### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-16-00621- CV

Toll Au stin, TX, LL C, Appellant

v. Brent Dusing an d El izabeth Dusing, Ap pellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 353 RD JUDICI AL DISTRICT NO. D-1 -GN-1 6-0 0219 6, H ONO RAB LE O RLINDA NARANJO , JUDGE P RESIDING

M E M O R A N D U M O P I N I O N

I n this case we are asked to consider whether subsequent purchaser s of a home are bound by an arbitra tion provision contai n ed in a sale ag ree ment and war ranty enter ed into by the orig inal owner of the home and the home builder. I n this interlocutory appea l, Tol l Au s t i n , T X,
L L C, the builder, appea ls the trial court’s denial of its “Plea in Abateme nt” as k i n g t h e court to “per manently abate ” the lawsuit filed ag ainst Toll by appellee s Br ent and Eliz abeth Dusing “in favor of binding arbitra tion.” Whil e not sty led as a “Motion to Compel,” the parties and trial court addre ssed the issues contained in Toll’s plea in abate ment as if it wer e a motion to compel arbitra tion by considering whether there was a binding arbitra tion ag ree ment betwee n the parties. See Tex. Civ.
P ra c. & R em . Code § 171.021(a) (“A court shall order the parties to arbitra te on application of a party showing : (1) an ag ree ment to arbitra te; and (2) the opposing party ’s ref usal to arbitra

te.”)

. Wewill consider the tr i al co u rt ’s order deny ing Toll’s “Plea in Abateme nt” as also deny ing Toll’s

implicit m otion to compel arbitration and w ill affirm the orde r.

BACK GR OUND
I n 2015 the Dusi ng s purcha sed t he home at i ssue from Brodne y Pool, who in 2005
enter ed int o an Agr eeme nt of S ale and L imited Builder ’s Home Wa rr an t y with Toll (collec tively , the Toll-Pool Ag ree ment) for the construction and purcha se of the home. The Toll-Pool Ag ree ment contained an arbitra tion provision. Shortly afte r moving into the home, the Dusing s filed a lawsuit
ag ainst Toll, asser

ting claims of neg lige nce and DTPA violations due to faulty construction, based

on alleg ed water infiltration into the home. Toll filed a “Plea in Abateme nt,” attaching a copy of the Toll-Pool Ag ree ment and asser ting that the trial court was require d to order the parties to arbitra tion based on the provisions contained the rein a nd section 171.021 of the Civil Practice and Remedie s Code. See Tex. Civ. Prac. & Rem. Code § 171.021(a)

. After a hear ing, the trial court denied Toll’s plea, a nd Toll appea ls.

DISCUSSIO N Whether we have subject-m atter juri sdiction over this interlocut ory appeal
We first consider the issue of whether this Court has subject-matter jurisdiction over this interlocutory appea l, which the Dusing s raise in their appellee s’ brief, contending that the trial
court’s order deny ing Toll’s plea in abate ment is an unappea lable interlocutory order beca use no

case law or statute allows for a party to appe al an o rd er d en y ing or g ranting a plea in abate ment. W alker Sand, Inc. v. Baytown Asphalt Materials, Ltd. , 95 S.W .3d 511, 516 (Tex. App.—Houston

2[1st Dist.] 2002, no pet.) (dismissing interlocutory appea l fo r l ack of subject-matter jurisdiction

beca use “[n] either [C ivil Practice s and Remedies Code] section 171.098, nor any other statute, provides for an i n t er l o cu tory appea l of an order deny ing a m otion to stay or abate t he trial court’s
proce eding s”); see Tex. Civ. Prac. & Rem. Code § 171.098(a) (“A party may appea l a judgme nt or decr ee enter ed u n der this chapte r or an order : (1) deny ing an application to compel arbitra tion made under Section 171.021

. . . .”). The Dusing s contend that Toll “neve r asked the Trial Court to compel arbitra tion” but mere ly asked it to “abat e” the proce eding s “in favor of arbitra tion” and, there fore , the trial court’s order deny ing Toll’s plea in abate ment does not fall under section 171.098, which we must construe strictly

. See Tex. Civ. Prac. & Rem. Code § 171.098(a) ; America Online,
I n c
. v
. W il li a m s , 9 5 8 S. W. 2 d 2 6 8 , 2 7 1 ( T e x. A p p . — H o u s to n [1 4 th D is t. ] 1 9 9 7 , n o p e t. ) ( “ T e xa s c o u r ts strictly construe sta tutes authorizing interloc utory appea ls.”).
Howeve r, it is the substance and function of the order being appea led, viewed in the
context of the rec ord, that controls our interlocutory jurisdiction, not a party ’s char acte riza t i o n or the caption of the order

. Chapa v. Chapa , No. 04-12-00 5 1 9 -C V, 2012 WL 6728242, at *5 (Tex. App.—San Antonio Dec

