Dargahi v. Handa - Appellant's Amended Brief

ACCEPTED
03-17-00386-CV
18775401
THIRD COURT OF APPEALS
AUSTIN, TEXAS
8/10/2017 5:10 PM
JEFFREY D. KYLE
CLERK
NO. 03-17-00368-CV
RECEIVED IN
3rd COURT OF APPEALS
IN THE COURT OF APPEALS AUSTIN, TEXAS
THIRD DISTRICT OF TEXAS 8/10/2017 5:10:15 PM
JEFFREY D. KYLE
Clerk
PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK CONSTRUCTION

SERVICES, LLC d/b/a LAKEWAY CUSTOM HOMES AND RENOVATION,
Appellants
v. September 8, 2017
DHIRAJ HANDA and RITU HANDA, Appellees
Accelerated Appeal from the 261st Judicial District Court

Travis County, Texas
Hon. Lora Livingston, Presiding
Trial Court Cause No. D-1-GN-16-001279
APPELLANTS’ AMENDED BRIEF
BUSH RUDNICKI SHELTON, P.C.
Carl J. Wilkerson
State Bar No. 21478400
cwilkerson@brstexas.com
200 N. Mesquite St., Suite 200
Arlington, Texas 76011
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
ATTORNEY FOR APPELLANTS
ORAL ARGUMENT REQUESTED

IDENTITY OF PARTIES AND COUNSEL
Appellants/Defendants: Pejman Dargahi, Kamran Dargahi, and

Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation
Appellants’ counsel:
Carl J. Wilkerson (trial and appeal) James Rudnicki (trial court)

State Bar No. 21478400 State Bar No. 24006148
cwilkerson@brstexas.com james@brstexas.com
Russell Clinage (trial court) Stephanie Lugo (trial court)
State Bar. No. 00790473 State Bar No. 00793927
rclinage@brstexas.com slugo@brstexas.com
Tyler Hood (trial court)
State Bar No. 24097846 Bush Rudnicki Shelton, P.C.
thood@brstexas.com 2508 Ashley Worth Blvd., Suite 200
Austin, Texas 78738
Bush Rudnicki Shelton, P.C. Telephone: (512) 263-8408
200 N. Mesquite St., Suite 200 Facsimile: (512) 263-2562
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
Appellees/Plaintiffs: Dhiraj Handa and Ritu Handa
Appellees’ counsel:
David A. King (trial and appeal) Graves, Dougherty, Hearon &

State Bar No. 24083310 Moody, A Professional Corporation
dking@gdhm.com 401 Congress Ave., Suite 2200
Brian T. Cumings (appeal) Austin, Texas 78701-3744
State Bar No. 24082882 Telephone: (512) 480-5603
bcumings@gdhm.com Facsimile: (512) 536-9942
G. Douglas Kilday (trial court)
dkilday@gdhm.com
ii
TABLE OF CONTENTS
Identity of Parties and Counsel.......................................................ii

Table of Contents.........................................................................iii
Index of Authorities........................................................................v
Statement of the Case..............................................................…….1
Statement Regarding Oral Argument……………………………………..2
Issues Presented…………………………………………………………….2
1. The trial court abused its discretion by denying Appellants’ motion
to compel arbitration of Appellees’ claims within the scope of the
parties’ arbitration agreement and by failing to abate further trial
court proceedings until the parties’ completion of arbitration.
Statement of Facts..........................................................................3
Summary of the Argument…………………………………………………7
Argument…………………………………………………………………….8
1. The trial court abused its discretion by denying Appellants’ motion
to compel arbitration of Appellees’ claims within the scope of the
parties’ arbitration agreement and by failing to abate further trial court
proceedings until the parties’ completion of arbitration……………...8
Standards of Review…………………………………………………..8
Appellees’ Claims Within Scope of Parties’
Valid Arbitration Agreement………………………………………...10
No Waiver of Appellants’ Right to Arbitration……………………...15
Prayer..............................................................……………………………………22
Certificate of Compliance…………………………………………………………23
Certificate of Service………………………………………………………………23
Appendix to Appellants’ Amended Brief………………………………...App. 1-461
iii
INDEX OF AUTHORITIES
Texas Supreme Court
G.T. Leach Builders, LLC v. Sapphire V.P., LP,

458 S.W.3d 502 (Tex. 2015)………………………………………......16,17,18,20,21
Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. 1992)…………………………10
In re Kaplan Higher Educ. Corp., 235 S.W.3d 206 (Tex. 2007)…………………….14
Knapp Med. Ctr. v. De La Garza,

238 S.W.3d 767 (Tex. 2007) (per curiam)…………………………………………19
In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185 (Tex. 2007)…………….14,15,21
Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008)…………………………………16
Richmont Holdings, Inc. v. Superior Recharge Sys, L.L.C.,

455 S.W.3d 573 (Tex. 2014) (per curiam)………………………………………15,16
In re U.S. Home Corp., 236 S.W.3d 761 (Tex. 2007)………………………...11,12,14
In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006)…………………………..12
Texas Court of Appeals
Prevost v. Insurance Advisors, Inc., 46 S.W.3d 289

(Tex. App. – Fort Worth 2001, no pet.)…………………………………………...19
SEB, Inc. v. Campbell, 2011 WL 749292, 2011 Tex. App. LEXIS 1588
(Tex. App. – Austin 2011, no pet.) (mem. op.)……8,9,10,11,12,13,14,15,17,18,19,20
In re Susan Newell Custom Home Builders, Inc., 420 S.W.3d 459

(Tex. App. – Dallas 2014)………………………………………………………….14
iv
Texas Rules
Tex. R. App. P. 26.1(b)………………………………………………………….2
Tex. R. App. P. 28.1(b)…………………………………………………………..2
Texas Statutes
TEX. CIV. PRAC. & REM. CODE §51.016…………………………………………...6,8
v
STATEMENT OF THE CASE
Nature of The case on appeal concerns enforcement of an arbitration

the case: agreement between homebuilder Appellants and homeowner
Appellees and to compel arbitration of Appellees’ claims.
Interlocutory The Honorable Amy Clark Meachum, Judge Presiding, signed

orders an ORDER ON DEFENDANTS’ MOTION TO COMPEL
signed by: ARBITRATION on May 30, 2017. CR 540/App. A.1 The
Honorable Scott H. Jenkins, Judge Presiding, signed an
ORDER ON DEFENDANTS’ MOTION TO STAY
PROCEEDINGS & FOR EXPEDITED HEARING on June
16, 2017. Supp. CR 4/App. B.2
Trial court: 261st Judicial District Court, Travis County, Texas
Interlocutory On May 24, 2017, the trial court, Judge Meachum presiding,
disposition by heard Appellants’ DEFENDANTS … PLEA IN
Trial Court: ABATEMENT and MOTION TO COMPEL
ARBITRATION to compel arbitration of Appellees’ claims
arising from the parties’ Residential Construction Contract.
CR 108/App. F. RR 1/App. I.3 Judge Meachum took the
matter under advisement. RR 29:23-24/App. I. Judge
Meachum denied the Motion to Compel Arbitration, without
ruling on the Plea in Abatement. CR 540/App. A.
1
The Clerk’s Record, Volume 1 of 1, filed July 10, 2017, hereinafter referenced as “CR”.
Selected portions of the Clerk’s Record are appended hereto within the Appendix to Appellants’
Amended Brief and may be accessed by the accompanying “App. __” link.
2
The Supplemental Clerk’s Record, Volume 1 of 1, filed July 10, 2017, hereinafter referenced as
“Supp. CR”. Selected portions of the Supplemental Clerk’s Record are appended hereto within
the Appendix to Appellants’ Amended Brief and may be accessed by the accompanying “App.
__” link.
3
The Reporter’s Record, Volume 1 of 1, filed June 19, 2017, hereinafter referenced as “RR
[page:line]”. The Reporter’s Record is appended hereto within the Appendix to Appellants’
Amended Brief and may be accessed by the accompanying “App. __” link.
APPELLANTS’ AMENDED BRIEF 1

STATEMENT REGARDING ORAL ARGUMENT
Appellate restrictions regarding perfection of accelerated appeals precluded
Appellant’s pursuit of further opportunity to be heard in the trial court. Tex. R.
App. P. 26.1(b), 28.1(b). In the interest of justice, Appellant requests that oral
argument before this Court should be permitted.
ISSUES PRESENTED
1. The trial court abused its discretion by denying Appellants’ motion to

compel arbitration of Appellees’ claims within the scope of the
parties’ arbitration agreement and by failing to abate further trial court
proceedings until the parties’ completion of arbitration.

STATEMENT OF FACTS
Appellants are homebuilder Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation (“Lakeway Custom Homes”) and its
members/managers Pejman Dargahi and Kamran Dargahi. CR 112-114/App. F; CR
260-263/App. G. Appellees are property owners Dhiraj Handa and Ritu Handa.
CR 114/App. F. In 2014, Lakeway Custom Homes, through Pejman Dargahi, and
the Handas each signed the Residential Construction Contract (“Contract”) for
the construction of a home on the Handas’ property at 228 Sanostee Cove (just
outside Austin city limits off Bee Cave Road). CR 114-124/App. F. By Contract,
the parties agreed that:
 LAKEWAY CUSTOM HOMES AND RENOVATION shall provide all

labor and materials for construction of … a single family residence
according to this Contract … [and] Owner agrees to pay …
$1,460,000.00 …;
 Owner and LAKEWAY CUSTOM HOMES AND RENOVATION each

binds himself or herself, his or her partners, successors, assigns and
legal representatives to the other party and to the partners,
successors, assigns and legal representatives of the other party in
all matters related to this agreement; and
 If a dispute arises between LAKEWAY CUSTOM HOMES AND

RENOVATION and Owner, which cannot be resolved in good faith
through informal discussions, the parties agree to submit the
dispute to mediation before resorting to any litigation other than a
suit to seek injunctive relief. If mediation is required, the parties
shall jointly agree upon a mediator acceptable to both parties. If a
dispute cannot be resolved through mediation, both parties agree to

submit the dispute to binding arbitration supervised by the
American Arbitration Association (AAA), Two Galleria Tower
Suite 1440, 13455 Noel Road, Dallas, Texas 75240, (214) 702-
8222, using an AAA approved arbitrator and AAA Construction
Industry Arbitration Rules. The decision of the arbitrator shall be
final and binding upon both Owner and LAKEWAY CUSTOM
HOMES AND RENOVATION and judgment may be entered upon it
in any court with proper jurisdiction.
CR 114, 119, 120/App. F. A dispute arose between the parties in November 2015.
CR 501-505/App. H; CR 537-538/App. H. Despite their informal discussions and
mediation, they could not resolve their dispute. CR 109/App. F; CR 308/App. H.
The Handas filed suit against Appellants in March 2016, alleging:
 Plaintiffs have made progress payments totaling … 95% of the

Contract price [and] Dargahi has completed less than 90% of the
scheduled work;
 Dargahi disclosed to Plaintiffs that he was still “$150,000 +/-

short to finish our contract” … [and] declared that “no more
[construction] activities could be performed unless we are
financially comfortable”;
 Dargahi ceased all construction work on the Project despite

repeated requests from Plaintiffs to resume work;
 Dargahi owed more than $120,000 to at least seventeen

subcontractors hired by Dargahi to work on the Project [and]
has refused to pay … [and] has not discharged any
subcontractors’ liens; and
 Dargahi and his brother, Kamran, had been systematically

diverting substantial sums of money from Plaintiffs’ progress
payments to other expenses unrelated to the Project.

CR 4, 6-8; CR 149-150/App. E.
Appellants answered the Handas’ lawsuit by general denial in May 2016. CR
15/App. C. In August 2016, Appellants’ counsel entered into a Rule 11 agreement
about Appellants’ responses to the Handas’ requests for production and
Appellants responded to requests for production. CR 352/App. H; CR 338-
351/App. H. Appellants substituted their counsel of record in October 2016. CR 17.
Appellants’ new counsel responded to the Handas’ requests for “two items that
need immediate attention”, specifically: their request to schedule the depositions
of Pejman Dargahi and Kamran Dargahi in December; and their request for
Appellants’ supplemental production. CR 427-428/App. H. Appellants sought
discovery from the custodian of records of the Handas’ construction lender
Regions Bank by Notice of Intention to Take Deposition By Written Questions and
accompanying Subpoena Duces Tecum. CR 429-445/App. H. On December 8,
2016, Appellants filed their Plea in Abatement and Motion to Compel Arbitration
to “abate this matter for binding arbitration” based on the Contract’s arbitration
provision. CR 108/App. F.
After two prior hearing settings, the trial court, the Honorable Amy Clark
Meachum presiding, heard Appellants’ Plea in Abatement and Motion to Compel
Arbitration on May 24, 2017. CR 135, 142, 144, 258. RR 1/App. I. The Handas filed

their Response that morning. CR 269/App. H. Their Response and hearing
arguments opposed enforcement of Appellants’ arbitration rights for two reasons:
Appellants waived arbitration; and Appellants Pejman Dargahi and Kamran
Dargahi lacked a valid arbitration clause. CR 269-280/App. H. RR 10:15 –
11:3/App. I. The trial court, Judge Meachum presiding, took the matter under
advisement and subsequently denied the Motion to Compel Arbitration by May 30,
2017 Order. RR 29:23-24/App. I. CR 540/App. A. That Order does not state the
trial court’s basis for its ruling. CR 540/App. A.
On June 7, 2017, Appellants timely filed Defendants’ Notice of Accelerated
Appeal of the Order denying the Motion to Compel Arbitration pursuant to TEX.
CIV. PRAC. & REM. CODE § 51.016. CR 666. Appellants also requested the trial
court to stay its further proceedings pending this Court’s review of the Order
denying the Motion to Compel Arbitration. CR 672. The Handas opposed
Appellants’ request. Supp. CR 5. The trial court, the Honorable Scott H. Jenkins
presiding, heard Appellants’ request and denied the Motion to Stay Proceedings by
June 16, 2017 Order. CR 682. Supp. CR 4/App. B. Supp. RR 1; 17:20.

SUMMARY OF THE ARGUMENT
When parties contractually agree to arbitrate their future disputes, the
courts’ obligation to honor and enforce such agreement requires referral of such
disputes to arbitration. However, two barrels must be loaded. A party seeking to
compel arbitration with another must establish: (1) a valid arbitration agreement;
and (2) asserted claims are within the agreement’s scope. When established, the
trial court must discharge its obligation to honor and enforce such agreement.
Here, Appellants established: (1) a valid arbitration agreement among all
parties; and (2) Appellees’ asserted claims are within the agreement’s scope.
Appellees opposed arbitration by a smoke screen that wrongly prevented the trial
court’s discharge of its obligation. This Court must reverse the trial court’s Order
as an abuse of discretion because it is based upon incorrect legal determinations
that: there is “no valid arbitration clause between [Appellees] and the Dargahis”;
and Appellants “have waived arbitration.”
Appellants offer to clear the air so this Court may properly aim the parties’
dispute toward arbitration, reverse the trial court’s Order and encourage the trial
court to discharge its obligation to honor and enforce the parties’ agreement to
arbitrate their dispute.

ARGUMENT
1. The trial court abused its discretion by denying Appellants’ motion to

compel arbitration of Appellees’ claims within the scope of the parties’
arbitration agreement and by failing to abate further trial court proceedings
until the parties’ completion of arbitration.
Standards of Review
SEB, Inc. v. Campbell, 2011 WL 749292, 2011 Tex. App. LEXIS 1588 (Tex.
App. – Austin 2011, no pet.) (mem. op.) provides this Court’s standard of review
for an interlocutory appeal of a trial court’s order denying a motion to compel
arbitration:
… As amended in 2009, section 51.016 of the civil practice and

remedies code now permits courts to review such orders by appeal:
In a matter subject to the [FAA], a person may take an appeal or

writ of error to the court of appeals from the judgment or
interlocutory order of a district court, county court at law, or
county court under the same circumstances that an appeal from
a federal district court’s order or decision would be permitted
by 9 U.S.C. Section 16.
Section 51.016 applies to this appeal because it was initiated after

September 1, 2009, the effective date of the statute. This Court has
not addressed the standard of review applicable to appeals brought
pursuant to section 51.016. However, in appeals of orders denying
arbitration under the TAA, we also apply a no-evidence standard to
the trial court’s factual determinations and a de novo review to its
legal determinations.
Therefore, we apply the same standard when reviewing an

interlocutory order denying a motion to compel arbitration regardless
of whether the appeal is brought pursuant to the TAA or is authorized

by civil practice and remedies code section 51.016. We will defer to the
trial court’s factual determinations if supported by the evidence,
review its legal determinations de novo, and reverse the trial court’s
order only if we conclude that the trial court abused its discretion by
denying the motion to compel arbitration.
SEB, at *5-*6 (citations omitted)/App. J.
This Court reviews, de novo, the trial court’s determination of the legal
question whether an enforceable arbitration agreement exists:
… A party seeking to compel arbitration must establish the

existence of a valid, enforceable arbitration agreement and that the
asserted claims fall within the agreement’s scope. The party seeking
arbitration has the initial burden to present evidence of an arbitration
agreement. Once the existence of an arbitration agreement has been
established, a presumption attaches favoring arbitration. The burden
then shifts to the opposing party to present evidence that the
agreement was procured in an unconsionable [sic] manner or induced
or procured by fraud or duress; that the other party has waived its
right to compel arbitration under the agreement; or that the dispute
falls outside the scope of the agreement.
…
Whether an enforceable agreement to arbitration exists is a legal
question that we review de novo.
SEB, at *7 (citations omitted)/App. J.
This Court reviews, de novo, the trial court’s determination of the legal
question whether a party has waived arbitration by litigation conduct:
… The standard for determining waiver of the right to arbitration,

however, is the same under both the TAA and the FAA. Courts will
not find that a party has waived a right to enforce an arbitration
agreement by taking part in litigation unless the party has substantially
invoked the judicial process to the opposing party’s detriment.

Whether a party has waived arbitration by litigation conduct is a
question of law, which we review de novo. A strong presumption
against waiver exists, and any doubts are resolved in favor of
arbitration. Implying waiver from a party’s actions is appropriate only
if the facts demonstrate that the party seeking to enforce arbitration
intended to waive its arbitration right.
Waiver must be decided on a case-by-case basis looking at the

totality of the circumstances.
SEB, at *15-*16 (citations omitted)/App. J.
Appellees’ Claims Within Scope of Parties’ Valid Arbitration Agreement
A Court considering a motion to compel arbitration shall determine the
applicability of the arbitration clause based upon the affidavits submitted in support
and opposition to the motion. See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 269
(Tex. 1992). Here, Appellants conclusively established the existence of a valid
arbitration agreement among all parties within the Contract by affidavits of:
Kamran Dargahi, as member and manager of Lakeway Custom Homes; and Pejman
Dargahi, as member and manager of Lakeway Custom Homes and as Contract
signator. CR 112-124/App. F; CR 262-263/App. G. By Appellees’ pleadings,
Appellants conclusively established that Appellees’ claims against Appellants are
within the scope of the valid arbitration agreement.

The Contract’s arbitration agreement recites:
XXIX: ALTERNATIVE DISPUTE RESOLUTION

If a dispute arises between LAKEWAY CUSTOM HOMES AND
RENOVATION and Owner, which cannot be resolved in good faith
through informal discussions, the parties agree to submit the dispute
to mediation before resorting to any litigation other than a suit to seek
injunctive relief. If mediation is required, the parties shall jointly agree
upon a mediator acceptable to both parties. If a dispute cannot be
resolved through mediation, both parties agree to submit the dispute
to binding arbitration supervised by the American Arbitration
Association (AAA), Two Galleria Tower Suite 1440, 13455 Noel
Road, Dallas, Texas 75240, (214) 702-8222, using an AAA approved
arbitrator and AAA Construction Industry Arbitration Rules. The
decision of the arbitrator shall be final and binding upon both Owner
and LAKEWAY CUSTOM HOMES AND RENOVATION and judgment
may be entered upon it in any court with proper jurisdiction.
CR 120/App. F. Dhiraj Handa signed and Ritu Handa initialed that page of the
Contract. CR 120/App. F. The Handas signed the Contract, immediately above the
signature of “Pejman Dargahi LAKEWAY CUSTOM HOMES AND RENOVATION.”
CR 121/App. F. Appellees do not dispute the existence of a valid arbitration
agreement between them and Lakeway Custom Homes. Appellees only dispute the
existence of a “valid arbitration clause between [them] and the Dargahis.” CR
270/App. H. That argument is without merit, according to the Texas Supreme
Court. See In re U.S. Home Corp., 236 S.W.3d 761, 765 (Tex. 2007). That argument
fails as an objection to a motion to compel arbitration, according to this Court. See
SEB at *14/App. J.

In U.S. Home, homeowners sued the corporate builder of their homes and
several builder employees. See id. at 763. Those homeowners argued that they did
not have to arbitrate with the individual builder employees because only U.S.
Home signed the agreement. See id. at 765. The Texas Supreme Court found that
argument without merit. Id. None of the individual defendants had a duty to the
homeowners but for the homeowners’ contracts with U.S. Home and, “[a]s the
nonsignatories’ liability arises from and must be determined by reference to the
parties’ contract rather than general obligations imposed by law, the suit is subject
to the contract’s arbitration provisions.” Id.
In SEB, homeowners sued SEB, Inc. d/b/a Circle B Mobile Homes
(corporate seller of their manufactured home), SEB’s president, and SEB’s
salesman. See SEB, at *1-*2/App. J. In response to the SEB parties’ motion to
compel arbitration, the homeowners argued that the only parties to the arbitration
agreement were themselves and “Circle B Homes.” Id. at *3/App. J. This Court
recognized, when contracting parties agree to arbitrate their disputes, they
generally intend to include disputes about their agents’ actions because the actions
of a corporate agent on behalf of a corporation are deemed the corporation’s acts.
See SEB at *13 (citing In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex.
2006))/App. J. This Court reversed the trial court’s order denying the motion to

compel arbitration and expressed this rule: “[w]hen the principal is bound by the
terms of a valid arbitration agreement, its agents, employees, and representatives
are also covered by the agreement.” SEB at *13-*14/App. J.
Here, as members and managers of the limited liability company doing
business as Lakeway Custom Homes, Kamran Dargahi and Pejman Dargahi are
agents and representatives of Lakeway Custom Homes. See TEX. BUS. ORG. CODE
§§ 101.251, 101.254 (a). By this Court’s SEB rule, Kamran Dargahi and Pejman
Dargahi are also covered by the arbitration agreement in the Contract and may
enforce it against Appellees. See SEB at *13-*14/App. J.
Whether Appellees’ argument is characterized as no arbitration agreement
or outside the scope of the arbitration agreement, the Texas Supreme Court’s U.S.
Home rule requires arbitration of Appellees’ claims against Kamran Dargahi and
Pejman Dargahi. Appellees refer to the Contract’s Article V regarding payment
protocol to allege liabilities of “All Defendants”, including Kamran Dargahi and
Pejman Dargahi, e.g.: systematic diversion of Plaintiffs’ progress payments made
under the Contract; fraudulent inducement of Plaintiffs’ progress payments; unjust
receipt of progress payments; fraudulent diversion and unlawful appropriation of
progress payments. CR 148-149/App. E; CR 153-155/App. E. Appellees also allege
construction defects and breaches of contracts and warranties by “All Defendants”

in the home construction made the basis of the Contract. CR 156-158/App. E.
Since Appellees must refer to the Contract’s payment protocol to determine the
liabilities of Kamran Dargahi and Pejman Dargahi, Appellees’ claims for such
liabilities are subject to the Contract’s arbitration provision. See U.S. Home at 765.
See also In re Kaplan Higher Educ. Corp., 235 S.W.3d 206, 209 (Tex. 2007)
(signatory company’s individual agents entitled to invoke company’s arbitration
clause regarding fraudulent inducement claims against them; since a contracting
party generally cannot avoid unfavorable clauses by suing the other party’s agents,
similar rule necessary to place arbitration agreements on equal footing with other
contracts); In re Susan Newell Custom Home Builders, Inc., 420 S.W.3d 459, 461-462
(Tex. App. – Dallas 2014) (applying In re Kaplan’s reasoning, homeowner’s claims
against homebuilder’s employees for fraudulent/criminal overcharging and billing
for work on unrelated projects compelled to arbitration).
When Appellants established that Appellees’ claims were within the scope of
a valid arbitration agreement between Appellees and all Appellants, Appellants
properly loaded both barrels for the trial court. The trial court abused its discretion
by failing to discharge the parties’ dispute toward arbitration and failing to abate
further proceedings in the trial court until conclusion of arbitration. See In re Merrill
Lynch Trust Co. FSB, 235 S.W.3d 185, 187, 195-196 (Tex. 2007) (when claims must

be arbitrated, trial court abuses discretion by failing to stay litigation until
arbitration is completed).
No Waiver of Appellants’ Right to Arbitration
When Appellants established that Appellees’ claims were within the scope of
a valid arbitration agreement among all parties, a presumption arose favoring
arbitration of Appellees’ claims. See SEB at *7/App. J. Appellees then bore the
burden to present evidence that Appellants waived their right to compel arbitration
under the Contract. See id./App. J. In addition to the presumption favoring
arbitration, Appellees also had to overcome the strong presumption specifically
against waiver. See id. at *15/App. J. Even if the trial court had any doubts whether
Appellees overcame such presumptions and carried their burden, the trial court
should have resolved any doubts in favor of arbitration. See id./App. J. Appellees’
evidence did not: overcome the initial presumption favoring arbitration; overcome
the strong presumption against waiver; and carry the burden to show that
Appellants substantially invoked the judicial process to Appellees’ detriment.
Appellees’ evidence to show Appellants’ waiver was Appellants’ inaction on
asserting their right to compel arbitration. Appellees argued: “Standing alone,
substantial delay in moving to compel arbitration can be enough to show waiver.”

CR 274/App. H. RR 10:15-22/App. I; 14:10-25/App. I; 17:17 – 18:5/App. I. That
evidence was nothing more than smoke.
The Texas Supreme Court specifically dissipates Appellees’ claim that
evidence of Appellants’ delay in filing for arbitration, standing alone, waived
arbitration. Whether a party has substantially invoked the judicial process depends
on the totality of the circumstances; key factors include the reason for the delay in
moving to enforce arbitration, the amount of discovery conducted by the movant,
and whether the movant sought disposition on the merits. Richmont Holdings, Inc. v.
Superior Recharge Sys, L.L.C., 455 S.W.3d 573, 576 (Tex. 2014) (per curiam) (citing
Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008)). Waiver can be implied from a
party’s unequivocal conduct, but not by inaction. G.T. Leach Builders, LLC v.
Sapphire V.P., LP, 458 S.W.3d 502, 515 (Tex. 2015). Mere delay in moving to
compel arbitration is not enough for waiver. Richmont Holdings, at 576.
Next, Appellees stressed Appellants’ delay with a shady time line:
“Defendants did not move to compel arbitration until nearly nine months after this
lawsuit was filed — a delay which approximates the amount of time establishing
waiver in other cases.” CR 274/App. H. But Appellees calculated that period of
time from their filing of suit on March 24, 2016 to Appellants’ December 8, 2016
filing of their Plea in Abatement and Motion to Compel Arbitration. CR 4; CR

108/App. F. The more appropriate time periods to examine for an alleged delay by
Appellants are: May 10, 2016 to October 2016, from Appellants’ Original Answer
to Appellants’ first mention of the arbitration clause to Appellees’ counsel; or May
10, 2016 to December 8, 2016, from Appellants’ Original Answer to their Plea in
Abatement and Motion to Compel Arbitration. CR 15/App. C; CR 108/App. F;
CR 449/App. H. Those time periods, whether five or seven months, clearly do not
“approximate[] the amount of time establishing waiver in other cases.” CR
274/App. H.
Appellees’ evidence that Appellants “continued to engage in discovery”
without seeking arbitration puffs more smoke. Appellants propounded a single
deposition upon written questions, including a Subpoena Duces Tecum, to obtain
project construction financing/payments records from third party Regions Bank.
CR 429-445/App. H. When only a minimal amount of discovery has been
conducted, and such discovery may also be useful for the purpose of arbitration,
courts do not ordinarily infer waiver. SEB at *19/App. J. As between Appellants
and Appellees, Appellants only responded to Appellees’ requests for production
(after Appellees moved to compel Appellants’ responses) and offered to produce
Kamran Dargahi for a deposition. CR 334/App. H; CR 338/App. H; CR 352/App.
H; CR 427-428/App. H. Appellants sought no discovery from Appellees.

Responding to discovery and simply being named in the lawsuit while discovery is
ongoing do not amount to waiver. G.T. Leach at 514. The Texas Supreme Court has
declined to find waiver even when the movant itself propounded discovery. Id. One
factor to consider in the totality of the circumstances in determining whether a
party has substantially invoked the judicial process is how much discovery has been
conducted and who initiated it. SEB at *16/App. J. A party who requests a
significant amount of discovery is not prejudiced by getting it and taking it to
arbitration. SEB at *20/App. J.
Appellees’ evidence that “In 2016, while Defendants’ counsel was
represented by Kemp Gorthey, Mr. Gorthey agreed orally to set this case for a jury
trial in this court and provided dates of availability” puffs more smoke. CR
448/App. H. Such evidence does not show that Appellants waived arbitration. See
G.T. Leach at 511. In that case, the attorney for the party moving to compel
arbitration previously signed a Rule 11 agreement in which all parties agreed to a
scheduling order and a new trial date. Id. The Texas Supreme Court held that such
Rule 11 agreement did not “expressly relinquish and repudiate a right to
arbitration.” Id. Here, Appellees’ counsel’s parol testimony that Kemp Gorthey
represented “Defendants’ counsel” provides no evidence of any agreement by
Appellants or that Appellants expressly relinquished and repudiated their right to

arbitration. Here, Appellees provided no evidence of a Rule 11 agreement with
Kemp Gorthey to “set this case for a jury trial in this court.” An oral agreement
between attorneys that does not comply with the requirements of TEX. R. CIV. P. 11
is no evidence of any agreement. See, e.g. Knapp Med. Ctr. v. De La Garza, 238
S.W.3d 767, 768 (Tex. 2007) (per curiam); Prevost v. Insurance Advisors, Inc., 46
S.W.3d 289, 293 (Tex. App. – Fort Worth 2001, no pet.).
Appellees’ counsel’s testimony that Appellees “have incurred over $35,000
in attorneys’ fees in connection with … legal services [for Appellees’ claims]
through December 8, 2017” puffs more smoke instead of evidence of prejudice to
Appellees resulting from Appellants’ conduct that substantially invoked the judicial
process. CR 448/App. H. Regardless that such testimony is conclusory
(unsupported by purportedly attached resume or actual billings, and forecasting
fees for “above-described legal services through December 8, 2017”), the incurred
amount represents “time spent pleading the case in this Court, participating in
written discovery, working with Plaintiffs’ expert, and preparing Plaintiffs’ Motion
for Summary Judgment.” CR 448/App. H. In response to a similar claim of
prejudice based upon the fact of expended funds for similar legal fees, this Court
concluded that such a fact was insufficient to establish prejudice:
By deciding to initiate and prosecute their lawsuit, [plaintiffs]

voluntarily incurred these expenses and assumed liability for these

costs. They cannot now rely on those very expenses and costs to
establish prejudice and prevent [defendant] from invoking the right to
compel arbitration. Nothing before us demonstrates that these same
expenses would not have been incurred during arbitration, nor that
they will not provide a benefit to [plaintiffs] in resolving this dispute in
that forum.
SEB at *23/App. J.
Appellees offered no evidence of the following factors within the totality of
the circumstances to be considered by a court to properly determine whether
Appellants substantially invoked the judicial process to Appellees’ detriment:
 The reasons for the movant’s delay [in seeking arbitration];
 Whether the movant requested the court to dispose of claims on

the merits;
 Whether the movant asserted affirmative claims for relief in court;
 The extent of the movant’s engagement in pretrial matters related

to the merits (as opposed to matters related to arbitrability or
jurisdiction);
 The amount of time and expense the parties have committed to the
litigation;
 Whether the discovery conducted would be unavailable or useful in

arbitration;
 Whether activity in court would be duplicated in arbitration; or
 When the case was to be tried.

See G.T. Leach at 512. Appellees’ offered evidence did not overcome the
presumptions favoring arbitration and against waiver. When the smoke is cleared,
Appellees did not meet their burden to show that Appellants substantially invoked
the judicial process to Appellees’ detriment. The trial court’s May 30, 2017 Order
on Defendants’ Motion to Compel Arbitration rests on the trial court’s incorrect
legal determination of Appellants’ waiver of their right to compel and/or the trial
court’s incorrect legal determination of the absence of an arbitration agreement
among Kamran Dargahi, Pejman Dargahi, and Appellees. Upon de novo review of
those legal determinations, this Court should reverse the trial court’s Order as an
abuse of discretion, properly aim the parties’ dispute toward arbitration and
discharge the obligation to honor and enforce the parties’ arbitration agreement in
their Contract. Specifically, this Court should remand the case to the trial court
with instructions that: the trial court compel arbitration of Appellees’ claims
against Appellants in accord with the parties’ arbitration agreement in their
Contract; and the trial court abate its further proceedings pending conclusion of
the parties’ arbitration. See In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185, 195-
196 (Tex. 2007) (abuse of discretion when trial court fails to stay litigation in court
until after conclusion of arbitration).

PRAYER
WHEREFORE, PREMISES CONSIDERED, Appellants Pejman Dargahi,
Kamran Dargahi, and Yekk Construction Services, LLC d/b/a Lakeway Custom
Homes and Renovation pray that this Court: reverse the trial court’s May 30, 2017
ORDER ON DEFENDANTS’ MOTION TO COMPEL ARBITRATION as an
abuse of discretion; remand the case to the trial court with instructions that the
trial court compel arbitration of Appellees’ claims against Appellants in accord
with the parties’ arbitration agreement in their Contract, and abate further
proceedings in the trial court pending conclusion of the parties’ arbitration; award
Appellants their costs on appeal; and award Appellants such other relief to which
Appellants may be justly entitled.
Respectfully submitted,
BUSH RUDNICKI SHELTON, P.C.
/s/ Carl J. Wilkerson

Carl J. Wilkerson
cwilkerson@brstexas.com
Telephone: (817) 274-5992
Fax: (817) 261-1671
ATTORNEYS FOR APPELLANTS

CERTIFICATE OF COMPLIANCE
I certify that this document was produced on a computer using Microsoft

Word 2007 and contains 4,402 words, as determined by the computer software’s
word-count function, excluding the sections of the document listed in Texas Rule
of Appellate Procedure 9.4(i)(1).

Carl J. Wilkerson
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of

APPELLANTS’ AMENDED BRIEF has been e-filed with the Clerk of this Court
and e-served to Appellees’ counsel of record on August 10, 2017.
David King
dking@gdhm.com
Brian T. Cumings
bcumings@gdhm.com
GRAVES, DOUGHERTY, HEARON & MOODY
401 Congress Ave., Suite 2200
Austin, Texas 78701
Telephone: (512) 480-5603
Facsimile: (512) 536-9942

NO. 03-17-00368-CV
IN THE COURT OF APPEALS

THIRD DISTRICT OF TEXAS
PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK CONSTRUCTION

SERVICES, LLC d/b/a LAKEWAY CUSTOM HOMES AND RENOVATION,
Appellants
v.
DHIRAJ HANDA and RITU HANDA, Appellees
Accelerated Appeal from the 261st Judicial District Court

Travis County, Texas
Hon. Lora Livingston, Presiding
Trial Court Cause No. D-1-GN-16-001279
APPENDIX TO APPELLANTS’ BRIEF
Appellants submit the following documents in support of Appellants’

Amended Brief. TEX. R. APP. P. 38.1 (k).
LIST OF DOCUMENTS
App. A Order on Defendants’ Motion to Compel Arbitration (CR 540)………..3
App. B Order on Defendants’ Motion to Stay Proceedings (Supp. CR 4)………4
App. C Defendants’ Original Answer (CR 15-16)……..………………….….......5
App. D Order Granting Unopposed Motion to Substitute Counsel (CR 17)…….7
APPENDIX TO APPELLANTS’ AMENDED BRIEF 1

App. E Plaintiffs’ Fourth Amended Petition (CR 146-257)……………………..8
App. F Defendants’ … Plea in Abatement

and Motion to Compel Arbitration (CR 108-124)…………………….120
App. G Defendants’ Supplemental Affidavit in Support of

Plea in Abatement and Motion to Compel Arbitration (CR 260-268)...137
App. H Plaintiffs’ Response to Defendants’ Plea in

Abatement and Motion to Compel Arbitration (CR 269-539)………...146
App. I Reporter’s Record of

May 24, 2017 trial court hearing (RR 1-33).........................…………...417
App. J SEB, Inc. v. Campbell, 2011 Tex. App. LEXIS 1588

(Tex. App. – Austin 2011, no pet.)……………………………………450
APPENDIX TO APPELLANTS’ AMENDED BRIEF 2

Filed in The District Court
of Travis County, Texas
MAY 3 0 2017 NNR

CAUSE NO . D-I-GN-I 6-001 279 AI / 0 ' '-(?rc M.
Velva L. Pri~, District Clerk
DHIRAJ HANDA and RITU I-lANDA, § IN THE DISTRICT COURT OF
Plaintiffs, §
§
v. § TRAVIS COUNTY, TEXAS
§
PEJMAN DARGAHI, §
KAMRAN DARGAHI, and §
YEKK CONSTRUCTION SERVICES, §
LLC, D/BI A LAKEWAY CUSTOM §
HOMES AND RENOVATION, §
Defendants. § 26 1sl JUDICIAL DISTRICT
ORDER ON DEFENDANTS' MOTION TO COMPEL ARBITRATION
On this day, the Court considered Defendants' Motion to Compe l Arbitration. After
considering the Motion, Plaintiffs' written response in opposition, the evidence submiued, the
arguments of Counsel , and the pleadings and other papers on file in this case, the Court
"'":I (:J
concludes that the Motion to Compel Arbitration should be in all things, and hereby is, DENIED.
"GNW ~ G,"'~"ru' CtJl:a, A '/LA. ____
Ilmlll.lllI~ I111111I111I111111II 11111111I

005218753
."
540
APPENDIX TO APPELLANTS' AMENDED BRIEF 3

Fllod In Tho Dist,ict Court
JUN 16 2017 NNR

CAUSE NO, D-I-GN-16-001219
At C'\'.L{(p.v Ii,
Velva L. Prfce; District Clem .
DHlRAJ HANDA and RITU HANDA, § IN TIIE DISTRIc;T COURT OF

Plaintiffs, §
§
§
PEIMAN DARGAHI, §
LLC, D/B/A LAKEWAY CUSTOM §
Defendants: §. 261st JUDICIAL DISTRICT
On this day. the Court considered Defendants' Motion. to S~y Proceedings and for
Expedited Hearing. After considering the Motion, Plaintiffs' written response in opposition, the
evidence submitted, the arguments of Counsel, and"the pleadings and other papers on file in this
. case, the Court concjJjd"J tha~ theJ'1otion shoulJi be in all tjlings, an~hereby is, DENIED, Wlt~
.o",~d,i.:: ~ /VI't?I>/~J~/"~y.sr;;0.kt'~~ d.-ls ~ LTtd~":::""tt-
(F' VSiGNED and ORDERED this ~ day of June, 2017. .;t /9~;r. ¥-
"''''=SIDING

5/10/2016 2:35:44 PM
Velva L. Price
District Clerk
Travis County
Cause No. D-1-GN-16-001279 D-1-GN-16-001279
Jessica Arzola
DHIRAJ HANDA and RITU HANDA § IN THE DISTRICT COURT OF

and RITU HANDA, §
Plaintiffs §
§
v. §
§ TRAVIS COUNTY, TEXAS
PEJMAN DARGAHI, §
KAMRAN DARGAHI, and YEKK §
CONSTRUCTION SERVICES, LLC, §
d/b/a LAKEWAY CUSTOM §
Defendants § 261ST JUDICIAL DISTRICT
DEFENDANTS' ORIGINAL ANSWER
Defendants, Pejman Dargahi, Kamran Dargahi, andY ekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation, file this Original Answer to Plaintiffs' Original Petition
and allege and say as follows:
Defendants enter a general denial.
WHEREFORE, Defendants respectfully pray that Plaintiffs take nothing and that
Defendants recover their costs and all other relief, general or special, at law or in equity, to which
they may be entitled.
Is/ Kemp Gorthev

Kemp W. Gorthey
Kendall L. Bryant
THE GORTHEY LAW FIRM
604 West 12th Street
Austin, Texas 78701
Tele: 512/236-8007
Fax: 512/479-6417
Email: kempgorthey@austin.rr.com
Email: kendall@gortheylaw.com
ATTORNEYS FOR DEFENDANTS
15

By my signature above I hereby certifY that a true and correct copy of the foregoing
Defendants' Original Answer was forwarded on this 1Oth day of May, 2016, to Plaintiffs' counsel as
follows:
David A. King Via email: dking@gdhm.com

Graves Dougherty Hearon & Moody
40 1 Congress Avenue, Suite 2200
Austin, TX 78701-3790
16

Filed in The District Cc)urt
OCT 10 2016
At 'S
'.l9D M.f'
CAUSE NO. D-1-GN-16-001279 Velva L. Price, District Clerk

§
Plaintiff, §
§
v. §
PEJMAN DARGAHI, KAMRAN §
DARGAHI, and YEKK CO~STRUCTION §
SERVICES, LLC, d/b/a LAKEWAY §
CUSTOM HOMES AND RENOVATION, §
§
Defendants. § 261 ST JUDICIAL DISTRICT
ORDER GRANTING UNOPPOSED MOTION TO SUBSTITUTE COUNSEL
The Court hereby grants the Unopposed Motion to Substitute Counsel filed on behalf of
Defendant Pejman Dargahi, Kamran Dargahi, and Y ekk Construction Services, LLC, d/b/a
Lakeway Custom Homes and Renovation. Kemp Gorthey of The Gorthey Law Firm is withdrawn
as attorney of record for Pejman Dargahi, Kamran Dargahi, and Yekk Construction Services, LLC,
d/b/a Lakeway Custom Homes and Renovation and the following attorneys are substituted in their
place:
James Rudnicki
JRudnicki1i1,BRSTexas.com
Russell Clinage
RClinage(d.BRSTexas.com
Tyler Hood
TH ood(i.I:B RS Texas. com
Bush Rudnicki Shelton, P.C.
200 N. Mesquite St., Suite 200 111111111111111111111111111 11111111 II IIIII III IIIIII IIII
Arlington, Texas 76011 004837769
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
SIGNED 5\f\btfv./ ~. , 2016. ''I
17

2/14/2017 4:42:11 PM
Velva L. Price
District Clerk
Travis County
D-1-GN-16-001279
Erica Salinas
CAUSE NO. D-1-GN-16-001279
DHIRAJ HANDA and RITU HANDA, § IN THE DISTRICT COURT OF

Plaintiffs, §
§
v. § TRAVIS COUNTY, TEXAS,
§
PEJMAN DARGAHI, §
Defendants. § 261st JUDICIAL DISTRICT
PLAINTIFFS' FOURTH AMENDED PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
COME NOW Plaintiffs Dhiraj Handa and Ritu Handa, and file this Fourth Amended
Petition complaining of Defendants Pejman Dargahi, Kamran Dargahi, and Y ekk Construction
Services, LLC, d/b/a Lakeway Custom Homes and Renovation, and for cause of action would
show as follows:
I.
BACKGROUND AND OVERVIEW
1. This lawsuit seeks money damages based on the Defendants' wrongful and
fraudulent actions in connection with a fixed-price residential construction project. Although
Plaintiffs have paid 95% of the Contract Price, the Defendants have improperly refused to move
forward with the work. Instead, the Defendants are holding the project hostage by insisting upon
payment of additional amounts that are not owed and that exceed the total Contract Price.
Further, Defendants have failed to pay subcontractors, despite falsely representing to Plaintiffs
that all subcontractors had been paid. Defendants have fraudulently diverted trust fund payments
made by Plaintiffs to themselves and to other purposes, leaving Plaintiffs exposed to the risk of
146

paying for the same completed work twice, while also having to pay new contractors to finish the
work that the Defendants are refusing to perform. As for the work Defendants completed before
abandoning the project, Defendants did not perform such work in a good and workmanlike
manner. The resulting construction defects caused physical property damage in the form of
cracking and other deterioration caused by moisture penetration.
II.
DISCOVERY PLAN
2. Discovery in this action should proceed under Level 3 pursuant to Rule 190.4 of
the Texas Rules of Civil Procedure.
III.
PARTIES
3. Plaintiffs Dhiraj Handa and Ritu Handa are residents of Travis County, Texas.
4. Defendant Pejman Dargahi, a resident of Travis County, Texas, has appeared and
answered herein.
5. Upon information and belief, Defendant Kamran Dargahi, a resident of Travis
County, Texas, has appeared and answered herein.
6. Defendant Y ekk Construction Services, LLC, d/b/a Lakeway Custom Homes and
Renovation, a Texas limited liability company, has appeared and answered herein.
IV.
JURISDICTION AND VENUE
7. This Court has subject matter jurisdiction over Plaintiffs' claims, and Plaintiffs'
claims are within the jurisdictional limits of this Court. Pursuant to Tex. R. Civ. P. 47(c)(5),
Plaintiffs seek monetary relief over $1,000,000.

2
147

8. Travis County is a county of proper venue under Section 15.002, Tex. Civ. Prac.
& Rem. Code. Each Defendant's residence or principal office is in Travis County and all or a
substantial part of the events giving rise to Plaintiffs' claims occurred in Travis County.
v.
FACTS
9. On or around April 4, 2014, Plaintiffs entered into a Residential Construction
Contract (the "Contract," attached hereto as Exhibit A) under which "Lakeway Custom Homes
and Renovation" agreed to build a house on a piece of unimproved land located at 228 Sanostee
Cove, Travis County, Texas, for a fixed contract price of $1,460,000.00 (the "Project"). The
Contract was executed on or around April4, 2014, by Defendant Pejman Dargahi ("Dargahi").
10. The Contract did not disclose that Lakeway Custom Homes and Renovation was a
d/b/a for Defendant Y ekk Construction Services, LLC ("Y ekk"), nor did the Contract disclose
that Dargahi was executing the Contract as the agent ofYekk or any other entity. In a November
19, 2015 email, Dargahi misrepresented to Plaintiffs that the Contract was with "Lakeway
Custom Homes LLC" (a non-existent entity), and Dargahi did not indicate that he signed the
Contract on behalf ofYekk. Dargahi has also indicated that he and his brother, Kamran Dargahi,
are "partners" in the non-existent Lakeway Custom Homes LLC. Although not disclosed in the
Contract, upon information and belief, Dargahi is the sole member and director ofY ekk.
11. Article V of the Contract describes the following payment protocol:
Progress Payments: During construction, LAKEWAY CUSTOM HOMES AND

RENOVATION shall present Owner with requests for Progress Payments based
upon the allocated cost of the completed portions and/or phases of construction
performed to the date of each request. Each Progress Payment request shall be
made in normal construction phases as agreed upon by Owner, LAKEWAY
CUSTOM HOMES AND RENOVATION, and the interim construction Lender,
if any, and shall be paid according to the draw schedule initialed by Owner and
LAKEWAY CUSTOM HOMES AND RENOVATION and attached to this
Agreement as an exhibit. LAKEWAY CUSTOM HOMES AND

3
148

RENOVATION agrees that progress payment to them will be made only
after the inspector from the financial institution that the Builder has an
agreement with passes and approves the completed portion of the
construction for which payment is being requested. [emphasis added]
12. In accordance with Article V, and as reflected in the Draw Schedule prepared by
the construction lender (Regions Bank), Plaintiffs have made progress payments totaling
$1,387,750 ($660,000 of which was paid directly by Plaintiffs and $727,750 of which was paid
by the construction lender). This is 95% of the Contract price. However, Dargahi has completed
less than 90% of the scheduled work at a value of $1,314,000. In other words, Dargahi has been
paid for more than he has completed, and has been overfunded by at least $73,750.
13. Dargahi's last request for a payment, in the amount of $90,520, was made in
November 2015. At that time, Dargahi was already overfunded by $29,950. Regions Bank
approved a progress payment of $43,800 on Friday, November 13, 2015, noting that this funding
was an "exception to policy" and was "the maximum amount we could get approval to fund per
management." Regions Bank stressed that "there will be no further draws from the loan until the
project is completed."
14. However, the following Monday, November 16, Dargahi disclosed to Plaintiffs
that he was still "$150,000 +/- short to finish our contract." This despite the fact that, with the
$43,800 payment made the previous Friday, Dargahi was already overfunded by $73,750.
Dargahi also declared that "no more [construction] activities could be performed unless we are
financially comfortable." At or around this same time, Dargahi abandoned the Project, leaving it
exposed to the elements, vandalism, and theft. Since that time, Dargahi has ceased all
construction work on the Project despite repeated requests from Plaintiffs to resume work.
15. In the weeks following Dargahi's refusal to complete his work on the Project in
accordance with the Contract, Plaintiffs learned that according to Dargahi's own estimate, it

4
149

would cost over $130,000 to complete the remaining work on the Project. Despite Plaintiffs'
repeated demands, Dargahi has refused to complete the outstanding work on the Project in
accordance with the Contract.
16. Plaintiffs also discovered that Dargahi owed more than $120,000 to at least
seventeen subcontractors hired by Dargahi to work on the Project, notwithstanding the fact that
Dargahi repeatedly represented to Plaintiffs prior to obtaining the last draw on November 13,
2015 that all subcontractors had been paid. With respect to a subcontractor responsible for
constructing a well for the Project, Dargahi had also obtained Plaintiffs' approval of a $20,000
change order after Dargahi falsely represented that the subcontractor had already been paid for
such work. Numerous subcontractors have filed liens on the Project or provided notice of intent
to file liens. Despite Plaintiffs' repeated demands, Dargahi has refused to pay the outstanding
debts owed to the subcontractors, and Dargahi has not discharged any subcontractors' liens.
17. Further, after Dargahi's cessation of work, Plaintiffs discovered that, all along,
Dargahi and his brother, Kamran, had been systematically diverting substantial sums of money
from Plaintiffs' progress payments to other expenses unrelated to the Project. Specifically,
according to Defendants' own bank statements and upon information and belief, the Dargahis
used Plaintiffs' money to pay for the following: (i) other construction projects (as confirmed by
affidavits obtained from Defendants' subcontractors, who worked on multiple projects for
Defendants, but who were paid only out of Plaintiffs' funds); (ii) advertising; (iii) web design;
(iv) plumbing work done on Pajeman Dargahi's personal house; (v) purchasing a car;
(vi) purchasing real estate; (vii) attorney's fees in connection with multiple disputes; and (viii)
personal expenses, including out-of-state trips, charged to an American Express credit card. As
Defendants' bank statements indicate, such payments were made directly from the bank account

5
150

created for the Project, which contained no funds other than those paid by Plaintiffs and the
construction lender for completion of the Project.
18. Remarkably, the Dargahis do not dispute that they systematically diverted and
spent such funds as if they had been deposited in the Dargahis' own personal bank account.
Instead, now that their misappropriation of funds has been uncovered, the Dargahis appear to
claim that they were entitled to divert Plaintiffs' payments based on the contention that they
expected to make a profit on the Project, and they therefore should have been able to deduct their
"expected" profits from Plaintiffs' progress payments before the Project was actually completed.
Of course, this baffling contention, which was only revealed after Plaintiffs' uncovered the
diversions, is contrary to Chapter 162 of the Texas Property Code and ignores the plain language
of the Contract. Rather than promising Dargahi any type of profit, the Contract expressly
provides for a fixed payment of $1,460,000-95% of which ($1,387,750) was fraudulently
extracted from Plaintiffs before the Dargahis announced in November 2015 that they were
halting all work on the Project unless and until Plaintiffs personally paid them well in excess of
what the construction lender could release and well in excess of what Mr. and Mrs. Handa were
obligated to pay under the Contract.
19. Further, Defendants did not perform the construction work they actually
completed (before abandoning the project) in a good and workmanlike manner. The resulting
construction defects caused physical property damage to the Handas' house in the form of,
among other things, cracking and other deterioration caused by moisture penetration. This
moisture damage resulted from Defendants' failure to perform work in conformity with
applicable industry standards and applicable standards of care. Specifically, in addition to other
defects and physical property damage described in the inspection report attached hereto as

6
151

Exhibit B (the "Inspection Report"), the following defects and damage have resulted from
Defendants' failures:
a. Foundation waterproofing and basement leaks: Multiple water leaks are present
in the basement and the cabana constructed by Defendants. Based on the severity
of the leaks, and upon information and belief, damage has been done to the
concrete foundation of the house, including but not limited to rusting and/or
corrosion of the concrete's reinforcing steel.
b. Water heaters: The plans and specifications called for installation of recirculation
pumps on all water heaters. In addition to other issues described in the Inspection
Report, the supply lines installed by Defendants are undersized and do not allow
for installation of recirculation pumps, resulting in no water in parts of the house
during cold weather.
c. Fire Sprinklers: The supply line to the fire system is undersized and not to code,
and sprinklers were not tested properly after installation of the system.
d. Electrical: Outdoor and indoor circuits are defective, causing parts of the
property to lose power intermittently.
e. Flat roofs: The flat roofs were built incorrectly, exposing the exterior of the
house to moisture damage. Deterioration is observable, including cracking in the
stucco exterior of the house.
f. Other issues: Additional defects in connection with the rear exterior
staircase/landing, electrical work, plumbing, drainage, stucco and stucco
termination, the courtyard waterfall, fire sprinklers, drywall, attic access, safety
glass, countertops, exterior balconies, the kitchen range and downdraft system,

7
152

toilets, interior staircases, and foundation finish are detailed in the Inspection
Report.
20. The Handas gave notice to Defendants on or around February 10, 2016, and
February 12, 2016, specifying in reasonable detail the construction deficiencies. Defendants did
not request to inspect the property, nor did they take any action to correct the non-conforming
and/or deficient work as required by the contract documents and/or law.
VI.
CAUSES OF ACTION
A. Breach of Fiduciary Duty Under Trust Fund Act (Against All Defendants)
21. Plaintiffs incorporate by reference the preceding paragraphs herein.
22. Plaintiffs' progress payments to Defendants were made under a construction
contract for the improvement of specific real property in Texas, and are therefore "trust funds"
pursuant to Section 162.001, Tex. Prop. Code. Defendants Pajeman and Kamran Dargahi had
control and direction over Plaintiffs' progress payments for the Project. Plaintiffs are
beneficiaries of such funds pursuant to Section 162.003, and Defendants are trustees of such
funds pursuant to Section 162.002.
23. As described above, Defendants engaged in the systematic diversion of Plaintiffs'
progress payments without first fully paying all current or past due obligations Defendants
incurred. Defendants did so intentionally, knowingly, and with intent to defraud. Defendants'
misapplication oftrust funds is in violation of Section 162.031, and is a breach ofDefendants'
duties as trustees, for which they may be held civilly liable.
24. Defendants' breaches of fiduciary duties owed to Plaintiffs under Chapter 162
caused Plaintiffs damages within the jurisdictional limits of this Court.

