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Toll Dallas TX, LLC v. Dusing

Court of Appeals of Texas, Third District, Austin

May 16, 2019

Toll Dallas TX, LLC f/k/a Toll TX, LP, Appellant
Brent Dusing and Edith Dusing, Appellees


          Before Justices Goodwin, Baker, and Triana



         In this interlocutory appeal from the trial court's denial of a motion to compel arbitration, we again address whether an arbitration agreement between the original purchaser of a home and its builder is enforceable against a subsequent purchaser, but with a slight twist. See Toll Austin, TX, LLC v. Dusing, No. 03-16-00621-CV, 2016 WL 7187482, at *3-4 (Tex. App.-Austin Dec. 7, 2016, no pet.) (mem. op.) (holding that subsequent purchaser of home was not bound by arbitration clause in original owner's purchase contract absent evidence of assignment of contract or circumstances justifying application of equitable estoppel). Toll Dallas TX, LLC, contends that our prior holding against its affiliate Toll Austin, TX, LLC, does not control this appeal because a different variety of equitable estoppel applies here that was not addressed in the prior appeal. We agree with Toll Dallas and, for the following reasons, reverse the trial court's order denying Toll Dallas's motion to compel and remand for entry of an order abating the proceedings against Toll Dallas and compelling the Dusings to arbitrate their disputes with Toll Dallas.


         On February 2, 2015, the Dusings purchased the home at issue from Brodney Pool, who in 2005 entered into an Agreement of Sale (Original Contract) with Toll Dallas's predecessor[2]for the construction and sale of the home. The Original Contract provided that "Seller [Toll Dallas] shall cause to be provided to Buyer [Pool] a 10 year limited warranty (the "home warranty") from Toll Brothers, Inc."[3] The Original Contract contained a broad arbitration provision:

Buyer, on behalf of Buyer and all permanent residents of the Premises, including minor children, hereby agree that any and all disputes with Seller, Seller's parent company or their subsidiaries or affiliates arising out of the Premises, this Agreement, the Home Warranty, any other agreements, communications or dealings involving Buyer, or the construction or condition of the Premises including, but not limited to, disputes concerning breach of contract, express and implied warranties, omissions by Seller, on-site and off-site conditions and all other torts and statutory causes of action, including but not limited to those arising or administered under the Deceptive Trade Practices Act (DTPA), Residential Construction Liability Act (RCLA) or Texas Residential Construction Commission Act (TRCAA) (the "Claims") shall be resolved by binding arbitration . . . .

         Like the Original Contract, the warranty referenced therein, entitled "Home Builder's Limited Warranty" (Warranty), contained a broad arbitration provision:

         Any disputes between YOU and US, or parties acting on OUR behalf, including PWC [the administrator of the Warranty], related to or arising from this LIMITED WARRANTY, the design or construction of the HOME or the COMMON ELEMENTS or the sale of the HOME or transfer of title to the COMMON ELEMENTS will be resolved by binding arbitration. Binding arbitration shall be the sole remedy for resolving any and all disputes between YOU and US, or OUR representatives. Disputes subject to binding arbitration include, but are not limited to: . . . Any disagreement that a condition in the HOME or the COMMON ELEMENTS is a CONSTRUCTION DEFECT and is therefore covered by this LIMITED WARRANTY; . . . [and] Any other claim arising out of or relating to the sale, design or construction of YOUR HOME or the COMMON ELEMENTS, including, but not limited to any claim arising out of, relating to or based on any implied warranty or claim for negligence or strict liability not effectively waived by this LIMITED WARRANTY.

(Emphases added.)[4]

         In May 2016, the Dusings filed a lawsuit against Toll Austin, asserting claims of negligence and DTPA violations due to faulty construction, based on alleged water infiltration into the home. Toll Austin filed a plea in abatement and motion to compel arbitration, contending that the trial court was required to order the parties to arbitrate based on the provisions in the Original Contract and Warranty. The trial court denied the motion, and we affirmed its order. See Toll Austin, 2016 WL 7187482 at *4.

