Fort Worth COA Orders Condo Purchase Dispute to Arbitration

Texas’ Second District Court of Appeals in Fort Worth has ordered parties to a condominium sales contract to arbitrate their dispute despite that one purchaser failed to sign the agreement. In Villa De Leon Condominiums, LLC v. Stewart, No. 02-14-00271-CV (Tex. App. – Fort Worth, February 19, 2015), Villa De Leon entered into a condominium sales contract with the Stewarts. An arbitration provision was included in the sales agreement. Although the husband did not sign the 11-page contract, he initialed the bottom of each page including the one that contained the dispute resolution agreement. In addition, both members of the couple signed a third party financing addendum and a letter agreement regarding the sale. A few days later, the couple decided to purchase a different condominium unit in the same building.

After the Stewarts selected a different condo, a handwritten change to the unit referenced in the parties’ letter agreement was made. This change was initialed and dated by each member of the couple. Next, the couple signed an addendum to the purchase contract which described certain repair costs associated with the new unit that would be paid by Villa De Leon. The addendum also stated it cancelled the purchase agreement for the originally selected unit. Both buyers and a representative for the seller signed and initialed the first addendum. More than one month later, the Stewarts signed a second addendum providing them with a buyer credit in lieu of certain condo unit floor repairs.

After closing on their condo unit, the Stewarts filed a Texas Deceptive Trade Practices Act lawsuit against the seller in Tarrant County. In their complaint, the couple also accused Villa De Leon of committing fraud and negligence. In response, the sellers filed a motion to compel arbitration and stay the trial court proceedings. Following an evidentiary hearing, the court found that the parties’ purchase contract was not enforceable because the husband failed to sign it. As a result, the trial court denied Villa De Leon’s motion. The seller then filed an appeal with Texas’ Second District in Fort Worth.

On appeal, the court analyzed the parties’ contract to determine “whether the First Addendum was intended to be merely an addition to the Contract or an entirely new agreement containing none of the provisions of the Contract.” In order to do this, the court stated it was required to examine the plain and ordinary meaning of each of the terms of the condo purchase agreement. Additionally, the appellate court said it must examine all of the related writings together in order to harmonize them.

According to the Fort Worth court, the first addendum was clearly intended to supplement the parties’ initial sales contract. The appeals court stated many of the terms included in the two addendums would not make sense if the husband had not agreed to the initial sales contract. The court added that the first addendum specifically referenced obligations included in the parties’ sales contract. In addition, the appellate court found that the first addendum did not replace the parties’ sales agreement because the second addendum referenced sales contract provisions that were not included in the first addendum or any other writing. If the sales agreement were no longer valid, the second addendum would have been wholly unnecessary.

Ultimately, the Court of Appeals held:

We conclude and hold––construing the First Addendum and related writings as a whole, as we must––that the Stewarts agreed to and are bound by the arbitration agreement in the dispute resolution clause of the Contract as evidenced by their agreement to the First Addendum and that the trial court erred by concluding otherwise. We sustain appellants’ first issue.

Because the trial court committed error when it denied the seller’s motion to compel arbitration, Texas’ Second District Court of Appeals in Fort Worth reversed the trial court’s order and remanded the case.

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