8
153

B. Common Law Fraud and Statutory Fraud (Against All Defendants)
26. Defendants Pajeman and Kamran Dargahi represented to Plaintiffs that their
progress payments and change order payments would be used to pay for the construction of the
Project. However, Defendants never intended to use Plaintiffs' payments solely for the Project,
as demonstrated by their systematic diversion of Plaintiffs' payments for Defendants' personal
use. Defendants' false representations and nondisclosures induced Plaintiffs to enter the
Contract and to make progress payments and change order payments to Defendants under the
Contract.
27. Defendants Pajeman and Kamran Dargahi also represented to Plaintiffs that they
had fully paid the subcontractors hired to work on the Project knowing that seventeen
subcontractors had not, in fact, been paid-to the tune of over $120,000. Defendants' false
representations induced Plaintiffs to make progress payments and change order payments to
Defendants under the Contract.
28. Because Defendants' fraud is in connection with "a transaction involving real
estate," Defendants are also liable for statutory fraud under Section 27.01, Tex. Bus. & Comm.
Code.
29. Plaintiffs' reasonable reliance on Defendants' false representations caused
Plaintiffs to incur damages in excess of $280,000.
C. Constructive Trust (Against All Defendants)
31. Defendants have wrongfully profited from their breaches of fiduciary duty
described above. Plaintiffs seek the imposition of a constructive trust upon all assets, revenues,

9
154

and profits that Defendants have received and continue to receive as a result of their wrongful
conduct and breaches of fiduciary duty.
D. Restitution and Unjust Enrichment (Against All Defendants)
33. Defendants unjustly received (by taking for themselves) the portion of Plaintiffs'
progress payments which Defendants diverted to non-Project expenses. Defendants obtained
those benefits by taking undue advantage of Plaintiffs. Defendants are required to make
restitution of the benefits they unjustly received at the expense of Plaintiffs.
E. Money Had and Received (Against All Defendants)
35. By fraudulently diverting Plaintiffs' progress payments, Defendants hold money
that belongs to Plaintiffs in equity and good conscience. Plaintiffs are entitled to recover such
money.
F. Texas Theft Liability Act (Against All Defendants)
37. As described above, Defendants unlawfully appropriated Mr. and Mrs. Handa's
money by deceiving the Handas into paying for services that were never performed by
Defendants. These actions constituted theft under the Texas Theft and Liability Act, Tex. Civ.
Prac. & Rem. Code § 134.002. Accordingly, Defendants are liable for the damages resulting
from this theft. Tex. Civ. Prac. & Rem. Code§ 134.003.
G. Negligence (Against All Defendants)

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39. Defendants, as the ones responsible for the construction work, negligently
performed the work and services. Defendants were under a duty to perform at a level of
professional skill and care consistent with industry practice. Defendants failed to do so.
Defendants' negligent conduct includes, without limitation, failing to perform the construction
services in a good and workmanlike manner, failing to supervise and/or direct work using that
skill and attention used by contractors exercising ordinary care, failing to properly inspect work
before covering with subsequent work, and failing to construct the project in accordance with
industry standards, generally acceptable construction practices, and manufacturer's instructions.
All such negligence, and the resulting construction defects, have caused damage to Plaintiffs and
have caused physical property damage in and to Plaintiffs' house in the form of, among other
things, cracking and other deterioration caused by moisture penetration. Damages include but
are not limited to repair costs, investigative costs and expenses, and damage to the house.
H. Breach of Contract/Breach of Warranties/Misrepresentation (Against Pejman

Dargahi and Yekk)
41. Y ekk and Plaintiffs are parties to the Contract, and Pejman Dargahi is
individually liable for any breaches of Y ekk' s obligations under the Contract, as described above
and as shown in the Contract itself.
42. Under the Contract, Yekk and Pejman Dargahi are obligated to "provide all labor
and materials for construction" of the Project "according to [the] Contract and the Plans," and
"pay all costs related to the Work." Exhibit A, Sections III, XIV. Y ekk and Pejman Dargahi
have breached these contractual obligations, or to the extent such breaches have not yet occurred,
Yekk and Pejman Dargahi have anticipatorily breached their obligations by stating that they do
not intend to complete construction of the Project.

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156

43. Yekk and Pejman Dargahi are further obligated under the Contract to "make
payments to subcontractors or vendors supplying material for" the Project. Exhibit A, Section
XV. Y ekk and Pejman Dargahi have breached their contractual obligation by failing to pay at
least seventeen subcontractors.
44. Y ekk and Pejman Dargahi are further obligated to "deliver title to all the
materials, appliances and equipment used in the Work free of all liens, claims, security interests
or encumbrances." Exhibit A, Section XV. Yekk and Pejman Dargahi have breached their
contractual obligation by failing to deliver title free of mechanics' liens.
45. Yekk and Pejman Dargahi have also breached their contracts and warranties, and
have not performed to the representations made. This includes, without limitation, failing to
perform the work in a good workmanlike manner as represented and agreed, failing to perform
work and services pursuant to the plans and contract documents, breaching the agreement that all
work, materials, and equipment would comply with applicable warranties, and failing to correct
non-conforming or defective work.
46. Because ofYekk and Pejman Dargahi's breaches of the Contract and warranties,
Plaintiffs have suffered actual and consequential damages in excess of$1,000,000.
I. Violation of Texas Deceptive Trade Practices Act (Against All Defendants)
4 7. Plaintiffs incorporate by reference the preceding paragraphs herein.
48. Defendants have breached their contracts and warranties, and have not performed
to the representations made. This includes, without limitation, failing to perform the work in a
good workmanlike manner as represented and agreed, failing to perform work and services
pursuant to the plans and contract documents, breaching the agreement that all work, materials,

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and equipment would comply with applicable warranties, and failing to correct non-conforming
or defective work.
49. Defendants engaged in false, misleading, or deceptive trade practices that
Plaintiffs relied on to their detriment. Defendants represented that their services had
characteristics and benefits which they do not have, and they represented that their services were
of a particular standard or quality when they were of another. In connection with the fraud claim
described above, Defendants also failed to disclose information concerning services which was
known at the time of the transaction, and which was intended to induce Plaintiffs into entering
into the Contract.
50. Furthermore, Defendants also took advantage of Plaintiffs' lack of knowledge and
experience with home construction to a grossly unfair degree; these actions are unconscionable
and are thus actionable under the DTPA. Tex. Bus. & Com. Code§ 17.50(a)(3).
51. Plaintiffs are consumers within the meaning of Tex. Bus. & Com. Code § 17.45 in
that they sought to acquire goods and services from Defendants.
52. Defendants have acted knowingly and intentionally in all of these actions that
constitute violations of the DTPA. Plaintiffs are thus entitled to recover treble damages pursuant
to Tex. Bus. & Com. Code § 17 .50(b )(1 ).
53. Further, Plaintiffs bring this claim pursuant to the authorization made in Tex. Bus.
& Com. Code Ann. § 17.505(b) with regards to giving 60 days' notice.
VII.
EXEMPLARY DAMAGES

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158

55. Plaintiffs are entitled to recover exemplary damages in light of Defendants'
wrongful conduct pursuant to Chapter 41, Tex. Civ. Prac. & Rem. Code, or as otherwise allowed
bylaw.
VIII.
ATTORNEY'S FEES
57. Pursuant to Tex. Civ. Prac. & Rem. Code§ 38.001 and 134.005(b), and Tex. Bus
& Comm. Code § 27.01(e), Tex. Bus. & Com. Code § 17.50, or as otherwise allowed by law,
Plaintiffs are entitled to recover reasonable and necessary attorney's fees and costs of court
incurred in bringing this action.
IX.
CONDITIONS PRECEDENT
58. All conditions precedent have been performed or have occurred, including all
conditions precedent to Plaintiffs' rights to recover as set forth herein.
X.
REQUEST FOR DISCLOSURE
59. Plaintiffs' Request for Disclosure was set out in Plaintiffs' Original Petition and
Request for Disclosure, and that Request for Disclosure is not waived and is carried forward
herein.
PRAYER
WHEREFORE, premises considered, Plaintiffs respectfully request that the Court enter
judgment awarding them:
1. Actual damages in such amount as may be shown by the evidence;
2. Treble actual damages under Tex. Bus. & Com. Code§ 17.50;
3. Exemplary damages in such amount as may be shown by the evidence;

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4. Plaintiffs' reasonable and necessary attorney's fees and costs of court pursuant to Tex.
Civ. Prac. & Rem. Code§ 38.001 and 134.005(b), Tex. Bus. & Com. Code§ 17.50, and
Tex. Bus & Comm. Code§ 27.01(e), or as otherwise allowed by law;
5. additional damages pursuant to Tex. Civ. Prac. & Rem. Code§ 134.005(a)(1); and
6. Such other and further relief, at law or in equity, to which Plaintiffs may show
themselves to be justly entitled.
GRAVES, DOUGHERTY, HEARON & MOODY, P.C.

401 Congress Avenue, Suite 2200
Austin, Texas 78701-3790
(512) 480-5722 Telephone
(512) 536-9942 Telecopier
By: Is/ David A. King

G. Douglas Kilday
dkilday@gdhm.com
David A. King
State Bar ID No. 24083310
dking@gdhm.com
ATTORNEYS FOR PLAINTIFFS

DHIRAJ HANDA AND RITU HANDA

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160

The undersigned certifies that a true and correct copy of the foregoing has been served by
electronically via the e-filing system on counsel of record as listed below on this the 14th day of
February, 2017:
James Rudnicki
JRudnicki@BRS Texas.com
Russell Clinage
RClinage@BRSTexas.com
Tyler Hood
THood@BRSTexas.com
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
Is/ David A. King

David A. King

16
161

RESIDEI\JTIAL CONSTRUCTION CONTRACT
1: PARTIES
LAKF·\\\\ ClSHVv!HCJi',JES :\\DRr.\OV\!lO~(Bti.LDER)IiV!THOFf'l(EAl l25SUIOO\JtR
DRIVE, At ST!\;, TX · 71':7315 agrees to construct the Improvements described below for
Ohiraj and Ritu Handa (Owner), residing at 1704 Randolph Ridge, Austin, TX •
787-t6 on the Property described below.
U: PROPI!:RTY
Lot l, Block A., Seven Oaks Section 4, also k.rwwn as 228 Sanostee Cove, Travis
County, TX. 78733 or otherwise described on attached exhibit, together with all
Improvements to be constructed Q.h the Property.
HI: l:\IPROVEMENTS
L-\KEV. .\\ Cl STOM HOMES A~D RENOVATION shall provide a!! tabor and materials for
construction of [X] a single family residence according to this Contract and the P!ans.,
prepared by Dominic Couturier of ItaUa Fim.~ Homes, Inc., and specifications <ts,
prepared by L.-\Kf.WJt. v CtSTOM H01'-IES A.'ID RE;'JOVATlON and initiated by both parties
(co!lc-ctive!y called the "Plans"). The labor and materials required to construct the
fmprovements may be referred to a,s the "Work''. Tl.; be dear, Plans include all interior,
exterior and landscape drawings as signed off between Owner & Builder.
IV: CONTR-\CT PRICE

Owner a6rrees to pay L\KE\"AY CtsTOM W.H·IF.S A:"ilJ RE:"''OVkf!ON, One Million Four
..!"l!Lf;;tu:.;:u...;,-¥~·onrt:¥ Thousand Dollars ($1,460,000.00), as compensation for construction
of the Improv;;::ments, subject to adjustment as allowed by this Agreement.
V: PA VMENTS TO LAKEV. A\ CrSTOM HOMES A~D RE'iOVA TION

The Contracr Price will be paid as follows:
.A. Deposit: Owner sha!l advance of Contract Price to LAKEWAY
CtSTOM HoMES A:-ID Rnov.HtoN prior to the st:nt of construction.
R Progress Payments: During construction. L-'.KEW.\ Y CtSTOM HorvtES

-'·' D RE:"¢0VAHON shaH present Owner with requests. tor Progress
Payments based upon the allocated cost of the completed portions amiior
phases of construction performed to the date of each request Each
Progress Payment request shall he made in normal construction phases as
upon by Owner, L,\1\.E\VAY CtSTOM HOi\IES A;\JD RENOVATION,
and the interim constmction lender. if any, and shaH be paid according t~l
the draw schedule initialed by Owner and L\KH\< A Y CrSTOM HOMES
.\.'liD RENOVATiON and attached to this Agreement a:'i an exhibit.
L\KEW \ v CrsT0:\1 HtHIF.S A~D RE"OVAW);'< agrees that progress
payment to them will be made only after the inspector fh)m the financial
institution that the Builder has an agreement \Vith passes and approves the
completed portion of the construction for which payment is being
requested,
~XHIBITA I
162

VI: H\iE fOR PA Y\fEYf
t:pon the prcsentarion of a request for a
busincs::. alta receipt of a request. pay th.;: to L \!<.:£\\ u· CrsT0\1
Ho\ns -\"<IJ RE"'OVAT!O\i Pi<:!~ V.B. The Final Payment (portion of the Cmtract Price
not paid by prior payments) will be due and payable within the of substantial
completion of constrm:tion~
VH: WORK SCHEDULE

LAKE\~.\ Y Cl STO'H HOMES A:•m RE.'iOV \T!O."' shall begin construction within 7
ca!tmdar days after (a) Owner has obtained a commitment tor interim construction
t!nancing Ol' cash security acceptable to l.\KE\V.\ Y Ct. STOM HOl1·!ES .A'\j!) RlL'iOVATION;
and {b) A building permit has been obtained, l.tKEW \ v Ct STOM HoMES A:'-ID
RE:'>I(lVA noN shall substantially complete constmction within 460 calendar days of the
date construction is begun. {Completion Date) unless the Com.pletion Dme is
EXTENSION OF COMPLETION DATE

LAKEWAY Ct:STOM HO!V!ES \:'-11) RENOV ;\TlON shall complete the fmprovements
according to this Agreement and Plans, and a!! Change by the Comp!etion
Date. However. if the Work is delayed by Change Order. Owner's acts or omissions, or
delay is caused by fire oi.' other casualty loss, weather, strikes, boycotts, non-availability
of materials for which no substitllte of equal equality and prk:e is available. or other
events beyond the control ofL\KEWAY CtSTO.M Ho:~.u:s .-\.'•m R£.'lOV-\ TIO!'.i. the tirne of
such delays shall be added to the Completion Date, L.-\.KE\v \ Y CrsTO~! HOMES .·\:-40
RDOV.-\.TION shall give Owners written notice each claimed extension day within {30)
calendar days of a claimed t:xtension
IX: Sl'BSTANTt\.L COMPLETION OF THE l\IPROVEME~TS

The Improvements will be deemed to be sllbstantiaUy completed!
when a temporary ccrti of occupancy is issued or, if no of occupancy is
required, when all electricoL heating and conditioning. plumbing and landscaping,
final. inspections have received regulatory authority approval or all approvals required for
occupancy been received. However, notwithstanding the foregoing, if tbe Owner
moves mto the Improvements~ the improvements shall be deemed to be substantially
completed.
X: SOL RCE OF PAYMENT TO BUILOE.R

If Owner is obtaining mtcrim construction t1nancing. 0\-vner shall and pay the loan
at Owner's expense. If Owner is unable to obtain an interim constn.tction loan. with terms
reasonable to Owner. within 7 days of this contract, either Owner or L-\KE'"' ...\ Y Cl STOM
HoMES A~IJ RE:'-!OV.-\ noN may terminate this agreement by giving the other party
written notice of termination. If Owner is not obtaining an interim construction loan to
pay for construction .of the Improvements. upon execution of this Agreement and prior to
start of construction, Owner shall establish a construction account "vith a financial
institution acceptable to both Owner and LA!i.:li:W\ Y Ct STOi\1 HO,\IES -\:'liD RE'W'- -\TIO"l.
The 0\vnersha!l deposit the entire Comract Price in the account when it is established,
L.\KE\\ .\ Y Ct5TOM H<Hif:S -\:"41) RE:"iOV ..\TION shaH have the right to monitor the
163

account to insure that OvHl..:r ha.·. dcrositt:d the funds into the account failure
();,vner tO c~'itab!is!J maintain thr.: ilCCt>tl.lit ch :;hatl he a bre~tdl of thrs
Xl: AlLOW.\."iCES
Ow·ner shall be entitled to ulhJ'vvances as fled in U the Plans [X] the Allowance
Schedule attached to this conrrac.t as an exhibit. -\l.J savings anributubk to allowances,
which are not spent, will be credited to 0\vner. and 0\vner \.vill be responsible for all
costs ex.cceding the Allowances lf Owner selects allowance items .in ex. cess of speci.tied
allowances, L\KEW.c\¥ 0 STOi'VI HOMES A.\D RE:\OV \liON may submit an ·'Allowance
Overage" to Owner in the tbrm of a Change Order, Upon approval by Owner. the
Allowance Overage wiU be payable with the next Payments.
XH: CHA:"4'GE ORDERS

No alterations, additions or deletions will made in the \Vork, unless agreed to in
writing by Owner and lAKE'.VA •r CtSTOM. HOMES A."''D RE~OVA noN. To approve a
proposed change, both Owner and LAKEVv \ '\' HOMES .-\:-.ID R.E'JO\ A. TION shall
sign a written approval referred to as a Change Order. \.Vhen both have signed a
Change Ordet. the Change Order will amend this agreement. The cost of all extra work
done and extra material furnished pursuant to a Change Order is as calculated by
L\KEW.\ v· CtSTOt'l'l HOMES .-\~D RE:"'OV.\TlOi\' plus 8 percent for administrative
ex.penses. The cost tbr any work performed under a Ch~:mge Order shall be paid
l.rmnediately or as a1;,rreed upon in the Change Order. LAKEW.\ Y Ct ST0,\1 HO:\.U•:s .\~D
RE~OV.HION shu!lperfom1 all construction at the property where the home is being
constructed unless agreed upon by LAKEW -\ v CtSTOM Hm·Ht.S -\~D
RE:-40\'.-\TION and the Owner{s). A!! such must be in writing. All requests for
works perfom1ed at the property shall be directed to L\lHVIIAY ClST0:\1 HOC'IES -\'H>
RE"iOVATlO;'i only. Any and all \vorks performed at th.e property by Subcontractors
wirhout the approval ofL...\KEW \ '¥ Ct STDM HO;\!ES A.'iD RE.,OVAT!O"'i are subject to
additional charges and are considered <:hange orders. Additional t',;es and/or penalties
may apply.
XU: INSURANCE
Before beginning the Work, Lu;:r '.'> n CtST0"-1 HO\!ES -\'iD RE'.OV HIO"'i shaH obtain:
Builders risk insurance covermg all msurable risks in an amount equal to or greater
than the Contract Price; (b) Comprehensive public and automobile liability insurance.
The cost all required insunmce is included in the Contract Price. Proof of insurance
would be stibmitted to Owner pnor to start of construction. Builder will also fttmish
Owner with a financial statement of LAKEW H Ct STOi\1 HOMES .\\iD RE:-iOV .\TIO'i
prior to signing this contract
XlV: LAKEW.A\ Cr:nO,'>i HO"I£5 .\:'>ID RE'iOV.-\TION's Dl'T!.ES

. \ Y CUiTOM Ho\-u:s -\.'< D RE'iO\ ATiO\o accepts responsibility for p~rformance of
all duties re~;sonable necessary to complete the Work and agrees that: {.a) L..\KE\\-\ Y
C'1 STO\·[ HOMES A:'>iD R.E~O\ A no'" shall obtain all n11cessary licenses. permits, and
similar authorizations fron:'! gowmmemal authorities required to perform under this
164

Inducting \\<lt~r and \Yasr~~\vater rap l b) L ~1\:E\V ,, y n ST0\1 HO\IES
-\\1!) R£\0\ HI07\I shall fy Owner ofllil conflicts bet\vcen the Plans Jnd
:md <1nv ordinances. ruks, regulations. and i including
1mpen ious .:oven that come to the attention of LAKEWAY Cu;;T0'\1 HO:\I!'S "-"~D
RE.'iO\ \ l'IO'i: lcll"-\KE\\ \Y Ct STO,H Htnu:s ,\,\i!J l~E'iOV \ r!O"i shall pay all cosb
reldted to the Work. except any applicable ordinances, nd~s, regulations, and
restrictions: (d) The mareriah m connectmn with the Work wit! be new and of a
quality adequate for the intended purposes, except as otherwise expressly specified in the
Plans: and (e) L,.\KEWA v CrsTO:YI HOMl£S A.:"'o RE:"10VATrON shall deii ver title to the
materials, appliances and eqlLipment used 111 the Work free of all liens, claims, security
interests or encumbrance the lien and se~:urity interests created by this a,b'Teement
or gjven to the ink-rim constmction lender. For clarity, Lakeway Custom Homes and
Renovation would accept the ownership of plans and specification in terms of
constmction, including correction of any errors in the plans tbat may result in tailing the
inspection.
XV: EVE"iTS OF DEFAULT BY L-\KEWU C't'STO:H HOMES A.'iD RE:\OVATlON

Each of the fo!lowmg shaH be deemed an Event of Default by L\KEW\ Y Ct STU:VI
HOMES .\:'olD RE~OVATION and a material breach this agreement: (a) L\KE\VAY
CtSTO,>vf H.o.vtES .vm Rl';:'iovxnm-i's tl1i!ure, without cause, to make paym.ents ro
subcontractors or vendors supplying material the Work; (b) A breach hy LAKEW \ Y
Cl STOM HoMES.. \'iD RE,'iOV -\liON of a covenant or agreement contained in this
agreement: {c) The filing of a voluntary petition in bankruptcy, mak1ng an assignment for
the benefit of any creditor. being adjt!di.::ated a banktupt or insolvent, or applying for or
to the appointment of a tn1stee or liquidator of all or substantial part
of L\kJ:.\\ w CrsToM ..\,\10 RE'iOV \noN's assets.
XVI: .'!OTlCE OF DEF,\tLT TO L-\KHVH CtsTO'vl HOMES A~D RE:"'Ov.HID"

Each th.;; following shaH be deemed an Event of Default LAKE\V\ Y CtST0:\1
HOMES AXD ATION and a material breach of this agreement: {a) L.\KEW.\'1'
Ct:;T0"-1 HoMES .\."''U RENOvATIO\'i's failure,, without cause, to make payments to
subcontractors or vendors supplying material for tht: Work; (b) A breach L\1<1\:\'V.\ Y
CTSTOM Ho:vu:s .\:'iD RF;:'IoV.\TlO"i of a. covenant or agreement contained in rhis
The of a voluntary petition in banktuptcy, making an assignment tor
any being adjudicated a bankrupt or Lnsoivent, or applying for or
consenting to the appointment of'" , trustee or liquidator aH or a substantial
part of L\K~:\V \ Y CrsTOM Ho,.!ES ~;,;'.!!) RE'iOVATION's assets.
XVH: RE;\IEDIES OF OWNER

Upon the occurrenc.: of any ~vent of det1wlt by LAKE:W.\Y CtSTOM HoME~ .\."iD
RE'iO\ -\TIOi"i, Owner may (but shall not be obligated to), ~:ithout prejudice to any other
available right or remedy: {a) Terrninate thts agreement (b) Seek specitic pertbrmance of
this by LAKEW \'t Ct ST0.\1 HO,;\olES A,\10 R£"40\oi.TIO:'i, (c) Pursue any other
remcdl<"S nvaibblc to O>vner under thls Agre~ment or as provided by !aw: or (d) Any
combination of the If Owner receives notice of any lien or claim labor
mriteria!s furnished to L\1\£\\ ..n Cl ST0'\1 Ho;m:s A;'.ll) RE:-<OYA no'i for which. if
165

Chvncr, or the Property rmght bccom-: liable though primarily to
Ov,ner shall h<iV\': the
L\J<..E\\ \ Y C! STCnl H<HlES \;\JD RE:\0\ \TlO''L w retain out
of any Payment, an amount suftkient to indemnify Chvn;;;r against :;uch ll¢fl or
claim. LU.:E:\VAY CtSTO\i HO\IES AVO RE~O\ UIO:\i 5hal! have the to
contest in good fhith the of such !it:n or claim. H L \1\£ v-. \\ Cl ST0\1 HO\!Es
\.'d) RE"'OVXf!ON t~tils to discharge any such Lien or claim any amounts by
for the payment of any liens or claims shaU be credited the Contract
XVHhO\V:"lER'S AGREEi'\IIK'iTS
Owm;r agrees to: (al Make all to LAKE\VA) HOMES A'iD
RE"'OV.HlO" required by this agreement; (b) Perform all other of Owner
required by this agreement: and (c) Protect the title and possession
pay all taxes and assessments prior to delinquency.
XIX: EVENTS OF DEFAULT BY OWNER

Each of the following shall be deemed an Event of Default by Owner and a mat.;:rial
breach of this agreement: (a) Owner tails to make any payments due undet this
within ofthe date it ls due: tb) Owner unreasonably delays L>.KEWH CrSTO:\'r
HOMF.s \."10 RE:-IOVATION in the prosecution of the Work; {c) Owner f1Hs to perform
any other covenant or agreen1ent contained in this agreement; (d) Owner, or any person
liable for the payment or performru1ce under this agreen1ent, files a petition in
bankrtlptcy. an assignmei1t tbr the benefit of any creditoL is adjudicated a
bankrupt or insolvent, or applies for or consents to the appointment of a trustee
or liquidiltor of all or a substantial part of their or its assets.
XX: OF DEFAULT BY OWNER

If Owner commits an Event Of Default. to any by this
or by law, L-\KE'It\H Cl.STOM HOi\<iES ..J~.:"<D RE'iOV.-HIO''i shall deliver
written aotl>::e of default to Owner. If the Event o.f Detau!t is not cured within ten days
of such written notice. LAKE\\- U' CtSTOM HOMES .\:'<0 Rl:.\iOVHlON may
ex.erctse any remedy granted by this agreement or applicable law. Upon the
occurrence ofan Event Of Detlmlt by Owner, all amounts owed for compk:ted wll!,
at the option of LAKEW.-\ V Ct STOM HOMES x:•<I) RE:"iOVAT!ON, after any notice and cure
period, become immediately du;;: and payable without prejudice to any other remedy of
L-\KEVV ..\ 'v CtSTOM HOMES J...'iD RE'iO\ .H!O>.;.
XXI: REMEDIES OF LxKnvxY C~.:::rrm1 Ho~lES A'iD Rr:-.oV.\TWN

Upon the occurrence of any Event of Default by Owner, L\KE\\t -\ YCtSTOi\l HoMES
.-\~0 RE."lOVHION may (but shaU not be obUgated to), \Vithout prejudice to any other
available right or remedy: (al Tenninate this agreement and recovery any
strftered by L.\KE\\ ..\V CtSTOM HOMES A"iD R.l!:\0\ AfiON: (b) Discontinue
pertbrmance of this agreement; (c) Seek :~pecific pertbrmance ofthis agreement by
Owner. (d) Pursue any other remedies available to L\KHV-\Y Ct'ST0,\1 HO\IES -':-ID
Rr:\O\ .\TlO"i under this ~greement or as provided by la\.v: or (e} Any cornbination of the
foregoing.
166

::\XH: \\- AHRA:"iTL!i;.,
L\J..::En \Y Crsnnl HO.HES \'i!) RE\0\ \TlO" lA Ill tran~ti::r to Ov.,ncr <dl manurh..:turcrs'
vvarnmtks by L .\1\E\\ .\ '< Ct ST0:\1 HU\ti':S \ \D RE,O\ \HO\ or any
subcontractor. L.\Kf.Vv \Y CtSTml Ho\IES \.'<D RE'-<0\ HIO;\, will not be reqwred to
warrant, repair or correct any the \V<:•rk provided any or sub-contractor
(other than L-\KHVA ¥ Ci STO\f HO\lES \.-.. D RE\0\ .\flO\} employed directly by Owner
and nor as a sub-contractor or L\KH\ .\ Y Cl Sf(H! HOMES ..\:'ID
RE:'iO\ \.TION. LAKHV\ Y 0 STOM Hov!ES \..''<D Rl':'iOV \flO"-! shall not be obligated
vmler any separat<:! warranty given to Owner until L\l.<E\YAY CrsT<HI HOMES A.\D
RE:'iOY\TlON has been pai.J rn fulL L.\KE\<\ "'' \ HOMES AND RE'\OVA TION shall
~.:otTect
any of the Work which is detective or which does not comply with the Plans and
Specifications for a period of one year from the date of sabstantial completion of the
Work. Upot~ dosing, Owner(s) shaH be responsible for care and mnintemmce
of the property. L-\KE'WA Y HOME~ A.'H) RE:'-IOV .\ T!ON warranty excludes items.
which have been damaged dttc to natural causes. normal wear and tear, imtd..:quate care
and maintenance and other uncontrolfab.le cause;<;.
XXIH:MECHANIC'S UE~
Owner grants to LAKEW.W CtSTO<vl Ht..fHES .-\.\l> RE.\0'\o AriON a lnechanic's lien to
secure performance of the obligations of Owner, and agrees, prior to beginning
construction, to execute a separate mechanic's !len contract acceptable t.o L\KE\VAY
CtSTOM HO,VIlJ:SA;'iO RENO'L\TW:"l and the Interim L~nder, if any. ffOwner is obtaining
an interim cot1struction loan, LAKHV-H. CtSTOiH HoMES A.'W RE...,OVATIO,.. shaH assign
to the Construction Lc:nder a portion of Contractor's mechanic's Hen equal to the
amount of the inn~rim construction loan obtained Owner and tO subordinate any
ren1aining an1.ount of L\KEW \ 'r C'r~T0\<1 HoMES -t'liV RE:'iOV\T!(Pi 's Hen to the interim
construction loan.
XtXIV: INDEPENDENT CONTRACTOR

L.;.KE\\o .\ Y CtSTOM HOMES.\:'< D R.E:>iO\ H!O'l will be an independent contractor.
Nothing contained in or inferabte from this commct .~hould be construed to {i) makl!
L\KEW A v CtSTOM HO;\>U!:S A"<'D -%noN the <~gent servant or employee of Owner.
or (ii) create any partnership, joim venture or other association bet>veen Owner and
LAKEIA'AY Ct'STOM HO:\iES .\\!) RE"iOV.\TIO'i
XXV: OTHER PARTIES BOt'ND

Owner and LA.KEWAV Ct:sTOM HO·'-iES A.'iD REN(n: HION each binds hlmsc:lfor herself.
his or her partners, successors, n;:;signs and kgal represent::~tives to the other and to
the partners, successors. assigns and representatives of the other in a.H mattdrs
related to this agreement.
XXVI; N 0 ASSIGNMENT
Neither party has the right to asstgn this without the writt<.m con!'>eflf of the
other unless this .agreement is transferred per sectkm XV,
.... 7'
167

XX\H:
~c,tke:s must be in wrirmg and must be by (a) delivery to the or
(b) certified rnaiL return receipt requested, postage prepaid in a properly addres:oed
envelope. The parties designate the addresses fo!kn.ving their as their addrcs:'
notice. Notices shall be deemed to be given and received as of~h~ earlier of (Hl actual
receipt or (b) the third day the date of deposit with the Postal Service. IT either
party to change its address tor notice, the party shall notice to the other
in the manner required by this at,rreement and the change of address win be as of
the to occur {a) the date recited in such notice or (b) the tenth day after
the date such notice is deposited with the US Postal Service.
Special Provision: builder agrees that the square rootage called on dnnvlngs ar.:
approximate the builder has his own calculation and is not on the square
tbotnge table.
XXVIB: TI:v£E OF THE ESSENCE

Time is of the essen.(;e in this agreement.
XXIX:ALTER:'<lATIVE OISPlJTE R:ESOLl'TlON

If a dispute between L.-\KEWA 't' CrSTOM HOMES \ 'ID RE:-IOVA TlON and Owner,
which cannot be resolved in good taith through infonnal discussions, the parties agree to
submit the dispute to mediation betbre resorting; to any litigation other than a suit to
injunctive relief. If mediation is required. the parties shaH jointly agree upon a mediator
acceptable to both p.arti~s. lf a dispute cannot be resolved through mediation, both parties
agree to submit dispute to binding arbitration supervised by the American Arbitration
Galleria Stlite !440, t3455 Noel Road, Dallas,
75240.! 214} using an A\A approved arbitrator and A.-\A construction
Industry Arbitration Rules. The decision of the arbitrator :'>hall be t1nal and binding upon
both Owner and L.\KE\v,;, v CrsTOM H0\>1 ES \'liD RE:'-iO\ \ T!ON and judgment may be
entered upon it in any court with proper jurisdiction.
X."'LX: CANCEI.L\TION
After I;! payment of$43.800 is made, if there is any issue with th~t permitting process
that pn~\ent-, the builder from obt<Lining tbe permit provided all the necessary
foundation. framing destgn ts completed by Builder (& re.ceipts shown to Owner) and aU
(Water meter and tab, electrical, HOA permit, and HOA deposit are paid by the
Builder), then O~vner and Builder can mutually decide to cancel the contract with no
additional obligation to each otheL a $3500 HOA deposit payment is refunded to
by the Builder or the HOA, \.vhoever is holding the S3500 deposit.
XXXI:ATTOR;..JEY FEES
If L-\KE\-\.-\V CtsTOM HO\lES .\'iD RE\;OV.\TI0"-1 or Owner initiates any arbi.trution or
legal proceedmg in accordance \Vith the Resi.dential Construction Liability Act, brought
under or with telatJo!1 to this contract, each party !:le responsible fbr their O\ldl
168

XXXII:
contrC~ct contains the .;;ntirc of the and CHllHU! be
their written agreement Exhibits and addem1a \.vhich are a p~111 d this contract are
(ltst):
Exhibit.\: Disclosure Statement Required for Residentia.! Construction Contract

Exhibit B: Subeontractors & Suppliers Ust
Exhibit C: References
Exhibit D: Payment Schethde
in the event of any cont1lct or inconsistency between the of Section r through

XXXIV of this contract and the provisions of any ofthe attached exhibits and addi;;'nda.
provisions oftb~ attached exhibits and addenda shall g . Jvem and
X,.XXJU: CONSULT YOVR ATTORZ'>LEY

Buildt!rs/Brokers .cannot give legal advice. This is intended to be a legally bmding
contract. .READ CAREFULLY. If you do not understand the effect of this contract
consult your attorney BtFORE signing
XXXIV; THIS CONTRACT CONSTITUTES AND CO"'STRVCTlON

MORTGAGE WITHIN THE MEA,'JING OF SECTION 9.3 U OF THE TEXAS
BtSINESS AND COM:VIERCE CODE. YOL AND L\~E\H Y CtSTOM HOivlF!:i A:"iil
RDOV.\TION ARE RESPONSIBLE FOR MEETl'lG THE TER:\IS AND
CONDITIONS OF TI-llS CONTRACT. IF YOt: SlG:'l THIS COYfRACT, .-\ND
YOC FAIL TO MEET THE TER\IS A:'lD CO:"''IHTIONS OF TH1S CONTRACT,
YOI! MAY LOSE YOUR LEGAL OWNERSHIP RIGHTS OF YOUR HOME.
KNOW YOUR RiGHTS AND Dl'TIES uNDER THE L.\W.
f
/'
t.
!
Executed on-....:....+----·~--------' lM;3.{Effective Date)
Client: Dniraj Handa
--~-----
Ritu Handa
---------------------(';
!,:i
169

E.\J-HBiT ".\"
DlSCLOSL ST :\TE\!E..ST REQl'!RfD FOR

CONTRACT
Proj<;:ct description. address: Lot t, Block A, Seven Oaks Section 4, also known as 228
Sanostee ('ove, Travis County, TX. 78733. Contractor: L\KE:~v-u CrstoM H.Oi\•H:s
Lender: Regions Bank
KNOW YOUR RIGHTS AND RESPONS!BlUHES THE LAvV. You are

about to enter !nto a transaction to build a new home or remodel residential
property. !aw requires your contractor to provide you .with this brief overview of
some of your rights, responsibilities, and risks in thJs transacti011.
CON'v-EY ANCE TO CONTRACTOR PROHlBfTED. Your contractor muy not

you to convey your real property to your contractor as a condition to the agreement
construction ofimpmvements on your property.
KNO\.V YOUR CONTRACTOR. Bet<xe you enter wto your agreement the
construction of improvements ~o your real property, make sure that you have investigatt::d
your contractor. Obtain and from other people '<vho have used the
contractor for the type and of construction proJect on your property.
GET IT WRITING. 'V!ake sure that you a ·written with your contractor
that includes: (I) a description ofthe work the commctorh to perf\.;nn~ (2) required
or estimated time for cornpletion the work; (3) rhe cost ofthe work or how the cost
will be determined; and (~l the procedure ancl method of payment including
tbr statutory Retainage and conditions final payment your time in reviewing
documents. if you borrow money from a lender to for the improvements, you are
entith;d to have loan closing documents rurnished to you for review at !east one business
day the closing. Do not waive this requirement a bonafide emergency or
another good cause and make sure you understand the docurnents before you
them_ if you tail to with the terms of the documents, you c.ouid lose your
property. You are .::ntitled to have your own attorney review any d:octrments. If you have
question about the meaning of a document consult an attorney,
GET A UST Of SUBCONTRACTORS AND SUPPLIERS. Bdbre construction
commences, your contractor is required to you \vith <tiist of the subcontractors
and sl!ppl iers the ~~ontractor intends to use on your project Your contractor is required to
supply updated mfom1ation on any subcontractors and suppliers added after the list
provided.
MONITOR fHE 'vVORK Lenders and governml!ntal authorities may lnspect the >vork m
progress from time to time ft)r their o~cvn purposes. Thes(~ inspections life not intended a:>
·-------/
170

quality ,;ontml i.n;.,p;;ctions. ()ua!ity control is a matter f(tr you and your contractor. ! o
ensure that your home 1s being ..:onstrw:tcd m accordance with your and
fkations, you should insped the work yoursdfor have your own independent
n;vkw the vvork in progress.
\:10~ !fOR P.i\ Y\YIENT. Jf you usc a lender, your lender is required to provide you >vith
a periodic stat<::ment showing the money disbursed by the lender from the proceeds of
your loan. Your contractor is also required to furnish you \vith a statement at least once
each month money disbursed to subcontmctots and suppliers for this project Review
these statements and make sure that the money is being properly disbursed.
CLAIMS BY CONTRACTORS AND SUPPLIERS. Under Texas law, if a subcontractor

or supplier who lahor or materials for the construction of improvl;';rnents on your
property is not paid, you may become liable and your property may be subject to a lien
for the unpaid amount. ev~n if you have not contracted directly \;vith the subcontractor or
supplier. To avoid liability, you should take the foHowing actions: ( l} If you a
written noth:e from a subcontractor or supplier, you shQu!d withhold payment from your
contractor tor the amount the claim stated in the notice until th~ displlte between your
contractor and the subcontractor or supplier Is resolved. !fyour lender is disbursing
mont:y directly to your contractor, you should immediately provide a copy of the notke
to your .lender and instruct the lender to withhold payment in the amount t.1f the claim
stated in the notice. If you. continue to pay the contractor after receiving the written notice
without withholding the amount of the claim, you may be liable and your property may
be :mbject to a lien for tht! amount you failed to withhoLd.
During construction ~md days after tinal c;ompletion, termJnatiorL or abandonment

of the contract by the contractor. you :;;hould withhold or cause your lender to withhold ! il
of tht! amount of payments made for the work performed by your contractor. This
is sometimes referred to as ·statutory Retainage.' If to withhold the 10 percem
tor at least JO days after final completion, termination. or abandonment of the contract
the contractor and if a valid claim ls timely made by a claimant. you may be personally
liable and your property may be to a lien up to the amount that you failed to
withhold. If a claim is not paid ~yvithin a certain time period, the claimant is required to
11le a mechanic's iien affida'lrit in the real property records in the county where the
property is located. A mechanic· s affidavit is not a lien on your property. but the nling
the affidavit could result in a court imposing a lien on your property ifthe claimant is
successful in litigation ro .::nfi.)rce the lien claim.
CLAfMS MAY BE VA.UD.

When you receive a vvritten notice of <'l claim or when a mechanic's lien affidavit is me
don yom· property. you should know· your legal and responsibilities regardmg the
claim. Not aU are valid. A notice of a daim by a subcontractor or supplier is
reqwred to be :sent and the mechanic's lien atlidavit is required to be filed. within strict
tirne periods. The notke and the affidavit must contain certain inforrnation. All claimants
may not fully cmnp!y \..,ith the !ega! requirements to collect on a claim. If you have paid
the contract in full before rece1ving a notice of a claim and htne fully complied with the
171

r<:ganhng statutory R..::tainage, you nmy not be for that cl.;;~im.
:';houid consult yom attorney you receive~~ writt.:n notic~: of a daim to
the true e.xtcnt of your liability or potential liability for that cbim.
OBTAIN A UEN RELEASE AND A B!LlS-PAlD AFFf.D;. \IT. \Vhcn you receive c~
notice of claim, do not ndease withheld funds 'vvithout obtaining a signed and not;;rrizcd
release lien and claim from the claimant. You C<Ul also reduce the risk of a
claim tiled by a subcontractor or supplh::r by requiring as a condition of each paymem
rnade by you or your lender that your contractor furnish you with an affidavit stating that
all bHls have been paid. Under Texas , on nnal completion of the work and befi.xe
t1na1 payment, the contractor is required to furnish you with an affidavit stating that all
bills have been paid. ff contractor discloses any unpaid bill in the nffidavit. you
should withhold payment in the amount of the unpaid bill umil you a ~;vaiver of
lien or from that subcontractor or supplier.
OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain a titk

insurance policy to insure that the tHie to your property and the existing improvements on
your property are free from liens claimed by subcontractors and suppliers. !fyour poticy
is issu~d before the improvements are completed and covers the value of the
improvements to be completed, you should obtain, on the compktion of the
improvements tin:: completed and covers the value of improvements to be completed. you
should obtain, on the completion of the improvements and as a c.ondi tion of your final
payment, a ·completion of improvements' policy endorsement This endorsement will
protect your property from liens daimed by subcontractors and suppliers that may
from the date the original title policy is issued to the date of the endorsement
THIS IS TO VERIFY THAT 11 WE} Hi\ VE RECEIVED.'\ COPY OF THIS

CONTRi\CTOR'S DlSCLOSLRE STATEMENT.
THIS IS i\LSO TO VERfFY THAT [ (WF:} HAVE RECElVED A COPY Of THE
ATTACHED UST S!JBCONTRCTORS AND SUPPLIERS.
(Month),
OWNERS:
Client: Dbkaj HamJa
C'lient: Ritu Handa
WIT;\lESS:
----
172

Pursuant to Property (ode S-:c. tollowmg is a !Jst of subcontractors and :;uppliers
who may perform work on your residence: list ls suby::ct to change without prior
notice: new information ;;hall made avmlabk upon reqttesl to Chent{s).
SLBCONTR:\CTORS
PHONE TRADE
R Town Plumbing 51 Plumbing

Airtron 5 i 1-~21-J l6J HVAC
Atlas R<tin Gutter 5! lOll Gutters
Renaissance Stone 512-264-0256 Count\!rtops
Hinkle Insulation 5I 12-0826 Insulation
fiberglass Waterproot1ng Waterproofing
Rodrigues Bros. 5t Framing
PC Concrete 51 Con crete \Vork
American Electric )t2-263-12i4 Electrical
SUPPLIERS
NAME PHONE TRADE
Desi,brrter floors 5 !2-263-3333 Tile & Carpet

factory Builder Store 5 t2 it\4·< 1442 Appliances
Centex 5l2--.f60-3033 Concrete
512-251-0606 foundation Steel
Stock Building Supply 512-444-31 Lumber
THIS UST Of SCBCONTRACTORS AND SUPPLIERS MAY NOT BE A

FINAL LISTING. THE CONTR/>.CTOR REQUIRED BY LA \V TO SUPPLY
UPDATED fNFORi\IATJON, i\S rHE l'\ifOR:VlA TfON BECOMES AILABLE.
FOR EACH SUBCONTR.i\CTOR SUPPLIER L'SED fN THE WORK
PERFORMED ON YOlJR RES!DE'-JCE.''
(Month),
Contr~ctor:
173

FXHHUT "("
REFLRf\( E'i
(479)
t5J2) -:UHQ27
], MR. 'vVESLEY C\LLAWA'r (5l2) l-1-2
(7!-i}
{5 l:! j 284-6 7 ~ 8
i;
174

This addendum shaH be a par! of Residential (onstructinn Contract
LI.KE\VA \ Ct'STOM HO\>IES .1. \il) RF:"iOV \TIO.'i and Dhiraj and Ritu Handa fi)( tb.:
construction of Improvements on 228 Sanostee Cove .\ustin, Texas .
.--\ Sum of $100.00 per would be the amount of penalty H the substantial
completion (lnchu:Hilg full landscaping) is not achieved within 460 day5 of start of
construction payabh.~ to the Owners by Lakeway Custom Homes.
A. sum of S 100.00 per day woukl be the amount of bonus if the substantial
completion (including full landscaping) is achieved before the 460 days of start of
cttnstruction payable by the Owner to Lakeway Custom Homes.
•('';,,,,..,.#
h ;.,,;r 0,; tk2JA20i:t(EffectiveDate).

~ ""\"
175

Foundation
The Foundation wUI be designed by a flcensed professional engineer, and it
wm include the following minimums to meet Lakeway Custom Homes &
Renovation standards:
L Footing, foundation walls concrete slab shall be reinforced concrete

AST!VL 150 Type l 3000 PS! at days.
2. Vapor barrier: provide 6 mil polyethylene. vapor below entire slab

area.
3. Reinforce steel bars to conform to ASTM A515, grade 40.
Framing
The structural framing wm be designed by a licensed professional engineer,
and it wm include the following minimums to meet Lakeway Custom Homes &
1. Wood framing, 2 x 4 Southern pine No.2 Y.P
2. Corner braced with O.S.B Exterior wafer board.
3. Sheeting with V:!' plywood at corners.
4. jolst: Southet·n pine No.2 Y.P
5. Bridging continuous at 1/3 points span not to exceed 6'-0" spacing.
6. Partition framlng: 2 x 4 at 16" o.c.SPF. This wHI be changed to 2 x 6 when

called.
7. Ceiling Southern Pine No. 2 Y P.
• Rafters: 2 x 8 at 24" o.c. Mmirnum.

• Continuous 2 x 6 Pur!ins at n!id-spdn or 11'-6'' rnaximmn.
176

• 2 x 4 Struts at ·H.:I" cu:. From compressiOn members to bearmg walls 'it
45 degree
• 2 x 4 lar ties at o.c.
• Hi valleys, ridges 2 x 10 minimums.
B. Ndiling and attachment of a!! framing members sheeting shall be as

spec1fied in the International Residential code Nailing Schedule.
9. Custom Homes & renovation have the root desJgned ustng roof
trusses at her discretion.
10. All extet'lor walls shaH be of 2 x 6 Southern pi.ne No.2 Y.P.
Roofing
L Roof Sheeting: Ox board x: 4' x8.'
2. 2 layers or 30 lbs and 15 ibs respectively.
3. Concrete roof, Hanson large barrel, or approved equal. Roof would

hand blended with 3 diffel~ent colors from manufacturer standard color
selectkm.
4·. Battens: Nominal
5. lndude bird sto.p.
6. Valley flashing shall minimum 11" from cente.r and splash

dtverter rib 1'' high.
7. Flat roof: single ply roofing. Granulated APP modified bitumen.
8. Concrete Tile roofto be selected from the standan::i manufacturer colors only.
9. Metal roof: 24 gauge standard color Kynar with 1" standing seam.
10. Metal covered gutters are included all around the house
Insulation
1 R-19 Fiberglass bdtt exterior walls and chase walls.
.. ······)
~ ~""""~
177

2. R-22 Fiberglass batt <)t opposite attic space.
3. Fiberglass batt at sloped ceilings
4. R-30 Blown insulation at accessible ceilings.
5. Two phase air lnfiltr.atwn control treatment.
6. Sound redu'Gtion insulation will be installed on Bee Cave Street Side. Double
sheetrock will be installed in the bedroom, family room, prep kitchen on
Cave side.
Drywall
L 5/8" Fire restraint drywall to all ceilings and garage/building common walls.
2. 5/8" fire restraint drywall to all gan1ge walls and cel!ings.
3. drywall in all other areas as needed.
4. 5/8" water resistant drywall, or concrete boards in all wet areas.
S. Tape, float and texture with heavy trowel on all walls at upper noor, rnain
t1oor and annex only, except closets -'md garages. All other area
to receive standard medium orange peel texture.
Finishes
AH paint material to be Sherwin· WiHiams or approved equaL
Exterior:
• A!J wood to receive oH based primer and two coats oflatex.
• Two coats ofTheralastlc paint at stucco.
• Exterior ralls: Wrought !ron (per attached picture)
Interior:
178

a. All cei and to receive two codts LHPX
b. Pnme t1nd two coats of enameL
c. Owner to maximum 2 cofors per room on walls and one color

on ceiling per room.
d. All tHe is based on $4/sf for materiaL including taxes and delivery to
jobsite
interior doors & Trin1
1. Interior doors shall be 1·3/4'' fir 6 panel recessed paint grade solid tore
doors.
2. Crown molding: As shown on drawings, but only with 2 step application.
3. Baseboard and door trim: x
4. wood paneling at walls is mduded.
Windovvs
1. All windows shall be Pella double pane wlth lowE

Vinyl
2. All operable to be supplied by appropriate screens.
3. AU windows on Bee Caves side of the road, prep & main Kitchen Wmdows
to be special "Sound reduction" windows
Exterior Door
L All exter1or dom·s to be steel with glass.
.
';.
.
179

Cabinets
L All cabinets sb.1ll be custom made with wood material using knotty alder in
the living areas and paint grade material in all closets.
2. All upper cabinets shall be 42"
3. All doors to have concealed European hinges
4. Allow for pull-out trash cabinet in kitchens (near sink} and pull-out
warmer drawer (near island).
Mirrors
1. All Framed Mirrors to be selected by the Owner with budget not to exceed $1800.
Non Framed mirrors are included outside of this $1800 budget.
G He
l. All Granite to be 3cm In ail kitchen areas, bathroom areas and aH niches wi.th
3cm, level 2, glued strip/laminate edge and 2cm in other a!'eas with 3cm glued
stri pj!arni nate edge
Phunbing
1. Insulate aU hot water lines in slab.
2. Poly sleeve cold water lines in slab.
3. tnsulate water llnes in all exterior walls.
4. Lead flashing on all plumbing vents.
5. Minimum of 1-t/2" water line and 4" of sewer line.
'L Plumbing is inclthied in all unfinished area and its limited to rough plumbtng
and capped.
5. Re-circulating pump
180

HVAC Systetn
1. Furnace: Heat pu carrier or
2. Air Conditioning Carrier or approved equaL Min. 14

seers.
3. Honeywell or approved equal programmable thermostat.
4 systems are included for Main floor_ 1 upper t1oor, 1 All

provisions for additionall system for basement w!il including compressor
pad.
Performance:
a. System layout balanced zone.
b. Size system to accommodate spots.
c. Proviqe aJr to eliminate hot
e. Minimize duct run where possible.
Electrical
l. All Electrical instaUation shall be per National Electrical (NEC)
6. Provide underground service from transformer to building.
3. Provide circuit breaker as required,
4, All conductors shaH be copper.
5, Provide fire smoke rm as n:qulred by codE\
181

6. wiring !S incluc!l::d m the unfL1ished clreas, and ltS lim1ted to
running wires and
7. Builder to w1rc Extension unit in a way to c~!low (lwner to be to
a separate meter at his discretion and cost.
Exterior Concrete
1. AH exterior concrete to match existlng profile with a minimum thickness

of<~".
2. Include 6 x: 6 wire mesh reinforcement.
Fireplaces:
1. All Fireplaces to be 42" metal fireplaces..
We have provided the following allowances within our proposal; sales

taxes and delivery to jobsite are included within allowances. However,
Builder coordinate the delivery schedule on behalf of Owner.
for the following items at owner discretions: Note: The Owner has elected to
exclude Allowances from contract, but would deliver all to the builder at his
cost The builder Is only responsible for instalLation of the aHowance Items
excluding all the low voltage wiring am! equipment.
a. Electrical Fixture
b. Plumbing fixtures
c. Appliances
d. f'ront Door
e. B;:~th Tubs
182

L Finish Hardware
g. Toilet actessones
h. Cab! net knobs & pulls
i. AH Low voltage wiring and equipment:
Telephone
Internet
Security
Audlo/Video
Please Note:
ln case of savings the appropriate funds wm be fuUy credited to the

owners, and in case of overage no mark-ups wUl be added to any
amount.
AH unfinished areas to be plumbed and capped with insulation and

sheet rock. The sheetrock would not receive any other treatments such
as tape and float or any texturing.
Change the pool deck and upper courtyard to stamped concrete in lieu
of for th:e sum of $0 (Zero DoHars) to be a-dded to the contract
sum.
AH landscaping is per plan • .Builder a Bows owne.r to substitute different

pl<.mts/trees/shrubs (5GaHon) of equivalent value.
An 19" berm wm be built along Bee Caves Road until the end of the
driveway.
183

Site Work:
1. All Pavers should be of manufacturer's
2. Pavets would be placed on 6" compatted rodd base
3. Maximum of 3 different colors of to be selected by the owner.
4. Areas to receive pavers are the foliowing per plan
a. All Driveways.
b. Areas immediately in front of'
c: Area between Garden and swimmlng pooL
5. Gravel to be of 3"crushed granite over .6 poly.
6, Landscaping per plan. The areu and all landscape area would be
cleaned, graded with of top soil and Bermuda with sprinklers
system. A!l future sprinklers relocation due to the own planting additional
landscaping ls excluded.
7. Stone retaining walls shaU be of 1 cut limestone dry stacked to 4' high. All
other heights ab.ove 4' would be set on mortar with weep holes at 3' O.C. with
a 12'' reinforced concrete pad under them. Wrouht iron to be instalied
around garden area.
8. Stone wall at the upper driveway 1n front the upper slab wm be
engineered reinforced concrete wall the exposed surfaces would
receive a thin layer cement commonly known as underpinning.
9. AH slab are revised by Architect and are noted on tht> record
drawings.
10. Both fountains at the driveway and area between garden and the
swimming pool is excluded. The 2 fountains are included. Minimum
size of fountains will he 6' length, 3' width, 1 depth for the basin and the
waterfall wil.l be at!east 8' or higher with entire waH behihd covered in
stone/rock
1 t AH excavated material from the site be used for:
a. Found<Uion fills if suitable and is approved by the engineer.
b. Other excavated materials would be used for fHl in other areas and
also be u.sed to fil1 the southwest corner of the upper parking area in
of garages.
c. AI! other none suit;;tble excavated materials such as boulders will
be hauled off site.
12. All other area of the site would be fine wlth 2" of top soli and grassed
with automatic sprinkler system, Ali automatic
184

the small cut out areas m upper & lower
be non-automated .sprinkler.
13. Columns ;;hown on drawings would be of stone columns to match
14. ! new 8' t iron would be a mJtch to existing.
15. Any reshown on the site would be supplied by the owner
16. Builder \N!il provided water wen as ind in plans. No storage tank is
included in the bid for of water extracted from the well. The
contractor and the builder are not responsible for the quality of water
supplied by the we!! underground waterreservotrs. Builder to insme
proper pressure to nm mu!ti:::.zoned sprinkler system to service the entire
property. This item !s not in base bid but this language overrides any
language in change order #2.
17. A 4' stone retaining wall would erected around the pooLequipment, wt~!!
equipment and A/C Compressors to match building stone, with an opening to
make lt accessible for future servicing activities by owner.
18. All basketball equipment, markings and sleeves for post, etc. are excluded.
19. 1\ll three existing gates would be operable vla remote control and access
20. Create positive dralnage at all location.

