Summary
holding that subsequent home purchaser was not bound by arbitration clause in original construction contract merely due to automatic transfer of builder's warranty to subsequent purchaser and his sending notice to warranty company and receiving home inspection
Summary of this case from Toll Dall. TX, LLC v. DusingOpinion
NO. 01-17-00426-CV
01-25-2018
D.R. HORTON-EMERALD, LTD., Appellant v. DANIEL MITCHELL AND TRISHA MITCHELL, Appellee
On Appeal from the 268th District Court Fort Bend County, Texas
Trial Court Case No. 16-DCV-236938
MEMORANDUM OPINION
This appeal involves whether Daniel and Trisha Mitchell, as subsequent purchasers of a home, are bound by an arbitration provision contained in a sales contract entered into by the original owner of the home, the Jinaduses, and the home builder, D.R. Horton-Emerald, Ltd. ("DRH"). The Mitchells sued DRH, alleging the home was defectively constructed. DRH moved to compel the Mitchells to arbitrate their claims under the arbitration provision in the original sales contract. The trial court denied DRH's motion to compel arbitration, and DRH appealed.
DRH recognizes that the Mitchells are non-signatories to the original sales contract, but it nonetheless contends that the Mitchells—as subsequent purchasers of the home—are the Jinaduses' successors in interest to the contract. DRH also relies on the doctrines of assumption and equitable estoppel to support its claim that the Mitchells are bound to the arbitration provision. Because we conclude that DRH has not shown that the trial court abused its discretion in denying the motion to compel arbitration, we affirm.
Background
In December 2006, the Jinaduses and DRH entered into a contract ("the DRH-Jinadus Contract") in which the Jinaduses agreed to purchase a yet-to-be-constructed home from DRH. The contract provided that DRH agreed to build and to sell the home to the Jinaduses. The contract also contained an arbitration clause, providing,
Buyer and seller agree that any claim, controversy or dispute of any kind between buyer and seller, whether arising from a tort, the Contract, any breach of the Contract in any way related to this transaction, including but not limited to claims or disputes arising under the Deceptive Trade Practices-Consumer Protection Act, Texas Business & Commerce Code Section 17.41 et seq., Texas Property
Code Chapter 27, and/or the terms of the express limited warranty referenced in paragraph 14 of the Contract, shall be resolved by BINDING ARBITRATION UNDER THE TEXAS GENERAL ARBITRATION ACT AND THE FEDERAL ARBITRATION ACT . . . .
Paragraph 14, referenced in the arbitration clause, in part, provides,
BUYER HAS BEEN PROVIDED A SAMPLE LIMITED WARRANTY AND HAS READ AND UNDERSTANDS THE MEMBER'S WARRANTY ADMINISTERED BY RESIDENTIAL WARRANTY CORPORATION ("RWC"), INCLUDING THE PROVISION THAT REQUIRES ALL DISPUTES THAT ARISE UNDER THE LIMITED WARRANTY TO BE SUBMITTED TO BINDING ARBITRATION. VALIDATION OF THE RWC LIMITED WARRANTY IS NOT GUARANTEED, BUT IT IS CONDITIONED ON THE SATISFACTORY COMPLETION OF ALL REQUIRED INSPECTIONS. . . . BUYER UNDERSTANDS AND AGREES THAT IF THE ABOVE WARRANTY IS VALIDATED, IT IS PROVIDED BY SELLER IN LIEU OF ALL OTHER WARRANTIES, ORAL AGREEMENTS, OR REPRESENTATIONS, AND SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO QUALITY, FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, ABILITY, OR OTHERWISE EXCEPT AS IS EXPRESSLY SET FORTH IN THE TEN-YEAR LIMITED WARRANTY PROGRAM. . . .
In October 2014, the Jinaduses sold the home to the Mitchells. The Jinaduses provided a warranty deed with vendor's lien conveying the property to the Mitchells and warrantying the title. Two years later, in June 2016, the Mitchells sent a letter to RWC, the company administering the limited home warranty. In the letter, the Mitchells informed RWC of the home's "foundation issues" and related structural defects. The letter stated that "this is a formal request for your warranty services." RWC responded by performing a fact-finding inspection of the home to determine if any defects were covered under "The Limited Warranty Program." Following the inspection, RWC sent a letter to the Mitchells in September 2016, indicating that its inspection had determined that there were "several grading and drainage issues at the home," a portion of which DRH agreed to address.
