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Tuscan Builders, LP v. 1437 SH6 L.L.C.

Court of Appeals of Texas, First District

January 30, 2014


On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 2012-33706

Panel consists of Chief Justice Radack and Justices Bland and Huddle.


Jane Bland Justice

In this construction dispute, a builder appeals the trial court's order denying its motion to compel arbitration against the building's owners. The builder contends that the trial court erred in finding that the builder had waived enforcement of an arbitration clause by invoking the judicial process and delaying its effort to compel arbitration for more than a year. Finding no error, we affirm.


The contract dispute

The commercial building owners, 1437 SH6 L.L.C. d/b/a Sweetwater Aesthetic Spa & Wellness Center, Shelena C. Lalji, M.D.P.A. d/b/a Dr. Shel Wellness & Medical Spa, and Lalji Dental, P.C. d/b/a Lake Pointe Dental and Specialty (collectively, Sweetwater) sued Tuscan Builders, L.P., the builder, for breach of warranty associated with alleged construction defects. Sweetwater had contracted with a construction design team, the Mirador Group, Inc., and an architect, Todd Blitzer, to design a dental office, a wellness clinic, and other health-related businesses. Sweetwater's design services agreement with Mirador provides that venue for any suit "shall be in a Texas State District Court in Harris County, Texas." The design agreement incorporates by reference specific provisions of the "Standard Form of Agreement between Owner and Architect (AIA Document B141-1997), " but it expressly excludes "Sections 1.3.4, Mediation and 1.3.5, Arbitration."

Sweetwater hired Tuscan to construct the building according to Mirador's design specifications. Tuscan prepared the construction contract using AIA Document A101-1997, the "Standard Form of Agreement between Owner and Contractor where the basis of payment is a stipulated sum." The parties' construction contract incorporates by reference an industry form document—AIA Document A201-1997, the "General Conditions of the Contract for Construction"—but it does not attach a copy of that document. Like AIA Document B141-1997, incorporated into the design agreement, A201-1997 calls for mediation in the first instance, followed by arbitration. Unlike the design agreement, the construction contract does not exclude the AIA Document's arbitration provisions that were incorporated by reference, but not attached to the contract. The pertinent sections of A201-1997 provide:

Claims not resolved by mediation shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association, and a copy shall be filed with the Architect.

After it moved in, Sweetwater noticed water leaking into the building. It informed Mirador and Tuscan of the problem, and they attempted to repair the leaks. During a rainstorm in July 2010, however, significant water leaks appeared in the exterior walls and roof, causing substantial damage to the structure and interior walls. Sweetwater again sought to have Mirador and Tuscan repair the building, but Sweetwater was not satisfied with the results.

Course of proceedings

In June 2012, Sweetwater sued Mirador, Tuscan, and Blitzer for negligence, breach of contract, and breaches of express and implied warranties, as well as statutory claims under the Texas Deceptive Trade Practices Act. Tuscan answered the suit on June 29. Tuscan denied Sweetwater's allegations, raised several specific defenses, and made a verified denial; it did not mention arbitration in the filing. In November, Tuscan sued its subcontractors, seeking indemnification under the indemnification provisions in each subcontractor agreement. Tuscan sued each subcontractor for negligence, breach of contract, and breach of warranty. Sweetwater later amended its petition to include its own claims against the subcontractors. The subcontractors answered, and several demanded a jury trial. In addition to pursuing written discovery, the subcontractors also sought to inspect the Sweetwater property, pursuant to Texas Rule of Civil Procedure 196.7. Tuscan participated with the third-party defendants in the inspection.

The trial court's docket control order called for the discovery period to end in March 2013 and trial to commence in April 2013. In January 2013, Tuscan joined Sweetwater in filing an agreed motion for continuance. The joint motion requested the continuance for the "opportunity to conduct discovery and identify the relevant issues." Tuscan did not mention arbitration. The trial court granted the motion and extended the discovery, motion, and pleading deadlines. It set trial to commence on September 16, 2013.

On June 6, 2013, Tuscan, the other defendants, and the third-party defendants moved to extend the mediation deadline complaining that, before mediating the dispute, they required additional information concerning the various components of Sweetwater's alleged damages, responses to additional interrogatories, answers to requests for admissions they had propounded, and the depositions of Sweetwater's ...

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