2L .St1l!der no standing water on the finished property,
22. !\li Exterior Railing to be constructed with appropriate patterned photograph
attached.
185

186

Schedule of Values
Contract Initiations !) $43,800

P.;:rrnit & 4" ,, $58,400
Site Excavation fill $58,400
Foundation Part l $116,800
foundation Part 1 $102,200
framing $262.,800
Rotr5!1 $73,000
Roofing $116,800
wn,\) $146,000
Exterior Skin
Insulation & Sheetrock $73,000
Trirn & Cabinets $73,000
Pamting $43;800
Flooring 4°'o $58,400
M; EIP FirJa-l $58,400
Septic Systen1 $29,200
Landscaping [rrigation $43,800
Driveway~ 4°''o $58,400
Final $43,800
To tat 100% $1,460,000
187

CLAWSON
CUSTC)Nl BliiLDERS
228 Sanostee Cove

Austin, TX 78733
Feb 10,2016
Defect Report Version 3
Please Note: While I carefully inspected the property over the course of several days and
discussed the project with multiple subcontractors involved, my findings cannot be
considered a comprehensive list of all defects or issues. I am merely providing all of the
information that I was able to discover with limited time, at a point in the project where
defects can be hard to easily detect and identifY I am focusing here on deficiencies and
problems that I see as significant based on my over 20 years in Residential construction
working with several builders, in several cities with multiple home inspectors.
General Site Conditions:

Project had the appearance of being abandoned.. On the days I was on site, little to no
contractor, or subcontractor presence was visible. No management or coordination, no
punch lists, no schedule posted. Lots of materials stacked, but uninstalled. Granite tops
partially installed and left. Fixtures, ready to install, but left laying about. Finished
suifaces were not left protected.
Foundation Waterproofing:
It is quite clear that several areas of the foundation, basement and retaining walls have
failed several times, and continue to leak. I have applied a water test to the inside comer
of intersection of the foundation wall and wood framed wall adjacent to the fountain
twice and it has failed far below the porch pan and waterproofing installed by Precision
roofing. (See Image 1,2,3 below). It is leaking in several spots starting 12" below the
finished tile and stucco and at points further down the wall. There are numerous holes in
Exhibit B
188

the product that was installed, and it was not installed correctly per manufactures
recommendation(in my opinion) or to industry standard in a shingled manner where the
upper most piece of material overlaps lower sections. There is no sill flashing, and
inadequate drainage. This materials is rated for usage in this application, as it was
covered with stone inside of an air gap, but is not rated to have multiple fasteners
penetrating it.
The same material was used on the front of the house on the foundation from north east
of the front entry to retaining wall for the lower basement. This material is not rated for
this application. It is not meant for indefinite exposure to UV light. It is not acceptable
as a finished product, and it was not installed correctly. See Image 4,5 and 6. In image 7
it is clear that material is not integrated into the rest of the waterproofing system on the
house behind the stucco, and also blocks the weep holes integrated in the stucco design to
let water drain away from the structure, as prescribed by code.
This material was also used to waterproof the courtyard door landing areas, and the
courtyard drainage area. The material was not integrated with stucco or roof flashings,
door pans, or door flashing, and cannot be finished in an appealing and secure manner,
and is already failing to bond to the substrate. See Image 8
Conclusions: All of this waterproofing material needs to be removed and replaced

correctly with the correct products by a professional. This is the most concerning defect
on the project. I have serious concerns as it has already failed, and was repaired with
suspect measures in my opinion, and these types of issues tend to deteriorate over time
and worsen. The front area of the house will need to be excavated, the material removed,
and a new material installed that can have a permanent stucco finish applied to match the
rest of the underpinning on the project per a typical home, per the print, and per code.
Water heaters and any fittings in the way of construction need to be removed, and then
the stucco needs to be removed to allow flashing to be installed behind the stucco
system, over the horizontal portion of the foundation and overlapping the new
waterproofing and stucco underpinning below. See Drawings 1-3 for typical
waterproofing applications and acceptable methods.
189

Image 1
190

Image 2
191

Image 3 (Not layered correctly, holes, poor bond, creating a "funnel effect" for water)
192

Image 3 b
(Water after running hose for brief water test at fountain comer)
193

Image 4
194

Image 5 (Temporary Barrier Prevents acceptable finish)
Image 6
195

Image 7: (Notice Membrane is simply applied over stucco, blocking weep holes and is
not integrated into stucco system or a permanent solution)
Image 8:
Bond failure. Also Not applied behind stucco waterproofing system ..
196

Drawing 1: (Typical Weep Screed and Underlayment Detail. Required by code.)
AQUAFLASH or EQUIVAlENT
lATH for STUCCO SUPPORT
:...,_..,...._..-............. m~v\,!IT LEVEUNG COAT & REINfORCING MESH
f'"''""*'""'"""'~·¥'"''"'"-'"''~'-~=<·DRYVIT TOP COAT OllER PRIMER
WEEP SCREED at WAll BOTTOM
10
197

Drawing 2: Notice all flashing details extend beyond brick ledge, and are integrated
with sheathing paper/ waterproofing membranes
sheathing paper
protects wall from
moisture ami
extends down to
overlap bottom
flashing
weep holes allow air

into cavity (to equalize
pressure) white allowing
water to drain out
brick lug
or moist projects
slightly beyond foundation edge
11
198

Drawing 3: (Weep screed, flashing system should extend below foundation, but
terminate above grade, porches, decking etc)
Foundation weep screed
" Min. at paving
4" Min. at grade
Stucco Termination at Slab/ Weep Screed Clearances:
It is typically the builder's responsibility to coordinate this critical detail between

applicable trades including the stucco installer, roofer, waterproof/ flashing crew/ tile
installer, and framer. Architectural drawings, local and national building codes and
industry standards are extremely clear about the importance of this detail. A minimum of
1" inch is needed to allow moisture to drain away from the stucco system and 2" is
prescribed by code. Blocking this drainage can cause the entire stucco system to fail.
Moisture collects, wood swells and stucco starts cracking. It is also a termite issue and I
have personally seen inspectors fail a project for that reason and termite damage that
resulted from similar situations. This condition is present in multiple locations and will
require the stucco be partially be removed, flashing installed, new waterproofing, stucco
and paint. See Images 9 and 10
As this is also a finish dependant detail, finished flooring grades should be coordinated
with the stucco crew so the exact location of the weep screed can established so that
clearances are consistent and professional to industry standards. See Images 11 and 12.
12
199

Image 9
Image 10
13
200

Image 11
14
201

11 and 12 are on the same wall about 10' apart)
Flat RoofAreas:
The flat roof areas were built incorrectly leaving exposed Radiant Barrier OSB between
the metal roof edge and stucco. OSB is not rated for this application. The material is
already delaminating as it absorbs ambient moisture. This will likely cause the stucco to
crack, and one crack, the only stucco crack I observed on the entire project, has formed.
These areas currently do not meet industry standards and are also aesthetically
unacceptable.
The metal roofing needs to be removed, the roof framing and plywood cut back to the
correct size, and the metal roofs and flashing installed in a manner that is integrated with
stucco and to industry standards . See Images 13 and 14
15
202

Image 13
Image 14
Rear Exterior Staircase and Landing.

16
203

This area is not per the plans and appears to have been modified and installed during
construction and is not properly integrated into the overall building design for
water-proofing. There is no flashing where the stucco meets the landings.( Image 15.)
There is no clear path for water to drain below the landings, and it appears to drain into
the rock work, and under the stairs. Additionally the entire under-stairs area has no
drainage, and has created a moisture and rain trap with no planned water egress. I have
concerns that water will back up in the stucco system as the weep holes that are buried in
the stone-see Drawings 1-3. I also have concerns that area below the stairs will partially
fill with rainwater creating an unsafe health environment.
Code Issues:
Open Risers May not allow a 4" sphere to pass. IRC R311. 7.5 .1
Headroom: Minimum of 6'8". IRC R311.7.2
Image 20 is the stonework cladding the staircase. There is no visible footing. Stonework
integrated into the building should have a brick ledge a minimum of 4" above grade to
allow drainage through weep holes and prevent termite intrusion.
Image 21 is another example of stone cladding that is integrated into the building
envelope that extends below finished grade.
Image lS(Gap between landing and stucco)
17
204

Image 16 (Open CMU and Rock for water to collect)
Image' 17 (Open Risers Greater than 4")
18
205

Image 18 (Head Room) This was taken from the lowest step, and the line of plumb falls
between the two steps .. The next step up has less than 6' of clearance.
Image 19
19
206

Image 20
Image 21
20
207

Electrical:
Electrical is incomplete currently. Numerous circuits incomplete. Numerous wires

protruding from the structure without junction boxes. Dead circuits, wires that were cut
during construction such as the fountain area. Wiring at Range is incorrectly located and
conflicts with range function.
Image 21
Plumbing:
Plumbing is incomplete currently. House was designed and "roughed in" for
recirculating water heaters. Current units do not have circulating pumps and with the
long distances from the fixtures to the installed location of the heaters, long lag times for
hot water can be expected. This is unacceptable on this level of home. These heaters
should have recirculation pumps.
Multiple fixtures are not installed.
Hose bibs are not secured to framing, and very susceptible failing and necessitating a
costly repair. The supply pipe is designed to support the hose bib. Hose bibs should
always be properly secured.( Image 22 and 23)
'Floor Drains were set above finished floor height and are not functional. The foundation
needs to be jack hammered and the drains set to the correct height. (Image 24 and 25)
Propane Tankless Water Heater installed with inadequate clearance to AC Condenser.
Image 26
Improper drain connection at dishwasher-dishwasher will not slide into finished location.
21
208

Concerning use of flexible unions. See Image 26 B
Image 22
Image 23
Image 24
22
209

Image 25
23
210

Image 26B
Image 26
24
211

Drainage Issues:
Courtyard drainage pipes may be undersized for the square footage of exposure they are
relied upon to drain. Drains are not terminated properly in the courtyard and incomplete.
Drains are incorrectly terminated on the exterior wall and may allow water to get behind
the stucco and cause significant water damage. Drains are also severely clogged with
construction debris and not designed or rated to used as drains. (Image 27)
Several drain pipes are incomplete, damaged, or incorrectly located. (Image 28)
See comments on Image 29 and 30.
Image 27
Image 28
25
212

Image 30 (Motor Court Area- a very significant land and roof area drains into the comer
at the left side of this picture. There is no drainage in a solid concrete wall. A heavy rain
could cause water to back up into the house and garage.
26
213

Stucco Issues:
Several patches need to be complete after waterproofing and repairs are made.
Overall stucco job is excellents except where it appears site conditions caused issues with
weep screed height. Expansion joint placement is to code, finish looks consistent, no
cracks, properly caulked no additional defects.
All flat stucco surfaces should be capped with a proper metal cap to prevent water
damage and subsequent stucco failure Should be installed by the roofer. See Image 31.
27
214

Image 31
Courtyard Waterfall:
This is an unacceptable situation. The stucco is not designed as a substrate for a water
feature. Proper water proofing, isolating the stucco system and allowing it to drain would
be needed. Electrical GFCI plug cannot be located here. Water supply is improperly
located. Light location conflicts
See Image 32
Image 32
28
215

Fire Sprinklers:
Incomplete. Need to be completed by a licensed installer. See image 33. However there
are multiple areas incomplete
29
216

Image 33
Drywall:
Drywall texture was not adequately sanded, "punched" and corrected prior to paint.
Texture is inconsistent, and unprofessional looking in many areas. The overall texture is
a hand-troweled look, and as such there should not be large areas of spray texture and
inconsistencies in finish from one surface to the next. Not up to industry standards or the
quality level of this home. See Image 34 and 35
All shower ceilings incomplete. Steam showers and saunas should have a Hardibacker
substrate, Not drywall. See Image 36
30
217

Image 34
Image 35
31
218

Attic Access:
All attic access doors must have an insulated and weatherstripped access door that can be
secured. None are in place. Additionally many home inspectors require attic stairs for
access doors greater than 10' from finished floor. The ceilings here are 12'. See image
37 and 38
32
219

Safety Glass:
Code requires safety glass in bathroom, stair chambers, walkways and near egress doors.
Multiple locations did not have safety glass stamps. These units will need to be replaced
if they are not safety glass.
33
220

Image 39
Electrical Safety Issues
IRC does not allow any electrical outlets including switches near baths and showers. We
have several clear violations of this code. Image 40 as an example
Image 40( plug inside of a tub area)
Countertop Design and Coordination.
The granite countertops were not

properly set. They needed to be furred
up to standard height to allow for the
install of various appliances. The
dishwasher and several fridges cannot be
installed as the countertops were set too
low. See Image 41- the dishwasher,
with the legs fully retracted, will not
slide into proper position.
Image 41
Exterior Balcony Installation,

Flashing and Finish
34
221

The elevated balconies are not complete, and were not installed correctly. Proper
flashing should have been installed to receive tile strip to cover the float and tile
substrate. The flashing was not coordinated with the stucco so that the transition is
correct. The flashing should also shed water away from the stucco. Porches should be
properly sealed so that leached cement does not stain the stucco and lower porches. See
Images 42 and 43A and B
Image 42
35
222

Image 43A
Image 43(B)
36
223

Kitchen Range and Downdraft
The kitchen range and downdraft system purchased by the owner were not adequately
planned for. The system expressly requires a 10" pipe to be correctly located to service
the downdraft. The roughed in pipes are only 6" and in the wrong location. Electrical
and gas pipe are in the wrong location and prevent the install of the downdraft unit. The
granite counter top was cut incorrectly to accommodate this system- the rough opening is
too large. The countertop will need to be replaced, the gas and electrical re-routed, and
the cabinets modified. The cabinet next to the stove will need to be modified and
replaced and the stucco will have to be repaired after a new, correctly located 10" exhaust
pipe and supply wire are re-routed.
Image 44
37
224

38
225

Image45
39
226

Toilet Clearance:
Toilets require a minimum clearance of 15" either side or 30" total.

See image 46
Interior Staircases
IRC and local code enforcement agencies strictly enforce code on stairways. Risers may
not exceed 7 %". Maximum variance on riser height is 3/8" to prevent tripping hazards.
On this project they vary over%" creating a safety hazard. See image 47 and 48
Also stairs are incomplete and not properly finished. See image 49
\
40
227

Image 47
41
228

Image 48
42
229

Image 49
43
230

Incorrect/ Incomplete Foundation finish.
Foundation should be underpinned or "mortar washed" with cement for a smooth finish
per plans, and per code. All voids and "honeycombs" should be filled. Exposed
foundation should be uniform, finished, and attractive. See images 50 51 and previous
1mages
Image 50
Image 51
44
231

Exterior Doors:
The vast majority of the exterior doors were set too low, or with the incorrect thresholds.
Thresholds are below finished tile by varying dimensions and are not consistent,
aesthetically appealing, or correctly serving their function. See Images 52, 53 and 54.
Stucco and stone clad houses should be largely maintenance free. I do not agree with
installing wood trim around doors in vulnerable locations as it will quickly rot. See
Image 55.
45
232

Image 52
Image 53
46
233

Image 54
I
Image 55
47
234

Bathtubs:
It appears that adequate steps to protect the bathtubs was not taken. Tubs are dirty,
scratched and full of debris from several trades. See Image 56. Tub and motor not
adequately supported from below. Ground wires not attached to motor pump.
48
235

Image 56
Outdoor Kitchens
Framing was not installed correctly to allow for adequate clearance around combustible
and was incorrectly sized on both kitchen. Frame and rock veneer at lower kitchen was
installed%" (See image 57) out oflevel front to back and 1 3/8" out oflevel over 10' .
Trash can installed below finished tile grade.
Outdoor kitchens, rough-framed only and incomplete.
49
236

Image 57
Granite Countertops
Countertops are not complete throughout the house. Many tops are missing and were
never installed, (images 58-60) approximately 90% of the tops were never set and glued
in place (Images 61-62). Tops were also not cut square to create a straight line across the
length of the countertop and need to be re-worked (Image 62) Sinks are not sealed with
silicone, splashes are not set or sealed. Multiple chips, cracks and damaged areas.
Fabricator attempted, poorly, to mask defects with black epoxy in an unacceptable
manner-( Images 63-65)
Outdoor Kitchens Incomplete (Image 66)
50
237

Image 59
Image 60
Image 61 Image 62
51
238

Image 63
Image 64
52
239

Image 65 A
53
240

Image 65 B
54
241

Image 66
55
242

Stairwell Grab Bars
Stairwells over 4 risers are to have a continuous grab bar per IRC code 311.7. 71-3
See Image 67 and 68
Image 67
56
243

Image 68
57
244

Missing Gate:
Per the plans, there is to be a gate installed at the breezeway between the lower garage
and the pool bath area. This also a code requirement to isolate the pool area from public
access if car gates are left open for entertaining. See Image 69
Image 69
58
245

Flat roofs:
The three flat roofs on the front elevation are clearly visible from the upstairs windows.
Roofs should be clean and clear of debris, stucco and paint, and installed in a clean
professional manner. One of the roofs also has multiple exposed nail penetrations.
See Image 70
Image 70
59
246

Addendum 1 March 10,2016
As discussed above in Image 23, the motor courtyard has improper drainage and the
design is causing excessive standing water. Without a path for drainage the water is
backing up across the courtyard area and is in danger of backing up into the garage. It is
also dangerously close to electrical fixtures. With improper drainage, the landscaping
cannot be completed in a satisfactory way. Notice the high water mark near the stone.
This rain event produced about 2 inches on dry soil conditions. More significant rain
events would raise serious concerns.
Image 71
Image 72
60
247

The basement area of the house had a very high humidity level and a noticeable musty
odor, particularly underneath the stairs, and in the future kitchen area, which was not
evident prior to rain. Drywall felt damp. Additional investigation is needed to test and
monitor the ambient humidity level and to check for the possibility of mold growth or
additional moisture intrusion.
Addendum 3: January 14, 2017

•••:K' T-Mobile LIE 9:47AM
Austin
April18, 2016 3:04PM
Image 72 Image 73
Wine Room Stairwell, Bar Area and Basement Kitchen: Water intrusion after heavy
rains noted by homeowner. April 2016 See Attached Correspondence with
waterproofing manufacturer. Pages 65-66
61
248

Image74
Thin-walled, flexible drainage pipe commonly used for shallow landscape drainage was
used for drainage under the courtyard and below the cabana slab area. It is not rated for
this application, and is prone to cracking and appears to be cracked and leaking.
Currently leaks inside the wall with a hose test from above.
Image 75
Addendum 5 January 14, 2017

Water is leaking through the retaining wall and stone veneer at the outdooring kitchen in
the cabana area. Significant ponding is present under the outdoor kitchen area. Stone
veneer is showing signs of water intrusion and staining also. Water is unable to drain
creating several long term problems. See Attached Correspondence with waterproofing
manufacture.
62
249

Image 76
Exterior Doors not installed correctly. Hardware incorrectly installed. Doors have
excessive movement in wind, setting off alarm sensors. Air and water intrusion issues.
14 doors need re-installation, tment or · See also 52-55
Image 77
63
250

Tankless water heater issues. Water heater to Garage Extension fixtures took 5 min to
reach a warm temperature, but not hot. Estimated at 85 degrees. Heater froze over in
subzero temperatures, and water was unavailable. Lines are either excessive in length,
run through unconditioned space, or not properly insulated. All water heaters were not
provided with a %" line for recirculation pumps as required by code and manufacturer's
specifications for recirculation. Units were either placed too far from use points, or
serviced with unacceptable long runs of piping for the units to work effectively. A
recirculation pump cannot be installed on the 1;2 line that was roughed in without voiding
warranty and most likely the system will also not work correctly. Recommended solution
is replace 1;2 line with %"throughout, and properly insulate as necessary. This will
involve significant remodeling, large scale removal of drywall, cabinetry, tile and granite,
and several months of uninhabitability and normal use. Additionally low voltage lines
were not provided for the controllers for the water heaters as is customary. The controls
are not rated for exterior use and must be mounted in a conditioned environment such as
a closet. This allows the homeowner to troubleshoot, set target temperature and reset the
units without having to contact a licensed plumber to manually do so. Low voltage wire
will need to be pulled to agreeable location through existing drywall and finished work.
(See Image 77 page 68)

Fire Sprinklers: Required Fire Marshal inspection revealed that the supply line to the fire
system is undersized and not to code, or to the plans approved by Westlake and Travis
County Emergency service and provided by the company that subcontracted the fire
system- Firetrol. There is a W' supply provided, and it needs to be 1.5" as it has an
approximate run of75' to the connection at meter. Driveway pavers and foundation and
landscaping must be excavated and properly sized supply line must be installed and
inspected. See Page 67 for excerpt from Fire Sprinkler Approved Plans

Microwave and Oven Cabinet are improperly sized or designed and will not
accommodate the selected appliances. Cabinet needs to be re-worked, with new face
frames and supports to the correct dimensions, and new doors built to match. Then
stained and finished to match.
(See Image 80 on page 70)

Fireplaces: Dampers installed improperly, debris and insulation is present, flue
misaligned with damper in living room creating possible fire hazard. Qualified
technician needs to inspect and correct defects.

Countertops: Countertops were chipped and damaged during install or transport to site.
A black resin was used to repair defects. Resin needs to be carefully removed and
replaced with a more correct and appealing color, then properly polished. See Also
64
251

Images 61-65b

Waterfall at Pool Area: Waterfall does not work correctly and was poorly designed or
installed. Water runs behind the stonework and into adjacent landscaping instead of into
the the recovery pool.

Window Defects: Many screens missing or damaged. Improperly installed or missing
hardware. Missing weatherstripping and latches. Pella Has Provided a quote to repair.

Electrical Defects: Lights behind pool area not working. Garage Extension Refrigerator
Breaker not working under a load. Water Heater to Garage Extension on GFCI plug
located in garage breezeway trips frequently, and will not stay on. Gate power supply
intermittently working. Licensed Electrician needed to trouble-shoot and correct issues.
Intermittent nature of problems indicates likely several shorts somewhere in the circuit.
Additionally exterior lights and fountains were planned to have control locations inside
the house but were not installed or were damaged. Wireless solutions will need to be
installed, or finished product removed so that new wiring may be installed from inside
location through landscaping and pavers to light fixtures. Refrigerator may need a
dedicated circuit.
Paint Defects: Large areas of paint work in the house are substandard or incomplete.
Several rooms only have one coat of latex paint, or an inadequate second coat on a
significant portion of walls and ceiling., The enamel work on doors and trim needs
prep-work, sanding and a second final coat in many areas.

Roof Leak: Water intrusion noticed in living room (overlooking pool deck) ceiling. Tile
roof needs to be repaired, and drywall and paint repaired.
(See Image 79 on Page 69)
Correspondence With Waterproofing Manufacturer:

Paje Dargahi
From:
Sent:
To:
Cc:
Subject:
David Loveless <DLoveless@wrmeadows.com> Wednesday, October 28,2015 10:20
AM Benjamin T. Feldt, P.E. 'Paje Dargahi'; kamran.dargahi@yahoo.com;
raj_handa@yahoo.com RE: 228 Sanostee-Austin
Ben,
Sorry to hear of the breach or failure in the Envelope. twill hold judgement untit I get a
65
252

bit more information.
1 would recommend we get a took at the project ASAP. 1 have included Sam
Stubbtefield on to this emait, t have recenttv taken a step away from day to day field
work. Sam is more than capable ofhandling this situation. To get us going ! witl address
the following.
1. If we assume the MEL-ROL was installed properly then where can water make its way
into the house? Top of wall, Possible ingression from roof down, Cold joints, under slab.
Bottom ofwall2. We do know that at the top of the basement walls the top of the
MEL-ROL was not extended past the soil line. Rather it was stopped and soil placed over
it. The contractor is aware of this deficiency and is correcting. No termination bar was
observed. Is it possible for water to enter from the top and behind of the waterproofing in
this case? Yes 3. Is it correct to assume that the waterproofing has failed in this case? No,
4. Have you seen instances such as this where the French drains have been plugged and
water got into a basement like this? Yes but only if there was other conditions present.
The drain should have been day lighted.
David Loveless
Office: 817-834-1969 I Toll Free: 800-342-5976 Email: ©Loveless@wrmeadows.com I
Web: ht ~t~://www.wrrneadows.com
Connect with us:
From: Benjamin T. Feldt, P.E. [maitto:ben@feldtconsulting.q~] Sent: Wednesday,
October 28,2015 10:11 AM To: David Loveless <DLoveless@wrmeadows.com> Cc:
'Paje Dargahi' <~ajet_~oc£1obalm~t>; kamran,da~@vahoo.com; @nda@vahoo.co~
Subject: 228 Sanostee-Austin
Hi David,
I hope you are doing well. It's been several years since we last spoke but you were very
helpful with Banister basement project near downtown Austin.
I have a builder client, Lakeway Custom Homes, Paje and Kamran Dargahi, who are
building a large residence in Austin. The homeowner is Raj Handa. All have been copied
on this email.
The house is still under construction and they are painting and doing trim work on the
interior now. The house has a walk- out type basement. During the recent rains they got
water in the basement level. They discovered that the open ends French drains had been
buried. So problem #1 fixed. Now that the drains are uncovered I believe that the water
will be conveyed away from the house as intended.
The question that has been raised; has the waterproofing failed? If the French drains
failed and water entered the house where did the water enter. Since MEL-ROLand
MEL-DRAIN were used I'm turning to you for advice. Here are a list of questions for
discussion:
1. If we assume the MEL-ROL was installed properly then where em~ water make its
way into the house? 2. We do know that at the top of the basement walls the top of the
MEL-ROL was not extended past the soil line. Rather it was stopped and soil placed over
it. The contractor is aware of this deficiency and is correcting. No termination bar was
observed. Is it possible for water to enter from the top and behind of the waterproofing in
this case? 3. Is it correct to assume that the waterproofing has failed in this case? 4. Have
you seen instances such as this where the French drains have been plugged and water got
66
253

into a basement like this?
Let me know if you have any input. Any advice you can offer is much appreciated.
Thank you,
Ben
Benjamin T. Feldt, P.E.
PHONE: (512) 583-1399 TBPE FIRM REG.#685
Fire Sprinkler Approved Plans Supply Specification
67
254

Image 78
68
255

Image 79
69
256

Image 80
70
257

12/8/2016 2:51:04 PM
Velva L. Price
District Clerk
Travis County
CAUSE NO. D-1-GN-16-001279 D-1-GN-16-001279
Terri Juarez
DHIRAJ HANDA and RITU HANDA, § IN THE DISTRICT COURT

§
Plaintiffs, §
§
v. § 261 st JUDICIAL DISTRICT
§
DARGAHI, and YEKK §
d/b/a LAKEWAY CUSTOM HOMES §
AND RENNOVATION, §
§
Defendants. § TRAVIS COUNTY, TEXAS
DEFENDANTS PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK

CONSTRUCTION SERVICES, LLC, d/b/a LAKEWAY CUSTOM HOMES AND
RENOVATIONS' PLEA IN ABATEMENT and MOTION TO COMPEL ARBITRATION
COME NOW, PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK
RENOVATION ("Defendants") and file this, their Plea in Abatement and Motion to Compel
Arbitration and would show the Court as follows:
I. PLEA IN ABATEMENT/MOTION TO COMPEL ARBITRATION
On or about April 4, 2014, Defendants entered into a Residential Construction Contract
(the "Contract") with Plaintiffs Dhiraj and Ritu Handa ("the Handas") for the construction of a
residence in Travis County, Texas. Pursuant to the terms of the Contract, Defendants are entitled
to abate this matter for binding arbitration. Paragraph XXIX of the Contract provides as follows:
ALTERNATIVE DISPUTE RESOLUTION. If a dispute arises

between LAKEWAY CUSTOM HOMES AND RENOVATION and
Owner, which cannot be resolved in good faith through informal
discussions, the parties agree to submit the dispute to mediation
before resorting to any litigation other than a suit to seek injunctive
relief. If mediation is required, the parties shall jointly agree upon a
DEFENDANTS' PLEA IN ABATEMENT AND MOTION TO COMPEL ARBITRATION PAGE 1 OF4
108

mediator acceptable to both parties. If a dispute cannot be resolved
through mediation, both parties agree to submit the dispute to
binding arbitration supervised by the American Arbitration
Association (AAA), Two Galleria Tower Suite 1440, 13455 Noel
Road, Dallas, Texas 75240, (214) 702-8222, using an AAA
approved arbitrator and AAA Construction Industry Arbitration
Rules. The decision of the arbitrator shall be final and binding upon
both Owner and LAKEWAY CUSTOM HOMES AND RENOVATION and
judgment may be entered upon it in any court with proper
jurisdiction. (emphasis added)
See Exhibit "A" attached hereto and incorporated herein by

reference, the Affidavit of Kamran Dargahi and attached Residential
Construction Contract.
The arbitration provision clearly provides that if a disputes arises between the parties, the
parties must attempt to resolve the dispute informally. If the dispute cannot be settled
informally, mediation through an agreed upon mediator must be attempted, and if that is
unsuccessful, the dispute must be submitted to binding arbitration. To date, the parties have
attempted to resolve the dispute both informally and through mediation, and no resolution of the
dispute has been reached. As a result, pursuant to the terms of the Contract, the parties have
agreed to resolve the dispute via binding arbitration with the American Arbitration Association
("AAA") and governed by AAA construction industry rules.
Once the existence of an agreement to arbitrate has been established, a presumption is
created in favor of arbitration. Henry v. Gonzalez, 18 S.W.3d 684, 688 (Tex. App.- San Antonio
2000, pet. dism'd by agmt.). The burden then shifts to the party opposing arbitration to present
evidence which invalidates the agreement to arbitrate or otherwise establishes that arbitration is
an improper forum. !d. Texas law favors referring matters to arbitration, a presumption exists
favoring agreements to arbitrate, and courts are duty bound to resolve any doubts about an
arbitration agreement's scope in favor of arbitration. In re FirstMerit Bank NA., 52 S.W.3d 749
(Tex. 2001); Cantella & Co. v. Goodwin, 924 S.W.2d 943, 944 (Tex. 1996); Green Tree Fin.
DEFENDANTS' PLEA IN ABATEMENT AND MOTION TO COMPEL ARBITRATION PAGE20F4
109

Corp. v. Randolph, 531 U.S. 614, 626 (2000). The party opposing arbitration has the burden to
establish a defense to arbitration. In re Oakwood Mobile Homes, Inc., 987 S.W.2d at 573.
Based on the clear arbitration provision at issue in this case, and the presumption in favor of
arbitrability, Defendants move the Court for an order compelling all claims and causes of action
asserted in this matter to arbitration, and abatement of this case in full.
II. PRAYER
Defendant prays for the following relief:
A. that the Court abate and/or dismiss this case in its entirety and enter an
order compelling the Plaintiffs to binding arbitration;
B. that Defendants be awarded such other relief to which they may be justly
entitled in law or in equity.
DEFENDANTS' PLEA IN ABATEMENT AND MOTION TO COMPEL ARBITRATION PAGE3 OF4
110

BUSH, RUDNICKI, SHELTON, P.C.
Jarne& udnicki , f /
State BarNo. 2400~'I48
Russell Clinage
Stephanie H. Lugo
Tyler Hood
2508 Ashley Worth Blvd., Suite 200

Austin, Texas 78738
Telephone: (512) 263-8408
Facsimile: (512) 263-2562
ATTORNEYSFORDEFENDANTS
I hereby certify that a true and correct copy of the foregoing document was delivered to
all counsel of record in accordance with Rule 21 a of the Texas Rules of Civil Procedure, via first
class mail, fax or by electronic delivery for those counsel available through the e-filing system,
on this the 8th day ofDecember, 2016.
David A. King
dkingiZt~gdhm.com
401 Congress A venue, Suite 2200
Austin, Texas 78701
ATTORNEY FOR PLAINTIFFS
Stephlrlie H. Lu~o ( /
DEFENDANTS' PLEA IN ABATEMENT AND MOTION TO COMPEL ARBITRATION PAGE40F4
111

CAUSE NO. D-1-GN-16-0012679
DHIR4.J HANDA and RITU HANDA, § IN THE DISTRICT COURT OF

Plaintiffs §
§
~ §
§
PEJMAN DARGAHI, KAMRAN § TRAVIS COUNTY, TEXAS
DARGAHI, and YEKK CONSTRUCTION §
§
Defendants §
§
§ 261 8T JUDICIAL DISTRICT
AFFIDAVIT OF KAMRAN DARGAHI
THE STATE OF TEXAB §

§
COUNTY OF TRAVIS §
BEFORE ME, the undersigned notary public, on this day personally appeared Kamran
Dargabi, who, first being duly sworn according to law, on his oath deposed and said:
J. My name is Kamran Dargahi. I am over 18 years of age, of sound mind, and

capable of making this affidavit. The facts stated in this affidavit are within my
personal knowledge and are true and correct.
2. Attached to this affidavit are eleven (11) pages of records comprising a

Residential Construction Contract entered into by Yekk Construction Services,
LLC d/b/a Lakeway Custom Homes and Renovation and Dhiraj and Ritu Handa,
whereby Yekk Construction Services, LLC agreed to construct a residence for
Dhiraj and Ritu Handa in Travis County, Texas. These are original records or
exact duplicates of the original records.
3. It is the regular practice ofYekk Construction Services, LLC to make this type of
record at or near the time of each act, event, condition, opinion, or diagnosis that
was recorded.
4. The records were made by, or trom information transmitted by, persons with
knowledge of the matters set forth in the record.
5. The records were kept in the course of regularly conducted business activity.
Exhibit A- Affidavit of Kmnran Dargahi
112

~
/!~/
Kan~ ··--~..-.~~--·-
SUBSCRIBED AND SWORN TO BEFORE ME on this the -7 day of December

2016. by Kamran Dargahi, member and manager of Yekk Construction Services, LLC, d/b/a
Lakeway Custom Homes and Renovation, to certify which witness my hand and official seal.
Exhibit A - A ftidavit of Kamran Darga hi
113

RESIDENTIAL CONSTRUCTION CONTRACT
I: PARTIES
LAKEWAY CUSTOM HOMES AND RENOVATION (BUILDER) WITH OFFICE AT 125 SCHOONER
DRIVE, AUSTIN, TX - 78738 agrees to construct the Improvements described below for
Dhiraj and Ritu Handa (Owner), residing at 1704 Randolph Ridge, Austin, TX-
78746 on the Property described below.
H: PROPERTY
Lot1, Block A, Seven Oaks Section 4, also known as 228 Sanostee Cove, Travis
County, TX. 78733 or othenvise described on attached exhibit, together with an
Improvements to be constructed on the Property.
IH: IMPROVEMENTS
LAKEWAY CUSTOM HOMES A1'\fD RENOVATION shall provide all labor and materials for
construction of [X] a single family residence according to this Contract and the Plans,
prepared by Dominic Couturier of ltalia Fine Homes, Inc., and specifications as,
prepared by LAKEWAY CUSTOM HOMES AND RENOVATiON and initiated by both parties
(collectively called the "Plans"). The labor and materials required to construct the
Improvements may be referred to as the "Work". To be clear, Plans include all interior,
IV: CONTRACT PRICE

Owner agrees to pay LAKEWAY CUSTOM HOMES AND RENOVATION, One Million Four
Hundred ~ty Th. ous~nd DoU~rs ($1,460,000.00), as c~mpensation for constmction
of the fmpy1\rements, subject to adJustment as allowed by th1s Agreement.
V: PAYMENTS TO LAKEWAY CUSTOM HOMES AND RENOVATION

The Contract Price will be paid as follows:
A. Deposit: Owner shall advance 3% of the Contract Price to LAKEWAY
CUSTOM HOMES AND RENOVATION prior to the start of construction.
Progress Payments: During construction, LAKEWAY CUSTOM HOMES

AND RENOVATION shall present Owner with requests for Progress
Payments based upon the allocated cost ofthe completed portions and/or
phases of construction performed to the date of each request. Each
Progress Payment request shall be made in normal construction phases as
agreed upon by Owner, LAKEWAY CUSTOM HOMES AND RENOVATION,
and the interim construction lender, if any, and shall be paid according to
the draw schedule initialed by Owner and LAKEWAY CuSl'OM HOMES
AND RENOVATION and attached to this Agreement as an exhibit.
LAKEWA V CUSTOM HOMES AND RENOVATION agrees that progress
payment to them will be made only after the inspector from the financial
institution that the Builder has an agreement with passes and approves the
completed portion of the construction for which payment is being
requested.
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114

VI: TIME FOR PAYMENT
Upon the presentation of a request for a Progress Payment, Owner shall, \Vi thin three
business days after receipt of a request, pay the Progress Payment to LAKEWAY CuSTOM
HOMES AND RENOVATION PER V.B. The final Payment (portion ofthe Contract Price
not paid by prior payments) will be due and payable within five days of substantial
completion of construction.
VU: WORK SCHEDULE

LAKEWAY CUSTOM HOMES AND RENOVATION shall begin construction within 7
calendar days after (a) Owner has obtained a commitment for interim construction
financing or cash security acceptable to LAKEWAY CUSTOM HOMES AND RENOVA noN;
and (b) A building permit has been obtained. LAKEWAY CVSTOM HOMES AND
RENOVAnoN shall substantially complete construction within 460 calendar days of the
date construction is begun, (Completion Date) unless the Completion Date is extended.
VH: EXTENSION OF COI\fPLETION DATE

LAKEWAY CUSTOM HOMES AND RENOVATION shall complete the Improvements
according to this Agreement and the Plans, and all Change Orders, by the Completion
Date. However, if the Work is delayed by Change Order, Owner's acts or omissions, or
delay is caused by fire or other casualty loss, weather, strikes, boycotts, non-availability
of materials for which no substitute of equal equality and price is available, or other
events beyond the control of LAKEWAY CUSTOM HOMES AND RENOVATION, the time of
such delays shall be added to the Completion Date. LAKEWAY CUSTOM HOMES AND
RENOVATION shall give Owners written notice of each claimed extension day within (30)
calendar days of a claimed extension day.
IX: SUBSTANTIAL COMPLETION OF THE IMPROVEMENTS

The Improvements will be deemed to be substantially completed (including landscaping)
when a temporary certificate of occupancy is issued or, if no certificate of occupancy is
required, when all electrical, heating and air conditioning, plumbing and landscaping,
final inspections have received regulatory authority approval or all approvals required for
occupancy have been received. However, notwithstanding the foregoing, if the Owner
moves into the Improvements, the Improvements shall be deemed to be substantially
completed.
X: SOURCE OF PAYMENT TO BUILDER

If Ovvner is obtaining interim construction financing, Owner shall obtain and pay the loan
at Owner's expense. If Owner is unable to obtain an interim construction loan, with tenns
reasonable to Owner, within 7 days of this contract, either Owner or LAKEWAy CUSTOM
HOMES AND RENOVATION may terminate this agreement by giving the other party
written notice of termination. If Owner is not obtaining an interim construction loan to
pay tbr construction of the Improvements, upon execution of this Agreement and prior to
start of construction, Owner shall establish a construction account with a financial
institution acceptable to both Owner and LAKEWAY CUSTOM HOMES AND RENOVATION.
The Owner shall deposit the entire Contract Price in the account \vhen it is established.
LAKEWAY CUSTOM HOMES AND RENOVATION shall have the right to monitor the
115

account to insure that Owner has deposited the required funds into the account. Failure by
Ovvner to establish and maintain the account as required shall be a breach of this
Agreement.
XI: ALLOWANCES
Owner shall be entitled to allowances as specified in [] the Plans [X] the Allowance
Schedule attached to this contract as an exhibit. All savings attributable to allowances,
which are not spent, will be credited to Owner, and Owner will be responsible for all
costs exceeding the Allowances. If Owner selects allowance items in excess of specified
allowances, LAKEWAY CUSTOM HOMES AND RENOVATION may submit an "Allowance
Overage" to 0\:vner in the form of a Change Order. Upon approval by Owner, the
Allowance Overage will be payable with the next Prot,rress Payments.
XU: CHANGE ORDERS

No alterations, additions or deletions will be made in the Work, unless agreed to in
writing by Owner and LAKEWAY CUSTOM HOMES AND RENOVATION. To approve a
proposed change, both Owner and LAKEWAY CUSTOM HOMES AND RENOVATION shaH
sign a written approval referred to as a Change Order. When both parties have signed a
Change Order, the Change Order will amend this agreement. The cost of all extra work
LAKEWAY CUSTOM HOMES AND RENOVATION plus 8 percent for administrative
expenses. The cost for any work perfom1ed under a Change Order shall be paid
immediately or as agreed upon in the Change Order. l~AKEWAY CUSTOM HOMES AND
RENOV AHON shall perform all construction at the property where the home is being
constructed unless otherwise agreed upon by LAKEWAY CUSTOM HOMES AND
RENOVATION and the Owner(s). All such agreements must be in writing. All requests for
works performed at the property shall be directed to LAKEWAY CUSTOM HOMES AND
RENOV ATWN only. Any and all works performed at the property by Subcontractors
without the approval of LAKEWAY CUSTOM HOMES AND RENOVATION are subject to
additional charges and are considered change orders. Additional fees and/or penalties
may apply.
XII: INSUR<\NCE
Before beginning the Work, LAKEWAY CUSTOM HOMES AND RENOVATION shall obtain:
(a) Builders risk insurance covering all insurable risks in an amount equal to or greater
than the Contract Price; (b) Comprehensive public and automobile liability insurance.
The cost for all required insurance is included in the Contract Price. Proof of insurance
would be submitted to Owner prior to start of construction. Builder will also furnish the
O~'ller with a financial statement of LAKEWAY Cl!STOM HOMES AND RENOVATION
prior to signing this contract.
XIV: LAKEWAY CUSTOM HOMES AND RENOVATION's DUTIES

LAKEWAY CUSTOM HOMES AND RENOVATION accepts responsibility for performance of
all duties reasonable necessary to complete the Work and agrees that: (a) LAKEWAy
CUSTOM HoMES AND RENOVATION shall obtain all necessary licenses, permits, and
similar authorizations from governmental authorities required to perform. under this
116

Agreement, including water and wastewater tap fees; (b) LAKEWA v CUSTOM HOMES
AND RENOVATION shall notify Owner of ali conflicts between the Plans and
Specifications and any laws, ordinances, rules, regulations, and restrictions (including
impervious cover) that come to the attention of LAKEWAY CUSTOM HOMES AND
RENOVATION~ (c) LAKEWAY CUSTOM HOMES AND RENOVATION shall pay all costs
related to the Work, except any applicable laws, ordinances, rules, regulations, and
restrictions; (d) The materials used in connection with the Work will be new and of a
quality adequate for the intended purposes, except as othernrise expressly specified in the
Plans; and (e) LAKEWAY CUSTOM HOMES AND RENOVATION shall deliver title to all the
materials, appliances and equipment used in the Work free of all liens, claims. security
interests or encumbrance except the lien and security interests created by this agreement
or given to the interim construction lender. For clarity, Lakeway Custom Homes and.
Renovation would accept the ownership of plans and specification in tenus of
construction, including correction of any errors in the plans that may result in failing the
inspection.
XV: EVENTS OF DEFAULT BY LAKEWAY CUSTOM HOMES AND RENOVATION

Each ofthe following shall be deemed an Event of Default by LAKEWAY CUSTOM
HOMES AND RENOVATION and a material breach of this agreement: (a) LAKEWAY
CUSTOM HOMES AND RENOVA noN's failure, without cause, to make payments to
subcontractors or vendors supplying material for the Work: (b) A breach by LAKEWAY
CUSTOM HOMES AND RENOVATION of a covenant or agreement contained in this
agreement; (c) The tiling of a voluntary petition in bankruptcy, making an assignment for
the benefit of any creditor, being adjudicated a bankrupt or insolvent, or applying for or
consenting to the appointment of a receiver, trustee or liquidator of all or substantial part
of LAKEWAY CUSTOiVl HOMES AND RENOVATION's assets.
XVI: NOTICE OF DEFAULT TO LAKEWAY CUSTOM HOMES AND RENOVATION

Each ofthe following shall be deemed an Event of Default by LAKEWAY CUSTOM
HOMES AND RENOVATION and a material breach ofthis agreement: (a) LAKEWAY
CusTOM HOMES AND RENOVATION's failure, without cause, to make payments to
subcontractors or vendors supplying material for the Work~ (b) A breach by LAKEWAY
CUSTOM HOMES AND RENOVAHON of a covenant or agreement contained in this
agreement; (c) The filing of a voluntary petition in bankmptcy, making an assignment for
consenting to the appointment of a receiver, trustee or liquidator of all or a substantial
part of LAKEWAY CUSTOM HOMES AND RENOVATION's assets.
XVU: REMEDIES OF OWNER

Upon the occurrence of any event of default by LAKEWAY CUSTOM HoMES AND
RENOVATION, Owner may (but shall not be obligated to), without prejudice to any other
available right or remedy; (a) Terminate this agreement; (b) Seek specific perfonnance of
this agreement by LAKEWAY CUSTOM HOMES AND RENOVATION; (c) Pursue any other
remedies available to Ov.rner under this Agreement or as provided by law; or (d) Any
combination of the foregoing. If Owner receives notice of any lien or claim for labor
materials furnished to LAKEWAY CUSTOM HOMES AND RENOVATION for which, if
117

established, Owner, or the Property might become liable, though primarily chargeable to
LAKEWAY CUSTOM HOMES AND RENOVATION, Owner shall have the right to retain out
of any Progress Payment, an amoli11t sufficient to indemnify Owner against such lien or
claim. However, LAKEWAY CUSTOM HOMES AND RENOVATION shall have the right to
contest in good faith the validity of such lien or claim. If LAKEWAY CUSTOM HOMES
AND RENOVATION fails to discharge any such lien or claim any amounts expended by
Owner for the payment of any hens or claims shall be credited against the Contract Price.
XVIII: 0\VNER'S AGREEJVfENTS

Owner agrees to: (a) Make all payments to LAKEWAY CUSTOM HOMES AND
RENOV A noN required by this agreement (b) Perfonn all other obligations of Owner
required by this agreement; and (c) Protect the title and possession of the Property and
XIX: EVENTS OF DEFAULT BY OW:NER

Each of the following shall be deemed an Event of Default by Owner and a material
breach of this agreement: (a) Owner fails to make any payments due under this agreement
within five days of the date it is due: (b) Owner unreasonably delays LAKEWAY CUSTOM
HOMES AND RENOVATION in the prosecution of the Work; (c) Owner fails to perform
any other covenant or agreement contained in this agreement; (d) Owner, or any person
liable for the payment or performance under this agreement, files a petition in
bankruptcy, makes an assignment for the benefit of any creditor, is adjudicated a
bankrupt or insolvent, or applies for or consents to the appointment of a receiver, trustee
or liquidator of all or a substantial part of their or its assets.
XX: NOTICE OF DEFAULT BY 0\\-'NER

If Owner commits an Event Of Default, prior to exercising any remedy granted by this
agreement or by law, LAKEWAY CUSTOM HOMES AND RENOVATION shall deliver
written notice of default to Owner. If the Event of Default is not cured within ten days
after delivery of such written notice, LAKEWAY CUST01\'i HOMES AND RENOVATION may
exercise any remedy granted by this agreement or by applicable law. Upon the
occurrence of an Event Of Default by Owner, aU amounts owed for Work completed will,
at the option of LAKEWAY CUSTOM HOMES AND RENOVATION, after any notice and cure
period, become immediately due and payable without prejudice to any other remedy of
LAKEWAY CUSTOM HOMES AND RENOVATION.
X.Xl: REMEDIES OF LAKEWAY CUSTOM HOMES AND RENOVATION

Upon the occurrence of any Event of Default by 0\\rn.er, LAKEWAY CtrSTOM HOMES
AND RENOVATION may (but shall not be obligated to), without prejudice to any other
available right or remedy: (a) Terminate this agreement and seek recovery of any damage
suffered by LAKEWAY CtfSTOM HOMES AND RENOVATION; (b) Discontinue
perfom1ance of this agreement; (c) Seek specific performance of this agreement by
Owner; (d) Pursue any other remedies available to LAKEWAY CUSTOM HOMES AND
RENOVATION under this Agreement or as provided by law~ or (e) Any combination of the
foregoing.
118

X.XH: WARRANTIES
LAKKWA Y ClJSTOM HOMES A.ND RENOVATION will transfer to Owner all manufacturers'
warranties received by LAKEWAY CUSTOM HOMES AND RENOVATION or any
subcontractor. LAKE\VA Y CVSTOM HOMES AND RENOVATION will not be required to
warrant, repair or conect any of the Work provided by any general or sub-contractor
(other than LAKE\'VAY CUSTOM HOMES AND RENOVATION) employed directly by Owner
and not as a sub-contractor or employee ofLAKEWAY CVSTOM HOMES AND
RENOVATION. LAKEWAY CUSTOM HOMES AND RENOVATION shall not be obligated
under any separate warranty given to Owner until LAKEWAY CUSTOM HOMES AND
RENOVATION has been paid in fulL LAKEWAY CUSTOM HOMES AND RENOVATION shall
conect any of the Work which is defective or which does not comply with the Plans and
Specifications for a period of one year from the date of substantial completion of the
Work. Upon closing, Owner(s) shall be responsible for reasonable care and maintenance
of the property. LAKEWAY CUSTOM HOMES AND RENOVATION warranty excludes items,
which have been damaged due to natural causes, normal wear and tear, inadequate care
and maintenance and other uncontrollable cau..c;;es.
XXHI:MECHANIC'S LIEN
Owner grants to LAKEWAY CUSTOM HOMES AND RENOVATION a mechanic's lien to
secure performance of the obligations of Owner, and agrees, prior to beginning
construction, to execute a separate mechanic's lien contract acceptable to LAKEWAY
CUSTOM HOMES AND RENOVATION and the Interim Lender, if any. If Owner is obtaining
an interim construction loan, LAKEWA'I:,. CUSTOM HOMES AND RENOVATION shall assign
to the Interim Construction Lender a portion of Contractor's mechanic's lien equal to the
amount of the interim construction loan obtained by Owner and to subordinate any
remaining amount of LAKEWAY CUSTOM HOMES AJ'TD RENOVATION's lien to the interim
construction loan.
X.XIV: INDEPENDENT CONTRI'\CTOR

LAKEWAY CUSTOM HOMES AND RENOVATION will be an independent contractor.
Nothing contained in or inferable from this contract should be construed to (i) make
LAKEWAY CUSTOM HOMES AND RENOVATION the agent, servant or employee of Owner,
or (ii) create any partnership, joint venture or other association between Owner and
LAKEWAY CUSTOM HOMES AND RENOVATION.
XXV: OTHER PARTIES BOUND

Owner and LAKEWAY CUSTOM HOMES AND RENOVA nON each binds himself or herself,
his or her partners, successors, assigns and legal representatives to the other party and to
the partners, successors, assigns and legal representatives of the other party in all matters
related to this agreement.
X.C'XVI; NO ASSIGNMENT
Neither party has the right to assign this agreement without the written consent of the
other unless this agreement is transferred per section XV.
119

XXVH: NOTICES
Notices must be in writing and must be given by (a) personal delivery to the addressee or
(b) certified mail, return receipt requested, postage prepaid in a properly addressed
envelope. The parties designate the addresses following their signatures as their address
for notice. Notices shall be deemed to be given and received as of the earlier of (a) actual
receipt or (b) the third day after the date of deposit with the US Postal Service. If either
party desires to change its address for notice, the party shall give notice to the other party
in the manner required by this agreement and the change of address will be effective as of
the last to occur of (a) the effective date recited in such notice or (b) the tenth day after
the date such notice is deposited with the US Postal Service.
Special Provision: builder agrees that the square footage called on drawings are
approximate and the builder has his own calculation and is not relying on the square
footage table.
XtXVUI: TIME OF THE ESSENCE

Time is of the essence in this agreement.
XXIX:ALTERl\JATlVE DISPUTE RESOLUTION

If a dispute arises between LAKEWAY CUSTOM HOMES AND RENOVATION and 0v.'1ler,
which cannot be resolved in good faith through informal discussions, the parties agree to
submit the dispute to mediation before resorting to any litigation other than a suit to seek
injunctive relief. If mediation is required, the parties shall jointly agree upon a mediator
acceptable to both parties. If a dispute cannot be resolved through mediation, both parties
agree to submit the dispute to binding arbitration supervised by the American Arbitration
Association (AAA), Two Galleria Tower Suite 1440, 13455 Noel Road, Dallas, Texas
75240, (214) 702-8222, using an AAA approved arbitrator and AAA construction
Industry Arbitration Rules. The decision of the arbitrator shall be final and binding upon
both Owner and LAKEWAY CUSTOM HOMES AND RENOVATION and judgment may be
entered upon it in any court with proper jurisdiction.
XXX: CANCELLATION
After l sr payment of$43,800 is made, if there is any issue with the permitting process
that prevents the builder from obtaining the permit, provided all the necessary septic,
foundation, framing design is completed by Builder (& receipts shown to Owner) and all
fees (water meter and tab, electrical, HOA permit, and HOA deposit are paid by the
Builder), then Owner and Builder can mutually decide to cancel the contract with no
additional obligation to each other, except a $3500 HOA deposit payment is refunded to
Owner by the Builder or the HOA, whoever is holding the $3500 deposit
XX..XI: ATTORl'l"EY FEES

If LAKEWAY CUSTOM HOMES AND RENOVATION or Owner initiates any arbitration or
legal proceeding in accordance with the Residential Construction Liability Act, brought
under or with relation to this contract, each party will be responsible for their own
attorney's fees.
120

XXXII: AGREEMENT OF PARTIES
This contract contains the entire agreement of the parties and cannot be changed except
by their written agreement. Exhibits and addenda which are a part ofthis contract are
(list):
Exhibit A: Disclosure Statement Required for Residential Construction Contract

Exhibit B: Subcontractors & Suppliers List
Exhibit D: Payment Schedule
In the event of any cont1ict or inconsistency between the provisions of Section f through
XXXIV of this contract and the provisions of any of the attached exhibits and addenda,
the provisions of the attached exhibits and addenda shall govern and control.
XXXIII: CONSULT YOUR ATTOR["l"EY

Builders/Brokers cannot give legal advice. This is intended to be a legally binding
contract. READ IT C,\R.EFULLY. If you do not understand the effect of this contract,
consult your attorney BEFORE signing
XX:XIV: THIS CONTRACT CONSTITUTES AND CONSTRUCTION

MORTGAGE WITHIN THE l\tfEANING OF SECTION 9.313 OF THE TEXAS
BUSINESS A1"l"D COMMERCE CODE. YOU AND LAKEWAY CUSTOM HOMES AND
RENOVATION ARE RESPONSIBLE FOR MEETING THE TER.t\1S AND
CONDITIONS OF THIS CONTRACT. IF YOU SIGN THIS CONTRACT, AND
YOU FAIL TO MEET THE TER['\IIS AND CONDITIONS OF THIS CONTRA.CT,
YOU MAY LOSE YOUR LEGAL OWNERSHIP RIGHTS OF YOUR HOME.
Ki~OW YOUR RIGHTS Al'l'D DUTIES UNDER THE LAW.
). 0 il-l
Executed on ----'-/,\f_'?"_.i._-;_·. _(__i_J_____,~{Effective Date)
Client: Dhiraj Handa
um Dargahi
WAY CUSTOM HOME~""""-'+~fFI
121

EXHIBIT "A"
DISCLOSURE STATEMENT REQUIRED FOR RESIDENTIAL CONSTRUCTION

CONTRACT
Prq_ject desctiption!address: Lot 1, Block A, Seven Oaks Section 4, also known as 228
Sanostee Cove, Travis County, TX. 78733. Contractor: LAKEWAY CUSTOM HOMES
AND RENOVATION
Ki\TOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You are
about to enter into a transaction to build a new home or remodel existing residential
property. Texas law requires your contractor to provide you with this brief overview of
some of your rights, responsibilities, and risks in this transaction.
CONVEYANCE TO CONTRACTOR PROHIBITED. Your contractor may not require

you to convey your real property to your contractor as a condition to the agreement for
construction of improvements on your property.
Kl"JOW YOUR CONTRACTOR. Before you enter into your agreement for the
construction of improvements to your real property, make sure that you have investigated
your contractor. Obtain and verify references from other people who have used the
contractor for the type and size of construction project on your property.
GET fT fN \VRITfNG. Make sure that you have a written agreement with your contractor
that includes: (l) a description ofthe work the contractor is to perform; (2) the required
or estimated time for completion of the work; (3) the cost of the work or how the cost
will be determined; and (4) the procedure and method of payment, including provisions
for statutory Retainage and conditions for final payment. Take your time in reviewing
documents. If you borrow money from a lender to pay for the improvements, you are
entitled to have loan closing documents furnished to you for review at least one business
day before the closing. Do not waive this requirement unless a bonafide emergency or
another good cause exists, and make sure you understand the documents before you sign
them. If you fail to comply with the terms ofthe documents, you could lose your
property. You are entitled to have your own attorney review any documents. If you have
any question about the meaning of a document, consult an attorney.
GET A LIST OF SUBCONTR.A.CTORS AND SUPPLIERS. Before construction
commences, your contractor is required to provide you with a list of the subcontractors
and suppliers the contractor intends to use on your project. Your contractor is required to
supply updated infom1ation on any subcontractors and suppliers added after the list
provided.
MONITOR THE WORK Lenders and govemmental authorities may inspect the work in
progress from time to time for their o;;vn purposes. These inspections are not intended as
122

quality control inspections. Quality control is a matter for you and your contractor. To
ensure that your home is being constructed in accordance \vith your wishes and
specifications, you should inspect the work yourself or have your 0\\11 independent
inspector review the work in progress.
MONITOR PAYMENT. If you use a lender, your lender is required to provide you with
a periodic statement showing the money disbursed by the lender from the proceeds of
your loan. Your contractor is also required to furnish you with a statement at ieast once
each month of money disbursed to subcontractors and suppliers for this project. Review
CLAIMS BY CONT~A.CTORS AND SUPPLIERS. Under Texas law, if a subcontractor

or supplier who furnishes labor or materials for the construction of improvements on your
property is not paid, you may become liabie and your property may be subject to a lien
for the unpaid amount, even if you have not contracted directly with the subcontractor or
supplier. To avoid liability, you should take the following actions: ( l) If you receive a
written notice from a subcontractor or supplier, you should withhold payment from your
contractor for the amount of the claim stated in the notice until the dispute between your
contractor and the subcontractor or supplier is resolved. If your lender is disbursing
money directly to your contractor, you should immediately provide a copy of the notice
to your lender and instruct the lender to withhold payment in the amount of the claim
stated in the notice. If you continue to pay the contractor after receiving the written notice
v.rithout withholding the amount ofthe claim, you may be liable and your property may
be subject to a Hen for the amount you tailed to withhold.
During construction and for 30 days after final completion, termination, or abandonment
of the contract by the contractor, you should withhold or cause your lender to withhold 10
percent of the amount of payments made for the work performed by your contractor. This
is sometimes referred to as 'statutory Retainage.' If you fail to withhold the 10 percent
for at least 30 days after final completion, termination, or abandonment ofthe contract by
the contractor and if a valid claim is timely made by a claimant, you may be personally
liable and your property may be subject to a lien up to the amount that you failed to
withhold. If a claim is not paid within a certain time period, the claimant is required to
file a mechanic's lien affidavit in the real property records in the county where the
property is located. A mechanic's affidavit is not a lien on your property, but the filing of
the affidavit could result in a court imposing a lien on your property if the claimant is
successful in litigation to enforce the lien claim.
SOME CLAIMS MAY NOT BE VALID.

