel for CMH Homes in a dispute with home buyer Adam Perez.

Brister persuaded the justices that CMH Homes petitioned for a writ of mandamus, rather than an interlocutory appeal as the Fourth District ruled.

An interlocutory appeal seeks an exception to a rule that appellate courts may only review final judgments.

A writ of mandamus seeks to correct an error prior to final judgment in the absence of any other remedy.

Justice Dale Wainwright wrote that Texas policy disfavors disposing of appeals based upon harmless procedural defects.

"The interests of promoting the policy considerations of rigorous and expedited enforcement of arbitration agreements would not be served by letting a technicality rule the day," Wainwright wrote.

He wrote, "We will not unnecessarily waste the parties' time and further judicial resources by requiring CMH Homes to file a separate document with the title 'petition for writ of mandamus' listed on the cover."

Case background

Perez bought a manufactured home from CMH Homes in 2002.

He sued CMH Homes, salesman Bruce Moore, and lender Vanderbilt Mortgage and Finance in Duval County in 2009, alleging fraud and violations of debt collection law.

Perez and CMH Homes agreed that the Federal Arbitration Act governed the case, and Perez moved to compel arbitration.

CMH Homes offered three names as potential arbitrators, and Perez rejected all three.

Perez proposed an order compelling arbitration and leaving a blank space for District Judge Alex Gabert to write an arbitrator's name.

CMH Homes objected and offered two more names, but Perez rejected them.

Perez objected and submitted three names, including Gilberto Hinojosa.

CMH Homes answered that the sales contract gave it the right to choose an arbitrator.

Gabert held a hearing and appointed Hinojosa.

CMH Homes filed an interlocutory appeal that included an alternative request to consider its appeal as a mandamus proceeding.

Fourth District judges ignored the mandamus request and affirmed Gabert, but the Supreme Court reversed their decision.

"Because CMH Homes specifically requested mandamus relief in the court of appeals and preserved that issue in this court, and because judicial efficiency militates against requiring CMH Homes to file a separate original proceeding, we instruct the court of appeals to consider this appeal as a petition for writ of mandamus," Wainwright wrote.

He added that the court spoke only to proper review and not to proper relief.

"Because the merits were not briefed to this court, we do not decide whether the trial judge improperly appointed an arbitrator," he wrote.

Brister, Lino Mendiola, and Jorge Rangel represented CMH Homes.

Brendan McBride, David Rumley, and Baldemar Gutierrez represented Perez.

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