Court Opinion

ID: 6103502
Source: CourtListenerOpinion
Date Created: 2022-01-14 08:12:46.698322+00
Date Added: 2024-06-11T09:17:24.317366
License: Public Domain

In The

                                Court of Appeals

                    Ninth District of Texas at Beaumont

                              __________________

                              NO. 09-21-00018-CV
                              __________________

   D.R. HORTON-TEXAS, LTD. AND D.R. HORTON, INC., Appellants

                                         V.

      DAVID HERNANDEZ AND LAUREN HERNANDEZ, Appellees

__________________________________________________________________

               On Appeal from the 284th District Court
                     Montgomery County, Texas
                   Trial Cause No. 20-09-11354-CV
__________________________________________________________________

                          MEMORANDUM OPINION

       This is an accelerated appeal from the trial court’s order denying arbitration.

Appellees David and Lauren Hernandez (referred to collectively as “the

Hernandezes”) are subsequent purchasers of a home built by appellants D.R. Horton-

Texas, Ltd., and D.R. Horton, Inc. (referred to collectively as “DRH”). The

Hernandezes sued DRH, alleging the home was defectively constructed. DRH filed

a plea in abatement and moved to compel arbitration under a sales contract with the

original buyer. The trial court denied DRH’s motion to compel arbitration. In two

                                          1
issues, DRH argues that the trial court erred by denying its motion to compel

arbitration because (1) although the Hernandezes are non-signatories to the original

sales contract, as subsequent purchasers of the home, they are subject to the

arbitration provision in the sales contract under the theory of direct benefits estoppel,

and (2) the Hernandezes failed to establish any defense to arbitration. We affirm the

trial court’s order denying DRH’s motion to compel arbitration.

                                  BACKGROUND

      In 2012, Emily Hudnall and DRH entered into a Contract of Sale (“the

Hudnall-DRH Contract”) in which Hudnall agreed to purchase a home to be built by

DRH. The Hudnall-DRH Contract specifically identified the “Seller” as D.R.

Horton-Texas, Ltd., and the “Buyer” as Hudnall. The contract contained an

arbitration clause, providing:

      16. ARBITRATION CLAUSE. 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 &
      COMMERICE CODE SECTION 17.41 ET SEQ., TEXAS
      PROPERTY CODE CHAPTER 27, AND/OR THE TERMS OF THE
      EXPRESS LIMITED     WARRANTY REFERENCED IN
      PARAGRAPH 15 OF THE CONTRACT, SHALL BE RESOLVED
      BY BINDING ARBITRATION UNDER THE TEXAS GENERAL
      ARBITRATION ACT AND THE FEDERAL ARBITRATION ACT
      UNDER THE DIRECTION AND PROCEDURES ESTABLISHED
      BY THE AAA “CONSTRUCTION INDUSTRY ARBITRATION
                                           2
      RULES” EXCEPT AS SPECIFICALLY MODIFIED HEREIN OR
      DICTATED BY APPLICABLE STATUTES INCLUDING THE
      TEXAS GENERAL ARBITRATION ACT AND/OR THE FEDERAL
      ARBITRATION ACT. . . .

      The Hudnall-DRH Contract set forth that Hudnall was provided with a Sample

Limited Warranty administered by Residential Warranty Corporation (“RWC”). The

record shows that RWC is the administrator of the ten-year warranty that DRH

referenced in the Hudnall-DRH Contract. More specifically, the Hudnall-DRH

contract set forth that:

      15. BUYER HAD 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 IS CONDITIONED
      ON THE SATISFACTORY COMPLETION OF ALL REQUIRED
      INSPECTIONS, UPON MEMBER’S COMPLIANCE WITH ALL OF
      RWC’S ENROLLMENT PROCEDURES, AND UPON MEMBER
      REMAINING A MEMBER IN GOOD STANDING OF THE
      LIMITED WARRANTY PROGRAM. 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 2014, Hudnall sold the home to the Hernandezes. In September 2020, the

Hernandezes filed suit against DRH, alleging claims that were based on their status
                                        3
as subsequent purchasers of the home who were covered by DRH’s ten-year

construction warranty (referred to as the “RWC Limited Warranty”). The

Hernandezes alleged causes of action for violations of the Deceptive Trade Practices