When you receive a written notice of a claim or when a mechanic's lien affidavit is file
don your property, you should know your legal rights and responsibilities regarding the
claim. Not all claims are valid. A notice of a claim by a subcontractor or supplier is
required to be sent, and the mecharuc's lien affidavit is required to be filed, within strict
time periods. The notice and the affidavit must contain certain information. All claimants
may not fully comply with the legal requirements to collect on a claim. If you have paid
the contract in full before receiving a notice of a claim and have fully complied with the
123

law regarding statutory Retainage, you may not be liable for that claim. Accordingly, you
should consult your attorney when you receive a written notice of a claim to determine
the true extent of your liability or potential liability for that claim.
OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you receive a

notice of claim, do not release withheld funds without obtaining a signed and notarized
release of lien and claim from the claimant. You can also reduce the risk of having a
claim filed by a subcontractor or supptier by requiring as a condition of each payment
made by you or your lender that your contractor furnish you with an affidavit stating that
all bills have been paid. Under Texas law, on final completion of the work and before
final payment, the contractor is required to furnish you with an affidavit stating that an
bills have been paid. If the contractor discloses any unpaid bill in the affidavit, you
should withhold payment in the amount of the tmpaid biD until you receive a waiver of
lien or release from that subcontractor or supplier.
OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain a title

insurance policy to insure that the title to your property and the existing improvements on
your property are free from liens claimed by subcontractors and suppliers. If your policy
is issued betore the improvements are completed and covers the value of the
improvements to be completed, you should obtain, on the completion of the
improvements are completed and covers the value of improvements to be completed, you
should obtain, on the completion of the improvements and as a condition of your final
payment, a 'completion of improvements' policy endorsement. This endorsement will
protect your property from liens claimed by subcontractors and suppliers that may arise
from the date the original title policy is issued to the date of the endorsement.
THIS IS TO VERIFY THAT I (WE) HAVE RECEIVED A COPY OF THIS

CONTRACTOR'S DISCLOSURE STATEMENT.
THIS IS ALSO TO VERIFY THAT I (WE) HAVE RECEIVED A COPY OF THE
ATTACHED LIST OF SUBCONTRCTORS AND SUPPLIERS.
, t;;.- \ "( ._)'lA tt
SIGNED this _ _t_,_·_ _ _ (Day) of _ _._f_·. ;(_>_·v_·,_
. _·._____ (Month), 208:
OWNERS:
C. ;
·'-· • {"" --...... -=.:..::~ .
·'
~,~ {i-;.,
r Ll~l.i·l~c·lt'i..
Client: Ritu Handa
124

5/23/2017 4:34:18 PM
Velva L. Price
District Clerk
Travis County
CAUSE NO. D-1-GN-16-001279 D-1-GN-16-001279
Raeana Vasquez
DHIRAJ HANDA and RITU HANDA, § IN THE DISTRICT COURT

§
Plaintiffs §
§
v. § 261 st JUDICIAL DISTRICT
§
d/b/a LAKEWAY CUSTOM HOMES §
AND RENOVATION, §
§
Defendants § TRAVIS COUNTY, TEXAS
DEFENDANTS' SUPPLEMENTAL AFFIDAVIT IN SUPPORT OF PLEA IN

ABATEMENT and MOTION TO COMPEL ARBITRATION
COME NOW, PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK
RENOVATION ("Defendants") and file this Supplemental Affidavit in Support of their Plea in
Abatement and Motion to Compel Arbitration and would show the Court as follows:
I. PLEA IN ABATEMENT/MOTION TO COMPEL ARBITRATION
In further support of Defendants' Plea in Abatement and Motion to Compel Arbitration,
Defendants attach hereto and incorporate herein by reference Exhibit "B", the Affidavit of Pejman
Dargahi.
II. PRAYER
Defendants pray for the following relief:
A. that the Court abate and/or dismiss this case in its entirety and enter an
order compelling the Plaintiffs to binding arbitration;
B. that Defendants be awarded such other relief to which they may be justly
entitled in law or in equity.
Defendants' Supplemental Affidavit in Support of

Plea in Abatement and Motion to Compel Arbitration PAGE 1 OF 2
260

BUSH, RUDNICKI, SHELTON, P.C.
Jamelw. Rudnickfi>"\"/'/
JRudni cki (iV,B RST exas. com
Russell E. Clinage
RC! inage(CuB RS Texas.com
Stephanie H. Lugo
2508 Ashley Worth Blvd., Suite 200

Austin, Texas 78738
Telephone: (512) 263-8408
Facsimile: (512) 263-2562
ATTORNEYSFORDEFENDANTS
I hereby certify that a true and correct copy of the foregoing document was delivered to
all counsel of record in accordance with Rule 21 a of the Texas Rules of Civil Procedure, via first
class mail, fax or by electronic delivery for those counsel available through the e-filing system,
on this the 23rd day of May, 2017.
David A. King
dking(t7)gdhm.corn
Austin, Texas 78701
ATTORNEY FOR PLAINTIFFS
Defendants' Supplemental Affidavit in Support of

Plea in Abatement and Motion to Compel Arbitration PAGE20F 2
261

CAUSE NO. D-1-GN-16-0012679

§
Plaintiffs §
§
v. §
DARGAHI, and YEKK CONSTRUCTION §
§
Defendants § 26ts• JUDICIAL DISTRICT
AFFIDAVIT OF PEJMAN DARGAHI
THE STATE OF TEXAS §

§
COUNTY OF TRAVIS §
BEFORE ME, the undersigned notary public, on this day personally appeared Pejman
Dargahi, who, first being duly sworn according to law, on his oath deposed and said:
1. My name is Pejman Dargahi. I am over 21 years of age and I am of sound mind

and capable of making this affidavit. The facts stated in this affidavit are within
my personal knowledge and are true and correct.
2. A Certificate of Formation for Yekk Construction Services, LLC was filed with
the Texas Secretary of State on approximately July 16, 2001. On or about July
20, 2007, Yekk Construction Services, LLC filed an Assumed Name Certificate
with the Texas Secretary of State, indicating Lakeway Custom Homes &
Renovation as its assumed name. Yekk Construction Services, LLC, d/b/a
Lakeway Custom Homes & Renovation is still a valid existing business in the
state of Texas.
3. Attached to this affidavit are five (5) pages of records comprising the Texas
Secretary of State filings indicated above. These are original records or exact
duplicates of the original records.
4. It is the regular practice of Yekk Construction Services, LLC to make this type of
record at or near the time of each act, event, condition, opinion, or diagnosis that
was recorded.
Exhibit B
262

5. The records were made by, or from information transmitted by, persons with
knowledge of the matters set forth in the record.
6. The records were kept in the course of regularly conducted business activity.
7. On or about April 4, 2014, Yekk Construction Services, LLC, d/b/a Lakeway

Custom Homes and Renovation ("Yekk Construction Services, LLC") entered
into a Residential Construction Contract (the "Contract") with Plaintiffs Ritu and
Dhiraj Handa pursuant to which Yekk Construction Services, LLC agreed to
construct a residence for Plaintiffs at 228 Sanostee Cove, Austin, Travis County,
Texas 78733 (the "Residence").
8. J signed the Contract on behalf of Yekk Construction Services, LLC. At the time
that the Contract was executed, I was a member and manager of Yekk
Construction Services, LLC, and I executed the Contract in my capacity as a
member of Yekk Construction Services, LLC.
9. By virtue of my position vvith Yekk Construction Services, LLC, I am familiar

with the process of contracting for homes and the construction of homes on behalf
of Yekk Construction Services, LLC. I personally know that some of the
materials used in the construction of the Residence were shipped into Texas from
other states and that the construction of the Residence involved interstate
commerce. Specifically, wood products, electrical wiring, and plumbing fixtures
were transported through interstate commerce for use in the construction of the
Residence.
SUBSCRIBED AND SWORN TO BEFORE ME on this the ;)j day of May 2017 by
Pejman Dargahi, member and manager of Yekk Construction Services, LLC, d/b/a Lakeway
Custom Homes and Renovation, to certify which witness my hand and official seaL
NICOLE BURROW
My Notary !D # 128728242
Expires August 30, 2019
Exhibit B
263

II
/ ··~
( l
264

Form 503 This space reserved for office use.
(Revised 01/06)
F ll E 0
Return in duplicate to: In the Office of the
Secretary of State of Texas
Secretary of State
P.O. Box 13697
Assumed Narne Certificate JUL 20 2007
Austin, TX 78711-3697
512 463-5555 Corporations Section
FAX: 512 463-5709
Filing Fee: $25
The assumed name under which the business or professional service is, or is to be, conducted or
rendered is: ___ Lak'etJay cus/pm 1-/omes, /;/felfilo Vq f1o 11
;:~~~~attq1f
The name of the entity filing the assumed name is:
Y~KK Q;msfrucf,on s(fr~s llc.

State the name of the entity as currently shown in the records of the secretary of state or on its certificate offormation, if
not !iled with the secretary of state.
The filing enti ry is a: (Se!ectthe appropriate entity type below.)
0 For-profit Corporation 0 Professional Corporation

0 Nonprofit Corporation 0 Professional Limited Liability Company
D Cooperative Association 0 Professional Association
~Limited Liability Company 0 Limited Partnership
0 Other
Specify type of entity ifthere U;; no check box applicable.
The file number, if any, issued to the filing entity by the secretary of state is: 7093/7<'f 2 2.
The state, country, or other jurisdiction of formation is: --cJ.D_~~~(f::!-.::!5!!:..-.,----:----------
The registered or similar office of the entity in the jurisdiction of formation is:
[l;t The entity is required to maintain a registered office and agent in Texas.
The address of its
registered office in Texas and the name of the registered agent at such address is:
'ft;€cl rna*hoo~ ~a:br..

vt h
Q:r 1
Lo..ke.t.Jcy T'l· 7'6 7._38
The address of the principal office o the ent1ty (if not the same as the registered office) 1s:
-0 The entity is not required to maintain a registered office and agent in Texas. Its office address in
RECEIVED
Jue;lo
__
2flo7
.~o,...,.,..;,
4
265

in Texas is:
0 The entity is not incorporated, organized or associated under the laws of Texas. The address of
the principal place of business in this state is:
The office address of the entity is:
· · .· .D1B9Jtiijur'·. ·
~~----------~~--~~~~-=~~~
The period during which the assumed name will be used is 10 years from the date of filing with
the secretary of state.
OR
0 The period during which the assumed name will be used is _ _ years from the date of filing
with the secretary of state (not to exceed 10 years).
OR
0 The assumed name will be used until (not to exceed 10 years).
--------~~--------
mmlddlyyyy
co~~~~f~~·?
~----------------~~~~~~~~~~--~--
·· ;~~d:N.meused
The county or counties where business or professional services are being or are to be conducted or
rendered under the assumed name are:
~ All counties
0 :\ ll co untie~ with the exce;Jtion ofthe following countit:!s:
0 Only the following counties:
The undersigned signs this document subject to the penalties imposed by law for the submission of a
materially false or fraudulent instrument. If the undersigned is acting in the capacity of an attorney in
fact for the entity, the undersigned certifies that the entity has duly authorized the undersigned in
writing to execute this document.
Date:
Signature and title of authorized person(s) (see instructions)
266

...
Phil Wilson
P O.Box 1~697
Office of the Secretary of State
J 23.:2007
Y ekk Construction,
J 25 Schooner Dr.
Lakeway. TX 78738
CO'\STRt SLi< ICES. LC

File >-:umber: 709317922
;\ssurned :\anre:
File Date: '20·2007
Tt has been our pleasure to file assumed name ccni for the above referenced entity. Enclosed
is the certificate evidencing i:il Pa\mcnt the fi · Cce is ackno\v!cdgcd hy this letter.
ln addition to filing the SecreTary Slate. Chapter the Texas Business and Commerce Code
requires filing of assumed name ficatc \\Jrh county clerk in the county in \vhich the
principai oiTicc of the !s located. lf the entity is required by ]U\\ to maintain a registered office
in T'exas+ assun1cd nantc cert1 is also required 10 in the county in which the registered
office is located.
If we can be of further service at any time, please kt us know.
Corporations Section
Business & Public Filings Division
Enclosure
C'rnne vi~\·it us on !he internet nt us/

Phone: {512) 463-5555 Fax: (512) 463-5709 Dial: 7-l-l for Rday Se!Tices
Prepared by: Lnura Canales TfD !0336 Document: 1792465100()2
267

...
!
L
~ '~ \ .
268

5/24/2017 9:59:52 AM
Velva L. Price
District Clerk
Travis County
CAUSE NO. D-1-GN-16-001279 D-1-GN-16-001279
Carlos Martin

Plaintiffs, §
§
§
PEJMAN DARGAHI, §
PLAINTIFFS' RESPONSE TO DEFENDANTS' PLEA IN ABATEMENT AND

MOTION TO COMPEL ARBITRATION
COME NOW Plaintiffs and file this Response to Defendants' Plea and Abatement and
Motion to Compel Arbitration, and would respectfully show the Court the following:
I. Summary
Defendant Y ekk Construction Services, LLC, d/b/a Lakeway Custom Homes and
Renovation ("Y ekk Construction"), along with its sole officer and member Pejman Dargahi and
his brother Kamran Dargahi (collectively, "Defendants"), were hired to build Plaintiffs' home
under a fixed-price contract. Since construction began in 2014, Plaintiffs have paid Defendants
95% of the contract price. However, in November 2015, Defendants halted all work on the
project, insisting that Plaintiffs pay much more than the contract price. Unbeknownst to
Plaintiffs until then, the Dargahis had been using Plaintiffs' money for tens of thousands of
dollars' worth of expenses that have nothing to do with the construction of Plaintiffs' home,
including not only different construction projects, but also personal expenses such as plumbing
work on Pejman Dargahi's personal home, purchasing real estate, and attorneys' fees. Following
269

Defendants' abandonment of the project, Plaintiffs also discovered numerous defects m
Defendants' work.
Plaintiffs filed this lawsuit against Defendants on March 24, 2016, claiming that, by
misappropriating Plaintiffs' funds and failing to complete the project, Defendants had violated
the Texas Construction Trust Fund Act, engaged in fraud, and breached the construction
contract. Plaintiffs also alleged claims in connection with Defendants' defective work.
For nine months after Plaintiffs filed suit, Defendants never sought to enforce the
construction contract's arbitration clause. Instead, Defendants filed an answer, agreed to set the
case for trial, responded to discovery requests, and served third party discovery requests. It was
only after Plaintiffs filed a motion for summary judgment in December 2016 that Defendants, in
an effort to delay a judgment against them, sought to compel arbitration. Defendants' tactic must
fail, because, under these facts, Defendants have waived arbitration.
Further, even if arbitration were not waived, only one of the defendants-Y ekk
Construction-is bound by and can enforce the arbitration clause. Accordingly, and in the
alternative, Plaintiffs' claims against Pejman Dargahi and Kamran Dargahi cannot be compelled
to arbitration, because there is no valid arbitration clause between Plaintiffs and the Dargahis.
II. Facts
On or around April 4, 2014, Plaintiffs entered into a Residential Construction Contract
(the "Contract") with Yekk Construction for the construction of a house on a piece of
unimproved land located at 228 Sanostee Cove, Travis County, Texas, for a fixed contract price
of $1,460,000.00 (the "Project"). 1 Defendant Pejman Dargahi has taken the position that he
1
See Exhibit 1 (2014 Contract).
2
270

signed the Contract only as an agent of Y ekk Construction, not individually, 2 while Defendant
Karman Dargahi did not sign the Contract at all.
A. Defendants' First Counsel Answered Plaintiffs' Lawsuit and Engaged in Discovery

Without Seeking Arbitration.
Plaintiffs filed this lawsuit on March 24, 2016, 3 alleging damages ansmg from
Defendants' misappropriation of construction fund payments, breach of the Contract, and
negligent performance of construction work. 4 On May 10, 2016, Defendants filed their Original
Answer generally denying Plaintiffs' allegations. Defendants' Answer makes no reference to the
Contract's arbitration clause. 5
In June 2016, Plaintiffs propounded written discovery, including numerous requests for
production. 6 Although Defendants initially delayed responding to discovery, thereby forcing
Plaintiffs to file a motion to compel production, 7 Defendants eventually served responses to
Plaintiffs' discovery requests on August 11, 2016, 8 and signed a Rule 11 agreement regarding the
scope and timing of production of documents. 9 At no time during this agreed-to discovery
process did Defendants ever invoke the Contract's arbitration clause or argue that they were not
obligated to respond to discovery based on the arbitration clause.
2
Exhibit 2, December 9, 2015 Letter from Kemp Gorthey ("[Paje Dargahi] signed as an agent .... ").
3
Exhibit 3, Plaintiffs' Original Petition and Request for Disclosure.
4
A detailed factual summary of Plaintiffs' causes of action can be found in Plaintiffs' Motion for Summary
Judgment and the exhibits thereto, which are incorporate herein by reference in their entirety and attached hereto as
Exhibit 13.
5
Exhibit 4, Defendants' Original Answer.
6
Exhibit 5, Plaintiffs' First Request for Production.
7
Exhibit 6, Plaintiffs' Motion to Compel Discovery Responses and Production of Documents.
8
Exhibit 7, Defendants' Response to Plaintiffs' First Request for Production of Documents.
9
Exhibit 8, Rule 11 Agreement Re: Plaintiffs' Motion to Compel.
3
271

Further, Defendants' counsel also agreed (orally) to set the case for trial and provided
dates of availability. 10 During these discussions, Defendants' counsel never indicated that
Defendants would seek arbitration. The arbitration clause was not even mentioned.
With litigation underway, Plaintiffs also engaged an expert, Nathan Clawson, to
investigate the scope of damage to Plaintiffs' home, and Plaintiffs disclosed Mr. Clawson's
written report to Defendants. 11
B. Defendants Second Counsel Continues to Engage in Discovery Without Demanding

Arbitration-Until Plaintiffs File for Summary Judgment.
On October 3, 2016, over six months after Plaintiffs filed their lawsuit and with litigation
well underway, Defendants filed a motion to substitute counsel. It was only after Defendants
retained new counsel that Defendants, through their new counsel, mentioned the Contract's
arbitration clause for the first time. However, even then, Defendants' new counsel did not
immediately move to compel arbitration. Instead, they continued to engage in discovery by
producing additional documents and scheduling depositions 12 and by issuing a discovery
subpoena to Plaintiffs' construction lender, Regions Bank. 13
Having obtained sufficient discovery from Defendants evidencing their misappropriation
of Plaintiffs' construction funds and other wrongdoing, Plaintiffs filed their Motion for Summary
Judgment against Defendants on December 2, 2016. 14 Only then, with the evidence against them
clearly set forth in Plaintiffs' Motion and the prospect of a judgment looming, did Defendants
file their Motion to Compel Arbitration.
10
See Exhibit 12, Affidavit of David A. King, at~ 16.
11
Exhibit 9, Plaintiffs' First Amended Petition (Clawson report attached as Exhibit B).
12
Exhibit 10, November 9, 2016 Email.
13
Exhibit 11, Defendants' Notice oflntent to Take Deposition by Written Questions.
14
Exhibit 13, Plaintiffs' Motion for Summary Judgment.
4
272

III. Argument and Authorities
A. Defendants Have Waived Arbitration.
Defendants have waived arbitration by substantially invoking the judicial process in ways
that are fundamentally at odds with an arbitration proceeding and that prejudice the Handas'
right to a resolution of this dispute. See Perry Homes v. Cull, 258 S.W.3d 580, 589-90 (Tex.
2008) (holding that a party impliedly waives arbitration "by [1] substantially invoking the
judicial process [2] to the other party's detriment or prejudice").
1. Defendants Have Substantially Invoked the Judicial Process.
A party substantially invokes the judicial process by "taking specific and deliberate
actions after a suit has been filed that are inconsistent with the right to arbitrate." In re Castro,
246 S.W.3d 756, 761 (Tex. App.-Eastland 2008, no pet.). Courts consider a "wide variety of
factors" in determining whether a litigant has substantially invoked the judicial process,
including, among other factors:
• how long the party moving to compel arbitration waited to do so;
• the reasons for the movant's delay;
• whether and when the movant knew of the arbitration agreement during the
period of delay;
• how much discovery the movant conducted before moving to compel

arbitration, and whether that discovery related to the merits;
• whether the movant requested the court to dispose of claims on the merits;
• whether the movant asserted affirmative claims for relief in court;
• the extent of the movant's engagement in pretrial matters related to the merits
(as opposed to matters related to arbitrability or jurisdiction);
• the amount of time and expense the parties have committed to the litigation;
• whether the discovery conducted would be unavailable or useful in arbitration;
5
273

• whether activity in court would be duplicated in arbitration;
• when the case is to be tried.
Perry Homes, 258 S.W.3d at 591.
No single factor is required to show waiver, and "courts have found waiver based on a
few, or even a single one" of the above-described factors. !d. Here, the key factors weigh
against Defendants' Motion to Compel Arbitration.
i. Defendants' Delay Should Result in a Denial of Their Motion.
Standing alone, substantial delay in moving to compel arbitration can be enough to show
waiver. See Perry Homes, 258 S.W.3d at 591; Nova Info. Sys., Inc. v. Nidhi & Roneil, Inc., 14-
05-00845-CV, 2007 WL 925813, at *3 (Tex. App.-Houston [14th Dist.] Mar. 29, 2007, no pet.)
("A party can waive arbitration if that party delays seeking to compel arbitration and the delay
results in prejudice.").
Here, Defendants did not move to compel arbitration until nearly 9 months after this
lawsuit was filed-a delay which approximates the amount of time establishing waiver in other
cases. See, e.g., Perry Homes, 258 S.W.3d at 591 (waiver based on 14-month delay); Tuscan
Builders, LP v. 1437 SH6 L.L.C., 438 S.W.3d 717, 720-21 (Tex. App.-Houston [1st Dist.]
2014, review denied) (13 months); PRSI Trading Co. LP v. Astra Oil Trading, NV, 01-10-
00517-CV, 2011 WL 3820817, *3 (Tex. App.-Houston [1st Dist.] Aug. 25,2011, pet. denied)
(11 months).
Defendants' Motion to Compel Arbitration provides no explanation - and no excuse -
for the 9-month delay. Indeed, the first time that Defendants ever even mentioned the arbitration
clause was after they engaged new counsel to defend them in October 2016. But the fact that
Defendants chose not to invoke the arbitration clause for over six months when represented by
6
274

different counsel does not mean that Defendants' new counsel can ignore those months of delay.
At the same time, Defendants do not and cannot assert that they were unaware of the arbitration
clause in the Contract. It is Defendants' own form contract, and Defendants' counsel had a copy
of it since the outset of this litigation.
ii. Seeking to Compel Arbitration on the Eve of a Summary Judgment

Ruling Should Result in a Denial of Defendants' Motion.
Seeking arbitration on "the eve of trial" is a crucial factor in determining waiver. Perry
Homes, 258 S.W.3d at 584 ("[A] party cannot substantially invoke the litigation process and then
switch to arbitration on the eve of trial."). Not unlike seeking arbitration on the eve of trial,
Defendants are seeking arbitration on the eve of the Court's disposition of a summary judgment
motion. Indeed, Defendants filed their motion to compel arbitration within a week of Plaintiffs'
Motion for Summary Judgment. Thus, it was only when Defendants faced the imminent
prospect of a judgment against them that they sought to delay that judgment by filing their
Motion to Compel Arbitration.
iii. Defendants Engaged in Pretrial Matters Related to the Merits Prior to

Moving to Compel Arbitration.
For months, Defendants fully engaged in pretrial matters without once mentioning the
arbitration clause. Specifically, Defendants (i) filed an answer to Plaintiffs' Original Petition
without requesting arbitration; (ii) agreed to set the case for trial; (iii) responded to Plaintiffs'
Request for Production and Request for Disclosure; (iv) supplemented their discovery responses
after Plaintiffs filed a motion to compel discovery; and (v) issued a subpoena for production of
documents on Plaintiffs' construction lender Regions Bank.
Numerous courts have found that pretrial activities such as these may g1ve nse to
invocation of the judicial process. See, e.g., In re Castro, 246 S.W.3d at 761-62 (filing motion to
7
275

reinstate stricken answer, requesting entry of docket control order, requesting extension to file
dispositive motions, serving discovery requests, filing motion to compel, and taking deposition);
In re Christus Spohn Health Sys. Corp., 231 S.W.3d at 481-82 (motion for continuance,
substantive discovery, third-party petition, and motion for contempt); Cent. Nat. Ins. Co. of
Omaha, 856 S.W.2d at 494-95 (obtaining written discovery and filing general denial, motion for
continuance, and counterclaim); see also Electrostim Med. Services, Inc. v. Health Care Serv.
Corp., CIV.A. H-11-2745, 2012 WL 5373462, at *8 (S.D. Tex. Oct. 30, 2012) (Rosenthal, J.)
(obtaining written discovery and filing amended answer, joint discovery/case management plan,
and motion to dismiss).
iv. Significant Time and Expense Has Been Committed to Resolving This
Case on the Merits.
In the nearly nine months before Defendants moved to compel arbitration, and with the
Court's resolution of Plaintiffs' Motion for Summary Judgment Motion looming, the parties-
and particularly Plaintiffs-committed substantial time and expense to seeking a resolution of
the case on the merits. 15
2. Defendants' Delay in Seeking Arbitration Has Prejudiced Plaintiffs.
"Prejudice refers to the inherent unfairness caused by 'a party's attempt to have it both
ways by switching between litigation and arbitration to its own advantage."' Tuscan Builders,
LP, 438 S.W.3d at 721 (quoting Perry Homes, 258 S.W.3d at 597). The party opposing
arbitration need only show "the fact of prejudice," not "its extent." Perry Homes, 258 S.W.3d at
599.
"A party opposing arbitration may establish that it suffered actual prejudice by showing
that it incurred costs and fees due to the movant's actions or delay." In re Castro, 246 S.W.3d at
15
See Exhibit 12, Affidavit of David A. King, at~ 15.
8
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762. Here, Plaintiffs have incurred significant time and expense in connection with discovery
and in connection with preparing Plaintiffs' Motion for Summary Judgment. Though Plaintiffs
need not specify any particular amount expended in order to show prejudice from the
Defendants' delay in seeking arbitration, see Cent. Nat. Ins. Co. of Omaha, 856 S.W.2d at 495,
their expenses to date certainly reflect the extensive amount of pretrial activities undertaken
under the Texas Rules of Civil Procedure. Before Defendants moved to compel arbitration,
Plaintiffs incurred over $35,000 in attorneys' fees from pleading the case in this Court,
participating in written discovery, working with Plaintiffs' expert, and preparing Plaintiffs'
Motion for Summary Judgment. 16
Further, while Plaintiffs' costs and fees are enough to show prejudice, Plaintiffs have also
been prejudiced because Defendants have engaged in third-party discovery that they may not
have otherwise received in arbitration. See Perry Homes, 258 S.W.3d at 599 (rejecting argument
that no prejudice should be found from discovery without proof that the arbitrator would have
prohibited it because "arbitrators have almost unbridled discretion regarding discovery, so no
one can predict what they might do in advance").
B. The Dargahis Are Not Parties to the Arbitration Clause.
Further, while all Defendants have waived the arbitration clause, it is only one of the
defendants-Y ekk Construction-that would have any right to invoke the arbitration clause in
the first place. The individual defendants-Pejman and Kamran Dargahi-are not parties to the
arbitration clause and, accordingly, have no right to compel the claims against them to
arbitration.
16
Exhibit 12, Affidavit of David A. King, at~ 15.
9
277

"A party seeking to compel arbitration must establish that a valid arbitration agreement
exists and that the claims at issue fall within the scope of that agreement." G. T. Leach Builders,
LLC v. Sapphire VP., LP, 458 S.W.3d 502, 524 (Tex. 2015). Plaintiffs do not dispute that a
valid arbitration clause exists, but that clause, on its face, is only between two parties: Plaintiffs
and Y ekk Construction. By contrast, a valid arbitration clause does not exist between Plaintiffs
and the Dargahis.
It is axiomatic that, "[a]s a general rule, an arbitration clause cannot be invoked by a non-
party to the arbitration contract." !d. (internal quotation marks omitted). To determine whether a
valid arbitration clause exists between specific parties, the Court must look to the "intent of the
parties, as expressed in the terms of the agreement." !d.
Here, the plain language of the arbitration clause speaks for itself:
If a dispute arises between LAKEWAY CUSTOM HOMES AND

RENOVATION and Owner, ... both parties agree to submit the dispute to
binding arbitration . . . . The decision of the arbitrator shall be final and binding
upon both Owner and LAKEWAY CUSTOM HOMES AND RENOVATION
and judgment may be entered upon it in any court with proper jurisdiction.
[emphasis in original] 17
Thus, the intent of the parties is clear on the face of the arbitration clause: The only
parties bound by the clause are Lakeway Custom Homes and Renovation (i.e., Y ekk
Construction) and Plaintiffs.
Further, even if the arbitration clause were not express (although it is), the Dargahis
themselves have separately argued that they are not bound by any of the terms of the Contract. 18
Of course, the Dargahis cannot have it both ways, claiming on one hand that they are not bound
17
Exhibit 1, Contract Section XXIX (emphasis in original).
18
See Exhibit 2, December 9, 2015 Letter from Kemp Gorthey ("[Paje Dargahi] signed as an agent .... ").
10
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by the Contract for purposes of liability, but claiming on the other hand that they can invoke the
Contract's arbitration clause in an effort to avoid or delay a judgment against them.
Given that the arbitration clause is completely silent as to any parties other than Plaintiffs
and Y ekk Construction, the Dargahis have not met their burden of proving that a valid arbitration
agreement exists between them and Plaintiffs. See Murdock v. Trisun Healthcare, LLC, 03-10-
00711-CV, 2013 WL 1955767, at *3 (Tex. App.-Austin May 9, 2013, pet. denied) ("To be
entitled to compel arbitration under the FAA, [movant] had the initial burden of establishing as a
matter of law the existence of a valid arbitration agreement.").
Finally, Defendants also offer no evidence (or even an argument) that Plaintiffs are
equitably estopped from refusing to allow the Dargahis to benefit from the arbitration clause. It
is no wonder that Defendants do not make this argument, because it is the rare case when a non-
signatory is permitted to enforce an arbitration clause through equitable estoppel. Specifically,
this exception to the general rule is appropriate only when the claims against the non-signatories
seek "a direct benefit from a contract containing an arbitration clause." G.T. Leach Builders,
LLC, 458 S.W.3d at 527. By contrast
when the substance of the claim arises from general obligations imposed by state
law, including statutes, torts and other common law duties, or federal law, rather
than from the contract, "direct benefits" estoppel does not apply, even if the
claim refers to or relates to the contract.
!d. at 528 (quotation marks omitted) (emphasis added).
Here, Plaintiffs' primary causes of action against the Dargahis-e.g., breach of fiduciary
duty under the Texas Trust Fund Act, fraud, and unjust enrichment-are derived from
"obligations imposed by state law, including statutes, torts and other common law duties, or
federal law, rather than from the contract." Thus, regardless of whether these claims refer or
relate to the Contract between Plaintiffs and Y ekk Construction, Plaintiffs are not estopped from
11
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pursuing these claims against the Dargahis in state court. "While they have some relationship to
the general contract, the mere fact that the claims would not have arisen but for that contract is
not enough to establish equitable estoppel." !d. at 530.
WHEREFORE, PREMISES CONSIDERED, Plaintiffs respectfully request that the Court
deny Defendants' Motion to Compel Arbitration. Plaintiffs further pray for such other and
further relief at law and/or in equity to which they may be justly entitled.

A Professional Corporation
Austin, TX 78701-3790
(512) 480-5722 Telephone

David A. King
dking@gdhm.com

12
280

electronically via the e-filing system on counsel of record as listed below on this the 24th day of
May, 2017:
James Rudnicki
JRudnicki@BRS Texas.com
Russell Clinage
Tyler Hood
THood@BRSTexas.com
Stephanie Lugo
SLugo@brstexas.com
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
Is/ David A. King

David A. King
13
281

RESIDENTIAL C:oNSTRtrCTION CONTRACT
l: PARTIES
l 1 SCHOO\ER
L.-\KFV,_-\Y CL STO\l HO\IFS -\ \,l) RE'-<0\ .-\TIO\ (8Ui DER) \'vfTH OFFICE \1
DR!VL AL ST!:\, TX" 7873!) agrees to construct the Improvements described belovv for
Dhiraj and Ritu Handa (Owner), resi.ding at 1704 Randolph Ridge, Austin. TX-
787~6 on the Property described below.
H: PROPERTY
Lot l, Block:\, Seven Oaks Section 4. also known as 228 Sanostee Cove, Travis
County, TX. 78733 or otherwise described on attached exhibit together vvith all
improvements to be constructed on the Property.
HI: I'IPROVEMENTS
L\.KE\V.\ Y CLSTOM HO\IES A.'W RE:"iO\ATIO\i shall prmide all labor and materials for
construction of [X] a single family residence according to this Contract and the Plans.
prepared by Dominic Couturier of Italia Fine Homes, Inc., and specifications as,
prepared by L-\KEWA Y Ct ST0\1 HOMES \.'liD RE.\OYATIO'i and initiated by both parties
(collectively called the "Plans"). The labor and materials required to construct the
improvements may be referred to as the "vVork". To be clear, Plans include all interior,
IV: CONTRACT PRICE

Owner agrees to pay L\KE'IV.\ v Cr ST0:\-1 HO.\IES A.\iD RL\0\ -\TIO'<, One l'rliHion Four
~Thousand Dollars (S 1,~60,000.00), as compensation for construction
c; 1 1--k1· of the Improvements. subject to adjustment as allowed by this Agreement.
V: PAYMENTS TO L.-\KE\\A'f Ct STtHI HO\IES A:"iD RE:"iO\.-\TION

The Contract Price will be paid as follovvs:
A. Deposit Ovvner shall advance 3°-·o of the Contract Pnce to LAKEW.n
CtSTOM H<HIES .\:"iD RE.\0\.YflO'i prior to the start of construction.
B. Progress Payments: During construction. L-\KEW -\\- Ct ST0\1 HOMES

.\:"iD RE:"iOV.-\nO"'shall present 0\vner with requests for Progress
Payments based upon the allocated cost of the completed portions ami' or
phases of construction performed to the date of each request. Each
Progress Payment request shaH be made in normal construction phases as
agreed upon by Owner, L\KE\\.H CtST0\1 HOMES .\'\D R£'\0\.\TIO'i,
and th..: interim construction lender, if any, and shall be paid according to
the dnnv scheduk initialed by Owner and LAKEWA \ CtST0\1 HO\IES
A:"iD RE:"iO\.\TIO' and attached to this Agreement as an exhibit.
L\KE\\ \V CtST0\1 HO\IfS A:"iD RE.\0\ \TIO'i agrees that progress
payment to them will be made only after the inspector from the financial
institution that the Builder has an agreement vvith passes and approves the
completed portion of the construction for \vhicb payment is being
requested.
282

VI: TI.\IE FOR PA \'ME~T
l:pon the presentation of a request for a Pn)!;p·ess Payment, (hvner shalL vv1thin three
business lhys after r.;:ceipt of a request pay thl: Progress Pa]ment to L.\KE\\ \ 'l: Ct SHJ\1
HO\IES \'iD REVJ\·.\T!O\ PER V.B. The Final Payment (portion of the Contract Price
not paid by pnor payments) will be due and payable\\ 1thin f]v,.:: days of substantia[
VII: \VORK SCHEDlJLE

L\KE\\AY Ct STO\l HO.\H:S -\.'-ID RE.'iO\ -\TiO."i shall begin construction v.ithin 7
calendar days after (a l Ovvner has obtained a commitment for interim construction
flnancing or cash security acceptable to LAKE\\.\\:' CrsT0\1 HO\IES A.'iD RE'iO\ ATIO\:
and (b) A building permit has been obtained. L\K£W\.\ CtST0\1 HO:\IES A.'\D
RE\OV-\TIO'\i shall substantially complete construction vvithin 460 calendar days of the
date construction is begun. ( Compldion Date) unless the Completion Date is extended.
VH: EXTENSION OF COMPLETION DATE

L -\KE\V.\ Y CtST0.\1 H.o:HES .\'ID RE.'iOV \TIO'i shall complete the Improvements
Date. Hovvever. if the \Vork is delayed by Change Order, Owner's acts or omissions, or
delay is caused by flre or other casualty loss. vveather. strikes. boycotts, non-availability
of materials for which no substitute of equal equality and price is available, or other
events beyond the control of L\KE\V \Y Ctsr0.\1 HO.\IES A\D RE'I!OVATIO~. the time of
such delays shall b..; added to the Completion Dare. L-\KE\\A"r CtSTOM HO\lES A'iD
RE'I!O\ \Tl0.\1 shall give Ovvners written notice of each claimed extension day vvithin (30)
cal~ndar days of a claimed extension day.
IX: SCBSTA~TIAL CO:\IPLETION OF THE I.:\IPROVEME~TS

The Improvements \.vill be deemed to be substantially completed (including landscaping)
'vvhen a temporary ccrti ficate of occupancy is issued or. if no certitlcate of occupancy ts
required. vvben all electricaL heating and air conditioning. plumbing and landscaping.
tina! inspections have received regulatory authority approval or all approvals required tor
occupancy have been received. However. notvvithstanding the foregomg, if the Owner
moves into the Improvements. the Improvements shall be deemed to be substantially
completed.
X: SOCRCE Of PA Y:\lENT TO BVILDER

If Ov,ner is obtaining mttrim construction tinancing. 0\vncr shall obtain and pay the loan
at O',vner's expense. Tf 0\vner is unable to obtain an int~rim construction loan, with tenr\s
reasonable to 0\vncr, vvithin 7 days of this contract either Ow·ner or L\KE\\ A Y CtSHJ\1
HO\IES \\D Rnov \ TIO:\ may terminate this agreement by givmg the other party
\Hitten notice of termination. If Owner is not obtaining an interim construction loan to
pay for cnnstrucnon of the lmprovements. upon ex,.::cution of this Agreement and prior to
start of constntction. 0\vner shall establish a construction account vvith a financial
institution acceptable to both Owner and L\KE\\ .\' Cl SH)\l HO.\IES \\,D RE'iOV.\ flO.'-!.
The 0\\ncr shall deposit the entire Contract Prke in the account when it is established.
L\KE\\ \"r Ct ST0\1 Ht)\!FS \'liD Rr:vn .\TIO:'\ shall have the right hJ monitur the
283

account to insure that Ovvncr has deposited the required funds into the account. failure by
Owne-r tu establish and rmuntatn the account :.1s required shall be a breach ofthb
Agreement.
XI: ALLO\VANCES
Ovvner shall be entitled to allowances a~~ spcci fied m [] th..;: Plans [X] the Allowance~
Schedule altached to this contract as an exhibit. ,All savmgs attributable to allov;,ances.
\Vhich are not spent, vvill be credited to Chvner. and Ovvner \\ill be responsible for all
costs exceeding the A.llo\vances. If Owner se kcts allo\vance items in excess of specified
al!ovvanccs, L\KEV\· A Y CCST0\1 HO.\IES \'iD RL\0\ -\ TIO'i may submit an ....\ltowance
Overage" to 0\vner in the fom1 of a Change Order. C:pon approval by Owner. the
Allowance Overage vvill be payable vvith the next Progress Payments.
XH: CHA~GE ORDERS

\io alterations, additions or deletions \ViU be made in the \Vork. unless agreed to in
writing by 0\vner and L\KEW.\ Y CtST0\1 HO'\IES \'\D RE'iOV \TIO'Ii. To approve a
proposed change, both Owner and LAKE\\-\\ 0 ST0:\1 Hcnn:s _-\_'\D RF:'iOV\ TIO'i shall
sign a \vritten approval refen·ed to as a Change Order. \Vhen both parties have signed a
Change Order, the Change Order will amend this agreement The cost of all extra \vork
done and ..::xtra material furnished pursuant to a Change Order is as calculated by
L-'.KE\\ -\Y CtSTO\! HO-\IES A.'\D RL'iOV\TIO'-. plus 8 percent for admtmstrative
expenses. The cost for any \vork performed under a Change Order shall be paid
immediately or as agreed upon in the Change Order. L\KEW.\ Y CtST0\1 H(ntES .\.'\D
RE\!0\ATIO"< shall perform all construction at the property v\·ht:re the home is being
constructed unless othenvisc agreed upon by L-\KE\v-\Y Ct STO\i HO\IES \\!D
RE:\OV.\TIO"; and the Owner(s). All such agreements must be in writing. All requests for
\\ orks performed at the property shall be direckd to L\KE\\ .n C l ST0\1 H 0\1 ES \-" D
RE'iOVAriO'i only. Any and all v.~.xks performed at th.:: prop.::rty by Subcontractors
\Vithout the approval of L\KE\V-\ \ ClST0:\1 HO\IES .-\\D RE:\0\ ATIO'i are subject to
additional charges and are considered change orders. Additional fees and or penalties
may apply.
XII: 1:\Sl.'RANCE
Before beginning the vVork, LAKE\'~> AY CtST0.\1 HO\IES A~D R£:\OV.\TlO:\ shall obtain:
(a) Builders risk insurance covering all insurable risks in an amount equal to or greater
than the Contract Price: {b) Comprehensive public and autornobi le liabd ity insurance.
The cost for ali required insurance is inc! uded in the Contract Price. Proof of insurance
would be submitted to Owner prior to start of construction. Builder ~.>vitl also furnish the
Ov1ner \Vith a financial statement L)f L--\KE\\ A Y CI ST0\1 H<HIES \'iD RE.'tO\'.\TIO'Ii
XJ\': L\KE\\.\\ Ct ST0\1 H(HIES -\";!) RE\0\ \TlO\~S DLTIES

L\KE\\ .\\ Ct STO\l H0\1 ES A'dJ RE'<O\ -\TIO.'i a<.::cepts responsibili for performance of
~111 duties reasonable necessary to compktc the Work and agrees that: (a) L\1\~E\\-\\
C! STO\l HO\!ES \\!D RE'iO\ \T!O\ shall obtain all necessary licenses. permits. and
similar authonzations from gn<vernme11tal authorities rcqum::d lG perform under this
284

Agreenk~nr. including \Vclkr and ~.-va:~fc\.vatcr tap fees: (b) L\KE\\ \\ Crsro.\1 HO\IES
\\D RE"<O\ .\TJO'\i shall notify Owner of all conflicts betvvccn the Plan:; and
Spec i tications and any In \VS, ordi nanccs. rules, regulations, and re::-:tricti.ons l i ncl udi ng
impervious cover) that corne to the attention of L\KE\\ \\: Ct ST0\1 HO.\IES \.'ID
RE"<OV.\llO.'I; (c) L.\1\.E:\\.\i Ct ST0\1 H<.niES A'iD RE"iOV.HIO'i shall pay all cust:-i
related to the 'vVork, except any applicable lav.s, ordinances. rules, regulations. and
restnctions: (d) The materials used in connection 'vvith the \Vork will be ne'vv and of a
quality adequate for the intended purposes. except as othen:vise expressly specified in the
Plans: and (c) LAKE\\>.\ Y Ct ST0\1 HO'vtES .\\D RE'iOV.\ TIO'i shall deliver title to all the
materials, appliances and equipment used in the vVork free of all liens, claims. security
interests or encumbr::mce except the lien and security interests created by this agreement
or gi'llC!l to the interim construction knder. For clarity. Lakeway Custom Homes and
Renovtttion v;ould accept the ownership of plans and specification in tem1s of
inspection.
XV: E\lENTS OF DEF.ALLT BY LAKE\\\ 'l: CtST0.\1 Hn\IES .\.'iD RE'iO\ HIO'i
Each of the following shall be deemed an Event of Default by L.AKE\VA Y CtSTO\f
HO\rF:S .\\!) RE.\0\ .\.TlO'i and a material breach of this agreement: (a) L\KE\V \ Y
Ct ST0\1 HoMES A'<D RE\0\.\TIO'<'s failure, \vithout cause, to make payments to
subcontractors or vendors supplying materiJl for the \York: (b) A breach by L\KEWAY
Ct ST0\1 HOMES \'iD R£\0\ \riO:". of a covenant or agreerncnt contained in this
agreernent: (c J The filing of a voluntary petition in bankruptcy, making an assignment for
the benefit of any creditoL being adjudicated a bankrupt or insol'n:nt. or applying for or
consenting to the appointment of a receiver. tru:nee or liquidator of all or substantial part
of L\KE\\ \\ Cl STtHI HovtES A.'iD RE'-0\.\TlO'i ·s assets.
XVI: :"iOTICE OF DEF.ACLT TO L.\KEv'-'AY Ctsrcnr HO\IES .\.\D RE'iO\.\TlO\i

Each of the follmving shaU be deemed an Event of Default by L\KEW \ Y Ctsr0.\1
HO'viES .\.'\D RE'iOv XT!O.\ and a material breach of this agreement: (a) L\KE\V \ Y
Ct ST0\1 H(HIES A\D RE.\OY.\TIO'i 's failure, 1.vithout cause, to make payments to
subcontractors or vendors supplying material for the vVork: \b) A breach L.\KEvv .\\
Cl ST0\1 HO\IES .\'\iD RE'iOVATIO'i of a covenant or agreement contamed in this
agreement: 1c) The filing of a voluntary petition in bankruptcy, making an assignment for
consenting to the appointment of a receiver. trustee or liquidator of all or a substantial
part of L\KE\V .\ Y CtST0\1 HO.\IES \.\D RE'oO\ .-\TIO'i's assets.
XVII: RE\IEDIES OF OW'fER

Lpon the occurrence of any event of default by L\KE\v.n CtST0.\1 HO.\!ES \."iD
RE.\0\\llO'<. Owner may (but shall not be obllgated to), vvith(lllt prejudice to any other
avuilable right or remedy: (d) Terminate this agreement (bi Seek specitic pert\)rmance of
this agreement by L\KEW \ Y Cl ST0.\1 HO\IES nn RE'-10\ \Tl(f'i: (c) Pursue any other
remedies ~nailabk to Ovvncr under thi::. Agreement or as provided by lav\: or (d) .\ny
combinauon l)fthe foregoing. lJOvvner receives notice of any lie-n or claim f,)r labor
materials furni.shed to L\KE\V.\\ CrsTO\l HrntES \.'iD RE.\0\ .\TIO' for \vhich, iJ
285

established, Chvner, or the Property might becon1c liabk, though primarily chargeabk to
L\KEW \\ Ct ST0\1 HO\IES A"D RE.\10\' \TlO\i, 0\vner shall have the right to retain out
of Progress Payment an amount sufticient to indemnify Ov,ncr against such lien or
claim. tfcnvevec L\KE\\AY CtSTO\I HO\!F.SA-..o RE'\0\··\TIO'i shall have the right to
contest m good f::uth the vJlidiry of such lien or cb1im. If L\KEV\ \ Y Ct ST0.\1 Hcn!ES
.\.'iD RE:\10\.\TIO'i fails to discharge cmy such lien or claim any am.ounts expended by
Ov,ner for the payment of any liens or claims shall be credited against thc Contract Price.
XVIII: 0\V~ER 'S AGREEME.~TS

Chvncr agrees to: (a) Make all payments to L\KEW.\Y CtSTO\I HO.\IES A.\D
RE'\0\ATH}\i required by this agreement: (b) Perform all other obligations of Ovvner
required by this agreement: and (c J Protect the title and possession of the Property and
pay all ta.xes and assessments prior to delinquency.
XIX: EVE:">HS OF DEFALLT BY 0\VNER

Each of the following shal1 be deemed an Event of Det:1ult by Ov;ner and a material
breach of this agreement: (a) Ovvner t~1ils to make any payments due under this agreement
vvithin five days of the date it is due~ \b) Ovvner unreasonably delays L\KE\\AY CtSTO\I
HOMES .\.'W RE:\0\' ..\TIO'.' in the prosecution of the Work: (c) Ovvner fails to perform
any other covenant or at,'Teement contained in this agreement: idl Owner, or any person
liable for the payment or performance under this agreement files a petition in
bankrupt or [nsolvenL or applies rl_x or consents to the appointment of a receiver, trustee
or liquidator of all or a substantial par1 of their or its assets.
XX: :'-iOTJCE OF DEFAt:LT BY 0\'V:">iER

lfOwner commits em Event Of Default. prior to exercising any remedy granted this
agreement \X by law. LAKE\\.\)' Ct STO.\l HO\IES A.:\D REVW.\ T!O'.' shall deliver
\Vtitten notice of dd~llllt to (hvner. [fthe Event of Deffmlt is 11ot cured •within ten days
after deli very of such written notice. LAKE\\ A Y Ct ST0\1 Ho\IES \.'<D RE:\iOV.\TIO:"i may
exercise any remedy granted by this agreement or by applicable la\v. Lpon the
occurrence of an Event Of Default by 0'vvnec all amounts cnved for 'vVork completed ~;vill,
at the option of L\l(E\v.\ Y Ct ST0\1 HO\IES A\ D RE-...·0\ATIO'\, after any notice and cure
period. become immediately due and payable vvithout prejudice to any other remedy of
L\KE\VA \ CtST0\1 HO.\IES .\.\D RE.\10\\TlO.\i.
XXI: REMEDIES OF LAKEV\.H CtST0.\1 HO\IES .\'.'D RE:\OV\TIO\

Lpon the occurrence of any Event of Default by Ovvner, L\KE\".\ Y Ct ST0.\1 HOVIES
A.\D REV)\ \TIO'< may rbut shalt not be obllgated to). \Vithout prejudice tG any other
available right or remedy: (a) Terminate this asrreement and seek recO\ery of any damage
suffered L\KE\V \ Y Ct ST0\1 HO\IES \.'<D RE'iOL\TIO\: (b) Discontinue
perfonn~mce of this clgn;ement; ( c l Seck spec! fie performance of th1s agreement by
O~;vnt'r: [dJ Pur:;ue any other remed1es available to LAKE\\ .I\\. CtST0.\1 HcniES .\\D
RE\0\.\TIO\ under this .\.greernent or as [lrovided by [a\v: or {e) Any combination of the
fore~oing.
286

XXU: \vARR.A:"iTIES
L\Kf.\1; .\ Y Ct ST0.\1 HO.\IES .\ \iD RE:\0\ \ TIO\i will transr~r to Chvncr all manuhlcturcr'cl'
vvarranties received by L -\KE \I;\ Y Ct ST0\1 HO\IES \ \D R£\iO\ ATIO\i or any
subcontractor. L\.KE\\ .\\ Ct STO'r! Ho\IES \'<D RE\OV .\no-.. wli I not be required to
vvarranL repair or correct any of the \\iork provided any general or sub-contructor
!other than L\KEW-\r Ct ST0.\1 HO\IES .\.\D RE\0\ \TIO\l employed directly by 0\vner
and not as a sub-contractor or employee of L\KEV\\ Y Cl ST0\1 HO\IES A.\oD
RE."iO\.\ TlOi"i. L-\KE\\.\ Y CtST0\1 HO\fES \:'\D RE.\0\ Hl()\i shall not be obligated
under any ::;eparclte warranty given to 0\vner until L\KEv\-\ Y CLST0\1 Ho\n:s A:'«D
RE'iO\ ATIO'i has been paid in full. L\KE\\ \ Y Ct ST0\1 HO.\IES A:'«D RE'-;0\ \TIO\ shall
correct any of the \\lork vvhich is defective or which does not comply with the Plans and
Spcci fications for a period of one year from the date of :mbstantial completion of the
\Vork. Upon closing, Owner(s) :;hall be responsible t~x reasonabk care and maintenance
of the property. L\KE'~<\ \ i CtSTOM H{HIES A'iD R£\OV \Tl0\1 ~.<varranty excludes items,
~.<vhich have been damaged due to natura! causes, normal '"'ear and tear, inadequate care
and maintenance and other uncontrollable causes.
XXIII::HECHA:"iJC'S LIE:\'
Owner t,'Tants to L\KE'.V.\Y CtST0\1 HO.\IES A.'iD RE'<OV-\TIO'i a mechanic's lien to
secure performance of the obligations of Owner, and agrees. prior to beginning
construction, to execute a separate mechanic's lien contract acc.::ptable to L-\KE\\ \\
CtSTO\f HO\IES .\.'iD RE'iOV \ TrO"i and the fnterim Lender, if any. If Owner i:~ obtaining
an interim construction loan, LAKE\\.\ Y Ct STOM HO.\tES A.\ D RE'iOV-\ TIO"' shaH assign
ti.J the Interim Construction Lender a portion ofCtJntractor's mechanic's lien cqual to th.:
amount of the interim con::;truction loan obtained by Owner and to subordinate any
remaining amount l)f L\KE\v H CtSTO\f HO\IES .\'iD RDOYAT!O'; ':s lien to the interim
construct1on loan.
:LXIV: I'-iDEPENDE~T CO.'iTR-\CTOR

L\K£'1¥\ \ v Ct ST0\1 HO\IES A'i IJ RE"iO\ A no' ~,vi!! be an independent contractor.
;.;mhing contained in or inferable fi·om this contract should be construed to l i) make
LAKE\\ AY Ct ST0\1 HO\lES A'iD RK';O\ AIIO."i rhe ~1gent. servant or employee of OwneL
or ( i i) create any partnership, joint venture or other association between Owner and
LAKEVV-\Y Cisr0\1 HO.\fES A'iD RE:\0\\TlO';.
XXV: OTHER PARTIES BOL'ND

Owner and L\KE\\.\ Y CtSTOM HO\IES A';D RE."iO\ .. \TlO"i eacb binds himself or herscl L
his or her partners, successors. assigns and kgal represcntati ves to the other p<.trty and to
the: partners, successors, Gssigns and leg~1l representatives of the other party in all matters
relatc:d to thi::; agreement.
XXVI: \'0 ASSIGN"'lE"iT

\.!either party has the right to assign this agreement \-Vithout the \Hitkn consent of the
other unless this agreement ts transtt:rred per section XV.
287

:XXVII: NOTICES
\ioticcs must be in '-'"Titing and must be given by (a) personal delivery to the addressee or
( b > certi tled maiL return receipt requested. postage prepaid in a properly addressed
envelope. The parties designate the addresses follovving their signatures as their address
for notice. \iotices shall be deemed to be given and received as of the earlter of(a) actual
receipt or (b) the third day after the date of deposit ~.-vith the US Postal Service If either
party desires to change its address for notice. the party shall give notice to tho;;: other pm1y
in the manner required by this agreement and the change of addrese:> will be effective as of
the lJst tel occur of (a) the effecti vc: dat.:: recited in such notice or (b) the tenth day after
the date such notice is deposited ;;vith the L Postal Service.
Special Provision: builder agrees that the square fbotage called on dnnvings are
approximate and the builder has his 0\vn calculation and is not relying on the square
footage table.
XXVIII: TL\lE OF THE ESSENCE

Time lS of tbe essence in this agreen1ent.
XXIX: ALTERNATIVE DISPLTE RESOLl'TION

if a dispute arises betvveen L-\KEv\ A\ Ct snn1 HO\IES \.\iD RE:\0\.\TIO,\i and Owner,
\vhich cannot be resolved in good t~1ith through inft1rmal disntsstons, the parties agree to
subrnit the dispute to mediation before resorting to any litigation other than a suit to seek
inJunctiv..;;: relief. lfrnediation is required. the parties shall jointly agree upon a mediator
acceptable to both parties. If a dispute cannot be resolved through mediation. both panies
agree to submit the dispute to binding arbitration supervised by the American Arbitration
Association ( AAA). 1\vo Galleria T ow,~r Suite 1-!.40, 13-1-5 5 :.J oet Road. Dallas. T ex: as
752-\.0, ( 214) 702-8.:::22, using an i\AA approvc:d arbitrator and A.-\A construction
fndustry Arbitration Rules. The decision of the arbitrator shall be tina! and binding upon
both Ovvner and L\KEV\ \Y Ct ST0.\1 HO.\IES A:"'D RE"40\ -\TI0"4 and judgment may· be
entered upon it in any court \Vith proper jurisdiction.
XXX: CA:"iCELLATIO:"'
After l '' payment of S4J.800 is made, if there is ~my issue vvith the pem1itting process
that pre\enrs the builder from obtaining the p,;;:rmit. provided all the necessary septi.c.
foundation, framing design is completed by Builder (&receipts shtwm to Owner) and all
fees (water meter and tab, electricaL HO.-\ permit, and HO-\ deposit are paid by the
Builder). then O~:vner and Builder ~_:an mutually decide to cancel the contract \vith no
additional obligatJon to each other, e'\cept a $3500 HO.\ deposit payment is refunckd to
Owner by the Builder or the HO.-\. vvhoever is holding the SJ500 deposit
XXXI: ATTOR:\EY FEES

If L-\KE\\ A\ CtsT0\1 HO\IES -\"D RE...,O\ \rlO.'\ or Owner initiates any arbitration or
lc:g:al proceeding in <Kcorcbnce \vith the Residential Construction Liability ,\ct. brought
under or with relation to this contract, each party \\t!l be rcsp'-)nsibk for their own
atturne;t's fe<.::s.
288

XXXII: AG.REE:\IE'\iT OF P.\.RTIES
This contract contains the ~ntire ag:recmcnt of the partles and cannot be changed e'<.ccpt
by the1r wnttcn agrcerncnt. Exhibits and addenda which are a part this c~ontract are
(list):
Exhibit.-\: Disclosure Statement Required for Residential Construction Contract

