Publish Date: 
Wednesday, November 14, 2018

On November 9, 2018, Judge Carpenter of the Delaware Superior Court issued the Court's opinion denying a Motion to Dismiss filed in the matter of Frederick and Connie Wang v. Hockessin Chase L.P., et al. (N15C-03-066 WCC). 

The Court’s decision constitutes a significant victory for Delaware homeowners, and follows three years of litigation and an unsuccessful, non-binding arbitration.  The Wang family, like many Delaware homeowners, bought a newly constructed home expecting their builder to stand by their product.  Unfortunately, the Wangs discovered that, when their home started to leak due to improperly installed windows and stucco façade, their builder (Toll Brothers) refused to help. 

When the Wangs filed a lawsuit seeking enough money to repair their home, Toll Brothers filed a motion to dismiss claiming that the sales contract (drafted by Toll Brothers) contained a binding arbitration clause, which they claimed governed any disputes between. 

Cooch and Taylor attorneys, Blake Bennett and Christopher Lee, argued that the motion should be denied because Toll Brothers also issued a homebuyers’ warranty, which Toll Brothers claimed would control the Wangs’ rights, once the home was completed.  The homebuyers’ warranty contained a separate arbitration clause that directly contradicted the sales agreement.  The warranty explicitly stated that the Wangs had the right to "pursue remedies other than conciliation and binding arbitration." 

During a hearing on that motion to dismiss in August of 2015, Judge Carpenter declined to dismiss the Wangs complaint but also saw value in ordering the parties to attempt to work it out through a non-binding arbitration.  The parties moved forward with arbitration in May of 2017, but the arbitration failed to resolve the dispute.  Although the arbitrator nominally ruled in the Wangs' favor, his decision ignored the Wangs’ evidence and was wholly unacceptable to the Wangs.  

When the Wangs advised the Superior Court that the non-binding arbitration had failed and that they wished to proceed with the litigation, Toll Brothers filed another motion to dismiss on the grounds that binding arbitration had occurred.  The Wangs opposed that motion on the grounds, once again, that the arbitration was not binding arbitration.  Toll Brothers concurrently filed a complaint to affirm the arbitration award in Chancery Court.

After oral argument before Judge Carpenter, the Court issued its opinion, holding that: a) it did not order the parties to binding arbitration in August of 2015; and b) that the arbitration clause in the warranty superseded the arbitration clause in the contract because, consistent with settled Delaware law, the warranty was executed at a later date than the contract.

In its opinion, the Court stated the following regarding its prior, August 2015 bench ruling:

The Court was clear that it was hesitant to enforce the contractual arbitration provision as there was a conflict between the Contract and Warranty arbitration clauses.  This hesitation makes it more than obvious that the Court's suggestion that the parties first go to arbitration - clearly meant non-binding arbitration.  In hindsight, this good faith effort by the Court to hopefully get the parties to come to a reasonable, common sense resolution of this dispute merely provided the parties more grounds to advance legal arguments instead of addressing the real issues of this litigation.  This is clearly unfortunate, as is so often the case, the parties are now only making litigation decisions and not good business ones.

The Court also rejected Toll Brothers' argument that the contract's arbitration provision controlled, by highlighting the fact that the contract itself explicitly stated that once settlement occurred, the buyers could only look to the warranty for relief.  Indeed, the Court stated that, "For the builder to now suggest that the Court should abandon the Warranty in favor of the Contract is disingenuous at best."

As a result of the Court's ruling, it retained jurisdiction over all counts of the complaint and the arbitration award will not be entered as a judgment in any court nor may it "be cited as evidence or precedent, with any preclusive effect, in any court, arbitration, or other proceeding."  The Wangs will be free to pursue all of their claims against Toll Brothers.

The Court’s decision is a much needed recognition that developers and homebuilders will often provide lengthy contract and warranty documents that contain contradictory language.  Cooch and Taylor’s attorneys have been helping homeowners navigate these complicated legal issues for several decades and are grateful for the trust bestowed upon them to help people protect their most valuable asset – their home.