Act (“DTPA”), fraudulent inducement, fraud by nondisclosure, breach of warranty,

negligence, and conspiracy; however, the Hernandezes did not pursue a cause of

action for breach of contract under the Hudnall-DRH Contract. In their third

amended petition, the Hernandezes alleged that the source of their express warranty

and misrepresentation claims under the DTPA was the RWC Limited Warranty. The

Hernandezes’ claims for fraudulent inducement, fraud by nondisclosure, breach of

warranty, negligence, and conspiracy also rely on the express warranty provided in

DRH’s Warranty Booklet and on implied warranties provided by Texas law,

including warranties of good workmanship and habitability. The Hernandezes

alleged that in 2017, DRH reimbursed them for mold remediation and paid to remove

faulty air ducts and to install new ones. The Hernandezes further alleged that they

filed suit in 2019, when they found mold in the same location, and mold inspectors

determined that the mold was caused by inherent construction defects.

      In December 2020, DRH moved to abate and compel arbitration. According

to DRH, as subsequent purchasers who have alleged various construction defects

associated with the property, the Hernandezes are obligated to arbitrate their claims

under the doctrine of direct benefits estoppel because their factual allegations and

                                         4
causes of action are predicated on the existence of the Hudnall-DRH Contract. It

should be noted that the only Exhibits filed with DRH’s Motion to Abate and

Compel Arbitration were Exhibit A – the business records affidavit of Holly James

with 21 pages including Exhibit A-1 – the original Contract of Sale (the Hudnall-

DRH Contract); Exhibit B – the General Warranty Deed between DRH as the

Grantor and Hudnall as the Grantee; and Exhibit C – the Warranty Deed with

Vendor’s Lien with Hudnall as the Grantor and the Hernandezes as the Grantee.

More importantly, DRH failed to produce the DRH Sample Limited Warranty,

DRH’s ten-year construction warranty, DRH’s Warranty Booklet, the RWC Limited

Warranty, the Addendum to the RWC Limited Warranty, or similar DRH warranty

for the trial court’s consideration. Based upon on our review, the record does not

include any applicable warranty documents that were or could be relied upon by

DRH.

       The Hernandezes filed an objection to DRH’s motion to compel, arguing that

there is no valid contractual obligation that would compel arbitration, because as

subsequent purchasers, they are not bound by the arbitration clause in the Hudnall-

DRH Contract. According to the Hernandezes, the arbitration clause in the Hudnall-

DRH Contract only covers any claim, controversy, or dispute between the “Buyer”

and “Seller,” which the contract specifically identifies as D.R. Horton-Texas, Ltd.

and Hudnall. The Hernandezes also argued that if the trial court found that they are

                                         5
bound to arbitration as subsequent purchasers, the trial court should deny DRH’s

motion to compel due to the Hernandezes’ inability to afford arbitration. The

Hernandezes attached the following exhibits to their objection to the motion to

compel: a copy of the American Arbitration Association’s (“AAA”) Construction

Industry Arbitration Fee Schedule; Sample Arbiter Fees; the Texas Residential

Construction Commission Addendum to the Limited Warranty; the Declaration of

David Hernandez; and the Declaration of their attorney, Lawrence Chang. DRH

objected to the Hernandezes’ exhibits, and the Hernandezes filed a response and

additional exhibits, including a second Declaration by Chang. In a supplemental

reply to the Hernandezes’ objections to its motion to compel, DRH proposed that the

parties agree to an ad hoc arbitration of the dispute to reduce the cost of arbitration.

It should be noted that the Texas Residential Construction Commission Addendum

to the Limited Warranty referenced above was produced by the Hernandezes as

Exhibit 3, which is administered by RWC and entitled: “Residential Warranty

Corporation presents The TRCC Addendum to the Limited Warranty 10 Year

Warranty for New Homes.” More importantly, this TRCC Addendum to the Limited

Warranty was the only warranty produced in the entire record for the trial court’s

consideration.

