In the Missouri Court of Appeals
Western District
AMANDA MACKEY and GREG )
MACKEY, )
Respondents, )
v. ) WD84309
)
SCHOOLER'S CONSTRUCTION, L.L.C., )
Appellant. ) FILED: February 15, 2022
)
APPEAL FROM THE CIRCUIT COURT OF BOONE COUNTY
THE HONORABLE J. HASBROUCK JACOBS, JUDGE
BEFORE DIVISION THREE: ANTHONY REX GABBERT, PRESIDING JUDGE,
LISA WHITE HARDWICK, AND THOMAS N. CHAPMAN, JUDGES
Schooler’s Construction, LLC (“Schooler’s”) appeals the circuit court’s order
denying its motion to compel arbitration of Amanda and Greg Mackey’s (“the
Mackeys”) lawsuit alleging claims of negligence, breach of the implied contractual
duty to perform work in a good and workmanlike manner, and breach of the
implied warranty of habitability. Schooler’s contends the arbitration clause in a
limited warranty signed by the Mackeys requires arbitration of their claims. For
reasons explained herein, we reverse and remand with instructions to stay the
proceedings and compel arbitration.
FACTUAL AND PROCEDURAL HISTORY
On June 20, 2019, the Mackeys and Schooler’s entered into a residential
sale contract (“sale contract”) and addendum for new construction. The sale
contract required Schooler’s to complete the construction of a new single-family
residence in Ashland and convey the new house and land upon which it was
located to the Mackeys in exchange for $356,000. The sale contract required
Schooler’s to provide a one-year builder warranty to the Mackeys. The sale
contract also provided that the residence would have the same workmanship
quality as another house on the same street. The addendum for new construction
stated that Schooler’s had to provide the signed builder’s warranty to the Mackeys
for review during the inspection period, and the Mackeys had to acknowledge
receipt and acceptance of the builder’s warranty by signature at closing. Because
the parties signed the sale contract on June 20, 2019, the inspection period, as
defined in the sale contract, was June 21 through June 30, 2019. Schooler’s did
not provide a builder’s warranty to the Mackeys for review during the inspection
period.
Closing on the Mackeys’ new home occurred on September 27, 2019. At
closing, Schooler’s conveyed the real estate to the Mackeys, and the Mackeys paid
Schooler’s the amount owed under the contract. Schooler’s and the Mackeys also
executed a builder’s limited warranty (“limited warranty”). The limited warranty
stated that it “sets forth the entire post-closing agreement between the parties.”
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In the “Warranty Coverages” section of the limited warranty, Schooler’s
warranted that “the following elements of the Residential Dwelling shall be free
from latent defects caused by defective workmanship performed by the BUILDER
or BUILDER’s subcontractors and/or by defective materials provided by BUILDER
or BUILDER’s suppliers.” One of the elements listed was “Structural
Components.” In this provision, Schooler’s warranted that, for a period of one
year after the warranty date, the foundation and/or concrete slab for the house,
the floor joists, the load bearing walls, and other internal structural components of
the house that were installed by Schooler’s and not covered by other parts of the
limited warranty would be “free of substantial defects in materials or
workmanship.” The section defined what did, and did not, constitute a substantial
defect:
In the case of the foundation or concrete slab, a substantial defect
shall be defined to include a defect which affects the structural
soundness of the Residential Dwelling itself and includes cracks
which may develop which are greater than one-quarter inch (1/4”) in
width. This warranty of BUILDER shall not extend to minor “hairline”
cracks caused by natural shrinkage and earth movement and which
do not affect the structural stability of the Residential Dwelling and/or
which are less than one-quarter inch (1/4”) in width.
The ”Final Inspection” section of the limited warranty provided that, before
the Mackeys accepted possession of the house, the Mackeys were to inspect the
house and prepare a “punch list” identifying minor items of construction that had
not yet been completed. Schooler’s agreed that it would complete those items.