Exhibit B: Subcontractors & Suppliers List
ln the event of any con f1ict or inconsistenq· bet\Veen the provisions of Section I through
XXXIV ofthis contract and th~ provisions of any of the attached exhibits and addenda,
the provisions of the attached exhibits ::md addenda shall govern and controL
XXXIII: COi\SULT YOUR ATTOR'\iEY

Builders.Brokers cannot give legal advice. This is intended to be a legally binding
contract READ IT CAREFFLLY. If you do not understand the effect of this contract,
XXXlY: THIS CO~TR-\CT CO'JSTTTL'TES A~D CO~STRUCTlO,'l

'IORTGAGE \YITHI~ THE MEA~L'iG OF SECTIO~ 9.3 D OF THE TEXAS
BtSI~ESS A"JD COM:\IERCE CODE. YOl' A~D L\KE\v \ Y CrsT0\1 HO\fES A'H)
RE"-10\ \ TIO'< ARE RESPO:'\iSIBLE FOR :\IEElT\G THE TER.\IS A~D
CO-'iDITlONS OF THfS CO:"iTRACT. IF YOL SIG~ THIS CONTRA.Cf, A'iD
'fOl. FAIL TO MEET THE TER'\IS .-\'\iD CONDITIONS OF THIS COYfRACT,
YOt; MAY LOSE \'OCR LEGAL 0\V'\iERSHIP RIGHTS OF YOCR HO:\IE.
K~O\V YOLR RIGHTS .-\'\iD DCTIES t:"iDER THE LA \V.
/ z t 1~-f
Executed on ~-[\+,/ _ _ _ _ _ _ _ _ _ _ _ , l4H-J. (Effective Date)
Client: Ritu Handa
289

EXHIBIT "A"
DlSCLOSL:RE STATE.\fE:\T REQlJ!RED FOR RES!DENTL-\L CO:\STRLCTJO:\

C'O:\TR,\CT
Project ck:scnpticm address: Lot 1, Bl.ock A, Seven Oaks Section -1,, also known as 228
Sanostee Cove, Travis County, TX. 78733. Contractor: L\KE\\ \ 't Ct ST0\1 HO\!ES
.'l.'iD RE'iOV \ TIO\
lender Regions Bank
K:\O'v'v. YOLJR RIGHTS AND RESPO'iSIBTUTIES LNDER THE L\.\V. You are
about to '-:::nter intL) a transaction to build a new horne or remodel existing residential
property. Texas la\v requires your contractor to provide you \vitb this brief crverviev;; of
some ofyour rights. responsibilities. and risk:-; in this transaction.
CONvT\'X:\CE TO CC}:\TRi\CTOR PROHIBITED. Y•Jur contractor may not require

you to convey your real property to your contr1ctor as a condition to the agreernent for
construction of improvements on your property.
KNO\V YOUR CONTR.ACTOR. Bdore you enter into your agreement for tho;;
your contractor. Obtain and verify ret·erences from other people \vho have used the
contractor for the type and size of construction project on your property.
GET IT 1\l 'vVRlTL\lG. i\fake sure that you have a \vritten agreement \Vith your contractor
that inc lucks: t 1 l a description of rhe ~;vork the con tractor is to perform: ( 2) the required
or estimated time for compktion of the \vork: 13 l the cost of the 'A·ork or ho\V the cost
\viii be determined: and t-1-) the procedure and method ofpayrnent. inclw..ii11g provisions
for statutory Retainage and conditions for final payment. Take your time in revi~wing
documents. !f you borrov. . money from a lender to pay for the improvements, you are
entitl<::!d to have loan closing documents furnished to you for review at kast one business
anothcr good cause exists, and make sure you understand the documents before you sign
tbern. If you t~lil to comply \Vtth the terms of the documents, you coLdd lose your
property. You are entitled to have your own attorney review any documents. If you ha\e
any question about th.: meaning of a document. consult an attorney.
GET A UST Of SLBCO.\JTRACTORS AND SCPPLIERS. Beton~ construction
commences, your contractor is required. to provide you \vith a llst of the :->ubcontractors
and supplters the contractor intends to uso:: on your project Your contrJctor is required to
supply updated information on any subcontractors and suppli.::rs added after the list
pro'vickd.
:\10~ lTOR ntE \\ORK. Lenders and gmernrnental authontics may inspecr the work in
progress from time to time fur their own purposes. These inspections are not i.ntended as
290

quality control !nsp~ctions. Quality control is a matter for :lou and your contractor. To
ensure that yuur home i;; being construch:~d in accordance \\ith your \vi:-;hcs and
specifications, you should inspect the \\ork ;·ourself or h~tvc yuur own indepemknt
inspo;:ctor review the \vork in progress.
VIO:-.ilTOR P.-\ Y:VlE:-.iT lfyou use a lender, your knder is required to provide you \Vtth
a oeriodic statement shO\.ving the monev disbursed bv the lender from the oroceeds of
l '-.,-• v .. •
your loan. Your contractor is also required to furnish you \Vith a statement at least once
e:.1ch month of money disbursed to subcontractors and suppliers tor this project. Review
these statements and rnakc sure that the nH. mcy is being properly disbursed.
CLAIMS B'{ CONTR_,\CTORS A'iD SLPPUERS. Lnder Texas !avv, if a subcontractor

or suppller who f\1rnishes labor or matcrirds for the construction of improvements on your
property is not paid, you may become liable and your property mGy be subject to a lien
t(.)r the unpaid amount even if you have not contracted directly vvitb the subcontractor or
supplier. To avoid liability, you should rake the follo\ving actions: ( l) ff you receive a
v.ritkn notice from a subcontractor or supplier. you should withhold payment from your
contractor f(x the c1mount of the claim stated in tl1e notice until the dispute between your
contractor and the subcontractor or supplier is resolved. lf your lender is disbursing
money directly to your contractor, you should immediately provide a copy of tl1e notice
to )/Our lender and instruct the ],ender to \vithbold payment in the amount of the claim
stated in the notice. If you continue to pay the contractor after re~..:eiving the written notice
\Vithout \Vithhotding the amount of the cbim. you may be liable and your property may
be ~mbject to a lien for the amount you failed to \-Vithhold.
Dwing construction and for 30 days after final wmpletion, termination, or abandonment
of the contract by th.;; contractor. yoll should \vithhold or cause your lender to withhold ! 0
percent of the amount of payments made for the work performed by your contractor. This
is sometimes referred to as ·statutory Retainage,' ff you r~lil to \V!thhold the l 0 percent
for at least 30 days after final completion. termination. or abandonment of the contract by
the contractor and if a valid claim is timely made by a claimant. you may be personai.ly
liable and your property may be subject to a hen up to the amount that you failed to
v.,i thhold. If a claim is not paid \Vi thin a certain time period, the claimant is required to
fik a mechanic's lien affidavit in the real property records in the county vvhere the
the affidavit could result in a court imposing a !Jen on your property if the claimant is
successful in litig:::Hion to enforce the lien claim .
SOME CLAI\lS f'vf.\Y NOT BE V.~L!D,

\Vhcn you receive a written notice of a claim or when a mechanic's lien affidavit is flle
don your property. you should knovv your kgal rights and responsibilities regarding the
claim. Nut all claims are valid. r\ notice of a claim by a subcontractor or supplier is
required to be sent and the mechanic's lien affidavit is required to be filed. \vithin strict
time periods. The notice and the aftldavit must contain certain information. -\ll claimants
may not fully cornply '>\ith the legal requirc'ments to collect on a claim. If you have paid
the contract in full before receiving a notice of a claim and ha\e r\illy complied \.vi.th the
291

Lrvv regarding st<ttutory Rerainage, you may nut be l1abk t(x that claim. Acconlingly, you
should consult your attorney vvhcn you receive a \<'vrittcn notice of a dairn to determine
the true e'l.tcnt of vour !iabili or Dotcntial liabilitv for that claim .
.- < ,.:
OBTAI'\i A LIE'\i RELEASE .c\'iD A BILLS-PAID AFFlDA \'IT. \Vhcn vou receive a
notice of claim, do not release withheld funds vvithout obtaining a signed and notarized
claim tiled by a subcontractor or supplier by requiring as a condition of each payment
all bills have been paid. LJnder Texas la\v. on final completion of the work and before
final payment. the contractor ts required to furnish you \vith an aftldavit stating that all
bills have been paid. If the contractor discloses any unpaid bill in the affidavit. you
.shoulc! withhold payment in the amount of the unpaid bill until you recc:~ive a \.Vaiver of
lien or rekase from that subcontractor or supplier.
OBTAI'! TTTLE fNSUR/\.NCE PROTECTIO'i. You may be able to obtain a title

insurance policy to insure that the title to your property and the existing: improvements on
your property are free from liens claimed by subcontractors and suppliers. If your policy
is issued before the improvements are completed and covers the value of the
improvements to be completed, you should obtain, on th~ completion of the
improvements are compkted and covers the value of improvements to be compkted, you
should obtairL on the completion of the improvernents and as a condition of your final
payment, a 'completion of improvements' policy endorsement. This endorsement vvill
protect your property from liens claimed by subcontractors aml suppliers that may arise
from the date the original ti.tle policy is issued to the date of the .:ndorsernent.
THfS lS TO VERIFY THAT I ( \VE) HAVE RECEfVED A COPY OF THIS

CO:--JTRACTOR'S DISCLOSURE STATE:V!E:-iT.
THIS IS ALSO TO VERIFY THAT I (WE) HAVE RECEIVED A COPY OF THE
ATTACHED LIST OF SL!BCONTRCTORS A. 'iD SUPPLIERS.
.... \ . '
SlGNED this --J------J.-~-----~----
(Davl
-'
of ____ t' {' \. ·
, ---~-----------~---~------·
_;e_ _ _ _
i:Vlonthl, 201·:1:
'
0\VNERS:
' i : ' '~
Client: Ritu Handa
\HTNESS: _ _ _ _--,---·~-----~~-
292

EXI-H BIT ·•B"
Pursuant to Property Coi..k: Sc:c. 53.256. t\.;I!O<v\ ing i::; a l of .,ubcuntractors and supplkrs
vvho may perforrn vvork on your resid-:nce: this !i:-;r 1S subject to change \vithout prior
notice: nev\ information shall be made available upon request to Client( si.
SLBCO'iTRACTCJRS
'JA\lE PHO:\E TRADE
R Tovvn Plumbing 51 2-635-S63 2 Plumbing

A. irtron 512 '1-3163 HVAC
/\tlas Rain Gutter Systems 512-250-lOll Gutters
Renaissance Stone 5 I 2-264-0256 Countertops
tfinkle Insulation 512-312-0826 Insulation
Fiberglass 'vVatcrproofing System 512-259-8029 \V aterproofing
Rodrigues Bros. 512-80! -.5870 Frarning
PC Concrete 5!2-783-8373 Concrete 'vVork
.·\merican Electric 512-263-1214 Electrical
SUPPL.lERS
PHONE TRADE
Designer Floors 512-263-.3333 Tik & Carpet

Factory Builder Store 512-83-+-l-+-+2 .'-\ppliances
Centex Materials 512-460-3033 Concrete
RSS 5 12-251-0606 Foundation Steel
Stock Building Supply 512-444-3172 Lumber
":\OTfCE: THIS LIST OF SLJBCO\..lTRACTORS AND SC PPLIERS MAY '\JOT BE.·\

FI:\AL USTI'\iG. TH.E CO:\TR.J...CTOR IS REQCIRED BY LJ... \\'TO SUPPLY
LPDATED INFOR:VL\ TfO'i, AS THE f:\FORMATIO:\ BECO).;lES AVAiLABLE.
FOR EACH SUBCO:\TRACTOR OR SLPPUER LSED IN THE WORK
PERFOR\lED 0:-i YOUR RESIDEI\CE."
( :Vfonth ), 2.\:J-+~3
Contractor:
293
. ( ;

EXHIBIT ·•('"
RFFl:Rf'\( t'S
l . :~ -\ \,CY -\ '\ D BOB 80\\ \!. \ ,, (.+ 7l)) 236-4986
r 512) -B J-,~227
3. MR. 'vVESLEY C.\LL.~W-\Y ( 5 I 2 l 299-0! 42
-L \!R FERGL SO'\ (7!.-+)299-7830
5. ROBERT FAR\IER (5!2)28-t-6738
{ ;
294

PE\ \LTY & SO.\ Is CL\t SE
This addendum sh~1!l be a part of the Residential Construction Contract bet\veen

L\1\TW \ Y CtST0:\1 HO\IES \.'iD RE\0\ \TIO\ cmd Dhiruj and Ritu Handa for the
Cl)nstruction of Improvements on 228 Sanostee Cove Austin, Texas.
A Sum of $100.00 per day would be the amount of penalty if the substantial
completion (including full landscaping) is not achieved within .460 days of start of
construction payable to the Owners by Lake;\ay Custom Homes.
A sum of $100.00 per day would be the amount of bonus if the substantial
construction payable by the nvvner to Lakc\vay Custom Homes.
J
t\
Executed on
i
/t ... ._,... ,.._....~,~~:';>
,o,:?- . ~~~ . ~-"~~
Pej\1an Dargahi ,//~-------- ' \

.,,,__ j
L\KE\\ \\: Ct ST0\1 iJO\iES·c\:·"i-l:'r'RE\0\.HlO'\,
295

Foundation
The Foundation wiil be designed by a licensed professional engineer, and it
will include the following minimums to meet Lakeway Custom Homes &
1. Footing, foundation walls and concrete slab shall be reinforced concrete

ASTM, C-150 Type l 3000 PSI at 28 days.
2. Vapor barrier: provide 6 mil polyethylene vapor barrier belovv entire slab
area.
Framing
The structural framing will be designed by a licensed professional engineer,
and it will include the following minimums to meet Lakeway Custom Homes &
1. Wood framing, 2 x 4 Southern pint~ No.2 Y.P
2. Corner braced with O.S.B Exterior wafer board.
3. Sheeting with ·· plywood at corners.
4. Joist: Southern pine No. 2 Y.P
5. Bridging continuous at t/3 points span not to exceed 6'-0" spacing.
6. Partition framing: 2 x 4- at 16'' o.c. SPF. This vvill be changed to 2 x 6 when

called.
7. Ceiling framing: Southern Pine No.2 Y. P.
• Rafters: 2 x Bat 24" o.c. iVlinimurn.

• Continuous 2 x 6 Purlins at rnid-span or 11'-6" maximum.
296

• 2 x 4 Struts at 48" o.c. From compr·ession members to bearing walls at
45 degree angle.
• 2 x. 4 collar ties at 48" o.c.
• Hips, vatleys, and ridges 2 x 10 minimums.
8. Nailing and attachment oi' all framing members and sheeting shall be as
specified in the International Residential code Nailing Schedule.
9. Lakeway Custom Homes & renovation may have the roof designed using roof
10. All exterior walls shall be of 2 x 6 Southern pine No.2 Y.P.
Roofing
L Roof Sheeting: Ox board 1/:/' x 4' x 8'
2. 2 layers or felt: 30 lbs and 15 lbs respectively.
3. Concrete tile roof. Hanson large barreL or approved equaL Roof vvould have
hand blended with 3 different colors from manufacturer standard color
selection.
4. Battens: Nominal l'x2"
5. Include b1rd stop.
6. Vdlley flashing shall extend minirnum 11" from center and have splash
d rter rib 1" high.
7. Flat roof: single ply roofing. Gr·anulated APP modified bitumen.
8. Concrete Tile roof to be selected from the standard manufacturer colors only.
10. iV'letal covered gutters are induded all around the house
Insulation
1. R-19 Fiberglass batt exterior walls and chase walls.
297

2. R-22 Fiberglass batt at walls opposite attic space.
3. R-26 Fibe1·glass batt at sloped ceilings and inaccessible tlat cel1ings.
4. R-:30 Blown insulation at accessible ceilings.
5. Tvvo phase air infiltration control treatment.
6. Sound reduction insulation will be installed on Bee Cave Street Side. Double
sheetrock will be installed in the bedroom. family room, prep kitchen on Bee
Cave side.
Drywall
L 5/B" Fire restraint drywall to all ceilings and garage/building common walls.
2. 5/8" fire restraint drywall to all garage walls and ceilings.
3. ~~~" dryvvall in all other areas as needed.
5. Tape, lloat and texture with heavy trovvel on all walls at upper floor, main
t1oor and garage annex only, except the closets and the garages. All other area
to 1·eceive standard medium ocange peel texture.
Finishes
AH paint material to be Sherwin- \tVHliams or approved equaL
Exterior:
• All wood to receive oil based primer and two coats of latex.
• Two coats ofTheralastic paint at stucco.
• Exterior rails: VVrought !ron (per attached picture)
Interior:
298

a All ceilings and walls to receive two coats of ]dtex paint.
b. P1·ime vvoodwork and two coats of enamel.
c. Owner to select maximum of 2 colors per room on vv;:llls and one color
d. All tile is based on $4/sf for material, including taxes and delivery to
jobsite
Interior doors & Trim
1. !nterior doors shall be 1-3/4'' fir 6 panel recessed paint grade solid core
doors.
2. Crown molding: As shown on dravvings, but only with 2 step application.
3. Baseboard and door trim: Y2'' x 3-1/4"
4. No wood paneling at \Nalls is included.
Windovvs
L All windows shall be Pella double pane with lovv E glass, brown color
Vinyl windows.
2. All operable windows to be supplied by appropriate screens.
3. i-\Jl windows on Bee Caves side of the road, pt'ep & main Kitchen Windows
to be special "Sound !'eduction" windows
Exterior Door
L All exterio1· doors to be steel with glass.
299

Cabinets
1. All cabinets shaU be custom made vvith wood material using knotty alder in
2. All upper cabinets shalt be 42''
4. Allow for pull-out trash cabinet in kitchens (near sink) and pull-out
warmer drawer (near island).
Mirrors
1. Ail Framed Mirrors to be selected by the Owner with budget not to exceed $1800.
Non-Framed mirrors are included outside of this $1800 budget.
Granite
1. All Granite to be 3cm all kitchen areas, bathroom areas and all niches with
3cm, level 2, glued strip/laminate edge and 2cm in other areas with 3cm glued
stn pjlaminate edge
Plumbing
1. Insulate all hot vvater lines in slab.
3. Insulate water lines in all exterior vvalls.
4. Lead flashwg on all plumbing vents.
5. M tmurn of 1-1/2" water line and of sewer line.
4. Plumbing is included in aU unfinished area ;,md its llmited to rough plumbing

and capped.
·-;· ..·
300

HVAC System
L Furnace: Heat pump, earner or approved equal.
2. i\ir Conditioning compressor: Carrier or approved equal, with Min. 14

seers.
Note: 4 systems are included (2 for Main floor, 1 for upper floor, 1 forGE). All
provisions for additional 1 system r basement wilt be made mc!uding compressor
pad.
Performance:
a. System layout for balanced zone.
b. Size system to accommodate hot spots.
c. Provide return air to eliminate hot spots.
d. Maintain duct vvork within insulated envelope of the house.
e. i'l!inimize duct run where possible.
Electrical
L All Electrical installation sha!l be per National Electrical Codes (N EC)
6. Provide underground service fron1 transformer to building.
3. Provide circuit breaker as required.
4. All conductors shall be copper,
5. Provide flee and smoke <:lldrm as required by code.
301

6. Electrical wiring is included in the unfinished an::as, and its limited to
nmning wires and capped.
7. Builder to vvire Garage Extension unit in a way to allow Owner to be able to
add a separate meter at his discretion and cost.
Exterior Concrete
1. All exterior concrete to match existing profile with a minimum thlckness

of 4''.
2. Include 6 x 6 wire mesh reinforcement.
Fireplaces:
L All Fireplaces to be 42" metal fireplaces.
Allowances
vVe have provided the following allowances vvithin our proposal; sales
taxes and delivery to jobsite are included vvithin allowances. However,
$0 for the following items at owner discretions: Note: The Owner has elected to
exclude Allovvances from this contract, but would dellver all to the builder at his
cost. The builder is only responsible for installation of the allowance [terns
excluding all the lovv voltage ring and equipment.
a. Electrical Fixture
b. Plumbing fixtur·es
c. Appliances
d. Front Door
e. Bath Tubs
302

f Finish Hardwat'e
g. Toilet ;;c1ccessories
h. Cabinet knobs & pulls
i. All Low voltage wiring and equ1prnent:
Telephone
Internet
Security
Audio/Video
Please Note:
In case of savings the appropriate funds will be fully credited to the

owners, and in case of overage no mark-ups will be added to any
amount.
All unfinished areas to be plumbed and capped with insulation and

sheet rock. The sheetrock would not receive any other treatments such
of pavers for the sum of $0 (Zero Dollars) to be added to the contract
sum.
All landscaping is per plan. Builder allows owner to substitute different

plants/trees/shrubs (5Gallon) of equivalent value.
An 18" berm will be built along Bee Caves Road until the end of the
driveway.
303

Site Work:
1. All Pavers should be of manufacturer's standard selection and colors.
2. Pavers vvould be placed on 6'' compacted road base and V2" sand.
3. Maximum of 3 different colors of pavers to be selected by the owner.
4. Areas to receive pavers are the follovving per plan
a. All Driveways.
b. Areas immediately in front of garages.
c. Area between Garden and swimming pooL
6. Landscaping per plan. The garden area and all landscape area would be
cleaned, graded vvith 2" of top soil and Bermuda grass with sprinklers
system. All future sprinklers relocation due to the own planting additional
landscaping is excluded.
7. Stone retaining walls sha!l be of 12" cut limestone dry stacked to 4' high. All
other heights above 4' would be set on rnortar with weep holes at 3' O.C. vvith
a 12" reinforced concrete pad under them. V\frouht iron fence to be installed
around garden area.
8. Stone wall at the upper drivevv~1y in front of the upper slab garage:-:; will be
12" engineered reinforced concrete wall and the exposed surfaces would
receive a thin layer of cement commonly known as underpinning.
9. All slab elevations are revised by the Architect and are noted on the record
drawings.
10. Both fountains at the driveway and the area betvveen garden and the
svvimming pool is excluded. The other 2 fountains are included. Minimum
size of fountains IN'il! be 6' length, 3' width, U3" depth for the basin and the
waterfall will be atleast 8' or higher vvith entire wall behind covered ln
stone/rock
11. All excavated material from the site would be used for:
a. Foundation fills if suitable and is approved by the engineer.
b. Other excavated rnaterials would be used for fill in other areas and
also be used to fill the southwest corner of the upper parkmg area in
front of garages.
c. All other none suitable excavated materials such as big boulders will
be hauled off site.
12. All other area of the site vvould be fine graded vvith 2" of top soil and grassed
vvith automatic spnnkler system. All shrubs & trees to get automatic
: i
304

sprinkler except the small cut out areas in upper & lower courtyard a reds
where there will be non<:wtomated spnnkler
13. Columns shown on dravvings vvould be of stone columns to match existing.
14. All nevv 8' wrought iron fence vvould be a match to existing.
15. Any light fixture shown on the site would be supplied by the owner
16. Builder will provide a water we!l as indicated in plans. No storage tank is
included in the bid for storage of w;;1ter extracted from the well. The
supplied by the well from underground water reservoirs. Builder to insure
proper pressure to run multi=zoned sprinkler system to service the entire
property. This item is not in base bid but this language overrides any
17. A 4' stone retaining vvall would be erected around the pool equipment, well
make it accessible for future servicing activities by owner.
19. All three existing gates would be operable via remote control and access code
pads.
20. Create positive drainage at all location.
21. Builder Guaranties no standtng vvater on the finished property.
22. All Exterior Railing to be constructed with appropriate patterned photograph
attached.
305

306

Schedule of Values
Contra~.:t initiations $43,800

Permit Fees $58,400
Site Excavation· Fill 4() I) $58,400
Foundation Part l $116,800
70
Fmmdation Part 2 ; 0 $102,200
Framing l8°n $262,800
;\LEP Rough $73,000
Rooting $116,800
Exterior Skin $146,000
!J"L<:>t!lation & Sheetrock $73,000
Trim & Cabinets $73,000
Painting $43,800
to
Flooring -+ 0 $58,400
.'vL E P Fina! $58,400
Septic System $29,200
Landscaping llTigation $43,800
l0
Drivevvays -+ n $58,400
final $43,800
Total 100% $1,460,000
307

Fax: (512) 479-6417
Kemp W. Gorthey Kendall L. Bryant
kemp@gortheylaw.com kendall@gortheylaw.com
Tel: (512) 236-8007 Tel: (512) 580-2858
December 9~ 2015
David King Via email: dking@gdhm.com

Graves Dougherty
Re: 228 Sanostee Cove, Austin, Texas 78733
Dear David:
As you know, I represent Pejman Dargahl, Kmnran Dargahi, and their company Yekk
Construction Services, LLC d/b/a Lakeway Custom Homes & Renovations.
You asked that we provide a preliminary outline of possible terms of settlement prior to the
mediation tomorrow at 2:30 p.m. with Ben Cunningham at the Lakeside Mediation Center.
Yekk Construction Services, LLC C'Yekk") owns 2 lots, 411 Goodnight Drive,
Georgetown, value approximately $220,000, loan a1nount approximately $110,000, and 408
Indigo Lane, Georgetown, value approximately $165,000, loan a1nount approximately $80,000.
We are going to put the lots on the market and sen them. We would use the cash proceeds to
contribute toward cost of finishing construction of the Handas' home. In order to expedite the
construction process, we would suggest possibly using the lots as collateral for some type of loan,
assuming the costs of the loan are not prohibitive. This would generate funds for immediate use
even if we could only borrow say 50% loan to value on the equity. Once the lots are sold, we
would then have aH of the equity available to pay back the loan and to contribute further to
construction costs.
Yekk also has approximately $10,000 in its account representing draws on the Handa
construction loan, plus approximately $70,000 left m the loan.
We would contribute aU of these funds toward the construction and Ka1nran Dargahi would
devote his time to completing the construction.
I do want to make dear that we regard the Handa's claim as an obligation of Yekk
Construction Services, LLC, and not Pejman Dargahl, personally. I have previously provided the
paperwork to Rick showmg ·that Lakeway Custom Homes & Renovation was registered in 2007
with the Texas Secretary of State as the assumed name of Yekk Construction Services, LLC, and
that Yekk Construction Services, LLC was identified as the contracting party and the entity to
308

which construction loan draws would be paid in documents signed by the Handas and provided to
their lender. Therefore, we do not believe there is any basis for imposing personal liability on Mr.
Dargahl based upon the fact that he signed the construction contract. He signed as an agent for an
identified principal~ and his principal's identity was actua.Uy known to and acknowledged by the
Handas.
We look forward to working with you tomorrow to resolve this matter.
Sincerely,
KG/ch
cc: Rick Triplett Via email: rtriplett@gdhm.com

cc: Pejman Dargahi Via email: paje 1@sbcglobaLnet

Y ekk Construction Services, LLC
d/b/a Lakeway Custom Homes & Renovations
cc: Ka:mran Dargahi Via email: kamran.dargahi@yahoo.com

Yekk Construction Services, LLC
d/b/a Lakeway Custom Homes & Renovations
309

3/24/2016 11:38:09 AM
Velva l. Price
District Clerk
Travis County
D-1-GN-16-001279
Cause No. D-t-GN-t6-oot~z9 Victoria Chambers
DHTRAJ HANDA and RTTU HANDA, § IN THE DISTRICT COVRT OF

Plaintiffs, §
§
v. § TRAVIS COUNTY, TEXAS,
§
PEJMAN DARGAHI, §
LLC, D/B/A LAKE\VA Y CUSTOM §
PLAINTlF.FS' QRIGINAL PETITION AND REQUEST .FOR DISCLOSURE
COME NOW Plaintiffs Dhiraj Handa and Ritu Handa, and file this Original Petition
complaining of Defendants Pejman Dargahi, Karuran Dargahi, and Yekk Construction Services,
LLC, d/b/a Lakeway Custom Homes and Renovation, and for cause of action would show as
follows:
I.
BACKGROUND AND OVIl:RVIEW
1. This lawsuit seeks money damages based on the Defendants' wrongful and
Further, Defendants have Jailed to pay subcontractors, despite falsely representing to P1ainti1Ts
made by Plaintiffs to themselves and to other purposes, leaving PlaintHis exposed to the risk of
310

work that the Defendants are refitsing to perform.
n.
DISCOVERY PLAN
HI.
PARTIES
4. Defendant Pejman Dargahi is a resident of Travis County, Texas, and may be
served with process at 125 Schooner Drive, Lakeway, Texas, 78738.
5. Upon information and belief, Defendant Karnran Dargahi is a resident of Travis
County, Texas, and may be served with process at 6425 Old Harbor Lane, Austin, Texas, 78739.
6. Defendant Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes and
Renovation is a Texas limited liability company with its principal office in Lakeway, Travis
County, Texas, and may be served with process by serving its registered agent, }Jejman Dargahi,
at 125 Schooner Drive, Lakeway, Texas, 78738
IV.
JUIUSDICTION AND VENUI~
7. This Court has subject matter jurisdiction over Plaintiffs' claims, and Plaintiffs'
claims are within thejmisdictionallimits ofthis Court. Pursuant to Tex. R. Civ. P. 47(c)(4),
Plaintiffs seek monetary relief over $200,000 but not more than $1,000,000.
& Rem. Code. Each Defendant's residence or principal offi.ce is in Travis County and all or a
PLAINTIFFS' ORIGINAL PETIT!ON AND REQUEST FOR DISCLOSURE

2
311

v.
FACTS
9. On or around Apri14, 2014, Plaintiffs entered into a Residential Construction
Cove, Travis County, Texas, for a flxed contract price of$1,460,000.00 (the "Project"). Tbe
Contract was executed on or around April 4, 2014, by Defendant Pejman Dargahi ("Dargahi").
d/b/a for Defendant Yekk Construction Services, LLC ("Yekk"), nor did the Contract disclose
19, 2015 email, Dargahi misrepresented to Plaintiffs that the Contract was with "Lakeway
Custorn Homes LLC" (a non-existent entity), and Dargahi did not indicate that he signed the
Contract on behalf of Yekk. Dargahi has also indicated that he and his brother, Kamran Dargahi,
are "partners" in the non-existent Lakeway Custom H<;mms LLC. Although not disclosed in the
Contract, upon infonnation and belief, Dargahi is the sole member and director of Yckk.
1L Article V of the Contract describes the following payment protocol:

if any, and shall be paid according to the draw schedule .initialed by Owner and
Agreement as an exhibit. LAKEWAY CUSTOM HOM.ES AND
RENOVATION agrees that progress payment to them wm be made only
after the inspector from the fimwcial institution that the Builder has an
agreement with passes and approves the cm:npleted portion of the
construction fo•· which payment is being requested. [emphasis added]
PLAINTIFFS' OR!G!NAL PETITION AND REQUEST FOR DISCLOSURE

3
312

$1.387,750 ($660,000 of which was paid directly by Plaintiffs and $727,750 of which was paid
13. Dargahi's last request for a payment, in the am.ount of$90,520, was made in
November 2015. At that time, Dargahi was already ovcrfunded by $29,950. Regions Bank
approwd a progress payment of$43,800 on Friday, November 13, 2015, noting that this fhnding
was an "exception to policy" and was Hthe maximum amount we could get approval to fund per
management." Regions Bank stressed that "there will be no further draws fl·om the loan until the
that he was still "$150,000 +I~ short to finish our contract." This despite the fact that, with the
$43,800 payment made the previous Friday, Dargahi was already ovetfunded by $73,750.
Dargahi also declared that "no more [construction] acilvities could be performed unless we are
Pl.A!NTIFFS' ORIGINAL PETITION AND REQUEST FOR DISCLOSURE

4
313

constructing a well fbr the Project, Dargahi had also obtained Plaintiffs' approval of a $20,000
to file liens. Despite Plaintiffs' repeated demands, Dargahi has refused to pay the outstanding
used Plaintiffs' money to pay ibr the following: (i) other construction projects (as confirmed by
af11davits obtained from Defendants' subcontractors, who worked on multiple pn~jects for
Defendants, but who were paid only out of Plaintiffs' funds); (ii) advertising; (iii) web design;
(iv) plumbing work done on Pajeman Dargahi's personal house; (v) purchasing a car; (vi)
purchasing real estate; (vii) attorney's fees in connection with multiple disputes; and (viii)
PLAINTIFFS' ORIGINAL PETIT! ON AND REQUEST FOR DISCLOSURE

5
314

created for the Project, which contained no funds other than those paid by PlaintiUs and the
construction lender for completion ofthe Project.
Instead, now that their misappropriation of fhnds has been uncovered, the Dargahis appear to
Of course, this bafl:Hng contention, which was only revealed after Plaintiffs' uncovered the
provides for a fixed payment of$1 A60,000--95% of which ($1,387,750) was fraudulently
extracted t}om Plaintiffs before the Dargahis announced in November 2015 that they were
VI.
CAUSES OF ACTION
A. Breach of Fiduciary Duty Under Trust ·Fund Act (Against AU Defendants)
19. Plaintiffs incOI1Jorate by reference the preceding paragraphs herein.
pursuant to Section 162.001, Tex. Prop. Code. Defendants Pajeman and Karnran Dargahi had
PLAINTIFFS' 0RIGlNAL PBTITlON AND REQUEST FOR DISCLOSURE

6
315

progress payments without first fully paying all cwTent or past due obligations Defendants
incurred. Defendants did so intentionally, knowing1y, and with intent to defraud. Defendants'
misapplication of trust funds is in violation of Section 162.031, and is a breach ofDef:endants'
B. Common Law Fraud (Against All Defendants)
Project. However; Defendants never intended to use Plaintiffs' payments solely for the Project,
as demonstrated by their systematic diversion of Plaintiff.<>* payments for Defendants' personal
use. Defendants' false representations induced Plaintiff:., to enter the Contract and to make
progress payments and change order payments to Defendants under the Contract.
25. Defendants Pajeman and Kamran Dargahi also represented to Plaintiffs that they
had fully paid the subcontractors hired to work on the Project knowjng that seventeen
subcontractors had not, in fact, been paid·-·-·to the tune of over $120,000. Defendants' false
PLAINTIFFS' ORIGINAL PETITION AND REQUEST FOR DISCLOSURE

7
316

C. Constructive Trust (Against AU Defendants)
28. Defendants have wrongfully profited from their breaches of fiduciary duty
D. Restitution and Unjust Enrichment (Against AU Defendants)
progress payments which Defendants diverted to non~Project expenses. Defendants obtained
those benefits by taking undue advantage of Plaintiff..'). Defendants are required to make
E. Money Had and Received (Against AU Defendants)
31. Plaintiffs incorporate by reference the preceding paragraphs hemin.
that belongs to Plaintiffs in equity and good conscience. Plaintiff.s are entitled to recover such
money.
F. Hre~•cb of Contract (Against Pejman Dargahi and Yekk)
PLAINTIFFS' 0R!GJNAL PETITION AND REQUEST POR DISCLOSURE

8
317

34. Yekk and Plaintiffs are parties to the Contract, and Pejman Dargahi is
individually liable for any breaches of Yekk's obligations under the Contract, as described above
35. Under the Contract~ Yekk and Pejman Dargahi are obligated to "provide all labor
and materials for construction" ofthe Project "according to [the] Contract and the Plans," and
"pay all costs related to the Work." Exhibit A, Sections III, XIV. Yekk and Pejman Dargahi
XV. Yekk and Pejman Dargahi have breached their contractual obligation by failing to pay at
37. Yckk and Pcjman Dargahi are further obligated to "deliver title to all the
materials, appliances and equipment used in the Work free of all Hens, claims, security interests
or encumbrances." Exhibit A, Section XV. Yckk and Pejman Dargahi have breached their
contractual obligation by failing to deLiver title free of mechanics' Hens.
38. Because ofYekk and Pejman Dargahi's breaches ofthe Contract, Plaintiff's have
suffered actual and consequential damages in excess of $280,000.
VII.
EXEMPLARY DAMAGES
39. Plaintiffs incol'porate by reference the preceding paragraphs herein.
PLA!NTlFFS' ORIGINAL PETITION AND REQUEST FOR DISCLOSURE

9
318

by law.
VIH.
ATTORNEY'S FEES
42. Pursuant to Tex. Civ. Prac. & Rem. Code§ 38.001, or as otherwise allowed by
law, Plaintiffs are entitled to recover reasonable and necessary attorney's fees and costs of court
IX.
CONDITIONS PRECEDI~NT
x.
44. Pursuant to Tex. R. Civ. P. 194, Plaintiffs request that Defendants disclose within
50 days of service of this request all information or material described in Rule 194.2 (a)-(I).
PRAYER
l. Actual damages in such amount as may be shown by the evidence;
3. Plaintiffs' reasonable and necessary attorney's fees and costs of court
pursuant to Tex. Civ. Prac. & Rem. C~)de § 38.001, or as otherwise allowed by law; and
PLAINTIFFS' ORIGINAL PETITION AND REQUEST FOR DISCLOSURE

10
319

4. Such other and further relief, at law or in equity, to which Plaintiffs may
show themselves to be justly entitled.

Austin, TX 78701~3790
(512) 480-5722 Tel
(512) 53f}-9942
By:

PLAINTIFFS' ORIGINAL PETITJON AND REQUEST FOR DISCLOSURE

11
320

5/10/2016 2:35:44 PM
Velva L. Price
District Clerk
Travis County
CauseNo. D-1-GN-16-001279 D-1-GN-16-001279
Jessica Arzola

and RITU HANDA, §
Plaint{ffs §
§
v. §
PEJMAN DARGAHI, §
KAMRAN DARGAHI, and YEKK §
Defendants § 261ST JUDICIAL DISTRICT
DEFENDANTS• ORIGINAL ANS\VER
Defendants, Pejman Dargahi, Kamran Dargahi, and Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation, file this Original Answer to Plaintiffs' Original Petition
and allege and say as follows:
Defendants enter a general denial.
WHERE FORE, Defendants respectfully pray that Plaintiffs take nothing and that
Defendants recover their costs and all other relief, general or special, at law or in equity, to which
they may be entitled.
Is/ Kemp Gorthey

Kemp W. Gorthey
Kendall L. Bryant
Austin, Texas 78701
Tele: 512/236-8007
Fax: 512/479-6417
Email: kendall@gortheylaw .com
321

CERTIFICATE OF SERVI<;E
By my signature above I hereby certify that a true and correct copy of the foregoing
Defendants' Original Answer was forwarded on this lOth day of May, 2016, to Plaintiffs' counsel as
follows:
David A King Via email: dking@gdhm.com

40 1 Congress Avenue, Suite 2200
Austin, TX 78701-3790
322

HO. D-1-GN-16-001279
DHIRAJ HANDA and RITU HANL'A, § IN THE DISTRICT COURT OF

Plaintiffs, §
§
v. §
§
PEJMAN DARGAHI, KAMRAN § TRAVIS COUNTY, TEXAS,
D/B/A LAKEWAY CUSTOM HO.r-tJES §
AND RENOVATION, §
· De:t::ndants. § 261st JUDICIAL DISTRICT
PLAINTIFFS' FIRST RE.JUEST FOR PRODUCTION OF DOCUMENTS

T;) ALL DEFENDANTS
TC: Defer.dants Pejman [ argahi, Kamran Dargahi, and Yekk Cor.struction Services,
LLC, d/b/a Lakeway ~.:ustom .t-Iomes and Renovation by and through their
attorney for record a:: listed ir. the Certificate of Service, below.
Pursuant to Rule 196, Texas }~ules o;· Civil Procedure, Plaintiffs Dhiraj Handa c.nd Rf!·~)
Handa ("Piaintiffs") request that eac'1 of Pejman Dargahi, Kamran D~r)::11,·, . ··
Construction Services, LLC, d/b/a Lakeway 2ustom Homes and Renov~!tion serve a wdtten
response tc this First Request for Productior~ and produce the documents described in ;.>.e
attached Exhibit A for inspection and copyir,g in the offices of these Plaintiffs' undersigned
counsel nr,, later than 30 Gays from f 0 date c7 service hereof, or at such other place and time as
·'
may be m•tually agreed upon by the parties. Each of the three Defendants is further requested to
•·
amend or supplemer.~ as necessary r ;d. as re·~·1ired under Rule 193.5, Texas Rules of Civil
Procedure.
I'LAINTIFFS' FIRST REQUEST FOR PROf :JCTION OF DOCUMENTS TO ALL DEFENDANTS

Pt.GElOFll
323

ORAVES, DOUGHERTY, HEARON & MOODY

Austin, TX 78701-3790
(512) 480-5722 Telephone
~512) 536-9942 Facsimile
By: js/ David A. King:

·G. Douglas Kilday
\ State Bar No. 00787834
dkilday@gdhm.com
David A. King
dking@gdhm.com

CK:·.TU'ICLTE OF SERVICE
The undersigned certifies that a true rnd correct copy of the foregoing has been served
electronically on counsel of record 'S listed aelow on this the 17th day of June, 2016:
Ke;~1pGorthey
The Gorthey Law Firm
604 W. 12th St.
Austin TX 78701
kem.n(G{gorthey law .com
/s/ David A. King

=>avid A. King
1'LAINT!FFS' FIRST REQUEST FOR PROI UCTION OF DOCUMENTS TO ALL DEFENDANT~:

F/,GE2 OF 11
324

EXIDBITA
INSTRUCTIONS
1. All documents produ')ed in response to this Request for Production of Documents

should be ::ccompanied by any and all attachments and enclosures with which they are or have
been stored.
2. Documents produced should be Bates-numbered and organized either as they are

kept in the ordinary course of bminess or organized and labeled to correspond with tl;le
paragt:aphs in this Request for Prodr;ction of Documents.
, 3. Pursuant to Rule 196.4, Tr:-xas Rules of Civil Procedure, this request for
production also specifically requests production of electronic or magnetic data. Such data should
be produced as it is maintained in the ordinary course of business, in native format, and in the
form of a computer readable CD or DVD. If production in this format is not reasonably
available, the undersigned is available to discuss alternative formats that would also be
compatible and reasonably available so as to allow the production to proceed.
4. Production format requested includes native files, searchable text, and

Concordance format load files (.dat and .opt for any images). Native file names should match
their Bates number and be linked within the Concordance load file. Text should be named
similarly and have one .txt file per document. Images, where appropriate, should be Group IV
300dpi TIP. Standard metadata fields, including all dates, subject, To, From, CC, Bee, Author,
Folder and MD5Hash should be included.
5. All wards or phrases shall be construed as either singular, plural, masculine,

feminine, or neuter as necessary to tring within the scope of these requests any documents which
might otherwise be construed to be outside their scope.
6. "And" as well as "or" shall Le construed either disjunctively or conjunctively as

necessary to bring within the scope of these requests any information which might otherwise be
construed to be outside their scope.
7. Pursuant to Rule 193.3, if y::m are withholding any information, documents, or

tangible things from your response to these requests, please state in your response: (1) that you
are withholding info;:mation or materials, (2) the request to which the information or material
relates, and (3) the privilege(s) asserted.
FLAINTIFFS' FIRST- REQUESTFOR PROCUCTION OF DOCUMENTS TO ALL DEFENDANTS

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325

DEFINITIONS
The following definitions apply to the requests for production below and are deemed to
be incorporated therein.
A. "Documents" means data or information reflected or stored in tangible, electronic,

or magneth form. Examples include papers, notes, books, accounts, drawings, graphs, charts,
photographs, electronic or videotape recordings, email, data and data compilations.
B. "Petition" means Plabtiffs' Erst Amended Petition filed in this matter.
C. "You," and "Your" tneans the individual Defendant (Pejman Dargahi, Kamran
Dargahi, or Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes and Renovation)
responding to this Request and any person or entity acting as an agent, representative, consultant,
attorney, o~· employe~ of the individu:1l Defendant responding to this Request.
D. "Plaintiffs" means Dhiraj Handa and Ritu Handa.
DOCUMENTS TO BE PRODUCED
1. Y ur file on the constructior, of the b:mse located at 228 Sanostee Cove, Travis County,
Texas (the ''House").
2. Do::uments regarding the h 1Juse or the construction of the House, including but not
limited to communications and correspo:1dence exchanged between You and any other
Defendant, You and Plaintiffs, or 7 ou and any subcontractors or other individuals or entities
involved in the construction of the Eouse.
3. Documents r~garding the ReJidentia' Construction Contract (the "Contract") entered on

or around April4, 2814, including bt not limited to the Contract, any drafts ofthe Contract, any
amendments to the Contract, and any documents or communications relating to the negotiation,
execution, or perfonnance of any of the terms of the Contract.
4. Dc.cuments, including bank ::tatements, invoices, and receipts, reflecting the expenditure,
transfer, or disposition of any funds paid by Plaintiffs or PlaintitTs' construction lender, Regions
Bank, to You. This request includes, but is not limited to documents reflecting the expenditure
of suc:1 fu~1ds for purposes other tt.an constructing the House, including (i) other construction
projects; (:i) advertising; (iii) web C:esign; (iv) work done on Pejman Dargahi's personal house;
(v) car pur.;)hases; (vi) real estate pu·~::hases; (vii) attorney's fees or other court costs; (viii) travel
expenses; or (ix) any other personali'!xpenses.
I r~AINTIFFS' FIRST REQUEST :r.DR PRODUCTION OF DOCUMENTS TO ALL DEFENDANTS

PAGE4 OF 11
326

5. Documents regarding the funding for the construction of the House, including but not
limited to communications and correspo:1dence exchanged between You and any other
Defendant, You and Plaintiffs, You and Regions Bank, or You and any subcontractors or other
individuals or entities involved in the construction of the House.
6. Documents reflecting or describing any work You, your subcontractors, or any other
individual ~or entity performed in connection with the Contract or in connection with the
constructio·1 ofthe House.
7. Documents reflecting any amounts invoiced or charged to You by (or owed by You to)
any subco:1tractors or other indivic!ual or entity for work performed in connection with the
Contract or in connection with the constructinn of the House.
8. Doc"!.lments reflecting any arr,ounts pc::d by You to any subcontractors or other individual
or entity iar work performed in ::onnection with the Contract or in connection with the
constructbn of the House.
9. De ~mnents reflecting or reh:.i:ing to r:ny demands, lawsuits, or settlements between You

ar.d any s .. Jcontractors or other ind:vidua:l-c: entity for work performed in connection with the
Contn:0t u in connection with the ccnstructbn ofthe House.
10. Do :-uments reflecting Yor·· estimJtes or projections of the cost of completing

r:onstructb:1 ofthe House on or after Novem)er 13,2015.
11. Re.:·.xds of materials used in <lour wcrk on the House.
12. All quotes, estimates, and pa/ applications or billing records for your wm·k on the House.
13. All videos and images You rave ofthe House or any parts ofthe House.
14. Ali plans, sketches or drawir:gs oftht~ House.
15. Documents reflecting Your s-:ope ofaork on the H~use.
16. Cb.nge orders, or other documents showing a change in the scope or nature of Your work
on the House.
17. D~cuments reflecting credit::; owed ~Q Plaintiff<> in connection with Your work on the
House.
PLAINTIFFS' FIRST REQUEST FOR PROe:JCTION OF DOCUMENTS 1D ALL DEFENDANTS

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327

18. Contracts between You and any subcontractor or other individual or entity who
performed work on the House.
19. Do~uments reflecting the scope of work of any subcontractor or other individual or entity
who performed work on the House.
20. Agreements of any kind, including any warranties, between You and any subcontractor or
other individual or entity who performed work on the House.
21. Insurance policies or proof of insurance You received from any subcontractor or other
individual or entity who performed work on the House.
22. Documents relating to any leaking or leak points in the House.
23. Do<::uments relating to Your diagnoses and/or repairs of any moisture-related problems in
the House.
24. Documents relating to any construction defects, problems, or damage described or

alleged in the inspection report attached as Exhibit B to Plaintiffs' Petition.
25. Documents relating to Your diagnoses and/or repairs of any defects, problems, or damage
described c: alleged in the inspection report Pttached as Exhibit B to Plaintiffs' Petition.
26. A ~opy of any insurance policy for which coverage may be available to satisfy any award
against Y o·J in this matter.
27. All petitions and complaints (original and amended) filed in any lawsuits in the past five
years to which You are, or have been, a party in any capacity.
28. All judgments that have been rendered in the past five years in any lawsuit in which You
are, or have been, a party in any capacity.
29. Documents concerning any of the matters which are the subject of Plaintiffs' Petition.
30. No.1-privileged documents a:·d communications relating to the formation and governance
of Y ekk Construction Services, LLC, d/b/a Lakeway Custom Homes and Renovation ("Y ekk").
This request includes, but is not limited to, organizational documents, operating agreements and
company agreements.
31. Do-.;uments reflectitig loans, capitalization, or any other funding for Y ekk.
fLAINTIFFS' FIRST REQUEST FOR PRODUCTION OF DOCUMENTS TO ALL DEFENDANTS

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328

32. Yekk's generalledger(s) from January 1, 2014 through the present.
33. M:r.utes, certificates of formation, certificates of operation and regulations for Yekk.
34. DoGuments reflecting members, owners, partners, managers, officers, directors, or

employees 'Jf Yekk
35. All income and expense statements, profit and loss statements, balance sheets, net worth
statements, and other financial staten:ents reflecting or related to Yekk's current net worth.
36. Yeklc's federal income tax returns and any other tax returns, with all attachments, Yekk
has prepared during the last three yeas.
37. Documents which reflect Yekk's ownership in any business since January 1, 2014.
38. Bank statements and records for Yekk from January 1, 2014 through the pre~ent,
including all documents which reflect checking accounts, savings accounts, and other monies or
cash on deposit Yekk has had with any financial institution, bank, or credit union, since January
1, 2014.
39. Documents reflecting monien debited/credited to and from Yekk since January 1, 2014.
40. D'J-:uments which reflect s:ocks, bonds, mutual funds, and/or exchange-traded funds
Yekk hs.s ::wned since January 1, 2C:4.
41. D'J~uments which reflect cedficates 'Jf deposit Yekk has owned since January 1, 2014.
42. Do.::uments which reflect annuities and annuity contracts Yekk has owned since January
1, 2014.
43. Docamcnts which reflect au~omobiles, trucks, recreational vehicles, motorcycles, boats,
watercraft, aircraft, and other vehicles Yekk owns or which Yekk has owned since January 1,
2014.
44. Documents which reflect an~' Hen or other encumbrance on any property Yekk owns that
is responsive to the foregoing request.
45. Documents which reflect real property Yekk owns or in which Yekk has an ownership or
leasehold interest.
46. Dccuments which reflect an:; mortgr,ge, lien or other encumbrance on any rea! property
Yekk owns or in wh!ch Yekk has an ownership or leasehold interest.
47. Do~uments which reflect an:' interest Yekk has in any oil and gas lease.
48. Ds ;uments which reflect an/ Hen o;_· other encumbrance on any interest Yekk has in any
oil and gas !ease.
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329

49. Documents which reflect any patent, copyright, or other intellectual property asset Yekk
owns or in which Yekk has an ownership interest.
50. Documents which reflect any lien cr other encumbrance on any patent, copyright, or
other intell(;ctual property asset Yekk owns or in which Y ekk has an ownership interest.
51. Do0uments which reflect money owed to Y ekk by any person or entity.
52. Documents which reflect any other asset Y ekk owns which have not been produced in
response to one of the foregoing paragraphs i:1 this request.
53. Documents which reflect the transfe:;- or conveyance by Yekk to any person or entity of
any asset (whether real property or personal property) valued at more than $1,000.00 during the
last three years. This includes, but is not limited to, the transfer or conveyance of any business
interest, stock, bond, certificate of deposit, annuity, automobile, boat, real property, lease, patent
and copyright.
54. Documents which reflect any claim, cause of action or lawsuit against Yekk.
55. Documents which reflect any debt owed by Yekk to any person or entity.
56. Documents which reflect any unpaid :ax owed by Yekk to any taxing authority.
57. Do~uments which reflect any other 'iability Yekk has which have not been 1xoduced in
response~~ one ofthe foregoing paragraphs:] this request.
58. Do·-~1ments which reflect Ye'<k's value, profitability or expected revenues.
59. Do::uments which reflect ass~ts in Yekk's name.
60. Do~uments which reflect all ;Jersons or entities with an ownership interest in Yekk since
January l, 2014.
61. D::>.:-uments reflecting the identities of Yekk's officers and employees who are
knowledgeable regarding Yekk's assets and liabilities .
. 62. Documents which reflect f'aiaries, distributions, bonuses, commissions, payment of

dividends cr transfers of any kind by Yekk t-:-, any person or entity since January 1, 20 i 4.
63. Documents which reflect th~ identit; of persons who have audited Yekk or who have
performed book keeping or other financial services for Yekk.
64. Documents filed by Y ekk wi':h the Internal Revenue Service or any other taxing authority
during the last five years concerning earning.: and withholdings.
65. Do:;uments that refer in any way, ditectly or indirectly, to any and all persons or entities
who have c:Jpraised any real or personal pro;_ erty for Y ekk since January 1, 2014.
PLAINTIFFS' FIRST REQUEST FOR PROD 1JCT!ON OF DOCUMENTS TO ALL DEFENDANTS

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330

66. Documents that constitute or refer in any way, directly or indirectly, to any appraisal of
any real or personal property prepared for Yekk since January 1, 2014 or that othetwise reflect
the value of any real or personal property in which Yekk has an interest.
67. Documents that refer in any way, directly or indirectly, to any filing in bankruptcy by
Yekk or any assignment by Yekk for the benefit of creditors.
68. Documents that refer in any way, directly or indirectly, to any and all business in which
Yekk is a partner or principal owner.
69. D:Jcuments reflecting any transactions Yekk has had with any corporate affiliate or
related part:; since January I, 2014.
70. All income and expense statements, I"rofit and loss statements, balance sheets, net worth
statements, and other financial statements reflecting or related to Pejman or Kamran Dargahi's
cun·ent net worth.
71. Pejman and Kamran Dargahi's federal income tax returns and any other tax returns, with
all attachments, Pejman and Kamran Dargahi have prepared during the last three years.
72. Documents which reflect Pejman or Kmnran Dargahi's ownership in any business since
January 1, 2014.
73. Documents which reflect checking accounts, savings accounts, and other monies or cash
on deposit Pejman or Kamran Dargahi has had with any financial institution, bank, or credit
union, since January 1, 2014.
74. Do:::uments which reflect stocks, bonds, mutual funds, and/or exchange~traded funds
Pejman or Xamran Dargahi has owned since January 1, 2014.
75. Dor;uments which reflect ce~tificates of deposit Pejman or Kamran Dargahi has owned
since Januay 1, 2014.
76. Documents which reflect annuities aild annuity contracts Pejman or Kamran Dargahi has
ovmed since January 1, 2014.
77. A copy of any insurance pollcy for which coverage may be available to satisfy any award
against Pejman or Kamran Dargahi ~n this mr.tter.
78. All Documents referring to any assets held in a trust for which Pejman or Kamran
Dargahi is or was a custodian, trustee, grantor, or beneficiary.
79. All Documents referring to any assets held in trust in which Pejman or Kamran Dargahi
has claimed or has had an interest.
80. Documents which reflect automobiles, trucks, recreational vehicles, motorcycles, l::oats,
watercraft and other vehicles Pejman or K?.mran Dargahi owns or which Pejman or Kmnran
Dargahi has owned since January 1, 2014.
I LAINTIFFS' FIRST REQUEST :<OR PRODUCTION OF DOCUMENTS TO ALL DEFENDANTS
PAGE90F 11
331

81. Documents which reflect any lien or other encumbrance on any property Pejman or
Kamran Dugahi owns that is responsive to the foregoing request.
82. Documents which reflect airplanes or other aircraft Pejman or Kamran Dargahi owns or
in which Pejman or Kamran Dargahi has an ownership interest.
83. Documents which reflect any lien or other encumbrance on any property Pejman or
Kamran Dargahi owns that is responsive to the foregoing request.
84. Documents which reflect real property Pejman or Kamran Dargahi owns or in which
Pejman or Kamran Dargahi has an ownership or leasehold interest.
85. Documents which reflect any mortgage, lien or other encumbrance on any real property
Pejman or Kamran Dargahi owns o1· in which Pejman or Kamran Dargahi has an ownership or
leasehold interest.
86. Documents which reflect any interest Pejman or Kamran Dargahi has in any oil and gas
lease.
87. Documents v.rhich reflect any lien Jr other encumbrance on any interest :>cjman or
Kamran Dargahi has in any oil and gas lease.
88. Do-;uments which reflect any pate:1t~ copyright, or other intellectual property asset
Pejma~1 or Kmnran L'argahi owns :r in w:.~ch Pejman or Kamran Dargahi has an ownershi!J
interest.
89. Do:uments which reflect any lien c· other encumbrance on any patent, copyright, or
other inte[ ~ctual property asset Pejman or Kamran Dargahi owns or in which Pejman or Kamran
Dargahi has an ownership interest.
90. Dor::uments which reflect m:mey ow~d to Pejman or Kamran Dargahi by any person or
entity.
9 J • Documents which reflect any other asset Pejman or Kamran Dargahi owns which have
not been produced in response to on.e of the foregoing paragraphs in this request.
92. Do :uments which reflect th<; transfer or conveyance by Pejman or Ka:nran Dargahi to
any person or entity of any asset (whether real property or personal property) valued at more than
$1,000.00 during the last three years. This includes, but is not limited to, the ~ransfer or
conveyance of any business interm:t, stock, bond, certificate of deposit, annuity, automobile,
boat, real property, h::ase, patent and copyrig~1t.
93. I?osuments which reflect any claim, (:ause of action or lawsuit against Pejman or Karman
Dargahi.
94. Documents which reflect any debt owed by Pejman or Kamran Dargahi to any person or
entity.
J LAINTIFFS' FIRST REQUEST FOR PRODUCTION OF DOCUMENTS TO ALL DEFENDANTS

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332

95. Dor;uments which reflect any unpaid tax owed by Pejman or Kamran Dargahi to any
taxing authority.
96. Doeuments which reflect any other Eability Pejman or Kamran Dargahi has vrhich have
not been pr?duced in response to one of the foregoing paragraphs in this request. -
97. Documents which reflect th~ identit'; of persons who have performed book keeping or
other finandal services for Pejman or Kamran Dargahi.
98. Dosuments that refer in any way, directly or indirectly, to any and all persons or entities
who have r.ppraised any real or personal pro:,Jerty for Pejman or Kamran Dargahi since January
1,2014.
99. Documents that constitute or refer in any way, directly or indirectly, to any appraisal of
any real or personal property prepared for Pejman or Kamran Dargahi since January 1, 2014 or
that otherwise reflect the value of any real or personal property in which Pejman or Kamran
Dargahi has an interest.
100. Documents that refer in any way, directly or indirectly, to any filing in bankruptcy
by Pejman or Kamra11 Dargahi or any assignment by Pejman or Kamran Dargahi for the benefit
of creditors.
iOl. Docu~nents that refer in any way, directly or indirectly, to any and all business in
which Pejman or Kamran Dargahi is a partner or principal owner.
PLAINTIFFS' FIRST REQUEST FOR PRODUCTION OF DOCUMENTS TO ALL DEFENDANTS

PAGE 11 OF 11
333

8/8/2016 5:28:00 PM
Velva L. Price
District Clerk
Travis County
CAUSE NO. D-1-GN-16-001279 D-1 ~GN-16-0(>1279
Tamara Franklin
Plaintiffs, §
§
§
PEJMAN DARGAHI, §
Defendants. § 26lst JUDICIAL DISTRICT
PLAINTIFFS' MOTION TO COMPEL DISCOVERY RESPONSES AND

PRODlJCTION OF DOCUMENTS
COME NOW Plaintiffs Dhlraj Handa and Ritu Handa ("Plaintiffs") and file this their
Motion to Compel Discovery Responses and Production of Documents from Defendants Pejman
Dargahi, Kamran Dargahi, and Yekk Construction Services, LLC, d/b/a Lakeway Custom
Homes and Renovation ("Defendants") and would respectfully show the Court as follows:
I. FACTUAL BACKGROlJND AND RELIEF REQUESTED

On May 27, 2016, Plaintiffs served on Defendants their First Retiuest for Disclosure
(included in Plaintiffs' Original Petition), and on June 17, 2016, Plaintiffs served on Defendants
their First Request for Production of Documents (attached hereto as Exhibit A) (collectively, the
"Discovery Requests").
Defendants' responses to the Dh;overy Requests were due under the Texas Rules of
Civil Procedure on June 17,2016 and July 17, 2016. Defendants have failed to respond to the
Discovery Requests or produce any documents responsive to the Requests. In an August 1,
2016, email (attached hereto as Exhibit B), Plaintiffs advised Defendants that if responses and
documents were not produced on or before August 5, 2016, Plaintiffs would have to file a motion
to compel. Defendants have yet to r~spond or produce documents.
334

In accordance with Rule 193 and 194 of the Texas Rules of Civil Procedure, Plaintiffs
respectfully request that the Court compel Defendants to respond to Plaintiffs' Discovery
Requests and produce all documents responsive to Plaintiffs' First Request for Production.
II. ATTORNEY'S FEES
Because Plaintiffs should not have to file and have a hearing on a motion to compel
Defendants to comply with basic discovery obligations under the Texas Rules, Plaintiffs ask this
Court to award Plaintiffs their reasonable expenses, including attorneys' fees, incurred in
obtaining 6e order to compel pursuant to Rule 215.1(d) ofthe Texas Rules of Civil Procedure.
In the ever:.~ that, after the filing of this motion but prior to hearing, Defendants elect to respond
in accorda~ce with Plaintiffs' reque~ts, Plaintiffs nonetheless ask this Court, in its discretion, to
award Plaintiffs their reasonable ex;::~nses.
WEEREFORE, PREMISES CONSIDERED, Plaintiffs respectfully pray that the Court
(i) issue an order compelling Defen~iints, wit3in seven days of the order, to produce responses to
the Discovery Requests and produr:') all documents responsive to Plaintiffs' First Request for
Production; (ii) award Plaintiffs the:r reasonable expenses, including fees, incurred in obtaining
the order; and (iii) grant Plaintiffs ~::.uch other and further relief, at law or in equity, to which it
may show themselves to be entitled.