         The Dusings then amended their petition to add Toll Dallas as a defendant. After discovery, Toll Dallas moved to compel arbitration.[5] Toll Dallas contended that it had "newly discovered evidence" establishing that Pool assigned the Warranty to the Dusings as part of their home-purchase contract and the Dusings "knew of the water intrusion issue before closing, negotiated a better purchase price because of this known condition, and even agreed to pursue a warranty claim against Toll Brothers and share the proceeds with Pool." Toll Dallas summarized its motion: "Contrary to the Dusings' prior arguments to the trial court and the Third Court of Appeals, newly discovered evidence establishes that: 1) the Dusings are assignees of the Warranty from Pool; 2) the Dusings have made claims and sought relief under the Warranty and are therefore bound by the arbitration clause in the Warranty[.]"

Toll Dallas attached the following evidence to its motion to compel:
• A property-inspection report prepared for the Dusings on January 9, 2015, which identified structural concerns with the foundation, drainage and grading, and Juliet balconies, and which noted "obvious signs of moisture penetration along the front wall of the basement area notably in the exercise room" and "signs on the stucco that may be indicative of a flashing and/or moisture protection deficiency notably around the Juliet balconies."
• A mold-inspection report dated January 12, 2015, stating, "The Client [Brent Dusing] indicated that the purpose of this inspection was to determine if there is a mold problem in the Exercise Room [located in the basement of the home] based on previous water intrusion. He is in the process of purchasing this property."
• A January 14, 2015 email from the Dusings' realtor, Dianna Salazar, to a contractor, Judd Fults, requesting him to provide a repair estimate for the Juliet balconies.
• A January 14, 2015 amendment to the Pool-Dusing sales contract stating, "Toll Brothers to inspect property during repair of basement wall for possible warranty reimbursement. If Toll Brothers pays for any portion of repairs the buyer is reimbursed for repair over $30, 000 and the remaining amount to be given to Brodney Pool. Any proceeds from Toll Brothers regarding [J]uliet balconies goes to buyer."
• A January 20, 2015 amendment to the Pool-Dusing sales contract providing, "Seller to pay buyers $30, 000 at closing or reduce sales price. Non realty addendum is part of contract. Toll [B]rothers builders warranty to transfer at closing."
• A January 21, 2015 email from Toll Brothers representative Brandon Cooper to Pool's realtor, Desmond Milvenan, stating, "In response to your question regarding the transfer of warranty, I can confirm that any time left in the Toll Brothers warranty is transferable with the sale of the home." Milvenan forwarded the email to Salazar the same day.
• A February 19, 2015 email from Cooper to Brent Dusing, in which Cooper provided "updates on the warranty claims" that had been made with respect to the home. Cooper's email explained that, "since our warranty is directly with you [as the new owner of the home], I have to direct my correspondence to you." Cooper further explained that, with respect to the "two outstanding [warranty] claims . . . [(1)] the improper flashing at the upstairs balconies . . . [and (2)] the water intrusion at the basement wall," the balcony-flashing repairs had been completed, with the exception of forthcoming painting work, and the basement-wall water intrusion was considered "non-warrantable" because the "waterproofing of the home was done correctly." Cooper indicated that he would update his file with a "possible structural failure [of one particular area of the basement wall with a leak] as an open warranty claim" but would "bring out an engineering company to inspect the area" to assess the possible claim.
• A March 26, 2015 letter from Cooper to Brent Dusing, stating that "in regards to the warranty request on [the Dusings'] home," "the flashing repairs at the balconies are 100% completed." It further provided, "the waterproofing was compromised by [the Dusings'] contractor, leaving it in a condition to where we could not perform a water test and determine [i]f there was any latent defects" but that "Water Proofing items are not covered in this warranty [and t]herefore any claim concerning the waterproofing is not warrantable." Cooper continued, "In regards to the concern . . . about the structural integrity of the basement walls, we had an engineering firm p[er]form an onsite inspection. Per the attached engineer's report, the concrete wall is structurally sound and will not need further attention. Because of the reasons stated above, we are closing out this warranty request."
• A June 9, 2015 email from Brent Dusing to Cooper, stating, "As part of the purchase [of the home], the previous owner transferred the Warranty to me. Can you send me a copy of ...

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