      The trial court conducted a hearing on DRH’s motion to compel. David

Hernandez testified that he had a contingency contract with Lawrence Chang to

                                           6
litigate the case, and Chang would not arbitrate the case without a fee. According to

David, he could not find any attorneys who would take an arbitration on a

contingency. David testified that he understood that DRH did not want AAA to

administer the arbitration, and he testified that he had $750 to pay the fee to get an

arbitrator. David explained that he could not afford the cost of filing fees, daily

arbitration, expert witnesses, or depositions, and Chang was unwilling to pay the

arbitration expenses. David also explained that he had approximately $6000 in

savings, but he paid $1800 for his daughter’s school tuition.

      David testified that before purchasing the home, he reviewed the warranty

booklet on DRH’s website, and David agreed that the booklet included an arbitration

clause. David testified that he never located the warranty booklet that applied to his

home, and David explained that the warranty booklet that Chang presented to the

trial court contained an arbitration clause and appeared to be the same booklet that

he reviewed on DRH’s website. Chang argued that the warranty booklet that he

provided as Exhibit 3 is a substantially similar warranty and the purpose of

submitting the sample warranty was to show that it included subsequent purchasers.

Chang further argued that DRH is the only party who has access to the warranty

booklet that was in effect when the Hernandezes purchased the home, but DRH

failed to provide the applicable warranty booklet. According to Chang, DRH

objected to David’s Exhibit 3 as the sample warranty agreement with RWC, but it is

                                          7
the only evidence produced regarding a warranty. More importantly, if Exhibit 3 is

the sample warranty that applies to the Hernandezes, it only requires the

Hernandezes to arbitrate with RWC and not DRH. However, we note that in the

Declaration of David Hernandez Under CPRC § 132.001, David averred that Exhibit

3 (the TRCC Addendum to the Limited Warranty) looked like the DRH ten-year

warranty found online. Likewise, in the Declaration of Lawrence Chang Under

CPRC § 132.001 and in the January 14, 2021, Declaration of Lawrence Chang Under

CPRC § 132.001, Chang averred that Exhibit 3 (the TRCC Addendum to the Limited

Warranty) was downloaded by him personally from DRH’s website. Again, this

TRCC Addendum to the Limited Warranty was the only warranty produced in the

entire record for the trial court’s consideration.

      During the hearing, the Hernandezes argued that there is no evidence of a

valid enforceable arbitration clause in the Hudnall-DRH Contract, because the

definition of the term “Buyer” in the contract does not include subsequent

purchasers. The Hernandezes also argued that DRH failed to present evidence of a

valid arbitration clause in the RWC Limited Warranty by not presenting the

applicable limited warranty, and the arbitration clause in the Addendum to the RWC

Limited Warranty that DRH provided includes an agreement for subsequent

purchasers to arbitrate with RWC and not DRH. Additionally, Chang argued that the

evidence showed the Hernandezes could not afford arbitration, the cost of arbitration

                                           8
is prohibitively inexpensive to the point of being unjust, DRH’s offer to pay AAA

$750 for an arbiter does not comply with the arbitration clause DRH is trying to

enforce, and DRH has provided no evidence of the cost of potential arbiters. DRH

maintained that the strongest arbitration provision to compel arbitration is in the

Hudnall-DRH Contract, which referenced that the Buyer (Hudnall) was provided a

Sample Limited Warranty and stated that all warranty disputes are to be submitted

to binding arbitration; however, DRH never produced a warranty document

supporting its position. The trial court denied DRH’s motion to abate and compel

arbitration. In addition, it should be noted that no findings of fact or conclusions of

law were requested or filed.

                                    ANALYSIS

      In two issues, DRH argues that the trial court erred by denying its motion to

compel and motion to abate because (1) the doctrine of direct benefits estoppel

requires the Hernandezes to arbitrate all their claims against DRH, and (2) the

Hernandezes failed to establish any defense to arbitration.

      We review a trial court’s ruling on a motion to compel arbitration for an abuse

of discretion. See Wagner v. Apache Corp., 627 S.W.3d 277, 283 (Tex. 2021); In re

Labatt Food Serv., L.P., 279 S.W.3d 640, 642-43 (Tex. 2009). We defer to a trial

court’s factual findings, and we review the trial court’s legal determinations de novo,

including questions of contract interpretation, but in the event of a close call, we

                                          9
should not reverse because we might have decided the issue differently. See Downer

v. Aquamarine, Operators, Inc., 701 S.W.2d 238, 242 (Tex. 1985); Wagner, 627

S.W.3d at 283; Labatt Food Serv., 279 S.W.3d at 642-43; see also Barrow-Shaver

Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479 (Tex. 2019). A party

seeking to compel arbitration must first establish that a valid arbitration agreement

exists and that the claims are within the agreement’s scope. See Wagner, 627 S.W.3d

at 282; In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig.

proceeding); J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003).