Austin, TX 78701-3790
(512) 480-5722 Telephone
335

By: Is/ David A. King__
G. Douglas Kilday
dkilday@gdhm.com
David A. King
dking@gdhm.com

DHIRAJ I-lANDA AND RITU HANDA
CERTIFICATE OF CONFERENCE
Pursuant to Rule 191.2 of the Texas Rules of Civil Procedure, Plaintiffs hereby certify
that they have made a reasonable effort to resolve the discovery dispute with Defendants without
the neces3i~y of court intervention, bt such efforts have been unsuccessful. Plaintiffs' counsel
conferred via email with Defendants' counsel on August 1, 2016.
Is/ D ":vidA. King__

David A. King
CETITIFICATE OF SERVICE
The undersigned certifies thP': a true end correct copy of the foregoing has been- served by
electronically via the e-filing system on cov~1sel of record as listed below on this the 8th day of
Augu:.;t, 2C16:
Kemp Gorthey
604 W. 12th St.
Austin TX 78701
!<emp@gortheylaw.com
Is/ David A. King

David A. King
336

CAUSE NO. D-1-GN-16-001279

Plaintiffs, §
§
§
PEJMAN DARGAHI, §
YEKK CONSTRUCTION SERVIC3S, §
ORDER GRANTir-r-:; PLAINTIFFS' MOTION TO COMPEL

DISCOVERY RESPONSES AND PRODUCTION OF DOCUMENTS
On this day carne to be her_::d Plaintiffs' Motion to Compel Discovery Responses and
Productior: of Documents (the "Motion") in the above styled and numbered cause. After
considering the Motion, the evidenc":, the pleadings, and the arguments of counsel, the court is of
the opinion that the motion should b~ granted.
!t · :s ORDERED that Defendants, Pejman Dargahi, Kamran Dargahi, and Yekk
Construction Services, LLC, d/b/a Lakeway Custom Homes and Renovation, within no more
than 7 dayr. from the date of this o~·der, (i) f.erve responses to Plaintiffs' Request for Disclosure
and Plainti;:Ts' First Request for Production of Documents and (ii) produce all documents in their
possession, custody, or control that are responsive to Plaintiffs' First Request for Production of
Documents.
It is further ORDERED tl:at Plahtiffs have and recover their reasonable expenses
incurred ir. connection with this Mo"ion.
SIGNED this __________ day of ___ _ _ _ _ _ _ ,2016
PRESIDING JUDGE
337

Cause No. D-1-GN-16-00 1279

Plaintiff<; §
§
v. §
§
PEJMAN DARGAHI, § TRAVIS COUNTY, TEXAS
KAMRAN DARGA HI, and YEKK §
Defendants § 261 ST JUDICIAL DISTRICT
DEFENDANTS' RESPONSE TO PLAINTIFFS'

.FIRST REQUEST ~~OR PRODUCTION OF DOCUMENTS
TO: Plaintiffs by and through their counsel of record, David A. King, Graves Dougherty Hearon
& Moody, 401 Congress Avenue, Suite 2200, Austin, Texas 78701-3790
Defendants, Pejman Dargahi, Kamran Dargahi, and Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation, respond to Plaintiffs' First Request for Production of
Documents as follows:
1. Defendants object to the Instructions and Definitions to the extent they purport to
impose any obligation not required under, or to require Defendants to provide discovery of matters
beyond the scope of discovery under, Rules 192, 193, 195, 196 and 197, Tex. R. Civ. P., or which
are subject to the attorney-client privilege, the work product privilege, or any other privilege,
exemption or other prohibition from disclosure or confidentiality imposed or allowed by law.
2. Defendants reserve the right to produce documents only upon entry of an
appropriate protective order.
3. Whenever Defendants indicate they will produce documents, such response means
that they will produce for inspection and copying at their counsel's offices responsive documents to
the extent in the possession, custody or control of Defendants, subject to all objections, and to the
extent not privileged or exempt from discovery. To the extent not produced with this response,
documents will be made available for inspection at a mutually agreeable time at the offices of
338

Defendants' counsel. In addition, if Plaintiffs wish to designate a third party copy service,
Defendants will make the documents available to the third party copy service for copying and
delivery direct to Plaintiffs at their cost.
Is/ Kemp Gorthey

Kemp W. Oorthey
Kendall L. Bryant
Austin, Texas 78701
Tele: 512/236-8007
Fax: 512/479-6417
Email: kendall@gortheylaw.com
By my signature above 1 hereby certify that a true and correct copy of the foregoing
Defendants' Response to Plaintiffs' First Request for Production of Documents was forwarded on
this 11th day of August, 2016, to Plaintiffs' counsel as follows:
David A. King Via email: dking@gdhm.com

DARGAHJ and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCVMENTS/ch Page2
339

RESPONSE TO REQUEST FOR PRODUCTION
Defendants respond to Plaintiffs' Request for Production with the following paragraphs
being numbered to correspond to the numbered paragraphs ofthe Requests:
Request for Production No. 1: Your file on the construction of the house located at 228 Sanostee
Cove, Travis County, Texas (the "House").
RESPONSE: Will be produced.
Request for Production No.2: Documents regarding the House or the construction of the House,
including but not limited to communications and correspondence exchanged between You and any
other Defendant, You and Plaintiff.<>, or You and any subcontractors or other individuals or entities
involved in the construction ofthe House.
Request for Production No. 3: Documents regarding the Residential Construction Contract (the
"Contract") entered on or around April4, 2014, including but not limited to the Contract, any drafts
of the Contract, any amendments to the Contract, and any documents or communications relating to
the negotiation, execution, or perfom1ance of any of the terms of the Contract.
Request for Production No. 4: Documents, including bank statements, invoices, and receipts,
reflecting the expenditure, transfer, or disposition of any funds paid by Plaintiffs or Plaintiffs'
construction lender, Regions Bank, to You. This request includes, but is not limited to documents
reflecting the expenditure of such funds for purposes other than constructing the House, including
(i) other construction projects; (ii) advertising; (iii) web design; (iv) work done on Pejman Dargahi's
personal house; (v) car purchases; (vi) real estate purchases; (vii) attorney's fees or other court costs;
(viii) travel expenses; or (ix) any other personal expenses.
Request for Production No. 5: Documents regarding the funding for the construction of the House,
including but not limited to communications and correspondence exchanged between You and any
other Defendant, You and Plaintiffs, You and Regions Bank, or You and any subcontractors or
other individuals or entities involved in the construction of the House.
Request for Production No. 6: Documents reflecting or describing any work You, your
subcontractors, or any other individual or entity performed in connection with the Contract or in
connection with the constmction of the House.
RESI'ONSE: Will be produced.
DARGAHI and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTSfch Page3
340

Request for Productign No.7: Documents reflecting any amounts invoiced or charged to You by
(or owed by You to) any subcontractors or other individual or entity for work performed in
connection with the Contract or in connection with the construction of the House.
Reguest for Production No.8: Documents reflecting any amounts paid by You to any
subcontractors or other individual or entity for work perfonned in connection with the Contract or
in connection with the construction of the House.
Reguest for Production No. 9: Documents reflecting or relating to any demands, lawsuits, or
settlements between You and any subcontractors or other individual or entity for work performed in
connection with the Contract or in connection with the construction of the House.
Reguest for Production No. 10: Documents reflecting Your estimates or projections of the
cost of completing construction of the House on or after November 13, 2015.
Request for Production No. 11: Records of materials used in Your work on the House.
Reguest for Production No. 12: All quotes, estimates, and pay applications or billing records
for your work on the Bouse.
.Request for Production No. 13: All videos and images You have of the House or any parts of
the House.
Reguest for Production No. 14: All plans, sketches or drawings of the House.
Reguest for Production No. 15: Documents reflecting Your scope of work on the House.
Reguest for Production No. 16: Change orders, or other documents showing a change in the
scope or nature of Your work on the House.
DARGAH! and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page4
341

Request for Production No. 17: Documents reflecting credits owed to Plaintiffs in connection
with Your work on the House.
Request for Production No. 18: Contracts between You and any subcontractor or other
individual or entity who perfmmed work on the House.
Request for Production No. 19: Documents reflecting the scope of work of any subcontractor
or other individual or entity who performed work on the House.
Request for Production No. 20: Agreements of any kind, including any warranties, between
You and any subcontractor or other individual or entity who perfonned work on the House.
Request for Production No. 21: Insurance policies or proof of insurance You received from
any subcontractor or other individual or entity who performed work on the House.
Request for Production No. 22: Documents relating to any leaking or leak points in the
House.
Request for Production No. 23: Documents relating to Your diagnoses and/or repairs of any
moisture-related problems in the House.
Request for Production No. 24: Documents relating to any construction defects, problems, or
damage described or alleged in the inspection report attached as Exhibit B to Plaintiffs' Petition.
Request for Production No. 25: Documents relating to Your diagnoses and/or repairs of any
defects, problems, or damage described or alleged in the inspection report attached as Exhibit B to
Plaintiffs' Petition.
DARGAHl and YEKK RESPONSE TO JST REQUEST FOR PRODUCTJON OF DOCUMENTS/ch PageS
342

Request for Production No. 2<5: A copy of any insurance policy for which coverage may be
available to satisfy any award against You in this matter.
Reguest for Production No. 27: All petitions and complaints (original and amended) filed in
any lawsuits in the past five years to which You are, or have been, a pmiy in any capacity.
Reguest for Production No. 28: All judgments that have been rendered in the past five years
in any lawsuit in which You are, or have been, a party in any capacity.
Reguest for Production No. 29: Documents concerning any of the matters which are the
subject of Plaintiffs' Petition.
Request for Production No. 30: Non-privileged documents and communications relating to
the formation and governance of Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes
and Renovation ("Yekk"). This request includes, but is not limited to, organizational documents,
operating agreements and company agreements.
Reguest for Production No. 31: Documents reflecting loans, capitalization, or any other
funding for Yekk.
Reguest for Production No. 32: Yekk's general ledger(s) from January 1, 2014 through the
present.
Reguest for Production No. 33: Minutes, certificates of formation, certificates of operation
and regulations for Yekk.
Request for Production No. 34: Documents reflecting members, owners, partners, managers,
officers, directors, or employees ofYekk.
DARGAHI and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page6
343

Request for Production No. 35: All income and expense statements, profit and loss
statements, balance sheets, net worth statements, and other financial statements reflecting or related
to Yekk's current net worth.
Request for Production No. 36: Yekk1s federal income tax returns and any other tax returns,
with all attachments, Yekk has prepared during the last three years.
RESPONSE: Objection: Confidential.
Request for Production No. 3(: Documents which reflect Yekk's ownership in any business
since January 1, 2014.
Request for Production No. 38: Bank statements and records for Yekk from January 1, 2014
through the present, including all documents which reflect checking accounts, savings accounts,
and other monies or cash on deposit Yekk has had with any financial institution, bank, or credit
union, since January 1, 2014.
Request for Production No. 39: Documents reflecting monies debited/credited to and from
Yekk since January 1, 2014.
Request for Production No. 40: Documents which reflect stocks, bonds, mutual funds, and/or
exchange-traded funds Yekk has owned since January 1, 2014.
Request for Production No. 41: Documents which reflect certificates of deposit Yekk has
owned since January 1, 2014.
Request for Production No. 42: Documents which reflect annuities and annuity contracts
Yekk has owned since January 1, 2014.
Request for Production No. 43: Documents which reflect automobiles, trucks, recreational
vehicles, motorcycles, boats, watercraft, aircraft, and other vehicles Yekk owns or which Yekk has
DARGAHI and YEKK RESPONSE TO lST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page7
344

owned since January 1, 2014.
Request for Production No. 44: Documents which reflect any lien or other encumbrance on
any property Yekk owns that is responsive to the foregoing request.
Request for Production No. 45: Documents which reflect real property Yekk owns or in
which Yekk has an ownership or leasehold interest.
Request for Production No. 46: Documents which reflect any mortgage, lien or other
encumbrance on any real property Yekk owns or in which Yekk has an ownership or leasehold
interest.
Request for Production No. 47: Documents which ret1ect any interest Yekk has in any oil and
gas lease.
any interest Yekk has in any oil and gas lease.
Request for Production No. 49: Documents which reflect any patent, copyright, or other
intellectual property asset Yekk owns or in which Yekk has an ownership interest.
any patent, copyright, or other intellectual property asset Yekk owns or in which Yekk has an
ownership interest.
Request for Production No. 51: Documents which reflect money owed to Yekk by any
person or entity.
Request for Production No. 52: Documents which reflect any other asset Yekk owns which
DARGAHI and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS!ch PageS
345

have not been produced in response to one of the foregoing paragraphs in this request.
Request for Production No. 53: Documents which reflect the transfer or conveyance by Yekk
to any person or entity of any asset (whether real property or personal property) valued at more than
$1,000.00 during the last three years. This includes, but is not limited to, the transfer or conveyance
of any business interest, stock, bond, certificate of deposit, annuity, automobile, boat, real property,
lease, patent and copyright.
Request for Production No. 54: Documents which reflect any claim, cause of action or
lawsuit against Yekk.
Request for Production No. 55: Documents which ref1ect any debt owed by Yekk to any
person or entity.
Request for Production No. 56: Documents which ref1ect any unpaid tax owed by Yekk to
any taxing authority.
Request for Production No. 57: Documents which reflect any other liability Yekk has which
have not been produced in response to one of the foregoing paragraphs in this request.
Request for Production No. 58: Documents which reflect Yekk's value, profitability or
expected revenues.
Request for Production No. 59: Documents which ref1ect assets in Yekk's name.
Re_quest for Production No. 60: Documents which reflect all persons or entities with an
ownership interest in Yekk since January 1, 2014.
Request for Production No. 61: Documents reflecting the identities of Yekk's officers and
DARGAHI and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page9
346

employees who are knowledgeable regarding Yekk's assets and liabilities.
Request for Production No. 62: Documents which reflect salaries, distributions, bonuses,
commissions, payment of dividends or transfers of any kind by Yekk: to any person or entity since
January 1, 2014.
Request for Production No. 63: Documents which reflect the identity of persons who have
audited Yekk or who have performed book keeping or other financial services for Yekk.
Request for Production No. 64: Documents filed by Yekk with the Internal Revenue Service
or any other taxing authority during the last five years concerning earnings and withholdings.
Request for Production No. 65: Documents that refer in any way, directly or indirectly, to any
and all persons or entities who have appraised any real or personal property for Yekk since January
1, 2014.
Request for Production No. 66: Documents that constitute or refer in any way, directly or
indirectly, to any appraisal of any real or personal property prepared for Yekk since January 1, 2014
or that otherwise reflect the value of any real or personal property in which Yekk has an interest.
filing in bankruptcy by Yekk: or any assignment by Yekk: for the benefit of creditors.
Reguest for Production No. 68: Documents that refer in any way, directly or indirectly, to any
and all business in which Yekk is a partner or principal owner.
Request tor Production No. 69: Documents reflecting any transactions Yekk: has had with
any corporate affiliate or related party since January 1, 2014.
DARGAHI and YEKK RESPONSE TO !ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch PagelO
347

Request for Production No. 70: All income and expense statements, profit and loss
statements, balance sheets, net worth statements, and other financial statements reflecting or related
to Pejman or Kamran Dargahi's current net worth.
RI<:SPONSE: Objection: Pejman and Kamran Dargahi will produce a financial statement showing
net worth to the extent required under law as a result of Plaintiffs' claims for
punitive damages. Otherwise, these matters are confidential, irrelevant, and
constitute impermissive post-judgment discovery.
Request for Production No. 71: Pejman and Kamran Dargahi's federal income tax returns and
any other tax returns, with all attachments, Pejman and Kamran Dargahi have prepared during the
last three years.
RESPONSE: See Response to Request for Production No. 70
Request for Production No. 72: Documents which reflect Pejman or Kamran Dargahi's
ownership in any business since January 1, 2014.
Request for Production No. 73: Documents which reflect checking accounts, savings
accounts, and other monies or cash on deposit Pejman or Katnran Dargahi has had with any
financial institution, bank, or credit union, since January 1, 2014.
Request for Production No. 74: Documents which reflect stocks, bonds, mutual funds, and/or
exchange-traded funds Pejman or Kamran Dargahi has owned since January 1, 2014.
Reguest for Production No. 75: Documents which reflect certificates of deposit Pejman or
Kamran Dargahi has owned since January 1, 2014.
Request for Production No. 76: Documents which reflect annuities and annuity contracts
Pejman or Kamran Dargahi has owned since January 1, 2014.
Request for Production No. 77: A copy of any insurance policy for which coverage may be
available to satisfy any award against Pejman or Kamran Dargahi in this matter.
DARGAHI and YEKK RESPONSE TO lST REQUEST FOR PRODUCTION OF DOCUMENTS/ell Page 11
348

Request for Production No. 78: All Documents referring to any assets held in a trust for
which Pejman or Kamran Dargahi is or was a custodian, trustee, grantor, or beneficiary.
RESPONSE:: See Response to Request for Production No. 70
Request for Production No. 79: All Documents referring to any assets held in trust in which
Pejman or Kamran Dargahi has claimed or has had an interest
Request for Production No. 80: Documents which reflect automobiles, trucks, recreational
vehicles, motorcycles, boats, watercraft and other vehicles Pejman or Kamran Dargahi owns or
which Pejman or Kamran Dargahi has owned since January 1, 2014.
any property Pejman or Kamran Dargahi owns that is responsive to the foregoing request.
Request for Productiqn No. 82: Documents which reflect airplanes or other aircraft Pejman
or Kamran Dargahi owns or in which Pejman or Kamran Dargahi has an ownership interest.
any property Pejman or Kamn~n Dargahi owns that is responsive to the foregoing request.
Request for Production No. 84: Documents which reflect real property Pejman or Kamran
Dargahi owns or in which Pejman or Kamran Dargahi has an ownership or leasehold interest.
Request for Production No. 85: Documents which reflect any mortgage, lien or other
encumbrance on any real property Pejman or Kamran Dargahi owns or in which Pejman or Kamran
Dargahi has an ownership or leasehold interest.
Request for Production No. 86: Documents which reflect any interest Pejman or Kamran
Dargahi has in any oil and gas lease.
DARGAHl and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page 12
349

Reguest for Production No. 87: Documents which reflect any lien or other encumbrance on
any interest Pejman or Kamran Dargahi has in any oil and gas lease.
Reguest for Production No. 88: Documents which reflect any patent, copyright, or other
intellectual propetiy asset Pejman or Kamran Dargahi owns or in which Pejman or Kamran Dargahi
has an ownership interest.
Reguest for Production No. 89: Documents which reflect any lien or other encumbrance on
any patent, copyright, or other intellectual property asset Pejman or Kamran Dargahi owns or in
which Pejman or Kamran Dargahi has an ownership interest.
Request for Production No. 90: Documents which reflect money owed to Pejman or Kamran
Dargahi by any person or entity.
Reguest for Production No. 91: Documents which reflect any other asset Pejman or Kamran
Dargahi owns which have not been produced in response to one of the foregoing paragraphs in this
request.
Reguest for Production No. 92: Documents which reflect the transfer or conveyance by
Pejman or Kamran Dargahi to any person or entity of any asset (whether real property or personal
property) valued at more than $1,000.00 during the last three years. This includes, but is not limited
to, the transfer or conveyance of any business interest, stock, bond, certificate of deposit, annuity,
automobile, boat, real property, lease, patent and copyright.
Reguest for Production No. 93: Documents which reflect any claim, cause of action or
lawsuit against Pejman or Kamran Dargahi.
Request for Production No. 94: Documents which reflect any debt owed by Pejman or
Kamran Dargahi to any person or entity.
Reguest for Production No. 95: Documents which ref1ect any unpaid tax owed by Pejman or
DARGA!-!! and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page 13
350

Kmnran Dargahi to any taxing authority.
Request for Production No. 96: Documents which reflect any other liability Pejmm1 or
Kamran Dargahi has which have not been produced in response to one of the foregoing paragraphs
in this request.
Request for Production No. 97: Documents which reflect the identity of persons who have
performed book keeping or other financial services for Pejman or Kamran Dargahi.
and all persons or entities who have appraised any real or personal property for Pejman or Kamran
Dargahi since January 1, 2014.
.Request for Production No. 99: Documents that constitute or refer in any way, directly or
indirectly, to any appraisal of any real or personal property prepared for Pejman or Kamran Dargahi
since January 1, 2014 or that otherwise reflect the value of any real or personal property in which
Pejman or Kamran Dargahi has an interest.
filing in bankruptcy by Pejman or Kamran Dargahi or any assignment by Pejman or Kmman
Dargahi for the benefit of creditors.
and aU business in which Pejman or Kamran Dargahi is a partner or principal owner.
DARGA!-!! and YEKK RESPONSE TO 1ST REQUEST FOR PRODUCTION OF DOCUMENTS/ch Page 14
351

David A. King
512.480.5722
512.536.9942 (fax)
dking@gdhm.com
GRAVES DOUGHERTY HEARON & MOODY MAILiNG ADDRESS:

P.O. Box 98
A Professional Corporation Austin, TX 78767-9998
August 12, 2016
Via Email
Mr. Kemp W. Gorthey
604 West lih Street
Austin, Texas 78701
kemp@gortheylaw.com
Re: Handa et al. v. Dargahi et al.; Cause No. D-1-GN-16-001279
Dear Kemp:
I write to confirm our agreement regarding Plaintiffs' Motion to Compel against Defendants.
Without waiving any of their requests for production and without withdrawing their Motion to
Compel, Plaintiffs agree that they will pull down the August 15, 2016 hearing on their Motion to
Compel based on Defendants' agreement to produce on or before August 24, 2016 (i) all
documents responsive to Request Nos. 1 through 69 of Plaintiffs' First Request for Production
and (ii) documents sufficiently showing each ofPejman Dargahi's and Kamran Dargahi's current
net worth.
Please confirm by countersignature below that you agree to the terms specified above.
Kind Regards,
Is/ David King
David A. King
AGREED:
' /'1 ..
IUz./i11 D GLwl~wA/}
Kemp W~hey --rl
Counsel for Defendants
352

5/27/2016 10:43:58 AM
Velva l. Price
District Clerk
Travis County
D-1-GN-16-001279
Patsy Ybarra
Cause No. NO. D-1-GN-16-001279

Plaintiffs, §
§
v. § TRA VJS COUNTY, TEXAS,
§
PEJMAN DARGAHI, §
PLAINTIFFS' FIRST AMENDED PETITION
COME NOW Plaintiffs Dhiraj Handa and Ritu Handa, and file this First Amended
Petition complaining ofDefendants Pejman Dargahi, Kamran Dargahi, and Yekk Construction
Services, LLC, d/b/a Lakeway Custom Homes and Renovation, and for cause of action would
show as follows:
I.
BACKGROUND AND OVERVIEW
I. This lawsuit seeks money damages based on the Defendants' wrongful and
Further, Defendants have failed to pay subcontractors, despite falsely representing to Plaintiffs
made by Plaintiffs to themselves and to other purposes, leaving Plaintiffs exposed to the risk of
353

work that the Defendants are refusing to perform. As for the work Defendants completed before
abandoning the project, Defendants did not perform such work in a good and workmanlike
manner. The resulting construction defects caused physical property damage in the form of
cracking and other deterioration caused by moisture penetration.
n.
DISCOVERY PLAN
III.
PARTIES
4. Defendant Pejman Dargahi, a resident of Travis County, Texas, has appeared and
answered herein.
5. Upon information and belief, Defendant Kamran Dargahi, a resident of Travis
County, Texas, has appeared and answered herein.
6. Defendant Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes and
Renovation, a Texas limited liability company, has appeared and answered herein.
IV.
JURISDICTION AND VENUE
7. This Court has subject rnatter jurisdiction over Plaintiffs' claims, and Plaintiffs'
claims are within the jurisdictional limits of this Court. Pursuant to Tex. R. Civ. P. 47(c)(4),
Plaintiffs seek monetary relief over $200,000 but not more than $1,000,000.

2
354

& Rem. Code. Each Defendant's residence or principal office is in Travis County and all or a
v.
FACTS
9. On or around April 4, 2014, Plaintiffs entered into a Residential Construction
Cove, Travis County, Texas, for a fixed contract price of$1 ,460,000.00 (the "Project"). The
Contract was executed on or around April 4, 2014, by Defendant Pejman Dargahi ("Dargahi").
d/b/a for Defendant Yekk Construction Services, LLC ("Yekk"), nor did the Contract disclose
19,2015 email, Dargahi misrepresented to Plaintiffs that the Contract was with "Lakeway
Custom Homes LLC" (a non-existent entity), and Dargahi did not indicate that he signed the
Contract on behalf of Yekk. Dargahi has also indicated that he and his brother, Kamran Dargahi,
are "partners" in the non-existent Lakeway Custom 11omes LLC. Although not disclosed in the
Contract, upon information and belief, Dargahi is the sole member and director of Yekk.
11. Article V ofthe Contract describes the following payment protocol:

CUSTOM HOMES AND RENOVAT£0N, and the interim construction Lender,
Agreement as an exhibit. LAKEWAY CUSTOM HOMES ANn

3
355

RENOVATION agrees that progress payment to them wm be made only
after the inspector from the financial institution that the Builder has au
construction for which payment is being requested. [emphasis added]
$1,387,750 ($660,000 ofwhich was paid directly by Plaintiffs and $727,750 ofwhich was paid
13. Dargahi's last request tor a payment, in the amount of $90,520, was made in
November 2015. At that time, Dargahi was already overfunded by $29,950. Regions Bank
approved a progress payment of $43,800 on Friday, November 13, 2015, noting that this funding
was an "exception to policy" and was "the maximum amount we could get approval to fund per
management." Regions Bank stressed that "there will be no further draws from the loan until the
that he was still "$150,000 +/- short to finish our contract." This despite the fact that, with the
$43,800 payment made the previous Friday, Dargahi was already overfunded by $73,750.
Dargahi also declared that "no more [constmction] activities could be performed unless we are
PLArNTlFFS' FIRST AMENDED PETITION

4
356

constructing a well for the Project, Dargahi had also obtained Plaintiffs' approval of a $20,000
to tile liens. Despite Plaintiffs' repeated demands, Dargahi has refused to pay the outstanding
used Plaintiffs' money to pay for the following: (i) other construction projects (as confirmed by
affidavits obtained from Defendants' subcontractors, who worked on multiple projects for
Defendants, but who were paid only out of Plaintiff<;' funds); (ii) advertising; (iii) web design;
(iv) plumbing work done on Pajeman Dargahi's personal house; (v) purchasing a car; (vi)
purchasing real estate; (vii) attorney's fees in connection with multiple disputes; and (viii)

5
357

created for the Project, which contained no funds other than those paid by Plaintiffs and the
construction lender for completion of the Project.
Instead, now that their misappropriation of funds has been uncovered, the Dargahis appear to
Of course, this baffling contention, which was only revealed after Plaintiffs' uncovered the
provides for a fixed payment of$1,460,000-95% ofwhich ($1,387,750) was fraudulently
extracted from Plaintiffs before the Dargahis announced in November 2015 that they were
19. Further, Defendants did not perform the construction work they actually
completed (before abandoning the project) in a good and workmanlike manner. The resulting
construction defects caused physical property damage to the Handas' house in the fonn of,
among other things, cracking and other deterioration caused by moisture penetration. This
moisture damage resulted from Defendants' failure to perfom1 work in conformity with
applicable industry standards and applicable standards of care. Specifically, in addition to other
defects and physical property damage described in the inspection report attached hereto as
PLAINTIFFS' FIRST AMENDED PETIT!ON

6
358

Exhibit B (the "Inspection Report"), the following defects and damage have resulted from
Defendants' failures:
a. Foundation waterproofing and basement leaks: Multiple water leaks are present
in the basement constructed by Defendants. Based on the severity of the leaks,
and upon information and belief, damage has been done to the concrete
foundation of the house, including but not limited to rusting and/or corrosion of
the concrete's reinforcing steel.
b. Flat roofs: The flat roofs were built incorrectly, exposing the exterior of the
house to moisture damage. Deterioration is observable, including cracking in the
stucco exterior of the house.
c. Other issues: Additional defects in connection with the rear exterior
staircase/landing, electrical work, plumbing, drainage, stucco and stucco
termination, the courtyard waterfall, fire sprinklers, drywall, attic access, safety
glass, countertops, exterior balconies, the kitchen range and downdraft system,
toilets, interior staircases, and foundation finish are detailed in the Inspection
Report.
20. The Handas gave notice to Defendants on or around February 10, 2016, and
February 12, 2016, specifying in reasonable detail the construction deficiencies. Defendants did
not request to inspect the property, nor did they take any action to correct the non-conforming
and/or deficient work as required by the contract documents and/or law.
VI.
CAUSES OF ACTION
A. Breach of Fiduciary Duty Under Trust Fund Act (Against AU Defendants)

7
359

pursuant to Section 162.001, Tex. Prop. Code. Defendants Pajeman and Kamran Dargahi had
progress payments without first fully paying all current or past due obligations Defendants
incurred. Defendants did so intentionally, knowingly, and with intent to defraud. Defendants'
misapplication of trust funds is in violation of Section 162.031, and is a breach of Defendants'
B. Common Law Fraud (Against AU Defendants)
Project. However, Defendants never intended to use Plaintifl's' payments solely for the Project,
as demonstrated by their systematic diversion ofPlaintifis' payments for Defendants' personal
use. Defendants' false representations induced Plaintiffs to enter the Contract and to make
progress payments and change order payments to Defendants under the Contract.
27. Defendants Pajeman and Kmnran Dargahi also represented to Plaintifl's that they
had fully paid the subcontractors hired to work on the Project knowing that seventeen

8
360

subcontractors had not, in fact, been paid-to the tune of over $120,000. Defendants' false
C. Constructive Trust (Against All Defendants)
30. Defendants have wrongfully profited from their breaches offiduciary duty
D. Restitution and Unjust Enrichment (Against AU Defendants)
progress payments which Defendants diverted to non-Project expenses. Defendants obtained
those benefits by taking undue advantage of Plaintiffs. Defendants are required to make
E. Money Had and Received (Against All Defendants)
that belongs to Plaintiffs in equity and good conscience. Plaintiffs are entitled to recover such
money.

9
361

F. Negligence (Against All Defendants)
36. Defendants, as the ones responsible for the construction work, negligently
performed the work and services. Defendants were under a duty to perform at a level of
professional skill and care consistent with industry practice. Defendants failed to do so.
Defendants' negligent conduct includes, without limitation, failing to perform the construction
services in a good and workmanlike manner, failing to supervise and/or direct work using that
skill and attention used by contractors exercising ordinary care, failing to properly inspect work
before covering with subsequent work, and failing to construct the project in accordance with
industry standards, generally acceptable construction practices, and manufacturer's instructions.
AI! such negligence, and the resulting construction defects, have caused damage to Plaintiffs and
have caused physical property damage in and to Plaintiffs' house in the form of, among other
things, cracking and other deterioration caused by moisture penetration. Damages include but
are not limited to repair costs, investigative costs and expenses, and damage to the house.
G. Breach of Contract/Breach ofWarranties!Misrepresentation (Against Pejman

Dargahi and Yekk)
38. Yekk and Plaintiffs are parties to the Contract, and Pejman Dargahi is
individually liable for any breaches ofYekk's obligations under the Contract, as described above
39. Under the Contract, Yekk and Pejman Dargahi are obligated to "provide all labor
and materials for construction" of the Project "according to [the] Contract and the Plans," and
"pay all costs related to the Work." Exhibit A, Sections HI, XIV. Yekk and Pejman Dargahi

10
362

XV. Yekk and Pejman Dargahi have breached their contractual obligation by failing to pay at
41. Y ekk and Pejman Dargahi are further obligated to "deliver title to all the
materials, appliances and equipment used in the Work free of all liens, claims, security interests
or encumbrances." Exhibit A, Section XV. Yekk and Pejman Dargahi have breached their
contractual obligation by failing to deliver title free of mechanics' liens.
42. Yekk and Pejman Dargahi have also breached their contracts and warranties, and
have not performed to the representations made. This includes, without limitation, failing to
perform the work in a good workmanlike manner as represented and agreed, failing to perform
work and services pursuant to the plans and contract documents, breaching the agreement that all
work, materials, and equipment would comply with applicable warranties, and failing to correct
non-confonning or defective work.
43. Because ofYekk and Pejman Dargahi's breaches ofthe Contract, Plaintiffs have
suffered actual and consequential damages in excess of $280,000.
vn.
EXEMPLARY DAMAGES
by law.

11
363

VIII.
ATTORNEY'S FEES
47. Pursuant to Tex. Civ. Prac. & Rem. Code§ 38.001, or as otherwise allowed by
law, Plaintiffs are entitled to recover reasonable and necessary attorney's fees and costs of court
IX.
CONDITIONS PRECEDENT
X.
49. Plaintiffs' Request for Disclosure was set out in Plaintiffs' Original Petition and
Request for Disclosure, and that Request for Disclosure is not waived and is carried forward
herein.
PRAYER
1. Actual damages in such amount as may be shown by the evidence;
3. Plaintiffs' reasonable and necessary attorney's fees and costs of court
pursuant to Tex. Civ. Prac. & Rem. Code§ 38.00!, or as otherwise allowed by law; and
4. Such other and further relief, at law or in equity, to which Plaintiffs may
show themselves to be justly entitled.
PLAINTIFFS' FIRST AMENDED PETri'! ON

12
364

ORAVES, DOUGHERTY, HEARON & MOODY

Austin, TX 78701-3790
(512) 480-5722 Telephone
By: -~~/;.ing _ _ _ _ _ _ _ _ __
G. Douglas Kilday
dkilday@gdhm.com
David A. King
State Bar lD No. 24083310
dking@gdhm.com

electronically via thee-tiling system on counsel of record as listed below on this the 2ih day of
May, 2016:
Kemp Gorthey
604 W. 12th St.
Austin TX 78701
kemp@gortheylaw .com

13
365

CLAWSON
CUSTOM Bl1ILDERS
\
228 Sanostee Cove

Austin, TX 78733
Feb 10,2016
Inspection Report
Please Note: While I carefully inspected the property over the course of several days and
discussed the project with multiple subcontractors involved, my findings cannot be
considered a comprehensive list of all defects or issues. I am merely providing all of the
information that I was able to discover with limited time, at a point in the project where
defects can be hard to easily detect and identifY I am foc:using here on deficiencies and
problems that I see as significant based on my over 20 years in Residential construction
working with several builders, in several cities with multiple home inspectors.
General Site Conditions:

Project had the appearance of being abandoned.. On the days 1 was on site, little to no
contractor, or subcontractor presence was visible. No management or coordination, no
punch lists, no schedule posted. Lots of materiab; stacked, but uinstalled. Granite tops
partially installed and left. Fixtures, ready to install, but left laying about. Finished
surfaces were not left protected.
Foundation Waterproofing:
It is quite clear that several areas of the foundation, basement and retaining walls have
failed several times, and continue to leak. I have applied a water test to the inside corner
of intersection of the foundation wall and wood framed wall adjacent to the fountain
twice and it has failed far below the porch pan and waterproofing installed by Precision
roofing. (See Image 1,2,3 below). It is leaking in several spots starting 12" below the
finished tile and stucco and at points further down the wall. There are numerous holes in
the product that was installed, and it was not installed correctly per manufactures
recommendation(in my opinion) or to industry standard in a shingled manner where the
!EXHIBIT 8 I
366

upper most piece of material overlaps lower sections. There is no sill flashing, and
inadequate drainage. This materials is rated for usage in this application, as it was
covered with stone inside of an air gap, but is not rated to have multiple fasteners
penetrating it.
The same material was used on the front of the house on the foundation from north east
of the front entry to retaining waH for the lower basement. This material is not rated for
this application. It is not meant for indefinite exposure to UV light. It is not acceptable
as a finished product, and it was not installed correctly. See Image 4,5 and 6. In image 7
it is clear that material is not integrated into the rest of the waterproofing system on the
house behind the stucco, and also blocks the weep holes integrated in the stucco design to
let water drain away from the structure, as prescribed by code.
This material was also used to water proof the courtyard door landing areas, and the
courtyard drainage area. The material was not integrated with stucco or roof flashings,
door pans, or door flashing, and cannot be finished in an appealing and secure manner,
and is already failing to bond to the substrate. See Image 8
Conclusions: All of this waterproofing material needs to be removed and replaced

correctly with the correct products by a professionaL This is the most concerning defect
on the project. I have serious concerns as it has already failed, and was repaired with
suspect measures in my opinion, and these types of issues tend to deteriorate over time
and worsen. The front area of the house will need to be excavated, the material removed,
and a new material installed that can have a permanent stucco finish applied to match the
rest of the underpinning on the project per a typical home, per the print, and per code.
Water heaters and any fittings in the way of construction need to be removed, and then
the stucco needs to be removed to allow flashing to be installed behind the stucco
system, over the horizontal portion of the foundation and overlapping the new water-
proofing and stucco underpinning below. See Drawings 1-3 for typical waterproofing
applications and acceptable methods.
367

Image l
368

lmage2
369

hnage 3 (Not layered correctly, holes, poor bond, creating a "funnel effect" for water)
370

Image3 b
(Water after running hose for brief water test at fountain corner)
371

Image 4
372

Image 5 (Temporary Barrier Prevents acceptable finish)
Image 6
373

Image 7: (Notice Membrane is simply applied over stucco, blocking weep holes and is
not integrated into stucco system or a permanent solution)
Image 8:
Bond failure. Also Not applied behindstucco water~proofing system ..
374

Drawing 1: (Typical Weep Screed and Underlayment Detail. Required by code.)
·--"''*_,..-.-·!lin: AllATH for STUCCO SUPPORT
~''"«.'~··~,~-·····~·~"'· PLASTER CEMENT STUCCO BASE COAT
~---.._.DR'I'VIT LEVELING COAT & REINFORCING MESH

_ __,---~--··-DRVVIT TOP COAT OVER PRIMER
WEEP SCREED at WAll BOTIOM
375

Drawing 2: Notice aU flashing details extend beyond brick ledge, and are integrated
with sheathing paper/ waterproofing membranes
I sheathing paper
protects wall from
moisture and
extends down to
overlap bottom
flashing
wail
framing~
air gap~
sheathing
weep holes allow air

into cavity (to equalize
pressure) while aflowing
water to drain out
fi<:H>hing or moist.
slightly beyond IOtJfHHH!Orl
376

Drawing 3: (Weep screed, flashing system should extend below foundation, but
terminate above grade, porches, decking etc)
Foundation weep screed
4" Min. at grade
Stucco Termination at Slab/ Weep Screed Clearances:
It is typically the builder's responsibility to coordinate this critical detail between

applicable trades including the stucco installer, roofer, waterproof/ flashing crew/ tile
installer, and framer. Architectural drawings, local and national building codes and
industry standards are extremely clear about the importance of this detail. A minimum of
1" inch is needed to allow moisture to drain away from the stucco system and 2" is
prescribed by code. Blocking this drainage can cause the entire stucco system to fail.
Moisture collects, wood swells and stucco starts cracking. It is also a termite issue and I
have personally seen inspectors fail a project for that reason and termite damage that
resulted from similar situations. This condition is present in multiple locations and will
require the stucco be partially be removed, flashing installed, new water proofing, stucco
and paint. See Images 9 and 10
As this is also a finish dependant detail, finished flooring grades should be coordinated
with the stucco crew so the exact location of the weep screed can established so that
clearances are consistent and professional to industry standards. See Images 11 and 12.
377

Image 9
378

11 and 12 are on the same wall about 10' apart)
379

Flat RoofAreas:
The flat roof areas were built incorrectly leaving exposed Radiant Barrier OSB between
the metal roof edge and stucco. OSB is not rated for this application. The material is
already delaminating as it absorbs ambient moisture. This will likely cause the stucco to
crack, and one crack, the only stucco crack I observed on the entire project, has formed.
These areas currently do not meet industry standards and are also aesthetically
unacceptable.
The metal roofing needs to be removed, the roof framing and plywood cut back to the
correct size, and the metal roofs and flashing reinstalled in a manner that is integrated
with stucco and to industry standards . See Images 13 and 14
Image 13
380

Rear E:'rterior Staircase and Landing.
This area is not per the plans and appears to have been modified and installed during
construction and is not properly integrated into the overall building design for water~
proofing. There is no flashing where the stucco meets the landings.( Image 15.) There is
no clear path for water to drain below the landings, and it appears to drain into the rock
work, and under the stairs. Additionally the entire under-stairs area has no drainage, and
has created a moisture and rain trap with no planned water egress. I have concerns that
water will back up in the stucco system as the weep holes that are buried in the stone-see
Drawings l -3. l also have concerns that area below the stairs will partially fill with
rainwater creating an unsafe health environment
Code Issues:
Open Risers May not allow a 4" sphere to pass. IRC R311. 7.5 .1
Headroom: Minimum of6'8". IRC R311.7.2
Image 20 is the stonework cladding the staircase. There is no visible footing. Stonework
integrated into the building should have a brick ledge a minimum of 4" above grade to
allow drainage through weep holes and prevent termite intrusion.
Image 21 is another example of stone cladding that is integrated into the building
envelope that extends below finished grade.
Image 15(Gap between landing and stucco)
381

Image 16 (Open CMU and Rock for water to collect)
Image '17 (Open Risers Greater than 4")
382

Image 18 (Head Room) This was taken from the lowest step, and the line of plumb falls
between the two steps .. The next step up has less than 6' of clearance.
383

Image 19
Image20
384

Image 21
385

Electrical:
Electrical is incomplete currently. Numerous circuits incomplete. Numerous wires

protruding from the structure without junction boxes. Dead circuits, wires that were cut
during construction such as the fountain area. Wiring at Range is incorrectly located and
conflicts with range function.
Image 21
Plumbing:
Plumbing is incomplete currently. House was designed and "roughed in" for
recirculating water heaters. Current units do not have recirculating pumps and with the
long distances from the fixtures to the installed location of the heaters, long lag times for
hot water can be expected. This is unacceptable on this level of home. These heaters
should have recirculation pumps.
Multiple fixtures are not installed.
Hose bibs are not secured to framing, and very susceptible failing and necessitating a
costly repair. The supply pipe is designed to support the hose bib. Hose bibs should
always be properly secured.( Image 22 and 23)
'Floor Drains were set above finished floor height and are not functional. The foundation
needs to be jack hammered and the drains set to the correct height (Image 24 and 25)
Propane Tankless Water Heater installed with inadequate clearance to AC Condensor.
Image 26
Improper drain connection at dishwasher®dishwasher will not slide into finished location.
Concerning use of flexible unions. See Image 26 B
386

Image22
Image23
Image 24
387

388

Image 26
389

Drainage Issues:
Courtyard drainage pipes may be undersized for the square footage of exposure they are
relied upon to drain. Drains are not terminated properly in the courtyard and incomplete.
Drains are incorrectly terminated on the exterior wall and may allow water to get behind
the stucco and cause significant water damage. Drains are also severely clogged with
construction debris and not designed or rated to used as drains. (Image 27)
Several drain pipes are incompleted, damaged, or incorrectly located. (Image 28)
See comments on Image 29 and 30.
Image 27
image 28
390

Image 30 (Motor Court Area- a very significant land and roof area drains into the corner
at the left side of this picture. There is no drainage in a solid concrete wall. A heavy
391

Stucco Issues:
Several patches need to be complete after waterproofing and repairs are made.
Overall stucco job is exceUents except where it appears site conditions caused issues with
weep screed height. Expansion joint placement is to code, finish looks consistent, no
cracks, properly caulked no additional defects.
All flat stucco surfaces should be capped with a proper metal cap to prevent water
damage and subsequent stucco failure Should be installed by the roofer. See Image 31.
Image 31
392

Courtyard Waterfall:
This is an unacceptable situation. The stucco is not designed as a substrate for a water
feature. Proper water proofing, isolating the stucco system and allowing it to drain would
be needed. Electrical GFCI plug cannot be located here. Water supply is improperly
located. Light location conflicts
See Image 32
Image32
393

Fire Sprinklers:
Incomplete. Need to be completed by a licensed installer. See image 33. However there
are multiple areas incomplete
394

D;ywall:
Drywall texture was not adequately sanded, "punched" and corrected prior to paint
Texture is inconsistent, and unprofessional looking in many areas. The overaH texture is
a hand-troweled look, and as such there should not be large areas of spray texture and
inconsistencies in finish from one surface to the next. Not up to industry standards or the
quality level of this home. See Image 34 and 35
All shower ceilings incomplete. Steam showers and saunas should have a Hardi-backer
substrate, Not drywall. See Image 36
395

Image 34
Image35
396

Attic Access:
All attic access doors must have an insulated and weatherstripped access door that can be
secured. None are in place. Additionally many home inspectors require attic stairs for
access doors greater than 10' from finished floor. The ceilings here are 12'. See image
37 and 38
lmage37
397

Safety Glass:
Code requires safety glass in bathroom, stair chambers, walkways and near egress doors.
Multiple locations did not have safety glass stamps. These units will need to be replaced
if they are not safety glass.
398

Image39
Electrical Safety Issues
IRC does not allow any electrical outlets including switches near baths and showers. We
have several clear violations of this code. Image 40 as an example
Image 40( plug inside of a tub area)
399

Cmmtertop Design and Coordination.
The granite countertops were not properly set. They needed to be furred up to standard
height to allow for the install of various appliances. The dishwasher and several fridges
cannot be installed as the countertops were set too low. See Image 41- the dishwasher,
with the legs fully retracted, will not slide into proper position.
Image~!
Exterior Balcony Installation, Flashing and Finish
The elevated balconies are not complete, and were not installed correctly. Proper
flashing should have been installed to receive tile strip to cover the float and tile
substrate. The flashing was not coordinated with the stucco so that the tranisition is
correct. The flashing should also shed water away from the stucco. Porches should be
properly sealed so that leached cement does not stain the stucco and lower porches. See
Images 42 and 43A and B
400

Image 42
401

Image 43A
402

Kitchen Range and Downdraft
The kitchen range and downdraft system purchased by the owner were not adequately
planned for. The system expressly requires a 10" pipe to be correctly located to service
the downdraft. The roughed in pipes are only 6" and in the wrong location. Electrical
and gas pipe are in the wrong location and prevent the install of the downdraft unit. The
granite counter top was cut incorrectly to accommodate this system- the rough opening is
too large. The countertop will need to be replaced, the gas and electrical re-routed, and
the cabinets modified. The cabinet next to the stove will need to be modified and
replaced and the stucco wiU have to be repaired after a new, correctly located 10" exhaust
pipe and supply wire are re-routed.
403

Image45
404

Toilet Clearance:
Toilets require a minimum clearance of 15" either side or 30" totaL

See image 46
Interior Staircases
lRC and local code enforcement agencies strictly enforce code on stairways. Risers may
not exceed 7 %". Maximum variance on riser height is 3/8" to prevent tripping hazards.
On this project they vary over %" creating a safety hazard. See image 4 7 and 48
Also stairs are incomplete and not properly finished. See image 49
\
405

Image 47
406

Image 48
407

Image 49
408

Incorrect/Incomplete foundation finish.
Foundation should be underpinned or "mortar washed" with cement for a smooth finish
per plans, and per code. All voids and "honeycombs" should he filled. Exposed
foundation should he uniform, finished, and attractive. See images 50 51 and previous
images
Image 50
409

Image 51
Exterior Doors:
The vast majority of the exterior doors were set too low, or with the incorrect thresholds.
Thresholds are below finished tile by varying dimensions and are not consistent,
aesthetically appealing, or correctly serving their function. See Images 52, 53 and 54.
Stucco and stone clad houses should be largely maintenance free. J do not agree with
installing wood trim around doors in vulnerable locations as it will quickly rot. See
Image 55.
410

Image 52
Image 53
411

Image 54
Image 55
412

.Bathtubs:
It appears that adequate steps to protect the bathtubs was not taken. Tubs are dirty,
scratched and full of debris from several trades. See Image 56. Tub and motor not
adequately supported from below. Ground wires not attached to motor pump.
Image 56
Outdoor Kitchens
Framing was not installed correctly to allow for adequate clearance around combustible
and was incorrectly sized on both kitchen. Frame and rock veneer at lower kitchen was
installed%'' (See image 57) out oflevel front to back and 1 3/8" out oflevel over 10' .
Trash can installed below finished tile grade.
Outdoor kitchens, rough-framed only and incomplete.
413

Image 57
Granite Countertops
Countertops are not complete throughout the house. Many tops are missing and were
never installed, (images 58-60) approximately 90% of the tops were never set and glued
in place (Images 61-62). Tops were also not cut square to create a straight line across the
length of the countertop and need to be re-worked (Image 62) Sinks are not sealed with
silicone, splashes are not set or sealed. Multiple chips, cracks and damaged areas.
Fabricator attempted, poorly, to mask defects with black epoxy in an unacceptable
manner-( Images 63-65)
Outdoor Kitchens Incomplete (Image 66)
414

Image 59
Image 60
Image 61 Image 62
415

Image 63
Image 64
416

Image 65 A
417

Image 65 B
418

Image 66
419

Stairwell Grab Bars
Stairwells over 4 risers are to have a continuous grab bar per IRC code 311.7. 71-3
See Image 67 and 68
Image 67
420

Image 68
421

Missing Gate:
Per the plans, there is to be a gate installed at the breezeway between the lower garage
and the pool bath area. This also a code requirement to isolate the pool area from public
access if car gates are left open for entertaining. See Image 69
Image 69
422

Flat roofs:
The three flat roofs on the front elevation are clearly visible from the upstairs windows.
Roofs should be clean and clear of debris, stucco and paint, and installed in a clean
professional manner. One of the roofs also has multiple exposed nail penetrations.
See 70
Image 70
423

As discussed above in Image 23, the motor courtyard has improper drainage and
the design is causing excessive standing water. Without a path for drainage the
water is backing up across the courtyard area and is in danger of backing up into
the garage. It is also dangerously dose to electrical fixtures. With improper
drainage, the landscaping cannot be completed in a satisfactory way. Notice the high
water mark near the stone. This rain event produced about 2 inches on dry soil
conditions. More significant rain events would raise serious concerns.
424

425

The basement area of the bouse had a very high humidity level and a noticeable
musty odor, particularly underneath the stairs, and in the future kitchen area,
which was not evident prior to min. Drywall felt damp. Additional investigation is
needed to test and monitor the ambient humidity level and to check for the
possibility of mold growth or additional moisture intrusion.
426

From: Tyler Hood <THood@brstexas.com >
Sent: Tuesday, November 01, 2016 10:22 AM
To: King, David A.
Cc: Stephanie Lugo; Arely Emilio; Nicole Burrow; Russell Clinage
Subject: RE: Handa et al. v. Dargahi et al.
David,
I spoke with our clients yesterday. Unfortunately, Pejman will not be available for depositions in December, however,
Kamaran will. Additionally, Stephanie, a lawyer with our firm and copied on this email, is meeting with them today and is
working on getting all the documents you request, more specifically, RFP's 30-69. I will stay in touch regarding the
production of documents and in the meantime if there is anything I can do for you please let me know.
Sincerely,
Tyler Hood
Main: 817.274.59921 Direct: 817-635-7412 I Fax: 817.261.1671
DFW I 200 N. Mesquite, Ste. 200 I Arlington 76011
Austin I 2508 Ashley Worth Blvd., Suite 200 178738
www.BRSTexas.com
BUSH:
From: King, David A. [mailto:DKing@gdhm.com]

Sent: Monday, October 31, 2016 12:00 PM
To: James Rudnicki; Russell Clinage; Tyler Hood
Cc: Kilday, Doug
Subject: RE: Handa et al. v. Dargahi et al.
Tyler: As discussed, please see attached. I look forward to receiving the outstanding documents and deposition dates
this week.
Best,
David
David A. King
Attorney
Direct Phone: 512-480-5722

Direct Fax: 512-536-9942
www.gdhm.com
427

G.llA~'U QOUG.>HI>TY HEAQON & lo!QODY
Austin, TX 78701
From: King, David A.