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The limited warranty contained an arbitration clause that provided, in
pertinent part:
9. ARBITRATION: Any controversy or claim arising out of or relating
to this Limited Warranty, or the breach thereof, shall be settled by
Arbitration in Boone County, Missouri, in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the
Arbitrators may be entered in any Court having jurisdiction thereof. .
. . No actions at law or in equity based upon or arising out of such
controversy, claim or breach shall be commenced by any of the
Parties, except to enforce arbitration decisions or decrees or to seek
judicial review of the arbitration award as set forth herein.
Lastly, the limited warranty contained a severability clause stating that, if
any of its provisions were held invalid, the remaining provisions of the limited
warranty “shall remain in full force and effect.”
Over a year after closing, the Mackeys filed a petition against Schooler’s in
the Circuit Court of Boone County. The Mackeys alleged they had entered into a
contract with Schooler’s to construct their residence. They alleged Schooler’s
failed to construct the residence in a good and workmanlike manner and with
ordinary care and was otherwise negligent in that Schooler’s failed to properly
prepare the subgrade for the foundation and retaining walls and failed to pier the
foundation or take other steps as necessary to ensure that the residence would
not settle. The Mackeys further alleged that, as a direct and proximate result of
these failures, the subgrade of the property had settled, causing significant
interior damage to the residence, including that the basement walls, exterior
retaining walls, and interior drywall walls had cracked; the cabinets had cracked
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and pulled away from the walls; the floors had shifted out of level and were
uneven; the countertops had shifted and were no longer level; and the master
bathroom shower door had shifted and bowed away from the wall. The Mackeys
claimed these defects were latent and unknown to them at the time of purchase.
Additionally, the Mackeys alleged Schooler’s failed to complete the punch list
work, despite representing that it would. Based upon these allegations, the
Mackeys asserted claims of negligence, breach of the implied contractual duty to
perform work in a good and workmanlike manner, and breach of the implied
warranty of habitability. They requested damages in excess of $25,000, plus
prejudgment interest and attorney’s fees and costs.
In response to the Mackeys’ petition, Schooler’s sent a demand for
arbitration. The Mackeys declined to arbitrate. Schooler’s subsequently filed a
motion to compel arbitration and to stay the lawsuit pending arbitration. In its
motion, Schooler’s argued the Mackeys’ claims fall within the scope of the limited
warranty’s arbitration agreement. Specifically, Schooler’s alleged the primary
complaint in the petition is that the foundation of the house is defective, and the
limited warranty contains the standard for determining what is and is not a
substantial foundation defect. Schooler’s also alleged the secondary complaint in
the petition is that Schooler’s failed to perform the punch list work, and the limited
warranty specifically addresses its responsibility for punch list work. The Mackeys
filed a response asserting their claims do not arise out of the limited warranty; the
existence of the limited warranty does not mandate arbitration of their claims; and
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the limited warranty is unenforceable because it is a contract of adhesion and
unconscionable. After hearing arguments, the court entered its order denying the
motion to compel arbitration and stay the lawsuit pending arbitration. Schooler’s
appeals.
STANDARD OF REVIEW
The circuit court’s ruling on a motion to compel arbitration is an issue of
law, which we review de novo. Holm v. Menard, Inc., 618 S.W.3d 669, 673 (Mo.
App. 2021). “Our review of the trial court’s interpretation of an arbitration
provision is also de novo, as arbitration is contractual, and contract interpretation
is a question of law.” Id. (citation omitted).
ANALYSIS
Because the circuit court did not state its reason for denying Schooler’s
motion to compel arbitration, Schooler’s points on appeal challenge the three
grounds that the Mackeys raised in their response to the motion to compel.
Schooler’s asserts arbitration is required because the Mackeys’ claims relate to or
require reference to or construction of some portion of the limited warranty.