. 28, 2012, no pet.) (mem. op.) (“O ur interlocutory jurisdiction is controlled by the substance and function of an order , viewed in the context of the rec ord, not the title or form of the order or the parties’ ch ar acterization of the order .”); W alker Sand, Inc. , 95 S.W .3d at 515 (citing Marke l v. W

orld Flight, Inc. , 938 S.W .2d 74, 78 (Tex. App.—San Antonio 1996, no writ));

see also Del Valle Indep. Sch. Dist. v. Lopez , 845 S. W

. 2 d 8 0 8 , 8 0 9 (Tex. 1992) (“We reje ct the notion that

. . . matters of form control the nature of the order itself—it is the char acte r and function of an order that deter

mines its classifica tion.”). Wit hout elabor ation, the court’s order simply denies

3Toll’s “Plea in Abate ment.” I t follows, then, that we must turn to the lang uag e of the plea to

deter mine whether it can proper ly be char acte rized as an application to compel arbit ra t ion and whether the order is, there fore , appea lable. W alker Sand, Inc. , 95 S.W .3d at 5 1 5 ; In r e Bridges , 28 S.W .3d 191, 195 (Tex. App.—For t Worth 2000, orig

. proce eding ) (“A motion’s subst an ce is not to be deter

mined by its caption . . . but from the body and pra y er f or re lief.”) ; Merc er v. Band , 454 S.W .2d 833, 835 (Tex. Civ. App.—Houston [ 14th Dist.] 1970, no writ) (same).

Toll’s “Plea in Abateme nt,” to which its “Or igina l Answer [was] Subject There to,”

c it e d c iv il p r a c ti c e a

n d r e me d ie s c o d e s e c ti o n 1 7 1

. 0 2 1 ( a ) , a s s e r ti n g th a t th e tr ia l c o u

r t “ is r e q u ir e d to order the parties to arbitra te” “upon the showing of an ag ree ment to arbitra te betwee n the[] parties,” and that “[a]ll of Plaintiff’s claims ag ainst [i t] arise solely from [t he attache d and incorporated Toll-Pool Ag ree ment, wh i ch ] contain[s] valid and enfor cea ble arbitra tion clause s.” I ts plea went

on further to: (1) r equest the c ourt to “abate t hese procee dings in favor of arbitration” “pursuant”
to section 171.021(a) ; (2) repr esent that the Dusing s ref used to abate and arbitra te, despite Toll’s

r e q u e s t; a n d ( 3 ) p r a y th a t th e D u s in g s ’ la

w s u it “ b e p e r

ma n e n tl y a b a te d in f a v o r o f b in d in g a

r b it r a ti o n . ”
I n it s “ B r ie f in Su

p p o r t o f [i ts ] Pl e a in A

b a te me n t, ” T o ll s ta

te d th a t it “ h a s mo v e d th e Co u

r t to c o mp e l arbitra tion based upon the arbitra tion clause co ntained in [t he Toll-Pool Ag ree ment] which [t he Dusing s] are claiming under.” At the hear ing on the plea in abate ment, Toll’s counsel arg ued to the trial court that the c ourt “ne ed[ed] to abate this case a nd send it to arbitration.”
I n their “Response to [ T o l l ’s] Plea in Abateme nt” and at the hear ing, the Dusing s
arg ued that they had no contra ctual privity with Pool; that they did not sign the contra cts containing the arbitra tion clause s at i s s u e; an d that, in any case , they wer e not making any war ranty or other

4claims under the Toll-Pool Ag ree ment. Upon deny ing Toll’s plea in abate ment, the trial court issued

a letter to the par

ties further

explaining t he “basis for its ruling ,” noti ng that the “real iss ue in this

case is whether Plaintiffs, as non-si g natories to the contra ct containing the arbitra tion clause in question, can be bound by the arbitra tion provision” (citing Stanford Dev

. Corp. v. Stanford Condo.
Owners Ass’n , 285 S.W .3d 45 (Tex. A pp.—Houston [1st Dist.] 2009, no pet.) (holding that wher e non-sig natory to contra ct was asser ting brea ch of that contra ct, it was bound b y arbitra tion under estoppel principles); Edwards v. Schuh , 5 S.W .3d 829 (Tex. App.—Austin 1999, no pet.) (holding that subsequent purcha ser of building suing builder for brea ch of express and implied war ranties is not bound by

arbitra tion clause in c onstruction contra ct wher e no evide nce show ed purc haser was third-par ty benef iciary )). We conclude tha t, in the context of thi s rec ord—including the substance c ontained in Toll’s plea in abate ment and rela ted pl ea d i n gs as well as the rec ord of the hear ing on the plea—Toll’s plea functioned as both a motion to abate and a motion to compel arbitra tion a nd we, there fore , have subject-matter jurisdiction over the trial co u rt ’s o rder deny ing the plea, which we will revie w as an order deny ing a motion to co m p el arbitra tion despite its caption. See Tex. Civ.
Prac. & Rem. Code § 1 7 1

. 0 98(a) (1); see also Rachal v. Reitz , 403 S.W .3d 840, 843 (Tex. 2013) (providing that when appellate court revie ws order deny ing motion to compel arbitra tion, it defe rs
to trial court’s fac tual determinations that are supported by evidenc e but revie ws its leg al deter minations de novo).