In November 2016, the Mitchells sued DRH for defective construction of the home. In their petition, the Mitchells alleged that "[s]hortly after purchasing the Home, [they] discovered that the home had not been built in a good and workmanlike manner." They claimed that "[t]he [home's] foundation has suffered significant movement causing damage throughout the Home." The Mitchells claimed that their "damages arise from a construction defect as described in Chapter 27 of the Texas Property Code," known as the Residential Construction Liability Act ("RCLA").
Among the damages sought by the Mitchells were their out-of-pocket expenses to repair their home and diminished market value. The Mitchells also sought their attorney's fees.
DRH filed a motion to abate the proceedings and to compel the Mitchells to arbitrate their claims pursuant to the arbitration clause in the DRH-Jinadus Contract. DRH argued that the Mitchells, as subsequent purchasers of the home, were the Jinaduses' successors in interest and thus bound to arbitrate under the contract. DRH also asserted that the Mitchells had impliedly assumed any obligations under the contract and were equitably estopped from asserting that they were not subject to the arbitration clause.
After the Mitchells filed a response, the trial court denied DRH's motion to abate the proceedings and to compel arbitration. This interlocutory appeal followed. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.016 (West 2015) (permitting interlocutory appeal in cases subject to Federal Arbitration Act if that Act authorizes appeal).
Motion to Compel Arbitration
In two issues, DRH contends that the trial court erred when it denied its motion to compel arbitration. It asserts that, although the Mitchells were not signatories to the DRH-Jinadus Contract, it can enforce the arbitration agreement found in the contract against them because the Mitchells are the Jinaduses successors in interest. DRH also asserts that the Mitchells are subject to the arbitration provision under the theories of implied assumption and direct-benefits estoppel. A. Governing Law
The arbitration clause in the DRH-Jinadus Contract provides that disputes will be resolved by arbitration under both the Federal Arbitration Act and the Texas General Arbitration Act. When an "agreement references both the Texas Act and the FAA," the FAA controls. EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 91 (Tex. 1996) (orig. proceeding).
"Generally, we review a trial court's decision to grant or deny a motion to compel arbitration under an abuse of discretion standard." Enter. Field Servs., LLC v. TOC-Rocky Mountain, Inc., 405 S.W.3d 767, 773 (Tex. App.—Houston [1st Dist.] 2013, pet. denied); see also Sun Fab Indus. Contracting, Inc. v. Lujan, 361 S.W.3d 147, 150 (Tex. App.—El Paso 2011, no pet.) ("A trial court abuses its discretion when it refuses to compel arbitration pursuant to a valid and enforceable arbitration agreement."). "Under this standard, we defer to a trial court's factual determinations if they are supported by evidence, but we review a trial court's legal determinations de novo." Rocha v. Marks Transport, Inc., 512 S.W.3d 529, 535 (Tex. App.—Houston [1st Dist.] 2016, no pet.) (citing In re Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. 2009) (orig. proceeding)).
In general, a party seeking to compel arbitration under the FAA must establish that (1) there is a valid agreement to arbitrate and (2) the claims raised fall within the scope of that agreement. In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Because there is a presumption favoring agreements to arbitrate under the FAA, courts resolve doubts regarding an agreement's scope in favor of arbitration. Id. However, this presumption only arises after the party seeking to compel arbitration proves the existence of a valid arbitration agreement between the parties. Id.
The determination of gateway matters, such as the validity of an arbitration agreement, are decided by the court rather than the arbitrator. In re Weekley Homes, L.P., 180 S.W.3d 127, 130 (Tex. 2005). As a gateway matter involving validity, whether an arbitration agreement binds a non-signatory must be decided by the court. Id. A trial court's determination of the arbitration agreement's validity is a legal question subject to de novo review. See In re Kellogg Brown & Root, 80 S.W.3d 611, 615 (Tex. App.—Houston [1st Dist.] 2002, orig. proceeding).