Schooler’s further argues that the limited warranty is not a contract of adhesion
and that any portion of the limited warranty that may be deemed unconscionable
does not affect the arbitration agreement and can be severed from the remainder
of the limited warranty.1
1
Schooler’s does not argue on appeal that either the arbitrability issues, or any issues concerning
the validity of the arbitration agreement, should be decided by the arbitrator rather than the court
pursuant to a delegation clause either contained in the arbitration agreement or incorporated by
reference into the arbitration agreement.
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When ruling on a motion to compel arbitration, courts must consider: (1)
“whether a valid arbitration agreement exists”; (2) “whether the specific dispute
falls within the scope of the arbitration agreement”; and (3) “whether the
arbitration agreement is subject to revocation under applicable contract
principles.” Patrick v. Altria Grp. Distribution Co., 570 S.W.3d 138, 142-43 (Mo.
App. 2019) (citation omitted). To determine the existence of a valid arbitration
agreement, we consider whether the essential elements of a contract – offer,
acceptance, and bargained for consideration – are present. Id. at 143. In looking
for these essential elements, we review the parties’ contract as a whole and not
simply the arbitration agreement. Holm, 618 S.W.3d at 674.
In the parties’ sale contract and addendum, Schooler’s offered to sell real
estate to the Mackeys, to complete the construction of a new house on the real
estate, and to provide the Mackeys with a one-year builder warranty in exchange
for $356,000. The Mackeys accepted the offer. Although the limited warranty was
executed three months after the sale contract and addendum were executed, the
limited warranty was part of the parties’ whole contract, as the parties agreed in
both the contract and addendum that Schooler’s would provide a one-year
warranty that the Mackeys would acknowledge and accept by their signature at
closing. Because the parties’ contract as a whole establishes the essential
elements of a contract, a valid arbitration agreement exists.
The arbitration provision in this case requires arbitration of “[a]ny
controversy or claim arising out of or relating to this Limited Warranty, or the
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breach thereof.” Throughout its briefs, Schooler’s asserts that any claim that
arises out of or relates to either the sale contract, the addendum, or the limited
warranty is subject to arbitration under this provision because all three
documents form the “whole contract” and “must be read together in an effort to
capture what was intended.” While we agree that all three documents form the
parties’ whole contract, the plain language of the arbitration provision expressly
limits its application to only those claims that arise out of or relate to the limited
warranty. See St. Louis Reg'l Convention v. Nat'l Football League, 581 S.W.3d
608, 617 (Mo. App. 2019) (noting that, in analyzing the scope of an arbitration
agreement, we enforce any exclusions or exceptions in the agreement).
Therefore, in determining the scope of the arbitration agreement, our only
concern is whether the Mackeys’ claims arise out of or relate to the limited
warranty.
Arbitration is solely contractual and, therefore, “[p]arties cannot be required
to arbitrate a dispute they have not agreed to submit to arbitration.” Id. at 616.
To decide whether the parties contracted to arbitrate a particular dispute, “the
usual rules of state contract law and canons of contract interpretation apply.” Id.
at 617. Courts must ascertain the intent of the parties through the plain and
ordinary meaning of the contract terms and give effect to that intent. Id. Courts
“should order arbitration of any dispute that touches matters covered by the
parties’ contract.” Id. “A motion to compel arbitration of a particular dispute
should not be denied unless it may be said with positive assurance that the
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arbitration clause is not susceptible of an interpretation that covers the asserted
dispute.” Lunsford v. Deatherage, 518 S.W.3d 890, 896 (Mo. App. 2017) (quoting
Dunn Indus. Grp., Inc. v. City of Sugar Creek, 112 S.W.3d 421, 429 (Mo. banc
2003)). “Doubts as to arbitrability should be resolved in favor of coverage.” Id.
(quoting Dunn, 112 S.W.3d at 429).
“For a tort claim to be subject to arbitration, it must raise some issue the
resolution of which requires reference to or construction of some portion of the
parties’ contract.” St. Louis Reg’l, 581 S.W.3d at 617. “Where a tort claim is
independent of the contract terms and does not require reference to the
underlying contract, arbitration is not required.” Id. “The relationship between
the tort claim and the contract is not satisfied simply because the dispute would
not have arisen absent the existence of the contract between the parties.” Id.
