|
The South Dakota Supreme Court held that an arbitration agreement did not require arbitration of a homebuyer’s warranty claims where the warranty was provided five months before the arbitration agreement was ever presented or mentioned. A mutual pre-dispute arbitration agreement entered into by the parties at the outset of their contract would have covered this warranty dispute.
In Masteller v. Champion Home Builders, Co., No. 23936, 2006 WL 2987819 (S.D. Oct. 18, 2006), the Mastellers and Iseman entered into a purchase agreement whereby the Mastellers agreed to buy a home manufactured by Champion. The purchase agreement stated that the home “would be warranted assuming reasonable wear and tear for a period of one year from the date of delivery against defects in workmanship and materials.” The purchase agreement made no reference to arbitration.
Five months later, during installation of the home, an Iseman representative provided the Mastellers with Champion’s “Homeowner’s Guide, Limited Warranty and Arbitration Agreement.” Also, the Mastellers signed a form indicating that the “[f]actory & supplier warranties were received and understood.”
During the next few months, the Mastellers requested and received work on the home on several occasions. On all but one occasion, when the work was completed, the Mastellers signed a form “confirm[ing] acceptance and satisfaction of the warranty work performed.
When that work failed to remedy the defects, the Mastellers sued Iseman and Champion. Both Iseman and Champion filed a motion to compel arbitration. The trial court denied the motion, finding there was “no meeting of the minds” with respect to the arbitration agreement.
On appeal, Iseman and Champion argued that the purchase agreement did not give the Mastellers a warranty but merely informed them that a warranty would be provided. The Court found this contention “problematic” because the purchase agreement included the warranty statement that is quoted above. Moreover, as the Court noted, “even if a later warranty document should have been anticipated, nothing in the [purchase agreement] portended an arbitration clause.”
Iseman and Champion also argued that the Mastellers were bound by the arbitration agreement because they sought and accepted the benefits of the warranty. The Court acknowledged the rule that “unequivocal conduct” can establish consent but found no conduct that would trigger the rule. Specifically, the Court observed that the Mastellers’ warranty claim was based on the purchase agreement and not on the warranty that accompanied the arbitration agreement.
A week prior to this decision, the Louisiana Court of Appeals denied the benefits of arbitration to a home seller who did not disclose the arbitration agreement until several weeks after the purchase agreement was signed. See Quebedeaux v. Sunshine Homes, Inc., No. 06-349, 2006 WL 2871994 (La. Ct. App. Oct. 11, 2006). To ensure the right to arbitrate disputes arising from the sale of a home, parties should execute the pre-dispute arbitration agreement and purchase agreement contemporaneously, as the parties did in In re Palm Harbor Homes, Inc., No. 04-0490, 2006 WL 1562546 (Tex. June 9, 2006).
Subscribe to a free weekly update on ADR case law and
legislation
|