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Clayton v. Davidson Contractors, LLC

Court of Appeals of Tennessee, Knoxville

April 24, 2015


Session July 9, 2014

Appeal from the Chancery Court for Hamilton County No. 071016 Jeffrey M. Atherton, Chancellor

Tom D. Weldon, Ringgold, Georgia, for the appellants, Davidson Contractors, LLC, Phillip Lance Davidson and John Mason.

John R. Anderson and Katherine H. Lentz, Chattanooga, Tennessee, for the appellees, John G. Clayton and Kaci W. Clayton.

W. Neal McBrayer, J., delivered the opinion of the Court, in which Charles D. Susano, Jr., C.J., and Thomas R. Frierson, J., joined.



I. Factual Background

In the fall of 2006, James and Kaci Clayton purchased a home on Belleau Ridge Drive in Ooltewah, Tennessee from Davidson Contractors, LLC. According to Ms. Clayton, the owners of Davidson Contractors, Lance Davidson and John Mason, assured the Claytons that they would correct any problems with the construction of the home. Mr. Davidson and Mr. Mason also told the Claytons that they would receive a "2-10 Warranty" that would cover both craftsmanship and construction for a period of ten years.

At the closing, on November 28, 2006, the Claytons signed a document titled "Builder Application for Home Enrollment." In pertinent part, the document provided as follows:

Your Builder is applying to enroll your home in the 2-10 HBW® New Home Warranty program. By signing below, you acknowledge that you have read a sample copy of the Warranty Booklet, and CONSENT TO THE TERMS OF THESE DOCUMENTS INCLUDING THE BINDING ARBITRATION PROVISION contained therein. You further understand that when the warranty is issued on your new home, it is an Express Limited Warranty and that all claims and liabilities are limited to and by the terms and conditions of the Express Limited Warranty as stated in the 2-10 HBW® Booklet. IF YOU, THE BUYER(S), HAVE NOT RECEIVED A CERTIFICATE OF WARRANTY COVERAGE AND A WARRANTY BOOKLET FROM 2-10 HBW® WITHIN THIRTY (30) DAYS AFTER CLOSING THEN THERE IS NO COVERAGE BY THE BUILDER'S WARRANTY INSURER, YOU SHOULD CONTACT YOUR BUILDER.

HBW is a service mark for Home Buyers Warranty Corporation, the warranty administrator. Home Buyers Warranty Corporation maintains offices in Aurora, Colorado; Tucker, Georgia; and Arlington, Texas.

According to deposition testimony, within a year after moving into their new home, the Claytons began experiencing problems with both the structure and the property. The Claytons' complaints ranged from the minor, cracked tiles and a leaking shower, to the major, cracks in the foundation and mold growth. In addition to incurring costs to repair various items, the Claytons allege that their youngest daughter began suffering health issues from mold. Ultimately, the Claytons vacated the home.

On November 27, 2007, the Claytons filed suit against Davidson Contractors, as well as Mr. Davidson and Mr. Mason individually. The Claytons alleged fraudulent and/or reckless inducement to contract, violations of the Tennessee Consumer Protection Act, breach of implied warranty of habitability, and negligent construction. The defendants each filed answers in January 2008. In their answers, Davidson Contractors, Mr. Davidson, and Mr. Mason included a statement that the Claytons' complaint could not be heard by the trial court due to an arbitration clause included in the home warranty.

After a long period of inactivity, on June 21, 2010, the trial court entered an initial scheduling order. The order set the case for trial on November 2, 2010. Between 2010 and 2013, the court rescheduled the trial six different times. Davidson Contractors, Mr. Davidson, and Mr. Mason requested at least four of those continuances. During that same time period, the defendants participated in two mediation sessions and several depositions and propounded and answered written discovery. On September 6, 2013, Davidson Contractors, Mr. Davidson, and Mr. Mason filed a "Motion for Stay and Referral of this Matter to Arbitration Pursuant to Arbitration Agreement." In the motion, the defendants requested that the trial court stay the litigation and compel arbitration in accordance with the 2-10 Home Buyers Warranty contract.

On October 7, 2013, the trial court held an evidentiary hearing on the motion. Despite the acknowledgement contained in the "Builder Application for Home Enrollment, " Ms. Clayton testified that she and her husband did not receive a sample warranty booklet at the closing. She also maintained that they did not receive a warranty certificate or a warranty booklet within thirty days of the closing, or ever, from Davidson Contractors or ...

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