The party moving to compel arbitration has the burden to show a valid agreement to arbitrate. See id. Thus, "[t]he party seeking arbitration bears the burden of establishing that the arbitration agreement binds a nonsignatory." Santander Consumer USA, Inc. v. Mata, No. 03-14-00782-CV, 2017 WL 1208767, at *2 (Tex. App.—Austin Mar. 29, 2017, no pet.) (mem. op.).
"Nonsignatories to an agreement subject to the FAA may be bound to an arbitration clause when rules of law or equity would bind them to the contract generally." Id. (citing In re Labatt Food Servs., 279 S.W.3d at 643). Applying principles of contract and agency law, non-signatories may be bound to an arbitration agreement under six theories: (1) incorporation by reference, (2) assumption, (3) agency, (4) alter ego, (5) equitable estoppel, and (6) third-party beneficiary. In re Kellogg Brown & Root, 166 S.W.3d at 739 (citing Bridas S.A.P.I.C. v. Gov't of Turkm., 345 F.3d 347, 356 (5th Cir. 2003)). Here, DRH asserts two of the theories—assumption and equitable estoppel. It also asserts that the Mitchells are bound to the arbitration agreement in the DRH-Jinadus Contract because they are the Jinaduses' successors in interest.
B. Successors in Interest
In its first issue, DRH contends that "the trial court erred in denying DRH's motion to abate and compel arbitration because the Mitchells, as subsequent purchasers of the property, are bound as successors in interest to the terms of the [DRH-Jinadus Contract], which includes the obligation to arbitrate disputes." To support this contention, DRH points to the general warranty deed with vendor's lien ("warranty deed") signed by the Jinaduses, relating to sale of the home to the Mitchells.
The following language in the warranty deed is relevant to DRH's argument:
GRANTOR [the Jinaduses] has BARGAINED, GRANTED, SOLD, and CONVEY unto GRANTEE [the Mitchells], the following described property, to wit: [a legal description of the property].
TO HAVE AND TO HOLD the above-described premises, together with, all and singular, the rights and appurtenances thereto in anywise belonging unto GRANTEE [the Mitchells] and GRANTEE'S heirs and assigns forever. GRANTOR [the Jinaduses] does hereby bind
GRANTOR and GRANTOR'S heirs, executors, and administrators to warrant and forever defend, all and singular, the said premises unto GRANTEE [the Mitchells] and GRANTEE'S heirs and assigns against every person whomsoever claiming or to claim the same or any part thereof.
DRH asserts that the Mitchells are its successors in interest for purposes of both enforcing, and being obligated to, the DRH-Jinadus Contract because the warranty deed states that Jinaduses conveyed the property "together with, all and singular, the rights and appurtenances thereto in anywise belonging unto GRANTEE [the Mitchells] and GRANTEE'S heirs and assigns forever." However, we agree with the Mitchells that the cited language indicates that the Jinaduses conveyed the property along with their rights in the property to the Mitchells; it makes no indication that the Jinaduses have conveyed or assigned their rights and obligations with respect to the DRH-Jinadus Contract to the Mitchells.
We note that, in making its argument, DRH does not properly read the cited language in the context of a general warranty deed. "The purpose of a general warranty deed is to indemnify the purchaser against the loss or injury he may sustain by a failure or defect in the vendor's title." Saravia v. Benson, 433 S.W.3d 658, 667 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (citing City of Beaumont v. Moore, 202 S.W.2d 448, 453 (Tex. 1947)). The language relied on by DRH indicates that the Jinaduses conveyed title to the property to the Mitchells. The next sentence contains the general warranty covenant, indicating that the Jinaduses will "forever warrant and defend" the title conveyed to the Mitchells. Thus, the language relied on by DRH serves to identify and define the subject of the general warranty covenant; it does not serve to convey rights and obligations under the DRH-Jinadus Contract to the Mitchells.
