Bonded Builders Home Warranty Ass'n of Tex. v. Rockoff

• Decision Date: 16 June 2016
• Docket Number: No. 08-14-00090-CV,08-14-00090-CV
• Citation: 509 S.W.3d 523
• Parties: BONDED BUILDERS HOME WARRANTY ASSOCIATION OF TEXAS d/b/a Bonded Builders Warranty Group, Daniel Avila, Grisele Edith Arizpe, and AA Builders, LLC, Appellants, v. Patricia ROCKOFF, Appellee.
• Court: Texas Court of Appeals

509 S.W.3d 523

BONDED BUILDERS HOME WARRANTY ASSOCIATION OF TEXAS d/b/a Bonded Builders Warranty Group, Daniel Avila, Grisele Edith Arizpe, and AA Builders, LLC, Appellants,

v.Patricia ROCKOFF, Appellee.

No. 08-14-00090-CV

Court of Appeals of Texas, El Paso.

June 16, 2016

J. Morgan Broaddus III, Gordon Davis Johnson & Shane, P.C., Steven C. James, Attorney at Law, El Paso, TX, Clayton C. Cannon, Adams and Reese, LLP, Houston, TX, for Appellants.

John P. Mobbs, Attorney at Law, El Paso, TX, for Appellee.

Before McClure, C.J., Rodriguez, and Hughes, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

This is an interlocutory appeal from the denial of motions to compel arbitration. See TEX.CIV.PRAC. & REM.CODE ANN. § 51.016 (West Supp.2015)(permitting an interlocutory appeal from the denial of a motion to compel arbitration under the Federal Arbitration Act). Appellants raise a single issue contending the trial court erred in not compelling arbitration. We sustain that issue and remand the case to address one remaining issue: whether the cost issues raised by the arbitration agreement render it procedurally unconscionable.

FACTUAL SUMMARY

AA Builders, LLC, constructed a home at 3715 Laguna Court in El Paso, Texas. Appellants Grisele Arizpe and Daniel Avila are alleged to be the general partners of AA Builders, LLC (collectively we refer to all three as "AA Builders"). The original homeowners of 3715 Laguna Court obtained a new home warranty on the residence from Bonded Builders Home Warranty Association of Texas d/b/a Bonded Builders Warranty Group ("BBWG"). The original homeowners then sold the house to Appellee Patricia Rockoff in July 2013. By paying a $40.00 processing fee to BBWG, the warranty was transferred to her on July 11, 2013.

Shortly after acquiring the property she noticed cracks in the walls of the house which she attributes to the failure of load-bearing walls. It appears that the house was built on a lot that was cut and filled, meaning that some portion of the lot was graded away and other portions filled in to level the property. One of Rockoff's allegations is that a portion of the house was built over the fill dirt which was insufficiently engineered or compacted such that it could not carry the weight of the house. Rockoff first complained to AA Builders who denied her claim. Rockoff then made a warranty claim with BBWG.

There are two distinct warranties provided by BBWG on the home. The first is called the "Workmanship, Materials and Systems Warranty." Under that particular warranty, AA Builders warranted that the house meets certain specified construction performance standards detailed in the warranty document. One of those standards, for instance, states that a slab foundation should not tilt or deflect in excess of one percent from the original construction elevations. If there is a breach of one of those the standards, AA Builders would be primarily obligated to repair or replace the defective item under the terms of the warranty. BBWG in turn acts only as the guarantor and meets AA Builder's obligation if either: (1) it is unwilling or unable to comply with the terms of the warranty, or (2) following the alternative dispute resolution procedures and arbitration called for in the agreement, AA Builders refuses to or is unable to comply with the arbitration award.

Under the Workmanship, Materials and Systems Warranty, the homeowner is obligated to first contact AA Builders to make a claim. If the homeowner and AA Builders are unable to resolve their issues, the homeowner submits a claim form to BBWG who then contacts the builder to attempt to gain their compliance. Any dispute after that point must be submitted through BBWG's "conciliation process." That process contemplates that a conciliator, appointed by BBWG, meets with all the parties at the house, and then issues a non-binding award if no agreement is reached. Unless all parties accept that non-binding recommendation, the dispute is then submitted to a "Claim Review Group" consisting of the conciliator, a qualified representative for the homeowner, and AA Builders. If this meeting does not resolve matters, any dispute must be submitted "to binding arbitration pursuant to the terms and conditions of the Arbitration Section of this warranty." BBWG pays the cost of the conciliation process, other than the cost of the representative the homeowner may hire to participate in the Claim Review Group.