In this case, the Mackeys’ claims assert that Schooler’s breached duties that
it assumed, under common law, when Schooler’s agreed in the sale contract to
construct the Mackeys’ house. In Count I of their petition, the Mackeys assert that
Schooler’s performed its work in a negligent manner. “Where the parties have
entered into a contract, our common law has imposed the duty to perform with
skill, care, and reasonable expedience and faithfulness in regard to the thing to be
done or accomplished within the contract.” Autry Morlan Chevrolet Cadillac, Inc.
v. RJF Agencies, Inc., 332 S.W.3d 184, 193 (Mo. App. 2010) (quoting Am. Mortg.
Inv. Co. v. Hardin-Stockton Corp., 671 S.W.2d 283, 293 (Mo. App. 1984)). “The
negligent failure to observe and perform any portion of that duty gives rise to an
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action in tort.” Id. (quoting Am. Mortg., 671 S.W.2d at 293). In Count II, the
Mackeys assert that Schooler’s, as the general contractor, breached its implied
contractual duty to perform its work in a good and workmanlike manner.
“Missouri courts recognize that a general contractor does impliedly warrant that
the work agreed upon will be done in a workmanlike manner.” Helterbrand v.
Five Star Mobile Home Sales, Inc., 48 S.W.3d 649, 660 (Mo. App. 2001).
“Workmanlike in this context is defined as ‘work which is completed in a skillful
manner and is non-defective.’” Id. at 661 (citation omitted). Lastly, in Count III,
the Mackeys assert that Schooler’s, as the vendor-builder of the residence,
breached its implied warranty of habitability. “A purchaser is granted a right of
recovery against a builder-vendor under an implied warranty of habitability or
quality where structural defects are present in consequence of poor workmanship
or substandard materials or both.” Captiva Lake Invs., LLC v. Ameristructure, Inc.,
436 S.W.3d 619, 629 (Mo. App. 2014).
Although the Mackeys’ claims are not based on a breach of the limited
warranty, the central issue in each of their claims – Schooler’s responsibility for
alleged defects in the foundation that affect the structural soundness of the
residence and for minor, punch list items of construction – is the same issue that
the limited warranty purports to define. The “Final Inspection” section of the
limited warranty provides that (1) Schooler’s responsibility for repairs is limited to
that stated in the limited warranty; and (2) the Mackeys acknowledge that the
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limited warranty’s purpose is to identify Schooler’s responsibility for latent or
hidden construction defects:
Upon the acceptance of possession BUILDER’S responsibility to make
further repairs to the Residential Dwelling is expressly limited to the
following: (a) completion of all minor items of construction on the
punch list and (b) performance of the warranty repairs under this
Limited Warranty. BUYER and BUILDER acknowledge that the
purpose of this Limited Warranty is to identify BUILDER’s
responsibility for construction defects of a latent or hidden kind that
would have not have [sic] been found or otherwise discovered by a
professional inspection of the Residential Dwelling prior to Closing.
The determination of the extent of Schooler’s responsibility for the latent
and hidden foundation defects and the minor punch list construction items
alleged in the Mackeys’ claims may depend upon a determination of the legal
effect of this provision of the limited warranty on that responsibility. See
Lunsford, 518 S.W.3d at 896-97. At a minimum, “the dispute touches on matters
covered by the [limited warranty].” St. Louis Reg'l, 581 S.W.3d at 617.
Consequently, “we cannot say ‘with positive assurance that the arbitration clause
is not susceptible of an interpretation that covers’” the Mackeys’ claims.
Lunsford, 518 S.W.3d at 897 (quoting Dunn, 112 S.W.3d at 429). Because any
“[d]oubts as to arbitrability should be resolved in favor of coverage,” id. at 896,
the Mackeys’ claims fall within the scope of the arbitration agreement. Points I
and II are granted.