While there is a strong presumption favoring arbitration, that presumption only

arises after the party seeking to compel arbitration proves that a valid arbitration

agreement exists. J.M. Davidson, 128 S.W.3d at 227. Ordinary principles of state

contract law determine whether a valid agreement to arbitrate exists. Kellogg Brown

& Root, 166 S.W.3d at 738. When applicable, the party seeking arbitration must also

establish that the arbitration agreement binds a nonsignatory. Taylor Morrison of

Tex., Inc. v. Kohlmeyer, 634 S.W.3d 297, 304 (Tex. App.—Houston [1st Dist.] 2021,

no pet.) (opin. on rehearing). After the proponent of arbitration has made the required

showings, the burden then shifts to the party opposing arbitration to raise an

affirmative defense to enforcing arbitration. Venture Cotton Co-op v. Freeman, 435

S.W.3d 222, 227 (Tex. 2014).

                                          10
      Generally, “parties must sign arbitration agreements before being bound by

them.” In re Rubiola, 334 S.W.3d 220, 224 (Tex. 2011) (orig. proceeding) (citation

omitted). “Texas law has long recognized that nonparties may be bound to a contract

under various legal principles.” In re Weekley Homes, L.P., 180 S.W.3d 127, 131

(Tex. 2005) (citations omitted). A nonsignatory can be bound to an arbitration

agreement under the doctrine of direct benefits estoppel in two instances. Kellogg

Brown & Root, 166 S.W.3d at 739. First, a nonsignatory of a contract containing an

arbitration provision may be compelled to arbitrate his claims that are based on the

terms of the contract, because a nonsignatory cannot seek to enforce some provisions

of the contract to his benefit and argue that the arbitration provision does not apply.

Id. However, if a nonsignatory’s claims can stand independently of the underlying

contract, then generally, arbitration should not be compelled under the doctrine of

direct benefits estoppel. Id. at 739-40. The second way that direct benefits estoppel

may bind a nonsignatory to an arbitration agreement is where the nonsignatory seeks

or obtains direct benefits from a contract by means other than a lawsuit. Weekley

Homes, 180 S.W.3d at 132. In the second instance, a nonsignatory may be compelled

to arbitrate if he “deliberately seeks and obtains substantial benefits” from the

contract containing the arbitration provision. Id. at 132-33.

      DRH maintains that the Hernandezes’ claims arise from the representations

and warranties initially given to Hudnall and can only arise from the Hudnall-DRH

                                          11
Contract. In determining whether a claim seeks a direct benefit from a contract

containing an arbitration provision we look at the substance of the claim to see if

liability arises solely from the contract or must be determined by reference to it. Id.

at 131-32. It is not enough that the nonsignatory’s claim relates to the contract;

rather, the nonsignatory must seek benefits that stem directly from the contract’s

terms and the claim must be unable to stand independently without the contract. See

G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 527-28 (Tex.

2015); Kellogg Brown & Root, 166 S.W.3d at 739-41; Kohlmeyer, 634 S.W.3d at

306. Arbitration should not be compelled if a nonsignatory’s claims can stand

independently of the contract. Cardon Healthcare Network, Inc. v. Goldberg, No.

03-17-00474-CV, 2018 WL 1124500, at *4-5 (Tex. App.—Austin Mar. 2, 2018, no

pet.) (mem. op.).