Sent: Monday, October 24, 2016 11:36 AM
To: 'JRudnicki@BRSTexas.com'; 'RCiinage@BRSTexas.com'; 'THood@BRSTexas.com'
Cc: Kilday, Doug
Subject: Handa et al. v. Dargahi et al.
Counsel:
I presume that you have now had an opportunity to familiarize yourself with this case. We would like to move forward
where we left off with the defendants' former counsel. Here are the two items that need immediate attention:
• Written discovery: The defendants' document production is incomplete, as we notified former counsel on
September 14, 2016. Please provide the requested documents (described in the attached email) no later than
Monday, Oct. 31 so we can avoid court intervention.
• Depositions: We have been asking for deposition dates for the two individual defendants for over a
month. Please provide their dates of availability in the first two weeks of December. Please provide dates this
week if you would like to set the depositions by agreement.
Please contact me if you have any questions at all.
Thanks,
David A. King
Attorney
Direct Phone: 512-480-5722

Direct Fax: 512-536-9942
www.gdhm.com
GI<AYU llo\IGlU:!'IfY HEARON f. WOODY

Austin, TX 78701
This electronic communication (including any attached document) may contain privileged and/or confidential information. If you are not an
intended recipient of this communication, please be advised that any disclosure, dissemination, distribution, copying, or other use of this
communication or any attached document is strictly prohibited. If you have received this communication in error, please notify the sender
immediately by reply e-mail and promptly destroy all electronic and printed copies of this communication and any attached document.
2
428

12/02/2016 14:07 FAX f4l 0002/0017
Written Deposition Service, LLC

1750 Valley View Lane, Suite :no
Dallas, TX 75234
Telephone: (972) 488-5555 -Facsimile: {972) 488-5590 ~ (800) 346-4405

Den:ise.Edwards@WrittenDeposition.co:m- www.W.riff~nDenesitigg.co:m
Cause No. D-1-GN-16-001279

Dhirll} Handa, et al vs. Pejman Dargahi, et al
WAIVER OF NOTICE
Our client, Stephanie Lugo, has commissioned Written Deposition Service, LLC to obtain records as named in the attached
questions and/or exhibit As authorized under Rule 59.006, Texas Finance Code and Rule 200, Texas Rules of Civil Procedure, a
Subpoena wm be issued forthwith to direct the below named custodian of records to make an records as named in the attached
questions and/or exhibit available for photographic reproduction, and to answer the Direct and Cross Written Questions, if any.
Said deposition when so taken, may be used as evidence upon trial of the above numbered cause.
D' COPIES ARE DESIRED, PLEASE INDICATE BELOW BY MARKING Y OR N.

WDS Order# (s): 59163
---- 1 REGIONS BANK (Client Record SCQpe)
CROSS-QUESTIONS/OBJECTIONS/MOTIONS
Yes, we wm be issuing Cross Questions, Filing Objections and/or a Motion. (FYI: They must be in our
office in accordance witb the ten day rule as recorded in TRCP, Rule 200.3(b).)
No, we will not be issuing Cross-Questions and/or a Motion or Objections.
PURCHASE OF COPIES
Yes, I would like to purchase copies. We will require preparment, unless we have an established relationship
with your fir:m. We win advise of cost on the Officer's Certification Cover Letter.
Direct om my Carrier. Claim # Insurance Co.:
Adjuster: Address: '
No, I do not desire copies of these records
Please send information :re~ardin~ your service.
David A. King-Represents: Plaintiff; Fax: 5ll-47~H976

Signed: Date:--------
NOTE: To process your request for records, please return this form to:
W riiten Deposition Service, LLC
Fax: (972) 488-5590 or Email to: Denise.Edwards@WrittenDeposition.com
FYI: As a service to our clients we :maintain all records until we are notified tbat the case has been dismissed, etc.
429

12/02/2016 14: 08 FAX !410003/0017
Cause No.
DHIRAJ HANDA AND ruTU HANDA IN THE DISTRICf COURT OF
vs.
TRAVIS COUNTY, TEXAS
PEJMAN DARGAIU, KAMRAN DARGAHI,
AND YEK.K CONSTRUCTION SERVICES, LLC d/b/a
LAKEWAY CUSTOM HOMES AND RENOVATION 261ST JUDICIAL DISTRICT
NOTICE OF INTENTION
TO TAKE DEPOSITION BY WRITTEN QUESTIONS
TO: ALL PARTIES BY AND THROUGH THEIR ATTORNEY(S) OF RECORD AS PROVIDED JN THE ATTACHED
SERVICE LlST.
You wm take notice that twenty-four (24) days after the service hereof, with attached questions, a deposition by written
questions will be asked of the custodian of records for:
REGIONS BANK-(Ciient Record Scope)
C/0 CORPORATION SERVICE COMPANY (CSC)
:ZH E. 7TH STREET, STE 620, AUSTIN, TX 78701
Such questions to be answered on or before 01/0612017, before a Notary Public at the instance of:
Written Deposition Service, LLC
1750 Yaney View Lane Suite 210
Dallas, Texas 75234
The deposition with attached questions may be used in evidence upon the trial of the above-styled and numbered cause
pending in the above named court. Notice is further given that request is hereby made as authorized under Rule 59.006,
Texas Finance Code, and Rules 200 & 201(b), Texas Rules of Civil Procedure, to the officer taking this deposition to issue a
Subpoena Duces Tecum and cause it to be served on the witness to produce any and aU records as described on the attached
questions and/or Exhibit(s) and any other such record in the possession, custody or control of the said witness, and every such
record to which the witness may have access, and to turn all such records over to the officer authorized to take this deposition
so that photographic reproductions of the same may be made and attached to said deposition.
In compliance with §59.006(b)(2), Texas Finance Code, the financial institution is requested to contact the WJdersigned
counsel of record and provide notice of the reasonable costs of copying the financial records as described in the attached
questions and/or Exhibit(s) in advance of the deposition to ensure that the reasonable costs have been paid and the records
produced in the time, place and manner requested herein.
430

12/02/2016 14:08 FAX !ii}0004/0017
Respectfully Submitted,
s~ph~~~~-------------
ssA #: 00793927 U
Builih Rudnicki Shelton
2508 Ashley Worth Blvd., Ste. 200
Austin, TX 78738
512-263-9688; Fu 512-263-2562
slugo@brstexas.com
Attorney for: Defendant
431

12/02/2016 14:08 FAX l4J 0005/0017
I certifY, as authorized agent for the attorney of record, Stephanie Lugo, that a true and exact copy of
foregoing Notice of Intention to Take Deposition upon Written Questions was served to all attorneys of
record in the above-styled and numbered matter, said service being effected in the following manner:
CERTIFIED MAIL/RETURN RECEIPT REQUESTED
HAND DELIVERY
TELECOPY
OVERN1GHT/NEXT DAY DEL! VERY VIA LONE STAR OR UPS
E-MAIL L'
DATED:~
L
BY: --+-41
SERVED TO ALL PARTIES LISTED BELOW:

Dhiraj Handa, et al vs. Pejman Dargahi, et al
ATTORNEYS OF RECORD
David A. King
Graves, Dougherty, Hearon & Moody
401 Congress Ave, Ste 2200
Austin, TX 78701
512-480-5600; Fax: 512-478-1976
Attorney For: Plaintiff
432

12/02/2016 14:08 FAX !410006/0017
CAUSE NO: D-1-GN-16-001279

DHIRAJ HANDA AND RITU HANDA § IN THE DISTRICT COURT OF
§
vs. §
PEJMAN DARGAHI, KAMRAN DARGAHI, §
AND YEKK CONSTRUCTION SERVICES, LLC d/b/a §
LAKEWAY CUSTOM HOMES AND RENOVATION § 261ST JUDICIAL DISTRICT
DIRECT QUESTIONS TO BE PROPOUNDED TO THE WITNESS,

CUSTODIAN OF RECORDS FOR:
REGIONS BANK
1. State your fuU name and occupation, address and telephone number.
ANSWER: ~AME) __________________________________

(OCCUPATION)__________________________________
(ADDRESS) ________________________________
(CITY, STATE, ZIP}._ _ _ _ _ _ _ _ _ _ _ _ _ __
(TELEPHONE#)________________________________
2. Have you received a Subpoena Duces Tecum for the production of RECORDS AS NAMED IN
THE A'ITACHED EXBmiT A?
ANSWER=----------------------------------------------
3. Are you able to identify these records as the originals or true and correct copies of the originals?
ANSWER: _____________________________________________
Order#: 59163.001
433

12/02/2016 14:09 FAX ~0007/0017
4. Were these records made and kept in the regular course of your business?
ANSWER: ________________________________________________
5. In the regular course of business of your practice, business, or institution, did the person who signed
the records and/or reports· either have personal knowledge of the entries shown on the records and/or
reports, or obtain the information to make the entries from the sources who have such personal
knowledge?
ANSWER: ______________________________________________
6. Were such memoranda or documents then transmitted to your files and thereafter maintained under
your care, supervision, direction, custody, control or access as custodian of this facility?
ANSWER: ______________________________________________
7. Were the memoranda or documents that were transmitted to your files original entries on the part of
the Custodian or other employee or member of the staff of this facility?
ANSWER: _______________
8. Were the records or documents prepared at or about the time of the events and conditions they record?
ANSWER: ___________
9. Were these records kept as described in the previous questions?

ANSWER: ______________________________________________
10. Please examine copies of the original requested records. Have you produced records for attachment to
this Deposition?
ANSWER: ________________________________________________
11. Has anything been removed from or altered in the original records before making these copies?
ANSWE~----------------------------------------------
12. If you have answered the previous question yes, please state fully and precisely what alteration was
made in the original records and attach copies of every document removed from the original records.
ANSWER: _____________________________________________
Order#: 59163.001
434

12/02/2016 14:09 FAX @ 0008/0017
13. In the event that no records can be found, are there document archives (i.e. microfiche) or document
retention policies which explain their absence? If so, please identify who has knowledge of those
archives or policies of the above named facility.
ANSWER: ______________________________________________
14. Are you aware that it may be necessary to subpoena you or your employer to court at the time oftrial
if you have not provided all of the papers, notes, documents, records, genera1 correspondence, or oilier
tangible items of any kind pertaining to the above named individual to the Notary Public taking your
deposition?
ANSWER: (circle one) YES/NO
I, (Custodian of Record), do swear or affirm that my answers to

the above questions are the truth, the whole truth and nothing but the truth, so help me God.
Custodian of Record
I, , A Notary Public, do hereby certify the above

a
Custodian was duly sworn and the non-stenographic recording of this Written Deposition is true record of
the Custodian testimony.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, THIS _ _ DAY OF

- - - - - - - - - - - ' 20_.
SIGNATURE OF NOTARY PUBUC IN AND FOR THE STATE OF TX
. NAME OF NOTARY PUBLIC TYPED OR PRINTED

My Commission expires_ _ _ _ _ _ _ _ _ __
Order#: 59163.001
435

12/02/2016 14:09 FAX !4J0009/0017
EXHIBIT A
Definitions
1.) "You" or ''your" refers to you, your attorneys, accountants, bookkeepers, agents, employees, and/or
representatives.
2.) ''Defendant" means Pejman Dargahi, Kamaran Dargahi, and Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation and aH agents, employees, and other persons acting on their
behalf.
3.) "Plaintiff' means Dhiraj Handa and Ritu Handa and all agents, employees, and other persons acting
on their behalf.
4.) "Lender" means Regions Bank d/b/a Regions Mortgage One-Time-Close Construction/Permanent Loan
Program and aH agents, employees, and other persons acting on their behalf.
5.) "Property" means 228 Sanostee Cove, Travis County, Texas, 78733
6.) "Documents and tangible things" means the existence, description, nature, custody, condition,
location, and contents of papers, books, accounts. drawings, graphs, charts, photographs, electronic or
videotape recordings, data, and data compilations in your possession, custody, or control or known to you
or your counsel, whether printed, computerized, micro- filmed, reproduced by any other mechanical process
or medium of expression, o1· written or produced by hand and whether or not claimed to be privileged,
confidential, or personal, including but not limited to the final versions and aH prior drafts of contracts;
agreements; notes (including secretarial notes); business records; notebooks; work notes; work papers;
communications (including intradepartmental communications and intercompany communications);

facsimiles; te!ecopies; telefaxes; electronic mail; correspondence; statements; reports; telegrams; agendas;
forms; memoranda; bulletins; appointment books; logs; messages; diaries; texts; manuals; reference works
and materials; samples of materials; depositions; analyses; projections; damage projections; forecasts;
statistical statements; financial records; rep'orts; charts; brochures; purchase orders; estimates; computer
inputs and outputs; calculations; compilations of data; demonstrative evidence (including physical models,
sketches, charts, graphs. plans, drawings, etc.);joumals; billings; billing statements and records; 1·eceipts;
invoices; data compilations; slides; sketches; graphics; charts; movies; videotapes; photographs and the
negatives thereof; summaries, records> or minutes of meeting or conferences; expressions of statements of
policy; lists of people attending meetings or conferences; summaries, records, or reports of personal
436

12/02/2016 14:10 FAX ~ 0010/0017
EXHIBIT A
conversations or investigations; summaries, records, or reports of interviews; and all other writings, and any
other similar matter, now or formerly in your possession, custody, or control or that of your counsel, or of
any other agent, representative, employee, bookkeeper, accountant, expert, or anyone else acting on your
behalf, and includes documents used to support any conclusions or opinions reached. Any marginal
comments appearing on any documents and any handwritten or other notations on any copy of a document
render it original, requiring production of it or a true copy of it with such notations.
7.) "Relate to" means to name, refer to either directly or indirectly, comment on, analyze, review, report
on, form the basis of, be considered in the preparation of, result from, or have any logical relation or
relevance to the entity, person, document, event, or action pertaining to the subject matter on which inquiry
is made.
8.) "Knowledge" means not only the personal and present knowledge of the person inquired of, but also
the present knowledge of any officers, directors, agents, servants, employees, attorneys, and representatives
of the person inquired of and information available to them.
9.) "The Claims" means the claims that are the subject of this lawsuit, as aUeged in Plaintiffs' original
petition and amended or supplemental petition.
437

12/02/2016 14;10 FAX @OOll/0017
EXHIBIT A
REOUEST FOR PRODQCTION
REQUEST FOR PRODUCTION NO. 1: Please identifY and produce aB documents and tangible
things, including, but not limited to, loan applications, loan statements, loan summaries, loan
enrollment form, loan initiation forms, loan reports, all bills paid affidavits, draw requests,
disbursement forms and requests and any other like documents that relate to the Property for the
benefit of Plaintiffs for improvements made to the Property by Defendants including, but not limited
to, loan number 0899144669, or any other loan that is related to the Property and/or the Defendants
and/or Plaintiffs.
PLEASE NOTE: We have attached, for reference, documents already in our possession that relate
to the loan in question.
59163.001
438

12/02/2016 14:10 FAX @ 0012/0017
EXHIBIT A
~ ~::.. rc .l oN·s-·"
1!."'\ -' t '·
,.Ji
11
lnspectlon!Oisburooment Sheet tor Constructionlf'ermanerrt Loan
Borrower. Handa, Dhifaj & Ritu Loa>~ Amoqnt: $Mo,ooo.ao

Locat.l<>i> (Lot <.>r Address)~ Equity 111jecl!on • Ho~; $600,000.00 45.2%
Le&\'i GI<>Wl'l\l Orow: -=--=-'='......-o-
1-!ousa Amount; $1,460,000.00
Builders Schecluie of Values Schedllloo % Work Coostr<Jctiorl PniW$

Item# Ductiptl<m Value Complete Completed 12M!! Amot.mt
Contract Initiations 3.~ 211912015 $55,400.00
;------!2 f"~;rm\t& Fee& 4.0%
$4$,800.00
s5a400.00
3.0"4
4.0%
$43,800.00
S58 400.00 2 312!)12015 $118.000.00
3 Stte Excavati<;n!F«I 4.0% $.?8,400. 00 4.1}% $58,400.00 3 512212015 :i\131,400.00
-----~------- '
4 Founoatlon Pllrt 1 ll.O'Y> $116.000.00 $.0% SH6.1l00.00 4 7/Hl/2.015 000,520.00
5 foundalion Pllrt 2 7.0% $102.20000 7.0% $102.200.00 5 8/1012015 $75,920.00
s Fram!n. 18.0% $252,800.00 16.0% $262,800.00 fi 91112015 S62,(l00.00
7 MIE'J?Rouoo (J.O% $73,000.00 5.0% $73,000.00 7 912112015 S43,SOO 00
8 Roollna 8.0% $1 Vl,SOO.OO 8.11% $116,1;!00.00 6 912312015 $4),800.00
9 El<t«icf Skin (Veneer> 10.0% $146,000,00 iO.(l% S14S.O~~ s 10/1$!20H5 Sl>t,320.00
10 Insulation & Sheetrock 50% $13.000.00 5.()% $13,000.00 iO 11/131'2015 $43,800.001
11 Trim & Cabinets !iO% $73,000.00 4.S% $70,080.00 11 so.oo
t2 Palni!@ 3.0% $43800.00 2.8% $40,1!30.00 11 sa.oo
13 Ftoorina 4.0"10 858.400.001 4.0% $58,400,00 '!3 $000
14 Mff'JP Fine! 4.0"k $58,400.00 :!,.$% $55,480.00 14 $0.00
15 ~&p!lcS~m 2.0% $29,200.00 2.0% $2$,200.00 15 :l£1.00
16 l!mdS!:a~!Qatlon 3.0% $4$.ll0Ct00 0.0% $0.00 15 $()00
17 Odveways _ 4.0'14 $58.400.00 0.6% $8,70000 i7 $0.00
18 Flnat 30% $43800,00 0,0% $0.00 16 $0.00
---w- 0.0% $0.00 OO"k $000 HI sooo
20
21
22
- 0.0%
0.0%
0.0%
----so1i0
~
£0.00
___ __9j_}~-- ---_____!D~
0.0%
0.0%
$0.00
$.0.00
ll
20
21
12
$0,00
$0.00
:ro.oo
23 0.0% ·so.oo 0.0% $0.00 23 $.().()()
24 0,0% $.0.00 0.0% $0.00 24 so.oo
25 00% $0.00 0.0% $0.00 25 $.0.00
25 0.0% $000' 0.0% $000 26 so.oo
27 0.0% $0.00 tlO% so.oo 27 $0.00
28 0.0% $000 0.0"4 $0.00 28 ro.oo
29 O.Q% $0.00 00% $0.00 29 $000
I 30 0.0% $0.00 0.0"4 so.oo 30 so.oo
31 0.0% $000 j}(}% $0.00 31 $0.00
32 0,0% $0.00 00% $000 32 $0.00
33 0.0% ~M@ 0.0% $0.00 :33 $0.00
34
35 - 0.0%
00%
$0.00
$0.00
0.0%
0.0%
$0.00
$0.00
Total Orawo S7277:3l:J.OO
3$
37
0,0%
1).0%
$0.00
$(l00
0.0%
0.0%
$0.1
$()00
Furnls Available!
(Work Comp!eled Less Craws)
38 0.0% so.oo 0.0% $0.00 t.<>an S?lance: :sm.zso.QQ
3$ 0.0% $0.00 0.0% $0.00
40 I 0.0% $0.00 0.0% $0.00 Funds Remaining: ~
41 O.O'k $0.00 0,0% $0.00
ToM 100% $1,400,000.00 90.0% 1,314.000.00
fun<ls Remaining S12.Z50.oo

less 10% Retainage $146.000. oo
Ava!lOOie Net of Retalnage ~~ Ft.mde<t lh
439

12/02/2016 14:11 FAX !410013/0017
SUBPOENA DUCES TECUM

THE STATE OF TEXAS
County of Travis
Greeting, to any Sheriff or Constable of the State of Texas or other person authorized to serve subpoenas under Rule 176 of
Texas Rules of Civil Procedure: You are hereby commanded to subpoena and summon the following witness(es):
Custodian of Records for: REGIONS BANK

to be and appear before a Notary Public of my designation for Written Deposition Servite, LLC, 1750 Valley View Lane,
Suite, 210, Dallas, TX 75234, on or before 01/06/2017 at the office of the summoned witness, or any other agreed upon time
and/or place. There under oath to make answers of certain written questions to be propounded to the witness and to bring and
produce for inspection and photocopying RECORDS AS NAMED IN THE ATIACHED EXHUUT A; at any and all times
whatsoever.
Then and there to give evidence at the instance of the Defendant, Pejman Dargabi, et al., represented by Ste{!iunde Lugo,
Texas Bar No. 00793927 Attorney of Record, in that Certain Cause No. D-1-GN-16-001279, pending on the docket of the
District Court of tbe 26lst Judicial District of Travis County, Texas.
This Subpoena is issued under and by virtue of Rule 59.006, Texas Finance Code and Rule 200 and Notice of Deposition Upon
Written Questions on file with the above named court, styled
Dldraj Handa, et al vs. Pejman Dargahi, et ai
and there remain from day to day and time to time until discharged according to law.
WITNESS MY HAND, this l~ day of_ .,

·, N Whiteside~ ~
: :"illlary l'ublk, Slate ofT«'~a>
.,,........,...-,.,·· c,..,,,.,,,.;.,n n 126J.tC..U<i NOTARY PUBt:lC
· EJCpires: 12/07/2019
176.8 Enforcement of Subpoena. {a) Cbntempt. Failure by any person without adequate excuse to obey a subpoena served
upon that person may be deemed a contempt of the court from which the subpoena is issued or a district court in the county in
which the subpoena is served, and may be punished by fine or confinement, or both. This subpoena falls under exception to
confidentiality, Rule 509 (e) Texas rules of Civil Evidence.
OFFICER'S RETURN
Came to hand this _ _ _ _ day of_~-----' 20_ _, and executed this the _ _ day of _ _ _ _ _, 20_ _,
:in the following manner: By delivering to the w i t n e s s - - - - - - - - - - - - - _ _ _ _, a true copy hereof.
Returned this _ _ _ _ day of _ _ _ _ _ _ _, 20_ _ .
PROCESS SERVER
Order No. 59163.001
440

12/02/2016 14:11 FAX !41 0014/0017
EXHffiiTA
Definitions
1.) "You" or "your" refers to you, your attorneys, accountants, bookkeepers, agents, employees, and/or
representatives.
2.) "Defendant" means Pejman Dargahi, Kamaran Dargahi, and Yekk Construction Services, LLC d/b/a
Lakeway Custom Homes and Renovation and ail agents, employees, and other persons acting on their
behalf.
3.) ''Plaintiff' means Dhiraj Handa and Ritu Handa and all agents, employees, and other persons acting
on their behalf.
4.) "Lender" means Regions Bank d/b/a Regions Mortgage One-Time~Ciose Construction/Permanent Loan
Program and aU agents, employees, and other persons acting on their behalf.
5.) "Property" means 228 Sanostee Cove, Travis County, Texas, 78733
6.) ''Documents and tangible things" means the existence, description, nature, custody, condition,
location. and contents of papers, books, accounts, drawings, graphs, charts, photo· graphs, electronic or
videotape recordings, data, and data compilations in your possession, custody, or control or known to you
or your counsel, whether printed, computerized, micro- filmed, reproduced by any other mechanical process
or medium of expression, or written or produced by hand and whether or not claimed to be privileged,
confidential, or personal, including but not limited to the final versions and all prior drafts of contracts;
agreements; notes (including secretarial notes); business records; notebooks; work notes; work papers;
communications (induding intradepartmental communications and intercompany communications);
facsimiles; telecopies; teiefaxes; electronic mail; correspondence; statements; reports; telegrams; agendas;
forms; memoranda; bulletins; appointment books; logs; messages; diaries; texts; manuals; reference works
and materials; samples of materials; depositions; analyses; projections; damage projections; forecasts;
statistical statements; financial records; reports; charts; brochures; purchase orders; estimates; computer
inputs and outputs; calculations; compilations of data; demonstrative evidence (including physical models,
sketches, charts, graphs, plans, drawings, etc.);journals; billings; billing statements and records; receipts;
invoices; data compilations; sUdes; sketches; graphics; charts; movies; videotapes; photographs and the
negatives thereof; summaries, records, or minutes of meeting or conferences; expressions of statements of
policy; Hsts of people attending meetings or conferences; summaries, records, or reports of personal
441

12/02/2016 14:11 FAX @0015/0017
EXIDBITA
conversations or investigations; summaries, records, or reports of interviews; and aU other writings, and any
other similar matter, now or formerly in your possession, custody, or control or that of your counsel, or of
any other agent, representative, employee, bookkeeper, accountant, expert, or anyone else acting on your
behalf, and includes documents used to support any conclusions or opinions reached. Any marginal
comments appearing on any documents and any handwritten or other notations on any copy of a document
render it original, requiring production of it ·or a true copy of it with such notations.
7.) "Relate to" means to name, refer to either directly or indirectly, comment on, analyze, review, report
on, form the basis of, be considered in the preparation of, result from, or have any logical relation or
relevance to the entity, person, document, event, or action pertaining to the subject matter on which inquiry
is made.
8.) 'Knowledge" means not only the personal and present knowledge ofthe person inquired of, but also
the present knowledge of any officers, directors, agents, servants, employees, attorneys, and representatives
of the person inquired of and information available to them.
9.) 'The Claims" means the claims that are the subject of this lawsuit, as alleged in Plaintiffs' original
petition and amended or supplemental petition.
442

12/02/2016 14:12 FAX @0016/0017
EXHIBIT A
REQUEST FOR PRODUCTION
REQUEST FOR PRODUCT.ION NO, li Please identify and produce ail documents and tangible
things, including, but not limited to, loan applications, loan statements, loan summaries, loan
enroHment form, loan initiation forms, loan reports, aH biHs paid affidavits, draw requests,
disbursement forms and requests and any other like documents that relate to the Property for the
benefit of Plaintiffs for improvements made to the Property by Defendants including, but not limited
to, loan number 0899144669, or any other loan that is related to the Property and/or the Defendants
and/or Plaintiffs.
PLEASE NOTE: We have attached, for reference. documents already in our possession that relate
to the loan in question.
59163.001
443

12/02/2016 14:12 FAX ~ 0017/0017
EXHIBIT A
lnspe.:tioniDisbursement Sheet tm Constmlrtion/Permanent l.<~an
Sorrower: Handa, Dhiraj & R'ttu l.03n Amount: $!100,000.00

Location (l.<>t or Addroos): Equity Injection- Hou$e: ~.ooo.oo 45.2%
Les,.Clo'O!ng Draw:-::::;--==:-=
House AIDOUI\t: $1,46U,Oll0.00
Bulfdern SchedUiQ of Values $CIIe$iled "k Work constructiOn ornws

Item# lll>scrlplion -Valoo Completa Completed ~ AmOUnt
2
1
~$ 3.0%
4.0%
S43,eoo.oo
$56,400.00
3.0%
4.0"1.
$4$,800.00
SS8,400.00
1
2
2/1912015
31201':<015
Sf\5,400,00
$118,990.00
3 Site EJ<cava!lolliFIII 4.0% $58:,400.00 4.0"/o $58,400.00 3 5122/2015 $131,400.00
4 Foondatioo Pilli 1 8.0% $116.$00.00 S.O'l'o $116800.00 4 7/1012015 SW,52000
5 Foundattcn Pert 2 7.0% $~02:200.00 7.0% 5 ll/10/2!!15 S15.1l20.00
6
7
s
9
Framil1!l
MIE/PROU!:!h
Rnolin!i
E>:lerlor Skin Neneer
iiHl%
5.0%
1!.0%
10.0%
s:2s2.eoo.oo
$73000.00
$116$00.00
$146.000.00
18.0%
5.0%
a.o%
10.0%
Dl
$116,800.00
$146000.00
5
7
II
9
91112015
9/2112015
91231'2015
10/1S/20'15
soz.aoo.oo
S43,800. 00
S43,000.00
Sll1.320.00
10 InsulatiOn & Sheetrock 5.0% $73000.00 :>.0".\, $73,000.00 10 11/1312015 S43.800.00
11 Trim & Cabin"ls 5.0% $73,000.00 4.8".!, $70080.00 11 $0.00
12 PainlfM 3.0% $43,000,00 Z.ll% $40800.00 12 $0.00
13 Aoorlna 4.0% $00 400.00 4.0",(, $5<1400,00 13 $0.00
14 MIEIPFIMI 4.0% $00 400.00 3.8% $554$0.00 14 $0.00
•
15 S<;mtic System :to% $29200.00 2.Q% $29,200.00 15 so.oo
15 landscaoloo/lr(m!lon 30% O.O"A. $0.00 16 $000
17 OriWIW3V$ ~.0% s 00 0.6% $8,700.00 17 $0.00
18 !"Ina! 3.0% $43 00 0.0% $0.00 16 $0,00
19 0.0% $(l.00 00% so.oo 19 $000
20 0.0% $0.00 0.0% $0.00 20 so.oo
21 0.0% so.oc OJl% soon 21 $0.00
22 0.0% $0.00 0.0% so.oo 22 so.oo
23 0.0% sc.oo 0.0% :ro.C<() 23 $0.00
2<1 O.Oo/. $0.00 ().0% 1£0.00 24 so.oo
25 0.0% $0.00 0,0% $0.00 25 $0.00
26 ()% -so.oo 0'1. $0.00 25 so.oo
27 0.0% $0.00 0.0% $0.00 27 $0.00
I
28 .0% S'C.OO Q.()% 28 $0.00
Z9 0.0% $0.00 0.0% 29 $0.00
30 0.0% $0.00 0.0% 30 $0,00
31 0.0% so.oo 0.0% 31 $0.00
32 0.0% $0.00 0.0% 32 so.oo
33 0.0% $0.00 0.0% SQ.OO 33 $0.00
34 0.0% so.oo 0.0% $().00 To!a!Dmws $727'750.00
35 0.0% ro.oo 0.0% $0.00
36 o.o•J. $0.00 0.0% $0.00 Funds Available: ,§13.759.00 Ctlffltrllly '
31 O,Q% $0.00 0.0% so.oo (Work Completed L<>ss Ora""")
38 0.0% $0.00 0.0% $(l.00 Loan Balance: mz.m.oo
39 0.0'1. so.oo 0,0% so.oo
40 0.0% $0.00 0.0% $0.00 Funds ~ema!ning: ~
41 0,0% !to.oo 0.6% :OO.ro
Total 100% $1,460,000.00 90.0% 1,314,000.00
Funds Remaining $72,250.00

le&s 10% Reteit!a!141 $146,000.00
A~ Net of Relalnage ($73. 750.00} f!IJtlded lh
444

12/02/2016 1.4:07 FAX 14!0001/0017
1750 VaHey View Lane, Suite 210

Dallas, Tens 75234
Telephone {972) 488-5555 - Facsimile (972) 488-5590 - (800) 346-4405

Karen.Gientz@writtendeposition.com - www. w:rittendeposition.com
FACSIMILE COVER SHEET
Date: ---'-'Y~~~~·\\\ p _
Total Pages: ':J (lNCLUD.IJ.'IG COVER PAGE)
To: David A. King

Fax: 512-478-1976
From: - - J~ '. .!.,.;ru::..;_~~------

\
Re: Dhiraj Handa, et al vs. Pejman Dargahi, et al
File Name/Pertaining to: DHIRAJ HANDA, ET AL VS. PEJMAN DARGAHI,
ETAL
Comments: ATTACHED PLEASE FIND A WAIVER AND NOTICE OF INTENTION TO tAKE

DEPOSITION BY WRJITEN QUESTIONS. PLEASE COMPLETE nu; AITACHED WAIVER AND RETURN TO
OUR OFFICE VIA FAX UPON RECEIPT. 1F YOU PLAN TO FILE CROSS QUESTIONS OR MOTIONS, PLEASE
ADVISE OUR OFFICE RIGHT AWAY. ALSO NOTE, WE WILL NEED TO RECEIVE COPIES OF ANY MOTIONS
OR ADDITIONAL QUESTIONS. THANK YOU.
CONFll)ENTJ:ALJTY NOTICE
The documents accompanying this teleropy transmission may contain confidential inroo:nation which is legally privileged. The infonnation is intended
only for the use of the recipient named above. If you have rooeived this telecopy in error, please immediately notifY us by telephone to arrange for return
of the original documents to us, and you are hereby notified that any disclosure, copying, distribution, or taking of any action in reliance on the contents
ofthis telecopy information is strictly prohibited.
445

CAUSE NO. D-1-GN-16-001279

Plaintiffs, §
§
§
PEJMAN DARGAHI, §
AFFIDAVIT OF DAVID A. KING
STATE OF TEXAS §
§
COUNTY OF TRAVIS §
Before me, the undersigned authority, on this day personally appeared the
undersigned Affiant who is personally known to me and who, being by me sworn, stated
upon his oath:
1. "My name is David A. King. I am over 21 years of age, of sound mind, and fully
competent to testify to the matters stated herein. The facts stated herein are within my personal
knowledge, and are true and correct. I am an associate in the law firm of Graves, Dougherty,
Hearon & Moody, P.C. ("Graves Dougherty"), and a resume of my education, experience, and
qualifications is attached hereto.
2. "I had day-to-day responsibility for all of Graves Dougherty's work on behalf of
Plaintiffs in the subject lawsuit. I am familiar with the documents exchanged by the parties in
this litigation.
3. "Attached to Plaintiffs' Response to Defendants' Plea in Abatement and Motion
to Compel Arbitration as Exhibit 1 is a true and correct copy of the 2014 Residential
446

Construction Contract between Plaintiffs and Lakeway Custom Homes and Renovation, which
was produced by Defendants in this lawsuit.
to Compel Arbitration as Exhibit 2 is a true and correct copy of a December 9, 2015 letter
between myself and Defendants' counsel Kemp Gorthey.
to Compel Arbitration as Exhibit 3 is a true and correct copy of Plaintiffs' Original Petition and
Request for Disclosure.
to Compel Arbitration as Exhibit 4 is a tme and correct copy of Defendants' Original Answer.
7. '"Attached to Plaintiffs' Response to Defendants' Plea in Abatement and Motion
to Compel Arbitration as Exhibit 5 is a tme and correct copy of Plaintiffs' First Request for
Production.
to Compel Arbitration as Exhibit 6 is a tme and correct copy of Plaintiffs' Motion to Compel
Discovery Responses and Production of Doc-uments.
to Compel Arbitration as Exhibit 7 is a tme and correct copy of Defendants' Response to
Plaintiffs' First Request for Production of Documents.
to Compel Arbitration as Exhibit 8 is a true and correct copy of a Rule 11 Agreement between
myself and Plaintiffs' counsel Kemp Gorthey regarding Plaintiffs' Motion to Compel.
2
447

to Compel Arbitration as Exhibit 9 is a true and correct copy of Plaintiffs' First Amended
Petition and Exhibit B of that Petition, which is the inspection report ofNathan Clawson.
to Compel Arbitration as Exhibit 10 is a true and correct copy of a November 1, 2016 email
between myself and Defendants' counsel Tyler Hood.
to Compel Arbitration as Exhibit 11 is a true and correct copy of Defendants' Notice of Intent to
Take Deposition by Written Questions.
to Compel Arbitration as Exhibit 13 is a true and correct copy of Plaintiffs' Motion for Summary
Judgment.
15. "Through December 8, 2016, when Defendants moved to compel arbitration, the
amount of time worked by timekeepers at Graves Dougherty in connection with Plaintiffs'
claims totaled over 150 hours for attorneys (at a rate from $200.00/hr to $445.00/hr). Based on
the time worked and the timekeepers' rates, Plaintiffs have incurred over $35,000 in attorneys'
fees in connection with the above-described legal services through December 8, 2017. These
legal services include time spent pleading the case in this Court, participating in written
discovery, working with Plaintiffs' expert, and preparing Plaintiffs' Motion for Summary
Judgment.
16. "In 2016, while Defendants' counsel was represented by Kemp Gorthey, Mr.
Gorthey agreed orally to set this case for a jury trial in this court and provided dates of
availability.
3
448

17. "The first time Defendants mentioned the arbitration clause was not until after
Defendants retained new counsel in October 2016. The arbitration clause was not mentioned or
invoked to resist any of the pre-trial activities Defendants engaged in until Plaintiffs' filed their
Motion for Summary Judgment in December 2016."
David A. )ting
SUBSCRIBED AND SWORN TO BEFORE ME by David A. King this 24th day of
May, 2017, to certify which witness my hand and seal of office.
JOY MORENO
My Notary!D # 124900401 Public-State of Texas
Expires June 4, 2020
4
449

12/2/2016 4:51:35 PM
Velva L Price
District Cterk
Travis County
D-1~GN-16-001279
CAUSE NO. D-1-GN-16-001279
Irene Silva

Plaintiffs, §
§
§
PEJMAN DARGAHI, §
PLAINTIFFS' TRADITIONAL MOTION FOR PARTIAL SUMMARY JUDGMENT ON

CLAIMS FOR VIOLATION OF TRUST FUND ACT, COMMON LAW FRAUD,
STATUTORY FRAUD. AND BREACH OF CONTRACT
COME NOW Plaintiffs Dhiraj Handa and Ritu Handa ('"Plaintiffs") and file this their
Traditional Motion for Partial Summary Judgment against Defendants Pejman Dargahi, Kamran
Dargahi, and Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes and Renovation
("Defendants") and would respectfully show the Court as follows:
I. INTRODUCTION AND SUMMARY
Defendants are general contractors hired to build Plaintiffs' home under a fixed-price
contract. Since construction began in 2014, Plaintiffs have paid Defendants 95% of the contract
price. However, in November 2015, Defendants halted all work on the project, insisting that
Plaintiffs pay much more than the contract price. Unbeknownst to Plaintiffs until Defendants
ceased their work, Defendants had been using Plaintiffs' money for tens of thousands of dollars'
worth of expenses that have nothing to do with the construction of Plaintiffs' home, including
not only different construction projects, but also personal expenses such as plumbing work on
s
Defendant Pejman Dargahi' personal home, purchasing real estate, and attorneys' fees. While
Defendants were using Plaintiffs' construction funds as their own personal bank account, the
subcontractors hired by Defendants to build Plaintiffs' home have gone unpaid~--to the tune of
450

over $100,000. Adding insult to injury, even after Plaintiffs filed this lawsuit, Defendants
continued to divert Plaintiffs' money. Defendants' misappropriation of Plaintiffs' funds is not
only a blatant violation of the Texas Construction Trust Fund Act, but it also constitutes fraud
and is in breach of the construction contract.
For months, Defendant Pejman Dargahi has refused to make himself available for
deposition. This strategy appears to be aimed at delaying the progression of this case while Mr.
Dargahi takes steps to make himself judgment-proof. 1 However, Mr. Dargahi's efforts to evade
deposition and delay judgment against him are unavailing because, even without deposition
testimony, the material facts concerning Defendants' misconduct are undisputed, and partial
summary judgment is properly entered in favor of Plaintiffs and against Defendants on Plaintiffs'
claims for violation of the Trust Fund Act, common law fraud, statutory fraud, and breach of
contract.
H. UNDISPUTED MATERIAL FACTS
On or around April 4, 2014, Plaintiffs entered into a Residential Construction Contract
(the "Contract") for the construction of a house on a piece of unimproved land located at 228
Sanostee Cove, Travis County, Texas, for a fixed contract price of $1,460,000.00 (the
"Project"). 2 The Contract was executed on or around April 4, 2014, by Defendant Pejman
Dargahi ("Pejman"). 3 Although he did not sign the Contract, Defendant Kamran Dargahi
("Kamran") is Pejman's business partner on the Project, and they are also brothers.
Article V of the Contract describes the following payment protocol:
1
Mr. Dargahi's net worth in February 2014 was $1,590,800. See Exhibit A (2014 Net Worth Statement). By
August 2016, his net worth had allegedly been reduced to $149,000. See Exhibit B (2016 Net Worth Statement).
2
See Exhibit C (20 14 Contract).
3
Although not disclosed in the Contract, Pejman is the sole officer and member of Yekk Construction Services,
LLC. See Exhibit D (Articles of Organization); Exhibit E (Franchise Tax Report). While "Lakeway Custom Homes
and Renovation" is identified as a party to the Contract, the Contract did not disclose that Lakeway Custom Homes
and Renovation was a d/b/a for Yekk Construction Services, LLC, nor did the Contract disclose that Pejman was
executing the Contract as the agent ofYekk or any other entity. See Exhibit C, at 1, 8 (Contract).
451

Agreement as an exhibit. LAKEWAY CUSTOM HOMES AND
RENOVATION agrees that progress payment to them \ViU be made only
after the inspector from the financial institution that the Builder has an
construction for which payment is being requested. 4
In accordance with Article V, and as reflected in the Draw Schedule prepared by the
construction lender (Regions Bank), 5 Plaintiffs have made progress payments totaling
$1,387,750 ($660,000 of which was paid directly by Plaintiffs and $727,750 of which was paid
by the construction lender). This is 95% of the Contract price. However, Pejman has completed
no more than 90% of the scheduled work at a value of$1,314,000. 6 In other words, Pejman has
been paid for more than he has completed; he has been overfunded by at least $73,750. In
addition, Plaintiffs paid Pejman an additional $114,892.00 for all agreed Change Orders for
which payment was requested in accordance with Article XII of the Contract. 7
Pejman's last request for a payment, in the amount of $90,520, was made in November
2015. At that time, Pejman was already overfunded by $29,950. 8 Regions Bank approved a
progress payment of $43,800 on Friday, November 13, 2015, noting that this funding was an
"exception to policy" and was "the maximum amount we could get approval to fund per
9
management." Regions Bank stressed that "there will be no further draws from the loan until
4
Exhibit C, at Art. V (2014 Contract) (emphasis added).
5
Exhibit F, (Draw Schedule).
6
Id.
7
Exhibit T, at, 5 (Affidavit ofDhiraj Handa).
8
Exhibit F, (Draw Schedule).
9
Exhibit G (First Regions Email).
452

the project is completed." 10 Misinterpreting the Draw Schedule, Pejman asked Regions Bank if
he would receive an additional $146,000 11 upon completion of the Project, but the bank correctly
informed Pejman that "only $72,250 remains because we have already funded over the point of
completion and the finall0%." 12
However, the following Monday, November 16, Kamran and Pejman represented to
Plaintiffs that they were still "$150,000 +/- short to finish our contract" 13 --this despite the fact
that, with the $43,800 payment made the previo.us Friday, Pejman was already overfunded by
$73,750. Kamran and Pejman also declared that "no more [construction) activities could. be
performed. unless we are :financially comfortab!e." 14 At or around this same time, Pejman
abandoned the Project. Since that time, Pejman has ceased all construction work on the Project.
In the weeks following Pejman's refusal to complete work on the Project, Plaintiffs
learned that according to Pejman's own estimate, it would cost over $130,000 to complete the
remaining work on the Project. 15 Despite Plaintiffs' demands, 16 Pejman has refused to complete
the outstanding work on the Project in accordance with the Contract.
After the Project was abandoned, Plaintiffs also discovered that Pejman owed more than
$120,000 to at least seventeen subcontractors, 17 notwithstanding Pejman's and Kamran's
representations to Plaintiffs prior to obtaining the last draw on November 13, 2015 that all
subcontractors had been paid. 18 Plaintiffs also learned that, with respect to a subcontractor
responsible for constructing a water well for the Project, Pejman had obtained Plaintiffs'
10 !d.
11
$146,000, which is 10% ofthe Contract price, was held by Regions as retainage. See Section 53.101, Tex. Prop.
Code.
12
Exhibit H (Second Regions Email).
13
Exhibit I (Nov. 16 Kamran Email).
14
!d. (emphasis added).
15
Exhibit J (Estimated Cost to Complete).
16
See Exhibit L (Nov. 18 Demand Letter).
17
Exhibit K (Outstanding Invoices).
18
Exhibit T, at~ 3 (Affidavit ofDhiraj Handa).
453

approval and complete payment for a $20,000 change order after Kamran falsely represented that
the subcontractor had already been paid for such work. 19 In reality, the subcontractor had only
been paid partially for partial work. 20 Since Pejman abandoned the Project, numerous
subcontractors have filed liens on the Project or provided notice of intent to file liens. 21 Despite
Plaintiffs' demands, Pejman has refused to pay the outstanding debts owed to the subcontractors,
and Pejman has not discharged subcontractors' liens.
Further, after Pejman's cessation of work, Plaintiffs discovered that, all along, Pejman
and Kamran, had been systematically diverting substantial sums of money from Plaintiffs'
progress payments to other expenses unrelated to the Project. Specifically, according to their
own bank statements, the Dargahis used Plaintiffs' money to pay for the following: (i) thousands
of dollars in direct payments to themselves; 22 (ii) plumbing work done on Pejman's personal
house; 23 (iii) web design; 24 (iv) advertising; 25 (v) purchasing a car; 26 (vi) purchasing real estate;27
(vii) attorney's fees in connection with multiple disputes---including this dispute with the
l!andas; 28 (ix) property taxes on personal property; 29 and (viii) different construction projects. 30
Plaintiffs have also uncovered at least one instance in which a subcontractor's invoice for
31
services was far less than the amount ultimately paid for the services from Plaintiffs' funds.
l9Jd.
20
Exhibit J (Estimated Cost to Complete) (showing $4,000 estimate for completion of well).
21
ExhibitS (Lien Affidavits); Exhibit T, at, 6 (Affidavit ofDhiraj Handa}.
22
Exhibit N, at 2 (Check No. 304 7; $2,500 to Pajeman) (Check No. 3046; $2,500 to Kamran).
23
!d. at 3 (Check No. 3125; $504.00 to Webster Plumbing).
24
ld. at 5 (Check No. 3148; $1,000 to A. Rahmani).
15
!d. at 5 (Check No. 3147; $550.00 to Va!Pak).
26
!d. at l {Check No. 3017; $5,000 to Fiat of Austin).
27
ld. at 6 (Wire transfer for $26,883.72).
28
!d. at 4 (Check No. 3144; $1,200 to Siavesh Vaseghi); id. at 9 (Check No. 3370; $250.00 to Todd Knop).
29
!d. at lO (Check Nos. 3388 and 3389; $8,444.03 in property taxes).
30
!d. at 8 (Check No. 3335; $220.00 to flooring company for different property); id at 7 (Check No. 3196; $4,672 to
gutter company for other properties); see also Exhibit M (Affidavit of Ted Gutierrez) (confirmation that gutter
subcontractor who worked on multiple projects for Defendants was paid only out of Plaintiffs' funds).
31
Compare Exhibit P2 ($70 invoice for cleaning services) with Exhibit N, at 5 (Check No. 3162; $470 payment to
cleaning service).
454

As Defendants' bank statements indicate, an of these improper payments were made
directly from the bank account created for the Project, which contained no funds other than those
paid by Plaintiffs and Plaintiffs' construction lender for completion of the Project 32
The Dargahis do not deny that they systematically diverted Plaintiffs' funds since the
inception of the Project, nor do they deny that they continued to divert Plaintiffs' funds even
afler this lawsuit was filed. In fact, by their own calculation, between July 2014 and April2016,
the Dargahis diverted over $68,000. 33 Instead, now that their systematic misappropriation has
been discovered, the Dargahis take the baffling position that they were entitled to misappropriate
Plaintiffs' payments, arguing that because they envisioned making a profit on the Project, they
should have had the right to take their hypothetical profits out of Plaintiffs' construction account
long before the Project was actually completed. Of course, this nonsensical attempt to
rationalize their wrongdoing afler it was uncovered by Plaintiffs is not a legal defense to their
obvious violations of Texas law and statute. Indeed, it merely provides further proof that the
Dargahis' violations were intentional. It also ignores the plain language of the Contract, which,
rather than promising a fixed profit, expressly provides for a fixed pa}'ment of $1 ,460,00034 n-
95% of which ($1,387,750) the Dargahis fraudulently extracted from Plaintiffs before the
Dargahis announced in November 2015 that they were halting all work on the Project unless and
until Plaintiffs personally paid them well in excess of what the construction lender was able to
release and well in excess of what was agreed under the Contract.
32
Exhibit T, at~ 2 (Affidavit ofDhiraj Handa)
33
Exhibit 0 {Defendants' Spreadsheet of Withdrawals) (describing diversion of funds as "Profit Withdrawals").
34
Exhibit C, at 1 (2014 Contract).
455

HI. ARGUMENT AND AUTHORITIES
A. Defendants Have Breached Their Fiduciary Duties Under the Trust Fund Act.
Under Section 162.001(a), Tex. Prop. Code, construction payments made to a contractor
under a construction contract for the improvement of real property are "trust funds." The
contractor is the "trustee" of the trust funds,§ 162.002, and the property owner is a "beneficiary"
of the trust funds, § 162.003(b). A subcontractor who "furnishes labor or materials" for the
construction project is also a "beneficiary." § 162.003(a). Further, "any officer or director who
has control or direction over the funds is also a trustee of the funds, and is therefore personally
liable." Lively v. Carpet Services, Inc., 904 S.W.2d 868, 873 (Tex. App.-----Houston [1st Dist]
1995, writ denied); see also Sanchez v. Mulvaney, 274 S.W.3d 708, 712 (Tex. App.----San
Antonio 2008, no pet.) (holding that plaintiffs had valid individual claims against members of
general contractor LLC for violation of Trust Fund Act).
Under Section 162.031(a), Tex. Prop. Code, a trustee who "intentionally or knowingly or
with intent to defraud, directly or indirectly retains, uses, disburses, or otherwise diverts trust
funds without first fully paying all current or past due obligations incurred by the trustee to the
beneficiaries ... has misapplied trust funds."
The material facts concerning Defendants' misapplication of Plaintiffs' trust funds are
undisputed. Plaintiffs' progress payments to Defendants were made under a construction
pursuant to Section 162.001. Defendants Pejman and Kamran Dargahi had control and direction
over Plaintiffs' progress payments for the Project, 35 and they are therefore personally liable for
35
Exhibit Q (Reflecting Pejman's establishment of bank account); Exhibit R (Pejman's initial request for funds,
copying Kamran).
456

trust violations. Plaintiffs and the subcontractors are beneficiaries of such funds pursuant to
Section 162.003, and Defendants are trustees of such funds pursuant to Section 162.002.
It is also undisputed that Defendants intentionally, knowingly, or with intent to defraud
used Plaintiffs' progress payments without first paying all current or past due obligations.
Defendants' bank statements speak for themselves: Defendants used Plaintiffs' trust funds as
their own personal bank account, using such funds for dozens of their own expenses having
nothing to do with Plaintiffs' construction project. 36 Indeed, as late as April2016--immediately
after Plaintiffs filed this lawsuit-Defendants continued to intentionally divert Plaintiffs' funds
for their own personal use. 37 Further, it is undisputed that Defendants used Plaintiffs' trust funds
despite the fact that subcontractors were going unpaid for their work on the Project. 38
Partial summary judgment should be entered in favor of Plaintiffs and against all
Defendants on Plaintiffs' claims for breach of the Texas Construction Trust Fund Act.
B. Defendants Fraudulently Induced Plaintiffs into Entering the Contract and

Making Payments.
"A fraud cause of action requires a material misrepresentation, which was false, and
which was either known to be false when made or was asserted without knowledge of its truth,
which was intended to be acted upon, which was relied upon, and which caused injury."
Formosa Plastics Corp. USA v. Presidio Engineers & Contractors, Inc., 960 S.W.2d 41, 47
(Tex. 1998) (internal quotation marks omitted).
"The elements of fraud by nondisclosure are: ( 1) the defendant concealed from or failed
to disclose certain facts to the plaintiff; (2) the defendant had a duty to disclose the facts to the
plaintiff; (3) the facts were material; (4) the defendant knew the plaintiff was ignorant of the
36
See Exhibits N and 0.
37
Exhibit N, at 10 (Check Nos. 3388 and 3389; $8,444.03 in property taxes).
38
457

facts and the plaintiff did not have an equal opportunity to discover the facts; (5) the defendant
was deliberately silent when he had a duty to speak; (6) by failing to disclose the facts the
defendant induced the plaintiff to take some action or refrain from acting; (7) the plaintiff relied
on the defendant's nondisclosure; and (8) the plaintiff was injured as a result of acting without
the undisclosed facts." Bazan v. Munoz, 444 S.W.3d 110, 119 (Tex. App.----San Antonio 2014,
no pet.)
All ofthe above elements of fraud and fraud by non-disclosure are readily satisfied under
the undisputed facts of this case, described above. To induce Plaintiffs to enter the Contract and
make payments, Defendants Pejman and Kamran Dargahi represented to Plaintiffs that their
progress payments would be used to pay for the construction of the Project. 39 However,
Defendants never intended to use Plaintiffs' payments solely for the Project, as demonstrated by
their systematic misappropriation of Plaintiffs' payments for Defendants' personal use. 40
Equally, the Dargahis' failed to disclose to Plaintiffs until after Defendants had been paid 95% of
the Contract price that, all along, they had been diverting Plaintiffs' payments for their personal
use. 41 As trustees of Plaintiffs' funds under the Trust Fund Act, Defendants had a duty to
disclose their illegal diversions, and Plaintiffs did not have an equal opportunity to discover these
illegal diversions since Plaintiffs' construction account was controlled by the Dargahis. 42 Since
the Dargahis had sole control over Plaintiffs' construction account, but never revealed their
diversions, the Dargahis also knew that Plaintiffs were ignorant of the diversions. In reliance on
39
Exhibit T, at "V 2 (Affidavit of Dhiraj Handa); see also Exhibit I ("All the funds that we have received from your
bank has been spent on your house ...");
40
As noted above, in a bizarre effort to rationalize their wrongdoing, Defendants claim that they were entitled to
misappropriate Plaintiffs' payments because they envisioned making a profit on the Project. ·Of course, the Contract
does not entitle Defendants to a profit. Thus, far from providing them a defense, Defendants' claim that they were
entitled to divert Plaintiffs' payments-even after Plaintiffs filed this lawsuit-merely proves that their \\<Tongdoing
was intentionaL
41
Exhibit T, at~ 4 (Affidavit ofDhiraj Handa)
42
ld. at, 4.
458