In Point III, Schooler’s addresses the Mackeys’ affirmative defense that the
limited warranty is unenforceable because it is a contract of adhesion and is
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unconscionable.2 In their response to the motion to compel arbitration, the
Mackeys contended the limited warranty is a contract of adhesion because
Schooler’s provided it to them on the day of closing, insisted they sign it, and
gave them no opportunity to review it or negotiate its terms. The Mackeys
alleged that, if they did not sign the limited warranty, then the closing would not
have taken place, and “they would have no home at all.”
Section 435.350, RSMo 2016, of the Missouri Uniform Arbitration Act
provides that contracts, like the limited warranty, that warrant new homes against
construction defects are not contracts of adhesion:
A written agreement to submit any existing controversy to arbitration
or a provision in a written contract, except contracts of insurance and
contracts of adhesion, to submit to arbitration any controversy
thereafter arising between the parties is valid, enforceable and
irrevocable, save upon such grounds as exist at law or in equity for
the revocation of any contract. Contracts which warrant new homes
against defects in construction and reinsurance contracts are not
“contracts of insurance or contracts of adhesion” for purposes of the
arbitration provisions of this section.
(Emphasis added.)
Moreover, even if the limited warranty were a contract of adhesion, “courts
do not view adhesion contracts as inherently sinister and automatically
unenforceable.” Hartland Comput. Leasing Corp. v. Ins. Man, Inc., 770 S.W.2d
525, 527 (Mo. App. 1989). Instead, only those provisions that “fail to comport”
2
The party asserting a defense, such as unconscionability, to the formation of an agreement’s
arbitration clause bears the burdens of proof and persuasion on that issue. Lopez v. H & R Block,
Inc., 491 S.W.3d 221, 226 n.4 (Mo. App. 2016).
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with the parties’ objectively reasonable expectations and “are unexpected and
unconscionably unfair are unenforceable.” Fouts v. Regency N. Acquisition, LLC,
569 S.W.3d 463, 467 (Mo. App. 2018) (internal quotation marks and citation
omitted).
In their response to the motion to compel, the Mackeys argued that one of
the limited warranty’s provisions concerning exclusions from coverage is
unconscionable and renders the entire limited warranty unenforceable. Because
the limited warranty contains a severability clause and the provision that the
Mackeys assert is unconscionable is not a part of, let alone a necessary part of,
the agreement to arbitrate, the arbitration clause would still be enforceable even if
the exclusions provision were deemed unconscionable.3 See Eaton v. CMH
Homes, Inc., 461 S.W.3d 426, 436 (Mo. banc 2015) (noting that generally, courts
“will give effect to a severability clause when the clause being severed is not a
necessary part of the contract”). See also Greenpoint Credit, L.L.C. v. Reynolds,
151 S.W.3d 868, 875 n.5 (Mo. App. 2004).
The Mackeys did not allege in their response to the motion to compel that
the arbitration clause is unconscionable. Now, in their brief on appeal, they make
only the bare assertion that “the purported arbitration clause is itself
unconscionable.” This conclusory and unsupported statement is insufficient to
preserve the issue of the arbitration clause’s alleged unconscionability for our
review. Shuttlewagon, Inc. v. Higgins, 628 S.W.3d 185, 201 n.10 (Mo. App. 2021).
3
We express no opinion on whether the exclusions provision at issue is unconscionable.
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The Mackeys failed to meet their burden of proving that the arbitration clause is
unenforceable because it is a contract of adhesion or is unconscionable. To the
extent that the circuit court relied on this basis to deny the motion to compel, it
erred in doing so. Point III is granted.
CONCLUSION
The order denying Schooler’s motion to compel arbitration is reversed. The
cause is remanded to the circuit court to stay the proceedings and order the
parties to proceed to arbitration.
____________________________________
LISA WHITE HARDWICK, JUDGE
ALL CONCUR.
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