DRH also contends that the Mitchells are the Jinaduses' successors in interest based on their status as subsequent purchasers of the home. However, this argument was considered and rejected by the court in Toll Austin, TX, LLC v. Dusing, No. 03-16-00621-CV, 2016 WL 7187482 (Tex. App.—Austin Dec. 7, 2016, no pet.) (mem. op.). There, the Dusings discovered construction defects in a home they had recently purchased from the original homeowner. See id. at *1. The Dusings sued the homebuilder, asserting claims of negligence and DTPA violations. Id. The homebuilder requested the trial court to abate the proceedings and order the parties to arbitration based on an arbitration clause in the original contract it had with the original purchaser. Id. The trial court denied the request, and the homebuilder appealed. Id.
On appeal, the builder asserted that the Dusings, as subsequent purchasers of the home, were bound to the arbitration clause in the original contract. Id. at *3. The court of appeals disagreed, stating, "This Court has recently rejected the argument that by merely purchasing a home, a subsequent owner of that home is a 'successor' to the original homeowner with whom the homebuilder had an agreement. Id. (citing Zbranek Custom Homes, Ltd. v. Allbaugh, No. 03-14-00131-CV, 2015 WL 9436630, at *4 (Tex. App.—Austin Dec. 23, 2015, pet. denied) in turn citing Farm & Home Sav. Ass'n v. Strauss, 671 S.W.2d 682, 685 (Tex. App.—Dallas 1984, no writ)). The court explained, "The term 'successor' requires more than that." Id. (citing Strauss, 671 S.W.2d at 685 (holding, in case in which sales contract bound parties and their successors and assigns, that term "successor" in contract was "term of art which does not encompass third party purchasers" of property)). The court then concluded that the builder had "cited no evidence or factual allegations in the record that would support its bare contention that the Dusings are the legal 'successors' of [the original homeowner]." Id. For this reason, the court rejected the builder's "'successor' argument supporting its contention that the Dusings are bound by the arbitration provision in the [original contract.]." Id.
Similarly, here, DRH has cited to nothing in the record—aside from the warranty deed discussed above—to support its claim that the Mitchells are the Jinaduses' legal successors. Thus, we reject DRH's successor-in-interest argument as a basis to compel the Mitchells to arbitrate their claims. See id.
We overrule DRH's first issue.
C. Implied Assumption
As part of its second issue, DRH contends that the Mitchells are subject to the arbitration provision because they "impliedly assumed" the DRH-Jinadus Contract.
"Implied covenants are not favored, and courts will not lightly imply additional covenants enlarging the terms of a contract." Jones v. Cooper Indus. Inc., 938 S.W.2d 118, 124 (Tex. App.—Houston [14th Dist.] 1996, writ denied). "An implied assumption of obligations may arise 'when the benefit received by the assignee is so entwined with the burden imposed by the assignor's contract that the assignee is estopped from denying assumption and the assignee would otherwise be unjustly enriched.'" NextEra Retail of Tex., LP v. Inv'rs Warranty of Am., Inc., 418 S.W.3d 222, 228 (Tex. App.—Houston [1st Dist.] 2013, pet denied) (quoting Jones, 938 S.W.2d at 125).
DRH asserts the Mitchells impliedly assumed the DRH-Jinadus Contract by "demanding warranty inspection and compliance pursuant to the [DRH-Jinadus Contract]." In support of its motion to compel arbitration, DRH offered the letter written by the Mitchells to the home-warranty company, RWC, requesting its "warranty services." We note that no reference was made in the letter to the DRH-Jinadus Contract.
DRH also offered two letters sent by RWC to the Mitchells, responding to the request for warranty services. In the first letter, RWC stated that it needed information from the Mitchells regarding the home to make informed coverage decisions. RWC indicated that it would be sending a professional engineer to the home to conduct a "fact-finding" inspection. RWC also informed the Mitchells that the warranty coverage was defined by provisions contained in the Limited Warranty.
In the second letter, RWC stated that its fact-finding inspection had shown "several grading and drainage issues at the home." RWC stated that DRH had agreed to address some of the drainage and grading issues. RWC informed the Mitchells that, once those repairs were made, RWC would "monitor the foundation for approximately 6 months" and then schedule a re-inspection of the foundation. Neither of RWC's letters to the Mitchells referenced the DRH-Jinadus Contract.