A second warranty, referred to as the "Express Limited Major Structural Defect Warranty," has its own unique set of provisions. This warranty covers damage to designated load-bearing walls that are impaired to the extent that the house becomes "unsafe, unsanitary, or otherwise unlivable." Under this warranty, BBWG is primarily obligated to repair or replace covered defects. To make a claim, the homeowner first completes a designated form which is sent to BBWG. Any dispute under the terms of this warranty must be referred to mediation, with each party paying their share of the mediation expense. If not resolved by mediation, any dispute must again be submitted to "binding arbitration pursuant to the terms and conditions of the Arbitration Section of this warranty."

The Arbitration Section of the warranty first contains a broad agreement to arbitrate disputes:

In the event any Dispute under any BBWG warranty, including without limitation, a claim of subrogation, negligent or intentional misrepresentation or nondisclosure in the inducement, breach of any alleged duty of good faith and fair dealing, and/or any dispute over the scope of this Arbitration Provision, cannot be resolved by one of the Alternative Dispute Resolution processes described herein, You, the Builder and BBWG agree to submit the Dispute to binding arbitration.... By accepting the warranty, You are agreeing to waive Your right to a trial by either judge or jury in a court of law."

The term "Dispute" is defined to include "any dispute, controversy, claim or matters in question ... between Builder, You, Your successors in interest and/or BBWG arising out of or relating to this Warranty...." The Arbitration Section has several other terms which bear on the parties arguments raised in this appeal. One term addresses selection of the arbitrator:

You will have the right to select the arbitration company from the list of approved arbitration companies BBWG will provide to You when arbitration is requested. The arbitration will be conducted under the arbitration company's rules in effect at the time of the arbitration.

Another term addresses payment of the expenses of the arbitration:

The arbitrator's compensation fee, administrative fee and all expenses charged by the arbitrator and/or the arbitration service shall be borne equally by the arbitrating parties. Each party shall pay their own attorney fees and expenses. Additional fees may be assessed in accordance with the arbitration company rules and fees. The arbitrator shall have the discretion to reallocate such fees and expenses, save and except attorney's fees, in the interest of justice.

Two provisions address initiation of arbitration:

Any party who shall commence a judicial proceeding concerning a dispute, which is arbitrable hereunder, shall also be deemed to be a party requesting arbitration within the meaning of this paragraph.

....

Arbitration may be demanded at any time, but only after completion of all conditions precedent, and may be compelled by summary proceedings in Court.

The agreement is made expressly subject to the Federal Arbitration Act (Title 9 of the United States Code), and contains a savings clause:

If any provision of this arbitration agreement shall be determined to be unenforceable by the arbitrator or by the court, the remaining provisions shall be deemed to be severable there from and enforceable according to their terms.

The "General Conditions" section of the warranty provides that the homeowner's sole remedy against AA Builders, and all those associated with it, is under the terms and conditions of the warranty. This exclusive remedy agreement is "enforceable to the fullest extent permissible by the law of the state in which the property is located ..." Likewise, to the extent permitted by the applicable state law, the homeowner waives any implied warranties.

The General Conditions also provides that each party is to pay their own litigation costs and "under no circumstances shall any party, prevailing or otherwise be entitled to an award and/or judgment which includes or provides for attorney's fees and/or court costs." The General Conditions section contains its own severability clause which provides that should a court find any provision unenforceable, the remaining portions of this warranty will still be effective.

On September 9, 2013, Rockoff sent notice to AA Builders which promptly denied her claim. On October 10, 2013, she then completed BBWG's designated claim forms for both the warranty sections set out above. On October 25, 2013, BBWG sent her a letter stating that it would assign a conciliator after she completed an additional enclosed form. The next correspondence in the record, however, is a November 4, 2013, demand letter from Rockoff's attorney to BBWG demanding payment of the entire limit under the warranty.¹ On the same day, Rockoff also filed suit against AA Builders and BBWG asserting claims under the Texas Deceptive Trade Practices Act, and specifically asserting a breach of express and implied warranties pertaining to the BBWG's warranty. She later added claims for negligence and breach of implied warranties under the Texas Property Code. Her suit also seeks declaratory relief, which in part contends that the arbitration clause is unconscionable and unenforceable.

Both AA Builders and BBWG filed motions to compel arbitration. Rockoff filed a response, which after setting out various legal principles governing arbitration, recites in forty-two numbered paragraphs "factors for consideration by the court."...