      The record shows that DRH filed Special Exceptions to Plaintiffs’ Original

Petition, Supplement to Petition, and First Amended Petition, and the trial court

granted DRH’s special exceptions and ordered the Hernandezes to amend their

petition. In their live pleading, the Hernandezes did not assert a breach of contract

claim and they alleged that the source of their claims was the RWC Limited

Warranty and implied warranties created by Texas law. The Hernandezes’ claims

for violations of the DTPA, fraudulent inducement, fraud by nondisclosure, breach

of warranty, negligence, and conspiracy are based on their allegations that the home

                                          12
has construction defects that cause increased moisture and mold growth due to

DRH’s failure to follow minimum Texas Building Code standards for ventilation

systems, roofing, and foundation systems. The Hernandezes did not allege that DRH

breached any provision of the Hudnall-DRH Contract or that the home was not built

in accordance with the Hudnall-DRH Contract, nor did the Hernandezes seek to

enforce any terms of the Hudnall-DRH Contract or allege liability that arises solely

from the contract or must be determined by reference to it. See Weekley Homes, 180

S.W.3d at 131-32. Instead, the Hernandezes’ claims allege liability arising from the

RWC Limited Warranty, general obligations imposed by law, and relevant statutes

such as the DTPA, which can stand independently without the Hudnall-DRH

Contract. See G.T. Leach Builders, 458 S.W.3d at 527; Kellogg Brown & Root, 166

S.W.3d at 739-41; Kohlmeyer, 634 S.W.3d at 306-07; Goldberg, 2018 WL 1124500,

at *4-5; D.R. Horton-Emerald, Ltd. v. Mitchell, No. 01-17-00426-CV, 2018 WL

542403, at *6-7 (Tex. App.—Houston [1st Dist.] 2018, no pet.) (mem. op.).

      Again, it should be noted that the only Exhibits filed with DRH’s Motion to

Abate and Compel Arbitration were the affidavit of Holly James, the Hudnall-DRH

Contract, the General Warranty Deed between DRH and Hudnall, and the Warranty

Deed with Vendor’s Lien between Hudnall and the Hernandezes. Therefore, the only

documentary evidence that DRH can rely upon for its position is the Hudnall-DRH

Contract, because the other exhibits do not reference any warranties or arbitration.

                                        13
The only parties identified in the Hudnall-DRH Contract are DRH as the Seller and

Hudnall as the Buyer, and the Hudnall-DRH Contract set forth that the Buyer was

provided with a “Sample Limited Warranty” administered by RWC and included a

provision that requires all disputes that arise under the Limited Warranty to be

submitted to binding arbitration. The Hudnall-DRH Contract provides that “THIS

CONTRACT constitutes the entire agreement between the parties,” and anything

else not expressly set forth therein has no force and effect and is not part of the

contract. The Hudnall-DRH Contract further provides that the “SELLER’S SOLE

WARRANTY TO PURCHASER IS THE LIMITED HOME WARRANTY

DESCRIBED IN PARAGRAPH 14 OF THIS CONTRACT.” However, a review of

paragraph 14 shows that it makes absolutely no reference to a limited home

warranty. More specifically, the first paragraph of paragraph 14 requires the builder

to hold a certificate with the TRCC, the second paragraph provides the buyer with

the phone number of the commission to inquire about the builder, and the third and

last paragraph references Chapter 426 of the Property Code and how to proceed

under the “STATE-SPONSORED INSPECTION AND DISPUTE RESOLUTION

PROCESS[]” with a complaint concerning a construction defect. Therefore, based

on our review of the record, DRH failed to produce any documents that include a

DRH Sample Limited Warranty, DRH’s ten-year construction warranty, DRH’s

                                         14
Warranty Booklet, the RWC Limited Warranty, the Addendum to the RWC Limited

Warranty, or any similar DRH warranty for the trial court’s consideration.

      Again, DRH relies upon the application of direct benefits estoppel. Although

the Hernandezes’ Third Amended Petition repeatedly references the Hudnall-DRH

Contract and the warranties that DRH conveyed to Hudnall, the Hernandezes’

pleaded causes of action that stand independently of the Hudnall-DRH Contract,

because they arise from the RWC Limited Warranty and general obligations

imposed by state law, including statutes, torts, and other common law duties rather

than the Hudnall-DRH Contract. See G.T. Leach Builders, 458 S.W.3d at 527-28.

Importantly, the Hudnall-DRH Contract does not contain language stating that the

RWC Limited Warranty was incorporated by reference into the Hudnall-DRH

Contract, and the TRCC Addendum to RWC Limited Warranty provided in the

record specifically states that it “is separate and apart from your contract and or other

sales agreements with your Builder.”