Contrary to DRH's contention, the evidence offered in support of the motion to compel does not show that the benefits sought by the Mitchells under the Limited Warranty were "entwined with the burden imposed by [the DRH-Jinadus Contract]." We acknowledge that Paragraph 14 of the DRH-Jinadus Contract addresses certain aspects of the Limited Warranty, and it mentions that the Limited Warranty is provided "in lieu of all other warranties." However, Paragraph 14 also makes clear that the Limited Warranty, to be administered by RWC, is a separate document with its own terms and provisions apart from the DRH-Jinadus Contract.
RWC's first letter to the Mitchells also indicates that the Limited Warranty is a separate and independent document from the DRH-Jinadus Contract. The letter informs the Mitchells that coverage for the requested warranty services would be determined by the provisions of the Limited Warranty; the letter made no reference to the DRH-Jinadus Contract. And evidence offered by the Mitchells, in response to the motion to compel arbitration, shows that the Limited Warranty automatically transferred to them when they purchased the home, independent of the DRH-Jinadus Contract, which does not itself include the Limited Warranty terms, but instead states that to the extent the Limited Warranty is implemented, it is provided in lieu of any other express or implied warranties "as to quality, fitness for a particular purpose, merchantability, ability, or otherwise." In short, the evidence does not show that, by their request to RWC for home warranty services under the provisions of the Limited Warranty, the Mitchells were seeking or received a benefit under the DRH-Jinadus Contract; thus, the trial court could have properly rejected DRH's assertion that the Mitchells had impliedly assumed the obligations under the contract based on the request. See Creative Artists Agency, LLC v. Las Palmas Race Park, LLC, No. 13-14-00015-CV, 2015 WL 6652655, at *8 (Tex. App.—Corpus Christi-Edinburg Oct. 29, 2015, no pet.) (mem. op.) (upholding trial court's determination that appellee had not impliedly assumed contract containing arbitration provision because appellant and appellee had entered into separate agreement that was not dependent on agreement containing arbitration provision); see also Lone Star Gas Co. v. Mexia Oil & Gas, Inc., 833 S.W.2d 199, 201, 203 (Tex. App.—Dallas 1992, no writ) (declining to hold, as requested by appellant, that "if an assignee receives any benefit, no matter how tangential, from the contract, then the assignee impliedly assumes all of the contract's burdens, no matter how tangential").
DRH also argues that the Mitchells have impliedly assumed the DRH-Jinadus Contract because, in their petition, they are "seeking attorney's fees pursuant to Chapter 38 of the Texas Civil Practice and Remedies Code." However, DRH did not raise this argument in the trial court to support its motion to compel arbitration. Because it was not raised in the trial court, the argument has not been preserved for appeal, and we cannot consider it as a basis to conclude that the trial court erred. See TEX. R. APP. P. 33.1(a); see also Santander Consumer USA, Inc., 2017 WL 1208767, at *3 (citing Burbage v. Burbage, 447 S.W.3d 249, 257 (Tex. 2014) (holding that argument not raised in trial court, but offered on appeal, to show that non-signatories were bound to arbitration agreement was not preserved for appellate review).
Section 38.001 allows a party to recover reasonable attorney's fees for several types of claims, including for "an oral or written contract." TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8) (West 2015). In addition to Chapter 38, the Mitchells also cited the DTPA and Section 27.004(g) of RCLA as a basis for attorney's fees.
DRH also asserts that the Mitchells impliedly assumed the DRH-Jinadus Contract by "filing suit against DRH for alleged construction defects." However, in its brief, DRH offers no substantive argument to demonstrate how the Mitchells impliedly assumed the contract by filing suit. In any event, the discussion of this point is more properly conducted infra in conjunction with DRH's assertion that the Mitchells are bound to the arbitration provision based on the doctrine of direct benefits estoppel. Under this theory, DRH also points to the Mitchells' filing of a construction-defect claim as a basis to subject them to arbitration.
D. Direct-Benefits Estoppel
DRH also asserts that the Mitchells are bound to the arbitration provision in the DRH-Jinadus Contract under the theory of direct benefits estoppel.