5Whether th e trial court erred in refusin g to order the parties to bin ding arbi tration Toll makes four arg uments on appea l s u p p o rt ing its contention that the trial court

err ed in deny ing its plea and not order ing the parti es t o b i n d i n g arbitra tion: (1) the Dusing s, as subsequent p u rc h asers of the home, wer e bound by the arbitra tion ag ree ment as “succ essors” of Pool; and, even if the Dusing s wer e not “succ essors” and are thus non-sig natories to the arbitra tion
ag ree ment, they are nonetheless bound by its terms (2) under the doctrine of direc t-bene fits estoppel; (3) beca use they “impliedly assumed” the Toll-Pool Ag ree ment; and (4) beca use of the “ec onomic loss r ule.” We will address ea ch ar g ument in turn but beg in by noting the g ener al rule that parties must sign ar

bitration ag ree ments to be bound by them. In re Rubiola , 334 S.W .3d 220, 223 (Tex. 2011) (or ig. pr ocee ding)

.

This Cour t h as re cently reje cted the arg ument that by mere ly purcha sing a home,

a subsequent owner of that home is a “succ essor” to the orig inal homeowner wi t h wh o m t h e h o me b u il d e r h a d a

n a g r e e me n t. S

e e Zb r a n e k Cu s to m H

o m e s , Lt d

. v
. A ll b a u g h , N o . 0 3

- 1 4

- 0 0 1 3 1

- CV , 2015 WL 9436630, at *4 (Tex. App.—Austin Dec

. 23, 2015, pet. denied) (citing Farm & Home Sav.
Ass’n v. Strauss , 671 S.W .2d 682, 685 (Tex. A pp.—Dallas 1984, no writ)). The term “succ essor” require s more than that. See Strauss , 671 S.W .2d at 685 (holding that wher e sale s contrac t bound
p ar t ies and their succe ssors and assig ns, term “succ essor” was “ter m of art which does n o t
encompa ss third party purcha sers” of proper ty ). Toll has cited no evidenc e or fac tual alleg ations in the rec ord that would support its bare contention that the Dusing s are the leg al “succ essors” of Pool.
Acc ording ly , we reje ct Toll’s “succ essor” arg ument supporting its conte ntion that the Dusing s are bound by the ar bitration provision in the Toll-Pool Ag ree ment.

6We next consider Toll’s arg ument that the Du s i n gs are bound by the arbitra tion

provisions under the direc t-bene fits-estoppel doctrine. See, e.g. , In re Kellogg Brown & Root, Inc. , 166 S.W .3d 732, 740 (Tex. 2005) (orig

. proce eding ). Under that doctrine, i t i s n o t enoug h that a

n o n -s igna tory ’s claim “re late” to a contra ct containing an arbitra tion provision; rathe r, the n o n signa tory will be bound to arbitra te a claim only if it seeks, “thr o u gh t h e cl ai m , to derive a direc t benef it from the contra ct containing the ar bitration provision.” Id. ; see G .T. Leach Builders, LL C

v. Sapphire V.P., LP , 458 S.W .3d 502, 527–28 (Tex. 2015) (orig

. proce eding ); In re W eek ley Homes,
L.P. , 180 S.W .3d 127, 131–32 (T ex . 2 0 0 5) (orig

. proce eding ); cf. In re FirstMerit Bank, N.A. , 52 S.W .3d 749, 755 (Tex. 2001) (orig

. proce eding ) (holding that beca use nonparties asser

ted claims identical to signa tories’ contra ct claims, all claims had to be arbitra ted). Whether a claim “see ks a direc t benef

it from a contra ct containing an arbitra tion provision clause turns on the substance of the claim, not artful pleading .” In re W eek ley Homes , 180 S.W .3d at 131–32. “Claims must be broug ht

on the contra ct (and arbitra ted) if liability arises solely from the contra ct or must be deter mined by ref ere nce to it. On the other hand, claims can be broug ht in tort (and in court) if liability arises from
g ener al obligations im posed by law.” Id. at 132. The Dusings’ claims assert ing neg lige nce and DTP A vi olations do not arise solely from the Toll-Pool Ag ree ment; rathe r, Toll’s alleg ed l i ab i lity arises from g ener al obliga tions imposed by common-law neg lige nce and rele vant statutes, and based on the substance of th eir pleading s the Dusing s do not seek to derive any benef it from the Toll-Pool Ag ree ment. See Gupta

v. Ritter H

omes, Inc. , 633 S.W .2d 626, 628 (Tex. A pp.—Houston [14t h Dist.] 1982) (holding that privity of contra ct is not prer equisite for subsequent purcha ser of home to sue builder for brea ch of