      More specifically, we now turn to the specific language of the Hernandezes’

Exhibit 3, which is entitled: “Residential Warranty Corporation presents The TRCC

Addendum to the Limited Warranty 10 Year Warranty for New Homes[.]” RWC is

the Administrator of this TRCC Addendum to the Limited Warranty. “The Purchaser

includes the first buyer of the warranted Home and any and all subsequent Owners

                                           15
who take within the warranty period.” As set forth under Section IV of the TRCC

Addendum to the Limited Warranty, the conditions for resolving disputes include:

      1. This TRCC Addendum provides coverage only in excess of
         coverage provided by other warranties or insurance, including, but
         not limited to, the RWC Limited Warranty #319.
      2. This TRCC Addendum is binding on the Builder and you and your
         heirs, executors, administrators, successors and assigns.
      3. This TRCC Addendum is separate and apart from your contract
         and/or other sales agreements with your Builder. It cannot be
         affected, altered or amended in any way by any other agreement
         which you may have.
      4. This TRCC Addendum cannot be modified, altered or amended in
         any way except by a formal written instrument signed by you, your
         Builder and the Administrator.

DRH has likewise never produced any “RWC Limited Warranty #319.” More

importantly, the TRCC Addendum to the Limited Warranty, which is the only

warranty produced in the record, is separate and apart from the Hudnall-DRH

Contract relied upon by DRH in its claim for binding arbitration. Therefore, the trial

court could have reasonably determined that DRH failed to meet its burden to

establish that a valid arbitration agreement exists that binds the Hernandezes. See

Kellogg Brown & Root, 166 S.W.3d at 737.

      The evidence shows that the TRCC Addendum to the Limited Warranty and

the Hudnall-DRH Contract are separate and independent instruments. See D.R.

Horton-Emerald, 2018 WL 542403, at *8. While paragraph 15 of the Hudnall-DRH

Contract discusses certain aspects of the RWC Limited Warranty and states that the

warranty is provided “IN LIEU OF ALL OTHER WARRANTIES,” it is clear that
                                         16
the TRCC Addendum to the Limited Warranty is a separate document with its own

terms and provisions apart from the Hudnall-DRH Contract. Additionally, the TRCC

Addendum to the Limited Warranty, as a separate instrument, automatically

transferred to the Hernandezes when they purchased the home, and it is the TRCC

Addendum to the Limited Warranty that defines the warranty’s coverage and not the

Hudnall-DRH Contract. The TRCC Addendum to the Limited Warranty provides

that warranty disputes may be resolved by the parties and that a party may perform

actions pursuant to the TRCC Addendum to the Limited Warranty which may

include the cost to repair or replace any covered item. The TRCC Addendum to the

Limited Warranty further provides that in the event that a homeowner and builder

cannot agree on the presence of a construction defect or its proper resolution, the

TRCC has a State-Sponsored Inspection and Dispute Resolution procedure.

      Accordingly, since DRH failed to meet its burden to establish that a valid

arbitration agreement exists that binds the Hernandezes, the trial court did not abuse

its discretion by denying DRH’s motion to compel. See Labatt Food Serv., 279

S.W.3d at 642-43; Kellogg Brown & Root, 166 S.W.3d at 737, 739; Kohlmeyer, 634

S.W.3d at 305-06; D.R. Horton-Emerald, 2018 WL 542403, at *7-8. Since DRH

failed to meet its burden, we need not consider DRH’s first issue that the doctrine of

direct benefits estoppel requires the Hernandezes to arbitrate all their claims against

DRH. We overrule issue one. Likewise, since DRH failed to meet its burden, we

                                          17
need not consider DRH’s second issue complaining that the Hernandezes failed to

establish a valid defense to arbitration. See Tex. R. App. P. 47.1; Venture Cotton Co-

op v. Freeman, 435 S.W.3d 222, 227 (Tex. 2014); Kellogg Brown & Root, 166

S.W.3d at 737. We overrule issue two. Therefore, we affirm the trial court’s order

denying the motion to compel arbitration.

      AFFIRMED.

                                                     _________________________
                                                        W. SCOTT GOLEMON
                                                            Chief Justice

Submitted on April 28, 2021
Opinion Delivered January 13, 2022

Before Golemon, C.J., Horton and Johnson, JJ.

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