Under the doctrine of direct benefits estoppel, a non-signatory plaintiff who seeks the benefits of a contract or who seeks to enforce the terms of a contract "'is estopped from simultaneously attempting to avoid the contract's burdens, such as the obligation to arbitrate disputes.'" In re Kellogg Brown & Root, 166 S.W.3d at 739. Direct benefits estoppel can apply to bind a non-signatory to an arbitration agreement by two avenues.
By the first avenue, a litigant who sues based on a contract subjects himself to the contract's terms, including any arbitration agreement. G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 527 (Tex. 2015). A non-signatory sues "based on a contract" when he "seeks, through the claim, to derive a direct benefit from the contract containing the arbitration provision." In re Kellogg Brown & Root, 166 S.W.3d at 741. "[W]hether a claim seeks a direct benefit from a contract containing an arbitration clause turns on the substance of the claim, not artful pleading." In re Weekley Homes, 180 S.W.3d at 131-32. It is not enough that the claim simply relates to the contract; the claim must "depend on the existence" of the contract and be "unable to stand independently" of it. G.T. Leach Builders, 458 S.W.3d at 527-28.
DRH argues that the Mitchells are subject to arbitration under the theory of direct benefits estoppel because they have filed suit based on the DRH-Jinadus Contract. DRH avers that the Mitchells' "claim does not stand independently of the [DRH-Jinadus Contract]." Rather, "[t]he claim exists entirely because DRH's obligations and duties regarding the quality of construction—whether expressed or implied—were only created when the Jinadus contracted for DRH to build and sell the house pursuant to the terms [of the DRH-Jinadus Contract]. However, the supreme court has rejected the type of "but for" argument asserted by DRH, recognizing that "the fact that the [plaintiff's] claims would not have arisen but for the existence of the [contract containing the arbitration agreement] is not enough to establish equitable estoppel." Id. at 529. Rather, the alleged liability must "arise[ ] solely from the contract or must be determined by reference to it." Id. at 528 (citing In re Weekley Homes, 180 S.W.3d at 132).
Here, the Mitchells' petition does not assert a claim for breach of contract nor does it refer to or mention the DRH-Jinadus Contract. DRH intimates that any cause of action that can be raised by the Mitchells must arise from the DRH-Jinadus Contract. The Mitchells disagree, correctly pointing out that, in other reported construction-defect cases, subsequent purchasers have sued homebuilders for causes of action that did not arise from the original construction contract. See, e.g., Toll Austin, 2016 WL 7187482 at *3 (rejecting direct-benefits estoppel theory when subsequent purchaser sued homebuilder for negligence and DTPA violations, and finding that these claims did not arise from construction contract; rather, they arose from "general obligations imposed by common-law negligence and relevant statutes"); Gupta v. Ritter Homes, Inc., 633 S.W.2d 626, 628 (Tex. App.—Houston [14th Dist.] 1982), aff'd in part, rev'd in part on other grounds, 646 S.W.2d 168 (Tex. 1983) (permitting subsequent purchaser to sue homebuilder for negligence, finding that "a homebuilder contemplates sales of the home beyond the initial purchaser and . . . owes a duty to exercise ordinary care in the construction of the home"); see also Chapman Custom Homes, Inc. v. Dallas Plumbing Co., 445 S.W.3d 716, 718 (Tex. 2014) ("A party states a tort claim when the duty allegedly breached is independent of the contractual undertaking and the harm suffered is not merely the economic loss of a contractual benefit.").
In determining whether DRH has shown that it has a valid arbitration agreement with the Mitchells, we express no opinion about the merits of the Mitchells' claims. See AT & T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 649, 106 S. Ct. 1415, 1419 (1986) ("[I]n deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims.").
We note that the Mitchells' petition does not specify a particular cause of action. Instead, the Mitchells indicate that they are suing DRH for construction defect and cite the Residential Construction Liability Act (RCLA) to support their claims. See TEX. PROP. CODE ANN. §§ 27.001-.007 (West 2014). The Mitchells aver that their "damages arise from a construction defect as described in [RCLA] and is a result of [DRH's] failure to provide [the Mitchells] a [h]ome free of defects not excepted by § 27.003."