7duty to exercise ordinary car e in construction of home), aff’d in relev ant part, rev’ d in part on other

grounds , 646 S.W .2d 168 (Tex. 1983); see also Chapman Custom Homes, Inc. v. Dallas Plumbing
Co. , 445 S.W .3d 716 , 7 1 8

– 1 9 (Tex

. 2014) (“A party states a tort claim when the duty alleg edly brea ched is independe nt of the contra ctual under t ak i n g an d the harm suffe red is not mere ly the economic loss of a contra ctual benef it.”). Acc ording ly , we conclude that the Dusing s are not bound by the ar bitration provision under the dire ct-be nefits-e stoppel doctrine. Toll nex t contends that the Dusing s “impliedly assumed” the Toll-Pool Agr eeme nt

mere ly by virtue of purcha sing the home. See Creative Artists Agenc y, LLC v. Las P a l ma s Race Park, LLC , No. 13-14-00015- CV, 2015 WL 6652655, at *3 (Tex. App.—Corpus Christi-Edinburg Oct. 29, 2015, no pet.) (mem. op.) (“[A] n assig nor of a contract r emains liable for the obl igations he orig inally assumed, even afte r the contra ct is assig ned and ‘the assig nee of a co n t rac t is not responsible for the assig nor’s obliga tions unless he expressly or impliedly assumed them.’” (quoting
NextEra Retail of Tex., LP v. Inve stors W arranty of A m. , Inc. , 418 S.W .3d 222, 226–27 (Tex. App.—Houston [1st Dist.] 2 0 1 3 , p et. denied) )). Howeve r, the “assumption” theory by which non-sig natories may be bound to arbitra tion ag ree ments only applies to contra cts that have been assigned from one party to another

. See id. (discussing assumption theory in context of assig nment of contract); see also Zbranek C u stom Homes , 2015 WL 9436630, at *5 (holding that subsequent purcha sers wer e not “assig nees” of orig inal home buy ers wher e contra ct provided that no party had

r ig h t to a s s ig n c o n tr a c t w it

h o u t w r it te n c o n s e n t, a

n d th e r e w a s n o e v id e n c e o f a s s ig n me n t o r c o n s e n t)

. T h e Toll-Pool Ag ree ment specific ally provided that “B uy er may not transfe r, sell or assig n this Ag ree ment,” and Toll has provided no citations to the rec ord or any authority that would support a

c o n te n ti o n th a

t th e D u s in g s a

r e a s s ig n e e s o f th e T o ll

- Po o l A g r e e me n t. We r e je c t T o ll ’ s th ir d a

r g u me n t.
8L astly , Toll contends that the Dusing s are prohibited from making any claims besides

contra ctual claims by virtue of the “ec onomic loss rule.” See LAN/ST V v. Martin K. Eby Constr. Co. , 435 S.W .3d 234, 243 (Tex. 2014) (“T exas courts of appe als have uniformly applied the economic loss rule to deny rec overy of purely ec o n o mic losses in actions for neg lige nt perf ormanc e of service s.”). Howeve r, Toll’s citation of this rule has no application in the appea l befor e us beca use it is not one of the six exceptions to the g ener al rule that a non-sig natory is not bound by an arbitra tion clause

. See In re Kellogg Br o w n & R o o t , 166 S.W .3d at 739 (listing six rec og nized theories, arising out of common principles of contra ct and ag ency law, that may bind non-sig natories
to arbitra tion ag ree ments). Moreove r, the supreme court has specific ally held that the economic- loss rule does not bar all tort claims arising out of a contra ctual setting beca use by allowing a party to avoid tort liability simply by enter ing into a contra ct with another , the rule would “swa llow all claims betwee n contra ctual and commerc ial strang ers.” See Chapman Custom Homes , 445 S.W .3d at 717 (holding that plumber’s duty not to flood or otherwise damag e home is independe nt of any obliga tion underta ken in pl umbing subcontract with builder, and damag es alleg edly cause d by

brea ch of tha t duty extend be y ond economic loss of any anticipated benef it unde r plumbing contra ct). We r ejec t Toll’s final ar g ument.

CONCLUSION

Having construed Toll’s “Plea in Abateme nt” as reque sting the trial court to compel the par ties to binding ar

bitration, we a ffirm the tria l court’s de nial of Toll’s “Plea in Aba tement.”

9__________________________________________ David Pury ear , J ustice
Be fore J ustices Pury ear , Pemberton, and F ield Affir med Filed: De cembe r 7, 2016

10