Dan Ryan Builders, Inc. v. Nelson

DAN RYAN BUILDERS, INC., Petitioner, v. NORMAN C. NELSON and ANGELIA NELSON, Respondents.

CIVIL ACTION NO. 3:10-CV-76

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF WEST VIRGINIA MARTINSBURG

DATED: February 6, 2014

(JUDGE GROH)

MEMORANDUM OPINION AND ORDER DENYING IN PART AND GRANTING IN

PART RESPONDENTS' MOTION TO DISMISS ARBITRATION

On May 7, 2013, Respondents Norman C. Nelson and Angelia Nelson filed a motion to dismiss arbitration [Doc. 63]. On May 28, 2013, Petitioner Dan Ryan Builders, Inc. ("DRB") filed its response. On June 14, 2013, Respondents filed their reply. Petitioner and Respondents attached supporting affidavits and documents to their pleadings to aid the Court in rendering its decision. Additionally, on November 15, 2013, the Court held an evidentiary hearing where it received testimony and listened to arguments of counsel. For the following reasons, the Court finds that Respondents' Motion to Dismiss Arbitration should be DENIED IN PART and GRANTED IN PART.

I. Statement of Facts and Procedural History

The Nelsons are a married couple that ultimately purchased a home in Hedgesville, West Virginia from DRB. Mr. Nelson joined the United States Army at age eighteen, and he spent the majority of his adult life serving as an enlisted soldier. Resp. Ex. 2, Nelson Aff. at ¶ 37. Mr. Nelson served in the Army from 1983 through 1999,and he achieved the rank of Staff Sergeant. Pet. Ex. 1, N. Nelson Dep., p. 10, ln. 19-24. Mr. Nelson is a high school graduate. Id. at p. 9, ln. 19-23. He also earned a Bachelor's degree from Excelsior College. Id. at p. 10, ln. 9-12. After his military career, Mr. Nelson worked as a private investigator from 1999 to early 2002. Id. at p. 12, ln. 11-22. From 2002 to 2004, Mr. Nelson worked as an intelligence professional in Fort Meade, Maryland. Id. at p. 13, ln. 21-22. From 2004 to 2006, Mr. Nelson worked at NASA performing intelligence work. Id. at p. 13, ln. 23-24; p. 14, ln. 7-8. After 2006, Mr. Nelson began working at the Department of Health and Human Services as a supervisor in the Program Protection Office. Id. at p. 14, ln. 9-18.

Mrs. Nelson is also a high school graduate. Pet. Ex. 2, A. Nelson Dep., p. 7-8. She has received some higher education and training. Id. She studied accounting at City College of Chicago and the University of Maryland, and she has received computer and business administration training. Id.

In early 2008, Mr. Nelson began working with real estate agent Emory Csulak to assist in selling his current home in New Market, Maryland and purchasing a different home. N. Nelson Dep., p. 16-17. Mr. Nelson began looking in Georgetown Orchard, a DRB subdivision, because he had found a home he was interested in located in that subdivision on the Internet. Id. at p. 19. He also liked the Hedgesville, West Virginia area because he was looking for a larger home and thought the area had a pretty good school district. Id. at p. 17-18.

Upon driving through the Georgetown Orchard subdivision, Mr. Nelson first looked at the home he ultimately purchased from only the outside. Id. at p. 20. Later, his real estate agent arranged a tour of the inside of the home with DRB for May 10,2008. Id. at p. 21. However, this tour was later postponed to May 16, 2008. Id. On this date, Mr. Nelson, his wife, his real estate agent, and Cathy Ho, a DRB representative, toured the inside of the home and the lot over a two-hour period. Id.

After touring the home and the lot, the Nelsons drove to DRB's divisional office. While driving to DRB's office, the Nelsons discussed purchasing the home, and, during this discussion, Mr. Nelson stated he would only purchase the home if he could get it for the right price. After they arrived at the office, they were placed in a conference room to review the contract. The Nelsons reviewed the contract with Ms. Ho. This process took about an hour, and their real estate agent was present during this process. This was Mr. Nelson's first new home purchase. However, he previously purchased two homes that were existing construction.

Mr. Nelson entered into a contract with DRB to purchase the home, located at 453 Ploughman Way in the Georgetown Orchards subdivision, for $385,000. The preprinted Agreement of Sale ("contract") was seven pages. The arbitration provision was on the fifth page. The acknowledgment that the purchaser read and understood the agreement was on the seventh page. The entire agreement, with addenda, was approximately fifty-six pages. See Resp. Ex. 1.