Although the Mitchells rely on the statutory scheme to support their claim, the RCLA does not create a cause of action; rather, it limits and controls existing causes of action for damages resulting from construction defects in residences. 20/20 Vision, Ltd. v. Cameron Builders, Inc., 525 S.W.3d 854, 856 (Tex. App.—Houston [14th Dist] 2017, no pet.) (citing Gentry v. Squires Constr., Inc., 188 S.W.3d 396, 404 (Tex. App.—Dallas 2006, no pet.)). However, DRH did not file special exceptions to the Mitchells' petition to request greater specificity with respect to their claims, and DRH does not otherwise point to anything in the record to support its contention that the Mitchells' construction-defect claim relies on a duty found in the DRH-Jinadus Contract regarding the quality of the home's construction. As the party seeking to compel arbitration, DRH had the burden to prove that the Mitchells' construction-defect claim sought a direct benefit from the DRH-Jinadus Contract. Given the record, it has failed to do so. See ENGlobal U.S., Inc. v. Gatlin, 449 S.W.3d 269, 277 (Tex. App.—Beaumont 2014, no pet.) (determining that defendant did not satisfy its burden to show that direct benefits estoppel applied to require arbitration of premises liability claim when petition was ambiguous regarding whether plaintiff relied on contractual provision, establishing that defendant retained contractual right of control over the premises, and defendant did not file special exceptions); Glassell Producing Co. v. Jared Res., Ltd., 422 S.W.3d 68, 75, 83 (Tex. App.—Texarkana 2014, no pet.) (concluding that defendant did not carry its burden to show that equitable estoppel required arbitration of plaintiff's claims when plaintiff's pleadings were vague and did not clearly indicate that liability under the claims required reference to contract containing arbitration clause and defendant failed to file special exceptions).
The second avenue by which direct benefits estoppel may be applied to bind a non-signatory to an arbitration agreement is when the non-signatory "seek[s] or obtain[s] direct benefits from a contract by means other than a lawsuit." In re Weekley Homes, 180 S.W.3d at 132. Under this application of the doctrine, a non-signatory may be compelled to arbitrate if he "deliberately seeks and obtains substantial benefits" from the contract containing the arbitration clause. Id. at 132-33.
DRH asserts that the Mitchells sought and received a direct benefit under the DRH-Jinadus Contract by sending notice to the home-warranty company, RWC, regarding the faulty foundation and then receiving a home inspection under the Limited Warranty. However, as discussed above, the evidence shows that the Limited Warranty and the DRH-Jinadus Contract are separate and independent instruments. Paragraph 14 of the DRH-Jinadus Contract discusses certain aspects of the home warranty, however, it is the Limited Warranty, not the DRH-Jinadus Contract, which defines the warranty's coverage. The Limited Warranty, as a separate instrument, automatically transferred to the Mitchells when they purchased the home. The Mitchells directed their notice and request for warranty services to RWC with no mention of the DRH-Jinadus Contract. And, RWC responded to the Mitchells' notice by referencing the provisions of the Limited Warranty and indicating that whether the described home defects were covered was determined by the provisions of the Limited Warranty. Thus, any benefit sought or obtained by the Mitchells was under the Limited Warranty, not the DRH-Jinadus Contract. We conclude that the trial court could have properly determined that DRH failed to satisfy its burden to show that the Mitchells are bound by the arbitration provision under the direct-benefits-estoppel doctrine.
We overrule DRH's second issue.
Conclusion
Based on the record, we conclude that the trial court could have properly determined that DRH failed to show that (1) the Mitchells were the Jinaduses' successors in interest, (2) the Mitchells impliedly assumed the DRH-Jinadus Contract, or (3) the Mitchells are equitably estopped from denying the arbitration clause. We hold that DRH has not shown that the trial court abused its discretion when it denied its motion to abate the proceedings and compel arbitration. Accordingly, we affirm the order of the trial court denying DRH's motion to abate and to compel arbitration.
Laura Carter Higley
Justice Panel consists of Justices Higley, Massengale, and Lloyd.