Ms. Ho, a DRB sales representative, reviewed the documents, including the contract and addenda, with Mr. Nelson. Pet.'s Ex. 3, C. Ho Dep., p. 19-22. While reviewing the contract, Ms. Ho highlighted some of its provisions to Mr. Nelson. N. Nelson Dep. p. 44. Ms. Ho stated that she reviewed the whole contract, not just portions of the agreement. C. Ho Dep., p. 19-22. She would review one page at a time and cover the "highlights" on that page. Id. Ms. Ho testified that her usual practice wasto explain the arbitration provision and point out that if a problem arose between the purchaser and DRB, the purchaser was willing to go through arbitration instead of to judge and jury in order to save the company money. She estimated that the review of the contract took approximately an hour and a half to two hours. Id.

Ms. Ho also stated that she would answer any questions asked by a purchaser. Id. If she would not know the answer, she would seek clarification from someone else at DRB. Ms. Ho testified that Mr. Nelson was very astute and tedious, and she described Mr. Nelson as being very careful and taking his time in reviewing the documents. As Ms. Ho reviewed the documents, the Nelsons' real estate agent was present, but he did not ask any questions. N. Nelson Dep., p. 42-43. Additionally, the Nelsons' real estate agent did not point out any items that the Nelsons should be familiar with. Id.

During the review of the contract, Mr. Nelson negotiated the price of the home. Id. Additionally, Mr. Nelson used an outside lender, National Bank of Kansas City, rather than DRB's preferred lender Monocacy Home Mortgage. The contract had a provision requiring the purchaser to use DRB's preferred lender and title company in order to receive the incentives for the home. However, Mr. Nelson, negotiated with DRB to continue to use his outside lender and keep the incentives offered by DRB. N. Nelson Dep., p. 41-42, 44; C. Ho Dep., p. 16.

Mr. Nelson also negotiated quite a few addenda to the contract. The first handwritten changes to the contract provided that DRB would grade and seed any disturbed area of the home, including the rear and sides of the home. DRB also agreed to make sure the area to the left of the home, where the septic reserve was located,would be graded and seeded by the time of closing. Resp. Ex. 1, 49. The second handwritten addendum stated DRB agreed to grant purchasers "permission to build a storage shed or an inground pool (as long as there will be a 6 foot fence around it) to the side of the property instead of the rear due to the irregularity of Lot 11 at Georgetown Orchards." Resp. Ex. 1, p. 50. The third handwritten addendum provided that "DRB and the purchaser agrees that this contract is contingent on the settlement of the property located at 10630 Old Barn Road, New Market, Frederick County, Maryland to occur on or before June 16, 2008." Resp. Ex. 1, 51. This addendum permitted Mr. Nelson to walk away from the contract if his house had not sold on or before June 16, 2008. The last addendum provided that DRB would remove the rock/boulders at the side of the septic field and in the high grass area near and in between the apple trees. Resp. Ex. 1, p. 53. The addendum also provided that DRB would remove construction debris, a broken fence, and piles of dirt from the property at Mr. Nelson's request. Id.

Although the home was a spec home, Mr. Nelson made selections and modifications to it, such as selecting the place for the phone, cable, ceiling fans, and recessed lights. Resp. Ex. 1, p. 13. Mr. Nelson also upgraded the countertop to granite, the flooring to cherry, and the cabinets to Squire/Village Cherry in a hazelnut color. Id. at 16. Mr. Nelson selected the colors of the tile and the wall. He also added Guardian home protection services and selected the location of the alarms and motion detectors.

Prior to closing on the home, the Nelsons hired their own personal property inspector who performed a professional inspection of the home. N. Nelson Dep., p. 47. Although the inspector was not permitted to damage the home in his inspection, he did provide a thorough inspection that lasted several hours. On June 13, 2008, prior toclosing, Mr. Nelson did a walkthrough of the home. N. Nelson, Dep. 73. There were items that needed to be completed prior to the closing scheduled for June 16, 2008, and Mr. Nelson created a "punch list" of items that still needed to be completed. Id. On the day of closing, Mr. Nelson drove by the house and noticed that tasks outside of the house were still not completed, such as the grading.

At the closing, Mr. Nelson told the settlement attorney that "there was a problem with the grading and seeding and there was also some construction debris and whatnot on the property that they were supposed to remove that they never removed, and that I was upset and that I was not going to close on the property." Pet. Ex. 4, p. 9. As a result, Mr. Nelson and DRB negotiated the June 18 addendum providing for the completion of the additional work. Mr. Nelson stated that his real estate agent was present at the closing, but he did not retain his own attorney. However, Mr. Nelson acknowledged that he knew he had a right to consult his attorney to review the contract and attend the closing. Pet. Ex. 4, p. 12. Mr. Nelson proceeded with the closing after the settlement attorney created an addendum to the contract providing for the unfinished items to be completed. Mr. Nelson...