Defendants' false representations and nondisclosure, Plaintiffs entered into the Contract and
made progress payments and change order payments to Defendants under the Contract. 43
Defendants Pejman and Kamran Dargahi also represented to Plaintiffs that they had fully
paid subcontractors hired to work on the Project knowing that subcontractors had not, in fact,
been paid. 44 Defendants' false representations and nondisclosures regarding subcontractor
payments induced Plaintiffs to make progress payments and change order payments to
Defendants under the Contract. 45
Defendants Pejman and Kamran Dargahi are personally liable for the misrepresentations
and nondisclosures they themselves made to Plaintiffs. See Sanchez v. Mulvaney, 274 S.W.3d
708, 712 (Tex. App.-San Antonio 2008, no pet.) (holding that plaintiffs had valid individual
claims against members of general contractor LLC for fraud). Plaintiffs injuries resulting from
the Dargahis' fraud include the amount of funds that were misappropriated by the Dargahis,
which exceeds $68,000, 46 and the additional costs above the Contract price that Plaintiffs have
incurred and will have to incur in order to complete Defendants' unfinished work. 47 Partial
summary judgment should be entered in favor of Plaintiffs and against all Defendants on
Plaintiffs' claims for common law fraud.
C. Defendants Committed Statutory Fraud.
Transactions involving real estate are subject to Section 27.01, Tex. Bus. & Comm.
Code. "The elements of statutory fraud under section 27.01 of the Texas Business and
Commerce Code are essentially identical to the elements of common law fraud except that
43
!d. at, 2.
44
!d. at,[ 3.
45 !d.
46
See Exhibits N and 0.
47
See Exhibit K (Outstanding Invoices); Exhibit J (Estimated Cost to Complete); see also Exhibit T, at ttl 7
(Affidavit ofDhiraj Handa).
10
459

section 27.01 does not require proof of knowledge or recklessness as a prerequisite to the
recovery of actual damages." Trinity Indus., Inc. v. Ashland, Inc., 53 S.W.3d 852, 867 (Tex.
App.-Austin 2001, pet. denied); see also Tex. Bus. & Comm. Code§ 27.01(a)(l) ("(a) Fraud
in a transaction involving real estate or stock in a corporation or joint stock company consists of
a (1) false representation of a past or existing material fact, when the false representation is (A)
made to a person for the purpose of inducing that person to enter into a contract; and (B) relied
on by that person in entering into that contract.").
As described above, all of the elements of common law fraud are met in this case. The
Dargahis induced Plaintiffs into entering into the Contract based on the misrepresentation that aU
of Plaintiffs' payments would be used to fund the Project. Accordingly, because Defendants'
fraud is in connection with "a transaction involving real estate," Defendants are liable for
statutory fraud just as they are liable for common law fraud.
D. Defendants Yekk and Pejman Breached the Contract.
"The essential elements of a suit for breach of contract are that a valid contract existed,
that the plaintiff performed, that the defendant breached, and that the plaintiff has suffered
resulting damages." Scott v. Sebree, 986 S.W.2d 364, 372 (Tex. App.-Austin 1999, pet.
denied).
Defendant Yekk Construction Services, LLC, d/b/a Lakeway Custom Homes and
Renovation ("Yekk") and Plaintiffs are parties to the Contract. Defendant Pejman Dargahi is
individually liable for any breaches ofYekk's obligations since he is a signatory of the Contract,
and the Contract does not "show[ ] unambiguously that the signature was made on behalf' of
Yekk. See Tex. Bus. & Com. Code Ann. § 3.402. Not only does the Contract fail to disclose
that "Lakeway Custom Homes and Renovation" was a d/b/a for Yekk, but Pejman's signature
l1
460

does not indicate that he signed as an agent of any company. 48 In fact, the Contract does not
even indicate Pejman's corporate title. Pejman's signature is a textbook example of when an
individual, even intending to act as an agent, may be held personally liable on the contract. See
Comment 2 to § 3.402 (stating that the following may result in personal liability: "The name
"Richard Roe" [principal] is written on the note and immediately below that name Doe [intended
agent] signs "John Doe" without indicating that Doe signed as agent"). 49
Under the Contract, Y ekk and Pejman "accept[ ] responsibility for performance of all
duties reasonabl[y] necessary to complete the Work," and they are obligated to "provide all labor
and materials for construction" of the Project "according to [the] Contract and the Plans" and
"pay aU costs related to the Work." 50 Yekk and Pejman have breached these contractual
obligations by refusing to complete construction of the Project. 51
Yekk and Pejman Dargahi are further obligated under the Contract to "make payments to
subcontractors or vendors supplying material for" the Project. 52 Yekk and Pejman Dargahi have
breached their contractual obligation by failing to pay at l~ast seventeen subcontractors. 53
Yekk and Pejman Dargahi are further obligated to "deliver title to all the materials,
appliances and equipment used in the Work free of all liens, claims, security interests or
48
Exhibit C, Contract at 8.
49
Section 3.402 of the Texas Business & Commerce Code is an application of well-established agent/principal
liability rules----rules which are applicable to all instruments and contracts, and not merely negotiable instruments.
Comment 2 to Section 3.402 provides a pertinent illustration of why Pejman Dargahi is personally liable on the
Contract, but it is worth highlighting that there are numerous authorities outside of Section 3.402 that stand for the
same proposition that an agent is individually liable on a contract if the principal is not disclosed in the contract. See,
e.g., A to Z Rental Ctr. v. Burris, 714 S.W.2d 433, 435 (Tex. App.----Austin 1986, writ ref'd n.r.e.) ("If an agent
would avoid personal liability, he has the duty to disclose not only that he is acting in a representative capacity but
also the identity of his principal; the party with whom the agent deals has no duty to discover the principal.");
Lachmann v. Houston Chronicle Pub. Co., 375 S.W.2d 783, 785 (Tex. Civ. App.-Austin 1964, writ ref'd n.r.e.)
("The contract, as signed did not disclose to appellee that the contract was signed in a representative capacity....
the majority of cases hold that the use of a trade name is not a sufficient disclosure of the identity of the principal
and of the fact of agency.").
50
Exhibit Contract at Sections III, XIV.
51
Exhibit I (Nov. 16 Kamran Email).
52
Exhibit C, Contract at Section XV.
53
12
461

54
encumbrances." Yekk and Pejman Dargahi have breached their contractual obligation by
failing to deliver title free of mechanics' liens. 55
Prior to Defendants' breaches, Plaintiffs performed all of their obligations under the
Contract, including by making progress payments in accordance with Article V of the Contract. 56
Plaintiffs' damages resulting from Defendants' breaches include the additional costs above the
Contract price that Plaintiffs have incurred and will have to incur in order to complete
Defendants' unfinished work. 57
Partial summary judgment should be entered in favor of Plaintiffs and against Defendants
Yekk and Pejman on Plaintiffs' claims for breach of contract.
IV. THE SUMMARY JUDGMENT STANDARD
Summary judgment is properly rendered when there is no genuine 1ssue as to any
material fact and the moving parties are entitled to judgment as a matter of law. Nixon v. Mr.
Prop. Mgm.t. Co., 690 S.W.2d 546, 548 (Tex. 1985). A partial summary judgment is properly
entered in favor of Plaintiffs here. Defendants' own undisputed bank statements show that, since
the inception of the Project, they have violated the Texas Construction Trust Fund Act by
diverting Plaintiffs' construction funds for use on a multitude of expenses unrelated to the
Project. Defendants also committed fraud by inducing Plaintiffs into entering the Contract and
making progress payments, knowing that they did not intend to use those payments solely for the
Project. Finally, it is undisputed that Defendants breached the Contract by failing to complete
the Project and by failing to pay their subcontractors.
54
Exhibit C, Contract at Section XV.
55
ExhibitS (Lien Affidavits). Exhibit T, at~ 6 (Affidavit ofDhiraj Handa).
56
See Exhibit F (Draw Schedule).
51
See Exhibit K. (Outstanding Invoices); Exhibit J (Estimated Cost to Complete); see also Exhibit T, at "j[ 7
(Affidavit ofDhiraj Handa).
13
462

V. EVIDENCE RELIED UPON
Plaintiffs rely on the following exhibits:
Exhibit A Pejman Dargahi 2014 Net Worth Statement
Exhibit B Pejman Dargahi 2016 Net Worth Statement
Exhibit C The Residential Construction Contract
Exhibit D Y ekk Articles of Organization
Exhibit E Yekk Franchise Tax Report
Exhibit F Regions Bank Draw Schedule
Exhibit G First Nov. 12, 2015 Email from Regions Bank to Pejman Dargahi
Exhibit H Second November 12,2015 Email from Regions Bank to Pejman Dargahi
Exhibit I November 16,2015 Email from Kamran Dargahi to Dhiraj Handa
Exhibit J Defendants' Estimated Costs of Completion
Exhibit K Defendants' List of Outstanding Invoices from Subcontractors
Exhibit L November 18, 2015 Demand Letter from Plaintiffs
ExhibitM Affidavit of Ted Guitierrez
Exhibit N Construction Account Statements
Exhibit 0 Defendants' Account Withdrawals
Exhibit P Cleaning Invoice
Exhibit Q Construction Account Information
Exhibit R June 2014 Pejman Dargahi Email Requesting Draw
ExhibitS Lien Affidavits
Exhibit T Affidavit ofDhiraj Handa58
58
Exhibits A-C, F-K, and N-S are documents which were produced by Defendants in this lawsuit. See Tex. R. Civ.
P. 193.7.
14
463

VI. PRAYER FOR RELIEF
In light of the foregoing undisputed material facts and authorities, Plaintiffs respectfully
pray that the Court enter a partial summary judgment in Plaintiffs' favor and against Defendants
as follows:
(i) all Defendants violated the Texas Construction Trust Fund Act, Section 162.031 (a),
Tex. Prop. Code, and violated their fiduciary duties to Plaintiffs thereunder, as described above;
(ii) all Defendants are liable for common law fraud and statutory fraud for their
misrepresentations and nondisclosures, as described above;
(iii) Defendants Pejman Dargahi and Yekk Construction Services, LLC, d/b/a Lakeway
Custom Homes and Renovation breached the Contract, as described above;
(iv) Plaintiffs shall recover their reasonable and necessary attorney's fees, expert witness
fees, and costs of court incurred in bringing this action as provided under Tex. Civ. Prac. & Rem.
Code§ 38.001 59 and Tex. Bus & Comm. Code§ 27.01(e);
(v) Plaintiffs shall recover prejudgment interest on the judgment at the highest rate
allowed by law; and
(vi) such other and further relief, at law or in equity, to which Plaintiffs may show
themselves to be entitled.
A proposed form of Order is submitted with this Motion.
59
Plaintiffs first presented their breach of contract claim on or around November 18, 2015. See Exhibit L (Demand
Letter).
15
464


Austin, TX 78701-3790
(512) 480-5722 Telephone

G. Douglas Kilday
dkilday@gdhm.com
David A. King
dking@gdhm.com

electronically via the e-filing system on counsel of record as listed below on this the 2nd day of
December, 2016:
James Rudnicki
JRudnicki@BRSTexas.com
Russell Clinage
Tyler Hood
THood@BRSTexas.com
Telephone: (817) 274-5992
Facsimile: (817) 261-1671
Isl David A. King

David A. King
16
465

P.
:t: t * Co mm un i cat i on Res u1t Rep o d Feb. 19. 2014 1:57PM ) %
1)
2)
Dat eIT ! me : Fe b. 19. 2014 l: 48PM

Fi 1e Page
No. Mode Destnation pg (s} Result Not Sent
~------------------------------------------·----------~·
3094 Memory TX 5124622715 P. 5 OK
Reason for e(r'C·'

E.1) Han& uo or line fail E. 2) Busy
E. 3) No a.nswe r E. 4) No facsimile connectio-n
E. 5) Excet:ded max. E-mail size
PROSPERITY BANK
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EXHIBIT A
466

PERSONAL FINANCIAL STATEMENT
as of guo 1'',1- oo-·~41
tl
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SECTION A: ASSETS SECTION 8: UABIUTIES

CASH (Schedule 1) C::,.C), i'Ot.::l 0 MORT. PAYABLE (HOMESTEAD) {Schedule 5) 3;:(t,.'t;;"&o 0
MARKETABLE SECURITIES (Schedule 2) - 0 REAL ESTATE/MORT PAYABLE {Schedule 5) •. "5'& I;" ..J:~<O:? 0
NON-MARKETABLE SECURITIES
INVESTMENTS IN PARTNERSHIPS
(Schedule 3)
(Schedule 4)
-- 0
0
NOTES PAYABLE
MARGIN DEBT DUE BROKERS
(Schedule 8)
{Schedule 2)
.;;:· 0 lif)
~:-,
0
0
REAL ESTATE (HOMESTEAD) (Schedule 5) 4o{ ~·Jo~t' 0 NON-MARKETABLE SECURITIES DEBT (Schedule 3) '"'"" 0
REAL ESTATE (OTHER) (Schedule 5) ,:£ '? ,::·~"·'bfh 0 LOANS SECURED BY RETIREMENT (Schedule 6) "-<
0
IRA'S & RETIREMENT PLANS (Schedule 6) ' 'f:; < {)';70 0 OIL & GAS RELATED DEBT (Schedule 7) 0
OIL & GAS INTERESTS
OTHER ASSETS UJ e£:.;s,/fl':x'"'~ !St..-J).t:"',
(Schedule 7)
,,
:\,";!> /p, ~)~'"
- 0
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TAXES PAYABLE
CREDIT CARD DEBT
».·
<-~, ;~"'C'(>
0
0
Persona! Property 0 OTHER UABIUT!ES ~
0
Automobiles 0 Misc. 0
Notes Receivable 0
Interests in Trusts 0
Misc. 0 TOTAI.. UABILITIES
TOTAL ASSETS
SECTION C: CASH INCOME AND CASH EXPENSE INFORMATION

~zl•>I~Wif$0
NET WO~Iess Liabilities)
TOTAL U NET WORTH
H
THIS YEAR THIS YEAR
CASH INCOME* CASH EXPENSE**
GROSS WAGES OR SALARIES 0 REAL ESTATE I MORTGAGE PAYMENTS 0
COMMISSIONS BONUSES, ETC. 0 REGULARLY SCHEDULED PAYMENTS 0
PARTNERSHIP DRAWS, ETC. 0 INCOME TAXES 0
PARTNERSHIP DISTRIBUTIONS 0 PARTNERSHIP CONTRIBUTIONS 0
INTEREST & DIVIDENDS 0 OTHER TAXES (REAL ESTATE, ETC.) 0
RENTAL INCOME 0 UVING EXPENSES & MISC. 0
OIL & GAS INCOME 0 RENTAL EXPENSES 0
OTHER 0 OIL & GAS EXPENSES 0
OTHER ANTICIPATED PAYMENTS
OTHER ,Y·.S<:',
TOTAL CASH EXPENSE $0
TOTAL CASH INCOME $0 NET CASH FLOW $0
"Income from alimony, cllild support, or separate maintenance income need not be revealed Wyou do not wish !o have it considered as a besis for repaying this obligalicP.
-ust all assumptions on page 4 under Additonal comments and describe any significant expscted Cl\anges in your cash income or your cash expanse.
In !he lollw'ing stalement, the words "1", "me", and "my" mean anyone signing below. "You" and "yow" refar to Sank.
I nave given you this financial statement. ana attacllmants, if any, in order to obtain credit or services from you. I understand thet you wili rely on !his lnfo!fllallon in connection with any decision you
make in providing credit or services to me. I warrant and represent to you that this financial slatement and any other information 1may supply to you Is correct and tully and accurately discloses all
of my assets and liabilities including. but not fimi!ed to, my contingent liabilities. cash income. and cash expenses as of the dale I provide !his information to you. All appraisals and similar indications
of valua relating to my assets which are ava~ab!e to me as of this data are attaclled for your review. You may assume that my financial condition is at least as good as shown on this statement until
1provide you another updated financial statement You may request credit information about me from others including an investigative con$Umer report and you may request a consumer credit
report about me in connection with this statement for credit or services. If I ask you, you wm tell ma whether or not a consumer credft report was requesled and will also !ell me the name and
address of the reporting agency. I give you my permission to obtain additional consumer credit reports and investigative consumer reports withOut teHing me should you update, renew, extend, or
review my credit or other service arrangements with you. You may also share credit infonnatlon about me with your affiliates, subsidiaries, parent company, other credttors, and all others pannltted
or required by law. I understand that, in the event any information contained in the statement is incorrect, false, or misleading and you incur a loss, you may file a Criminal Referral Fonn as may be
requested or required by your suparvisory agency. I also understand that knoWingly providing false or miSleading infonnation in the finanr•al statement is a federnl offense that may subject me to
fine. imprisonment or both {18 USC Section 1014).
-ATTENTION: CONTINGENT OBliGATIONS SCHEDULE MUST BE COMPLETED,

IF NONE, THEN WRITE NONE ON THE SCHEDULE.
SIGNATURE DATE SIGNATURE DATE
EXHIBIT B
467

RESIDENTIAL CO:\STRUCTIO:\ CO:\TRACT
I: PARTIES
L-\KEW-\ YCt 'STO~I -\.\0 RE\iOV-\ 110:--.. ( Bt IL DER) \VlTH OFFICE \T 125 SCHOO\,ER
DRJVE, AL STI'<, TX. 78738 agrees to construct the Improvements described below for
Dhiraj and R.itu Handa (Owner), residing at 1704 Randolph Ridge, Austin, TX-
787~6 on the Property described below.
U: PROPERTY
Lot 1, Block A, Seven Oaks Section 4. also known as 2:28 Sanostee Cove, Travis
County, TX. 787.33 or otherwise described on attached exhibit, together with all
Improvements to be constructed on the Property.
HI: I~IPROVE.\IIENTS
L\KEVVA 'r Cl STOM HO'\U;S A'iD R.E'iOVA TION shall provide all labor and materials for
construction of [X] a single family residence according to this Contract and the Plans,
prepared by Dominic Couturier of Italia Fine Homes, Inc., and specifications as,
prepared by L\KEWA v Ct:ST0:\1 Ho'\n:s A."m RE:"iOV -\noN and initiated by both parties
(collectively called the "'Plans"). The labor and materials required to construct the
rmprovements may be referred to as the "'\Vork". To be clear, Plans include all interior,
exterior and landscape drawings as si~p1ed off between Owner & Builder.
IV: CONTR.-\CT PRICE

Owner agrees to pay LAKE\VA v CrsT0:\1 HoMES A'ID RE'iO\A TIOl\1, One MiUion Four
~-~~t~l,,!tQfJ':.!:L-44+1:-m'"f Thousand Dollars ($1,460,000.00), as compensation for construction
of rhe [mprovements, subject to adjustment as allmved by this Agreement.
V: PA Y.MENTS TO LAKE\VAY CtSTOM HOMES A'iD R.E'IOVATION

The Contract Price will be paid as follows:
Deposit Owner shall of the Contract Price to LAKEWAY
CrSTOM HOMES A'iD RE'iOV.-HION prior to the start of construction.
Progress Payments: During construction, L--\KEW .\ 'r Cl STOM HOMES

A'iD RENOVATION shall present Owner with requests for Progress
Payments based upon the allocated cost of the completed portions and/or
phases of constmction performed to the date of each request. Each
Pro6'Tess Payment request shall be made in normal construction phases as
agreed upon by Owner, L-\.KE\\-.\\ CtSfO:\i HOMES A~D RE~OVATIOI\i,
and the interim constmction lender, if any, and shall be paid according to
the draw schedule initialed by Owner and L-\KEW.-\Y CtST0:\1 HOMES
A'iD RE'tOVATION and attached to this Agreement as an exhibit.
L\KE\V \\' Ct STO\! HO'HES A~O RE:'<lOV.UIO'i agrees that progress
payment to them will be made only alter the inspector from the financial
institution that the Builder has an agreement with passes and approves the
completed portion of the construction for -..vhich payment is being
requested.
468

VI: TBU: FOR PA YME'iT
Lpon the presentation of a request for a Paym.-:nt, Owner shalL \vi thin three
bus mess days after receipt of a request. pay the Progress Payment to LJ.Knv-\ 1 Cl ST0\1
HOV!ES.-\~D RE~OVH!Q".j PER V.B. The Final Payment !portion of the Contrat:t Price
not paid by pnor payments) will be due and payable \vithin rive of substantial
VH: WORK SCHEDl'LE

L\KE\\ AY Cl STO~i HO\IES .-\.'iD RE:\'0\-\ TlO' shall begin constmction \vi thin 7
calendar days after (a} Owner has obtained a commitment for interim constn1ction
financing or cash security acceptable to LAKE't\AY Ct ST0:\1 HO:\IES A~D RDOVA no"'<:
and (b) A building permit has been obtained. L.lKEW-\ Y CtSTOM HOMES \.'iD
RE.'iOVA TJON shall substantially complete construction within 460 calendar days of the
date construction is begun, (Completion Date) unless the Completion Date is extended.
VH: EXTENSION OF CO~IPLETION D.-\ TE

L-\KEVV Av CtSTOM HO>\IES A'JD RE:"'o't·.-HIO'\ shall complete the Improvements
Date. However, if the Work is delayed by Change Order, 0\vner's acts or omissions. or
delay is caused by fire or other casualty loss, \Veather, strikes, boycotts. non-availability
of materials for which no substitute of equal equality and price is avaitable, or other
events beyond the control of L\KE\VA Y CtST0\1 HO\IES A.'iD RE.'iOV.\ TIO"';, the time of
such delays shall be added to the Completion Date. L-\KE\:u v CtSTOM Ho~n:s -\:'-ID
RE.'iOV.HIO~ shall give Owners written notice of each claimed extension day within (30l
calendar days of a claimed extension day.
IX: StBSTA:\fTL-\L CO:\<lPLETIO;'If OF THE IYIPROVE:\<lENTS

The Improvements vvil! be deemed to be substantially completed (including landscaping)
\.vhen a temporary certificate of occupancy is issued or, if no certit1cate of occupancy is
required, vvhen all electrical, heating and air conditioning, plumbing and landscaping,
final inspections have received regulatory authority approval or all approvals required for
occupancy have been received. However. notwithstanding the foregoing, if the Owner
moves into the Improvements. the Improvements shall be deemed to be substantially
completed.
X: SOL'RCE OF PA YME~T TO BLILDER

If Owner is obtaining interim construction financing, Ovvner shall obtain and pay the loan
at Ovvner's expense. If Owner is unable to obtain an interim constmction loan. vvith terms
reasonable to O>vner. within 7 days of this contract, either Owner or L-\KE\t A\ Ct STOM
HoMES A.'iD RE..,O\' -\noN may terminate this agreement by giving the other party
written notice of termination. if Owner is not obtaining an interim construction loan to
pay for construction of the Improvements, upon execution of this Agreement and prior to
start of constmction, Ov.·ner shall establish a construction account with a t1mmcia!
institution acceptable to both Ov.rner and LAKE\\ AY CtST0'\1 HOMES A'iD RE\iO\ .HIO"'<.
The Owner shall deposit the entire Contract Price in the account \Vhen it is established.
L-\KE\\-\ \ Cl ST0\1 Hcnn:s -\.'iD RENO\ ..\ TIO' shall have the right to monitor the
EXHIBIT C - Pag_e----y·
2
469

account to insure that Ovvner has deposited the required funds into the account Failure by
Ovvner to establish and maintain the account as reql!lred shall be a breach of this
A.greement.
XJ: ,\LL0\\1'.-\~CES
Owner shall be entitled to allowances as speci tied in [] the Plans [X] the Allowance
Schedule attached to this contract as an exhibit. All savings attributable to allowances.
which are not spent. will be credited to 0\vner. and 0\vner v>ill be responsible for
costs exceeding the ,\l!owances. ff Owner selects allowance items in excess of sped tied
a!lo'vvances, L\KE\tv \ Y Cl STOM Ho:viES '-"'D RE\0\ -HiO" may submit an ""Allowance
Overage" to Owner in the form of a Change Order. Cpon approval by Ov.ner. the
Allowance Overage be payable with the next Progress Payments.
XH: CHA~GE ORDERS

No alterations, additions or deletions will be made in the \Vork. unless agreed to in
writing by Ovvner and LAKEW H CUiT0:\1 HO"r!ES \:-40 RE:"lOV HION. To approve a
proposed change, both Owner and L.\.KEV\AY ClSTO:\.i HO:\.IES A:"iD RE:-40\'XfiON shall
sign a \vritten approval referred to as a Change Order. When both parties have signed a
Change Order, the Change Order will amend this agreement The cost of all extra \Vork
L-\KE\\AV CtSTOM HO:VIES AND RENOY.-HIOO'; plus 8 percent for administrative
expenses. The cost for work performed under a Change Order shall be paid
immediately or as agreed upon in the Change Order. LA.KEWAY Ct ST0\1 HOMES .\ND
RE:'IiO\ATION shall perform all construction at the property where the home is being
constructed unless othenvise agreed upon by L-\KEWAY CtSTOM HO\IES -\';D
RE"iOV.HIO"i and the Owner(s). All such agreements must be in writing. All requests for
works performed at the property shall be directed to L-\KE\v A't STO:vl HO\IES AND
RENO\" ATION only. Any and all works performed at the property by Subcontractors
without the appro\ a! of L-\KEWA Y Ct STOM Hm-n:s AND RE:-lOV.HION are subject to
additional charges and are considered change orders. Additional fees and or penalties
may apply.
XH: I~SCR-\:"'CE
Before beginning the \Vork, LAKE\\ A\' 0. STOM HO\IES AND RDOV\TIO'i shaU obtain:
(a} Builders dsk insurance covering all insurable risks in an amount equal to or greater
than the Contract Price: (b) Comprehensive public and automobile liability insurance.
The cost for aH required insurance is included in the Contract Price. Proof of insurance
\MOuld be submitted to Owner prior to start of construction. Builder will also furnish the
Owner \vith a financial statement of LAKE\\ A\ CtSTOM Ho:m:s A:-lD RE:"lOV \TIO'i
XIV: L-\KE\\ \.'\ CtSTO\i HO\IES A'jD RE'iO\" HIO'i's Dl'TIES

LAKE\\ AY Ct STO:Vi Ho.:vms AND RDOVATIO"~ accepts responsibility for pertormance of
all duties reasonable necessary to complete the \Vork and agrees that: (a) L\KE\\e.H
Cl STO\i HO\IES A:'liD RE.'iO\ HIO'i shaH obtain all necessary licenses, pem1its. and
similar authorizations from governmental authorities required to perfom1 under this
EXHIBIT C- Pag~a 3
470

/\greement. including water and wastewater tap fees: (b) L-\Kt:w \\ Ct ST0\1 HO.\IES
\'JD RE'iO\ HiON shall notify Ovvner all conflicts bet\veen the Plans and
Specifications and any !avvs, ordinances. rules, regulations. and restrictions 1including
impervious cover) that come to the attention of L.\KE\" \\ Ct sTm,l HO\IES -'"D
RE'iOY HI0'-4; (c) L-\KE\\ n Cl STO\I Hmu:s .\..,D RE'iOVJ.TIO"V shall pay costs
related to the Work, except any applicable la,vs. ordinances, rules, regulations. and
restrictions: (d) The materials used in connection vvith the vVork will be new and of a
quality adequate for the intended purposes, except as otherwise expressly specit1ed in the
P!ans: and (e) L-\KE\\AY CtSTOM HO.\lES .-\'<D RE'<OV-\TI0"-1 shall deliver title to all the
materials, appliances and equipment used in the Work free of all liens, claims, security
interests or encumbrance except the iien and security interests created by this agreement
or given to the interim construction lender. for clarity. Lakeway Custom Homes and
Renovation would accept the ownership of plans and specitication in tenns of
inspection.
XV: EVE;"'ITS OF DEFALLT BY L-\KH\.H CtSTOM HO~IESA:"iD R£:'40\.UION

Each ofthe following shall be deemed an Event of Default by LAKE\\ A\' CtST0~'-1
HO'\H:s A'iO RE'iOVATIO'l and a material breach of this agreement: (a) L-\KE\\-\ \
Ct ST0\1 HO,\IES A'iO RE'iOVATION 's failure, without cause, to make payments to
subcontractors or vendors supplying material for the \Vork: (b) A breach by L.\.KE\\1.\\'
CtST0\1 HOMES A:"iD RE~OVATIO'i of a covenant or ab'Teement contained in this
agreement; (cl The tlling of a voluntary petition in bankmptcy, making an assignment fur
the bendit of any creditor. being adjudicated a bankrupt or insolvent, or applying tor or
consenting to the appointment of a receiver, trustee or liquidator of ail or substantial part
of LAKE\\--\ Y CtST0:\-1 HO.\IES .-\'iD RE'WVA T!O'I 's assets.
XVI: :"iOTICE OF DEFAt:LT TO L-\KE\\1.-It.\ CrsTOM HO·\!ES A.'iO RE'iO\ ATIO'i

Each of the following shall be deemed an Event Default by LAKE\\ n CtST0\1
HOMES A~D RE'iO\ A no' and a material breach of agreement: (a) L..\KE\\1 \\
CtSTOM HOMES .-\.'liD RE:-.!OVATIO'i's tailure, without cause. to make payments to
subcontractors or vendors supplying material for the Work:; (b) A breach by L\KE'•"A\
Ct STOM HO\H:s A'iD RE:"iOV HI ON of a covenant or agreement contained in this
agreement: {C) The filing of a voluntary petition in bankruptcy, making an assignment for
the benefit of any creditor, being adjudicated a bank:mpt or insolvent, or applying for or
consenting to the appointment of a receiver, trustee or liquidator of all or a substantial
part of LAKE\\ AY Ct ST0\1 HO:\IES A'iD RE'iOVA Tl.O'i's assets.
XVII: RE~IEDlES OF 0\eV;"'IER

l'pon the occurrence of any event of default by LAKE\\-\ Y Ct ST0\1 HO.\IES A~D
RE'iOVHIO"i, 0\vner may (but shaH not be obligated tol, without prejudice to other
available right or remedy: (a} Terminate this agreement (b) Seek specific performance of
this agreement by i.AKE\\.\'1' Ct ST0\1 HO\IES A'<D RE'iO\ HIO'; (cl Pursue any other
remedies available to Ovvner under this Agreement or as provided by hn-v: ur (d) Any
combination of the foregoing. If 0"" ner receives notice of any lien or claim for labor
materials furnished to L-\KE\\-\ Y ('{ ST0\1 HO.\IES A'iD RE:"<O\ HIO'-t for \Vhich. if
EXHIBIT C' ~Page

471

established, Owner, or the Property might become liable, though primarily chargeable to
LAKE\\\ Y Ct ST0\1 HO\IES \.'d) RE'I;O\ HIO.'\, 0\vner shall have the right to retain out
of any Progress P::~yment. an amount suftkient to indemnify against such ben or
claim. However, L\KE\\ .n Ct ST0\1 Hcn!ES A-"'D RE'iO\ HIO'I; shall have the right to
contest in good faith the validity of such lien or claim. If LAKE\\\" Ct ST0\1 Hmn:s
A'il) RE.'IOV HW'i fails to discharge any such lien or claim any amounts expended by
Owner for the payment of any hens or claims shall be credited agmnst the Contract Price.
XVHI:O\V~ER'S AGREE,\;IE:'\'TS
0\vner agrees to: (a) \Iake all payments to L-\KE\\A Y CrsTO\l HO:\IES X'W
RE:"iO\ATIO'i required by this agreement (b) Perfom1 all other obligations of 0\vner
required by this agreement: and (c) Protect the title and possession of the Property and
XIX: EVE;"'lTS Of DEfAL'L T BY 0\V~ER

Each of the following shall be deemed an Event of Default by Owner and a material
breach of this agreement: (a) Owner fails to make any payments due under this agreement
within five days of the date it is due: (b) Owner unreasonably delays L-\KE\V..\\ CtST0:\-1
HOMES A:'>IIJ RE'iOVATiO!'i in the prosecution of the Work: (c) Owner fails to perform
any other covenant or agreement contained in this agreement (d) Owner. or any person
liable for the payment or performance under this agreement, files a petition in
bankrupt or insolvent. or applies for or consents to the appointment a receiver, trustee
or liquidator of all or a substantial part of their or its assets.
X.X: ~OTICE OF DEfAt:LT BY 0\V~ER

If 0\vner commits an Event Of Default. prior to exercising any r.:medy granted by this
agreement or by law, LAKE\v.n CtST0\1 Hm·IES A~D RE'jOVATIO~ shall deliver
';vritten notice of default to Owner. If the Event of Default is not cured within ten days
after delivery of such written notice. L.tKEV\< AY Ct STOvJ HoMES \'-lD RE~O\ A no'i may
exercise any remedy granted by this agreement or by applicable law. Cpon the
occurrence of an Event Of Default by Owner. all amounts owed for Work completed wilL
at the option of L~KE\vA Y CtSTOM HO:\-IES A.'I D RE~ov -HIO'-i. after any notice and cure
period, become immediately due and payable \.vithout prejudice to any other remedy of
L.-\KEW.\'1 CiSfO\l H(P.IES \:'>~!) RE'iO\ATIO'i.
X.XI: REMEDIES Of L-\KEV\<A\' CtST0.\1 HO:\-IES \'iD R£'\0\.HIO"<

Upon the occurrence of any Event of Default by Owner. L.-\KEWA Y Cl ST0\1 Hmn:s
A'jD RE'jOVATIO"' may (but shall not be obligated to), without prejudicl! to any othe-r
available right or remedy: (al Terminate this agreement and s~ek recovery of any damage
suft~red by LAKE\\AY CtSTO.\i HO\IES -\'jD RE~OVATIO'i; {b) Discontinue
performance of this agreement: (cl Seek specific performance of this agreement by
0'.-vner: (d) Pursue any other remedies available to LAKE\-\ A\: CrsT0\1 HO..\IES A'iD
RE'IO\ A no:-. under this Agreement or as provided by law: or {e) Any combination of the
foregoing.
472

XXH: \\'ARRA:'iTU:S
L\K£\\ n Ct.ST0:\1 HO\IES A.'-D RE:-.!0\ -\TIO\i will transfer to Ovvner all manufacturers'
warranties received by L-\KE'r\AY ('tST0:\1 H<HIES \ "''D RE'IiO\ HIO'\i or any
subcontractor. L\K£\\ n Ct ST0\1 Hmn:s -\.'iD RE,O\ HIO'\ vvil1 not be required to
warrant. repair or correct any of the Work provided by any general or sub-contractor
(other than L-\KEV\ A\ Ct ST0\1 HO\fES A 'iD RE'\iOV-\ TIO'i l employed directly by Owner
and not as a sub-contractor or employee of L\.KEV\1.\ \' Cl ST0\1 HO\H:s A:"iD
RE'iOV \ HO\i. L-\KEV\1 n CtST0\1 HO.\IES \.'iD RE'iO\ HIO'\i shall not. be obligated
under any separate warranty given to Owner until L \KE\-\ AY CrsT0\1 HO\IES A'< D
RE'iOV \ HON has been paid in full. L\KEW \ \' Cl ST0\1 HO\IES A'iD RDO\ A TIO'Io; shaU
cmTect any of the Work which is defective or \Vhich does not comply with the Plans and
Specitications for a period of one year from the date of substantial completion of the
'vVork. L'pon closing, Ownerts) shall be responsible tor reasonable care and maintenance
of the property. LAKE\\ A 'I' CtSTOM HOMES A.'-iD RE.'WV-\ TIO'i \Varranty excludes items.
v.hich have been damaged due to natural causes, normal wear and tear, inadequate care
and maintenance and other uncontrollable: causes.
X..XHI:MECHA;\IIC'S UE~
Owner grants to L\KEWA v CtST0\1 HO\lES A'iD RE'iO\.A TIO'i a rnechanic 's lien to
secure performance of the obligations of Owner, and agrees. prior to beginning
construction, to execute a separate mechanic's lien contract acceptable to LAKE\\-\\'
CtST0\1 Ho\!ES A'iD RE'iOVA TION and the Interim Lender. if any. If Ovvner is obtaining
an interim construction loan. LAKE\"AY Ct STOM HO:\>IES A~D RE'iOVAT!O'Ii shall assi~rn
to the [ntc:rim Construction Lender a portion of Contractor's mechani~'s lien equal to the
amount of the interim construction toan obtained by Owner and to subordinate any
remaining amount of LAKE\\- A Y Cl STO\f HO\IES \~D RE.'iOVATiO:o>.i 's lien to the intcrhn
construction loan.
XXIV: I~DEPE:\fDENT CO'iTR.\CTOR

LAKE\-\\ v Ct ST0:\-1 HO\!ES \'iD RE~O\ A nos will be an independent contractor,
Nothing contained in or inferable from this contract should be construed to ( i) make
LAKE\\- AY CtSTOM HOMES A.'ID RE'IO'. \ TIO:'i the agent servant or employee of Owner,
or ( ii) create any partnership, joint venture or other association bet;.veen O>vner and
LAKE\\AY CtSTO~I HO:\IES A~D RE:"!O\ A T!O"i.
XXV: OTHER PARTIES BOC~D

Owner and L~o.KEWAv· CtSTOi\1 HO\IES \'iD RE~OVATI01\i each binds himself or hersd[
his or her partners, successors, assigns and legal representatives to the other party and to
the partners. successors, assigns and legal representatives of the other party in all matters
related to this ab-rreernent.
XXVI: ~0 ASSlG;"i:\!ENT
Neither party has the right to this agreement >vithout the vvritten consent of the
other unless this agreement is transferred per section XV.
EXHIBIT C- Pager&'
473

XXVH: NOTICES
'Jotices must be in writing and must be given by (a) personal delivery to the or
!b) certified mail, return receipt requested. postage prepaid in a properly addressed
envelope. The parties designate the addresses following their signatures as their address
for notice. ;-..iotices shall be deemed to be g1ven and received as of the earlier of(al actual
receipt or (bl the third day after the date of deposit with tlie LS Postal Service. ffeither
party desires to change its address for notice, the party shall give notice to the other party
in the manner required by this agreement and the change of address wi!l be effective as of
the last to occur of(al the effective date recited in such notice or !b) the tenth day after
the date such notice is deposited \Vith the US Postal Service.
Special Provision: builder agrees that the square fOotage called on dra.,.vings are
approximate and the builder has his own calculation and is not relying on the square
footage table.
XXVIII: TL\IE OF THE ESSENCE

Time is of the essence in this agreement.
X.CXIX: AL TER~A TIVE D!SPt:HE RESOLLTION

If a dispute arises betv.een L\KE\\A \ Ct STO:H HOMES A:'IID RE:"iOV.HlO"i and 0\.vner,
which cannot be resolved in good faith through informal discussions, the parties agree to
submit the dispute to mediation before resorting to any litigation other than a suit to seek
injunctive relief. If mediation is required, the parties shall jointly agree upon a mediator
acceptable to both parties. If a dispute cannot be resolved through mediation, both parties
agree to submit the dispute to binding arbitration superv·ised by the American Arbitration
Association {AAA), Two Galleria Tovver Suite lA-40, 13-l-55 Noel Road, Dallas, Texas
75240, (2141 702-8212, using an AAA approved arbitrator and AAA construction
Industry A..rbitration Rules. The decision of the arbitrator shall be final and binding upon
both Owner and L.\KH\AY CtSTOM HO\H:S .\'-ID RE:\0\ ATION and judgment may be
entered upon it in any court \Vith proper jurisdiction.
XX.X: CA~CELLATIO:"i
After I ;1 payment ofS43.800 is made, if there is any issue with the pennitting process
that pre\.ents the builder from obtaining the permit provided all the necessary septic,
foundation, framing design is completed by Builder ( & receipts shown to Owner) and all
fees (water meter and tab, electricaL HOA permit, and HOA deposit are paid by the
Builder), then Owner and Builder can mutually decide to cancel the contract with no
additional obligation to each other, except a 53500 HOA deposit payment is re!l.mded to
Owner by the Builder or the HOA, whoever is holding the S3500 deposit.
XXXI:ATTOR:\fEY FEES
If LAKE\\ A\: CUiT0\1 HO\IES A:'liD RE:'IiO\ .\TIO:'Ii or Ov,.·ner initiates any ,arbitration or
legal pwceeding in accordance vvith the Residential Construction Liability Act, brought
under or ~tvith relation to this contract each party will be responsible for their O'>vn
attorney's fees.
EXHIBIT C- Page7-:7
474

XXXH:
This contract contains the entire agreement of the parties and cannot be changed ex.::ept
by their written agreement. Exhibits and addenda vvhkh are a part of this contract are
(list):
Exhibit A: Disclosure Statement Required for Residential Construction Contract

Exhibit B: Subcontractors & Suppliers Ust
in the event any con f!ict or inconsistency between the provisions of Section ! through
xxxrv of this contract and the provisions of any ofthe attached exhibits and addenda.
the provisions of the attached exhibits and addenda shall govern and controL
XX.XUI: CO~St'L T YOLR ATTOR:"!EY

Builders/Brokers cannot !ega! advice. This is intended to be a legally binding
contract READ IT C\REFl'LLY. If you do not understand the eftect of this contract
XXXIV: THIS CO~TR\CT CO~STITlTES A\'D CONSTRCCTION

'\-IORTGAGE \VITHI~ THE :\tlEANL'iG OF SECTION 9.313 OF THE TEXAS
Bl SINESS A~D COMMERCE CODE. YOL A.\iD L~KE\\-.\ \: CtST0\1 HOMES \~D
RE."!OV.HIO~ ARE RESPONSIBLE FOR :\JEETING THE TER:\IS AND
CONDITIO;'\IS OF THIS CONTR\CT. IF YOt' SIGN THIS CONTRACT, AND
YOL FAIL TO MEET THE TER'\-IS A~D CO~DITIONS OF THIS CONTRACT,
YOC ,\[A"' LOSE YOLR LEGAL 0\V;\IERSHIP RIGHTS OF YOCR HO~IE.
KNOW YOCR RJGHTS AND DCTIES t NDER THE LHV.
)
Executed on _ __:_i.e.;'I_'_ _ _ _ _ _ _ _ _ _ .l4H-3-(Effective Date)
~· Cli~nt: Ritu Handa
475

EXHIBIT '"A"
DiSCLOSLRE ST '\ TE.\!E\IT REQL:IRED FOR RESrDE:'iTL\L CO:'iSTRLCT!O:'i

CONTRACT
Project description, address: Lot 1, Block A, Seven Oaks Section 4, also known as 228
Sanostee Cove, Travis County, TX. 78733. Contractor: LAKE\\AY CrST0'-1 HO"IES
-\\0 RE"'lOV HIO"'l
K'iOvV YOLR RIGHTS AND RESPO:'iSIBiUTIES LNDER THE LAvV. You are
about to enter into a transaction to build a ne\v home or remodel e'\isting residential
property. Texas law requires your contractor to provide you vvith this brief overvievv of
some of your rights, responsibilities, and risks in this transaction.
('(}\iVEYANCE TO CONTRACTOR PROHIBITED. Your contractor may not require

you to convey your real property to your contractor as a condition to the agreement for
constntction of improvements on your property.
KNO'vV YOL R CO\iTRACTOR. Before you enter into your agreement for the
your contractor. Obtain and verify references from other people who have used the
contractor for the type and size of construction project on your property,
GET tT I'-1 WR!TI'iG. Make sure that you have a \.vritten agreement with your contractor
that includes: ( l) a description of the work the contractor is to perform: (2) the required
or estimated time for completion of the work: ( 3l the cost of the work or how the cost
will be determined: and (4) the procedure and method of payment, including provisions
for statutory Retainage and conditions for final payment. Take your time in reviewing
documents. lfyou bon-ow money from a lender to pay for the improvements. you are
entitled to have loan closing documents furnished to you for revievv at least one business
another good cause exists, and make sure you understand the documents before you sign
them. If you fail to comply with the terms of the documents. you could lose your
property. You are entitl.ed to have your own attorney review any documents. lfyou have
any question about the meaning of a document consult an attorney.
GET A LIST OF SLBCONTRACTORS A'-iD SCPPUERS. Before constrnction
commences, your contractor is required to provide you with a list of the subcontractors
and suppliers the contractor intends to use on your project. Your contractor is required to
supply updated infom1ation on any subcontractors and suppliers added after the list
provided.
\[0'\.iiTOR THE vVORK. Lenders and go\·emmental authorities may inspect the •vork in
progress from time to time for their mvn purposes. These inspections are not intended as
£,« '1
EXHIBIT', C- f?llQE!!~. c.
476

quality control inspections. Quality control i::; a matter for you and your contractor. To
ensure that your hom;;: is being constructed in accordance \Vith your vvishes and
specit1cations, you should inspect the vvork yourself or have your ov¥11 independent
inspector review the in progress.
).;10'\ilTOR PA YME~T. if you use a lender, your lender is required to provide you with
a periodic statement showing the money disbursed by the knder from the proceeds of
your loan. Your contractor is also required to furnish you with a statement at kast once
each month of money disbursed to subcontractors and suppliers for this project. Review
CLAL\ItS BY CONTRACTORS A:"'D SUPPLIERS. Lnder Texas law, if a subcontractor

or supplier who furnishes labor or materials for the construction of improvements on your
property is not paid, you may become liable and your property may be subject to a lien
for the unpaid amount. even if you have not contracted directly vvith the subcontractor or
supplier. To av·oid liability, you should take the following actions: ( l) If you receive a
written notice from a subcontractor or supplier. you should withhold payment from your
contractor. for the amount of the claim stated in the notice until the dispute between your
contractor and the subcontractor or supplier is resolved. If your lender is disbursing
money directly to your contractor. you should immediately provide a copy the notice
to your iender and instmct the lender to withhold payment in the amount of the claim
stated in the notice. If you continue to pay the contractor after receiving the written notice
without withholding the amount of the claim, you may be liable and your property may
be subject to a lien for the amount you failed to vvithhold.
During construction and for 30 days after final comph~tion. termination. or abandonment
of the contract by the contractor, you should withhold or cause your lender to withhold l 0
percent of the amount of payments made tbr the work performed by your contractor. This
is sometimes referred to as ·statutory Retainage.' If you fail to withhold the l 0 percent
for at least 30 days after tinal completion, termination, or abandonment of the contract by
the contractor and if a valid claim is timely made by a claimant. you may be personally
liable and your property may be subject to a tien up to the amount that you failed to
withhold. If a claim is not paid within a certain time period. the claimant is required to
file a mechanic's lien affidavit in the real property records in the county where the
the affidavit could result in a court imposing a lien on your property if the claimant is
successful in litigation to enforce the lien claim.
SOME CL:U\IS fv1A Y NOT BE VAUD.

When you receive a written notice of a claim or when a mechanic's lien affidavit is file
don your property. you should kno\v your iegal rights and responsibilities regarding the
claim. I\iot all claims are valid. A notice of a claim by a subcontractor or supplier is
required to be sent and the mechanic ·s lien affidavit is required to be filed, within strict
time periods. The notice and the affidavit must contain certain information. All claimants
may not fully comply with the legal requirements to collect on a claim. If you have paid
the contract in full before receiving a notice of a claim and have ndly complied with the
477

!av. regarding statutory Retainage. you may not be liable for that claim. Accordingly. you
should consult your attorney '"hen you receive a vvritten notice of a claim to detennine
the true e.xtent of your liability or potentia! liability for that claim.
OBTAI\! A UE:'\1 RELEASE A~D A B!LLS-P,;~ID AFFIDAVIT. \Vhen you receive a

notice of claim, do not release withheld funds without obtaining a signed and notarized
claim filed by a subcontractor or supplier by requiring as a condition of each payment
all bills have been paid. L'nder law, on tinal completion of the 1,vork and before
final payment the contractor is required to furnish you 1,vith an affidavit stating that all
bills have been paid. If the contractor discloses any unpaid bill in the affidavit. you
should withhold payment in the amount of the unpaid bill until you receive a waiver of
lien or release from that subcontractor or supplier.
OBTAIN TITLE [NSCR/'1..::--JCE PROTECTI0\1. You may be able to obtain a title

insurance policy to insure that the title to your property and the existing improvements on
your property are free ti·om liens claimed by subcontractors and suppliers. If your policy
is issued before the improvements are completed and covers the value of the
improvements to be completed, you should obtain. on the completion of the
improvements are completed and covers the value of improvements to be completed, you
should obtain, on the completion of the improvements and as a condition of your final
payment, a ·completion of improvements· policy endorsement This endorsement will
protect your property from liens claimed by subcontractors and suppliers that may arise
from the date the original title policy is issued to the date the endorsement
THIS IS TO VERIFY THAT i (\VEJ HAVE RECEIVED A COPY OF THIS

CO'lTRACTOR'S DISCLOSCRE STATEMP-iT.
THIS IS ALSO TO VERIFY THAT l (WEl HAVE RECEfVED A COPY OF THE
A. TTACHED LIST Of SCBCONTRCTORS AND SUPPLIERS.
! .t,
~--'----- ( :'v1onth). 20 ~:t;
OWNERS:
I--·----·-- ---~-----
----""--·- _ _
Client: Ritu Handa
\\'ITNESS: _ _ _ _ _ _ __
f \
EXHIBIT C- Page 11
478

EXHHUT ·•B"
Pursuant to Property Sec. following is a list of subcontractors and suppliers

>vho may perform ~;vork on your reskknce: this list is subject to change vvithout prior
notice: ne"" infom1ation shall be made available upon request to C!ient(s).
St:BCONTRACTORS
PHONE TR:\DE
R Town Plumbing 512-635-8632 Plumbing

Airtron 512-821-3! HVAC
,\t!as Rain Gutter Systems 512-250-lOl! Gutters
Renaissance Stone 512-264-0156 Countl.':!rtops
Hinkle Insulation 5 I 2-J !2-0826 fnsu!ation
fiberglass Waterproot1ng System 512-159-8929 Waterproofing
Rodrigues Bros. 512-801-5870 Framing
PC Concrete 5l1-7RJ-83 73 Con crete vVork
American Electric 512-263-12!4 Electrical
SLPPLIERS
:\AME PHONE TR:A.DE
Designer Floors 5!2-263-3333 Tile & Carpet

factory Builder Store 5!2-834-l442 Appliances
Centex Materials 512-460-3033 Concrete
RSS 511-251-0606 Foundation Steel
Stock Building Supply 512-44..+-3! n Lumber
"~OTICE: THlS LIST Of SUBCONTRACTORS AND SUPPLIERS MAY NOT BE A

FI~AL USTNG. THE CONTR:\CTOR IS REQURED BY LAW TO SL'PPL Y
LPDATED Il\IFOR~\lA TION, AS THE fNFORMA TfO'I BECOMES AVAfLABLE,
FOR EA.CH SUBCO:'-iTR.\CTOR OR SCPPLIER LSED N THE WORK
PERFOR.vfED ON YOLR RESIDEi'ICE."
.f-).
.. . . (Month), 2.G+3
EXHrBIT C- Page 12
'ff
479

EXHIBIT "C"
REFEREV ES
l . N \ '-CY \ '- D BOB 80\\ \!.\ '- ( 479) 236-4986
c5l2 HJ 1-82.2 7
3. :VIR. Wt:SLE y C.UL\ 'W \ y (5 [2) 299-0142
.:1-. MR. fERGL SO'-
5. ROBER r F -\R\!ER ! 512) 28-J.-6738
r'
'-.........." .
EXHIBIT C - Page 13
480

This addendum shall be a part of the Residential Construction Contract betv.een
L\KE\\> \\ CLST0!\1 HO\IE~ .\'iD RE'iOV-\TI0."-1 and Dhiraj and Ritu Handa for the
construction of Improvements on 228 Sanostee Cove Austin, Texas.
A Sum of $100.00 per day would be the amount of penalty if the substantial
completion (including fun landscaping) is not achieved within 460 days of start of
construction payable to the Owners by Lakeway Custom Homes.
A sum of $100.00 per day would be the amount of bonus if the substantial
construction payable by the Owner to Lakeway Custom Homes.
,__,.
T~ -
Executed on 4 h A'/ kl ~-·· cl(' .21~ 10 J4(Effective Date).
l
/
Client: DhiraJ Handa
Ritu Handa
nan Dargahi
·"~."~ .. ~,·/
EXHIBIT C- Page 14
481

Foundation
The Foundation will be designed by a licensed professional engineer, and it

will include the following minimums to meet Lakeway Custom Homes &
1. Footing, foundation walls and concrete slab shall be reinforced concrete

ASTM, C-150 Type l 3000 PSI at 28 days.
2. Vapor barrier: provide 6 mil polyethylene vapor barrier below entire slab
area.
Framing
The structural framing will be designed by a licensed professional engineer,
and it will include the following minimums to meet Lakeway Custom Homes &
1. Wood framing, 2 x: 4- Southern pine No.2 Y.P
2. Corner braced with OSB Exterior wafer board.
3. Sheeting with W' plywood at corners.
4. Joist: Southern pine No.2 Y.P
5. Bt·idging continuous at 1/3 points span not to exceed 6'-0" spacing.
6. Partition framing: 2 x 4 at 16'' o.c. SPF. This will be changed to 2 x 6 when

caUed.
7. Ceiling framing: Southern Pine No.2 Y.P.
• Rafters: 2 x 8 at 24" o.c. Minimum.

• Continuous 2 x 6 Purlins at mid-span or 11'-6" maximum.
)
-·y''/
EXHIBIT G- Page 15
482

• 2 x 4 Struts at 48" o.c. From compression members to bearing walls at
45 degree angle.
• 2 x 4 co!!ar ties at 48" o.c.
• Hips, valleys, and ridges 2 x 10 minimums.
R Nailing and attachment of all framing members and sheeting shall be as

specified in the International Residential code Nailing Schedule.
9. Lakeway Custom Homes & renovation may have the roof designed using roof
10. All exterior walls shaH be of2 x 6 Southern pine No.2 Y.P.
Roofing
1. Roof Sheeting: Ox board x4' x 8'
2. 2 layers or felt: 30 lbs and 15 !bs respectively.
3. Concrete tile roof, Hanson large barrel, or approved equaL Roof would have
hand blended with 3 different cotors from manufacturer standard color
selection.
4. Battens: Nominal l'x2"
5. Include bird stop.
6. Valley flashing shall extend minimum 11" from center and have splash
diverter rib 1" high.
7. Flat roof: single ply roofing. Granulated APP modified bitumen.
8. Concrete Tile roof to be selected from the standard manufacturer colors only.
10. Metal covered gutters are included all around the house
Insulation
1. R-19 Fiberglass batt exterior walls and chase walls.
483

2. R-22 Fiberglass batt at walls opposite attic
3. R-26 Fiberglass batt at sloped ceilings and inaccessible flat ceilings.
't. R-30 Blown insulation at accessible ceilings.
5. Two phase air infiltration control treatment.
6. Sound reduction insulation will be installed on Bee Cave Street Side. Double
sheetrock will be installed in the bedroom, family room, prep kitchen on Bee
Cave side.
Drywall
L 5/8" Fire restraint drywall to all ceilings and garage/building common walls.
2. S/8" fire restraint drywall to all garage walls and ceilings.
3. Vz" dryvJal! in all other areas as needed.
5. Tape, float and texture with heavy trowel on all walls at upper t1oor, main
t1oor and garage annex only, except the closets and the garages. All other area
to receive standard medium orange peel texture.
Finishes
AH paint material to be Sherwin- \tVHHams or approved equaL
Exterior:
• All wood to receive oil based primer and two coats of latex.
• Two coats ofTheralastic paint at stucco.
• Exterior rails: Wrought Iron (per attached picture)
Interior:
EXHIBIT C- Page ;t.7

484

a. AH ceilings and walls to receive two coats of latex paint.
b. Prime woodwork and two coats of enamel.
c. Owner to select maximum of 2 colors per room on walls and one color
d. All tile is based on $4/sffor material, including taxes and delivery to

jobsite
Interior doors & Trim
1. Interior doors shc1!l be 1-3/4" fir 6 panel recessed paint grade solid core
doors.
2. Crown molding: As shown on drawings. but only with 2 step application.
3. Baseboard and door trim: '12'' x 3-1/4"
4. No wood paneling at walls is included.
\1\lindows
l. All windows shall be Pella double pane with low E glass, brown color
Vinyl windows.
2. Ali operable windows to be supplied by appropriate screens.
3. All windows on Bee Caves side of the road, prep & main Kitchen Windows
to be special "Sound reduction" windows
Exterior Door
l. All exterior doors to be steel with glass.
485

Cabinets
1. Al! cabinets shall be custom made with wood material using knotty alder in
2. All upper cabinets shall be 42"
4. Allow for pull-out trash cabinet in kitchens (near sink) and pull-out
warmer drawer [near island).
Mirrors
1. All Framed Mirrors to be selected by the 0\lvner with budget not to exceed $1800.
Non-Framed mirrors are included outside of this $1800 budget
Granite
1. All Granite to be 3cm in all kitchen areas, bathroom areas and all niches with
3cm, teve! 2, glued strip/laminate edge and 2cm in other areas with 3cm glued
strip/laminate edge
Plumbing
1. Insulate all hot water lines in slab.
3. Insulate water lines in all exterior walls.
4. Lead flashing on all plumbing vents.
5. Minimum of 1-1/2" water line and of sewer line.
4. Plumbing is included in all unfinished area and its limited to rough plumbing
and capped.
/.
EXHIBIT c·-·Pag~ 19
I'
486

HVAC System
1. Furnace: Heat pump, carrier or approved equal.
2. Air Conditioning compressor: Carrier or approved equaL with Min. 14

seers.
Note: 4 systems are included (2 for Main floor, 1 for upper f1oor, 1 forGE). AU
provisions for additional 1 system for basement will be made including compressor
pad.
Performance:
a. System layout for balanced zone.
b. Size system to accommodate hot spots.
c. Provide return air to eliminate hot spots.
d. Maintain duct work within insulated envelope of the house.
e. Minimize duct nm where possible.
Electrical
1. AH Electrical installation shall be per National Electrical Codes (N EC)
6. Provide underground service from transformer to building.
3. Provide circuit breaker as required.
4. All conductors shall be copper.
5. Provide fire and smoke alarm as required by code.
r 1
EXHIBIT C- ~Ql
487

h. Electrical wiring is included in the unfinished areas, and its limited to
running ~.-vires and capped.
7. Builder to wire Garage Extension unit in a way to allow Owner to be able to
add a separate meter at his discretion and cost.
Exterior Concrete
1. All exterior concrete to match existing profile with a minimum thickness

of4".
2. Include 6 x 6 wire mesh reinforTement
Fireplaces:
L All Fireplaces to be 42" metal fireplaces.
Allowances
'vVe have provided the following allowances within our proposal; sales
taxes and delivery to jobsite are included vvithin allowances. However,
SO for the following items at owner discretions: Note: The Owner has elected to
exclude Allowances from this contract, but would deliver all to the builder at his
cost. The builder is only responsible for installation of the allowance !terns
excluding all the low voltage wiring and equipment.
a. Electrical Fix:ture
b. Plumbing fixtures
c. Appliances
d. Front Door
e. BathTubs
. (
EXHIBIT C- Pa~~2Y
488

f Finish Hardware
g. Toilet accessories
h. Cabinet knobs & pu!ls
i. All Low voltage wiring and equipment:
Telephone
Internet
Security
Audio/Video
Please Note:
In case of savings the appropriate funds will be fully credited to the

owners, and in case of overage no mark-ups will be added to any
amount
AH unfinished areas to be plumbed and capped with insulation and

sheet rock The sheetrock would not receive any other treatments such
of pavers for the sum of$0 (Zero Dollars) to be added to the contract
sum.
i\11 landscaping is per plan. Builder allows owner to substitute different

plants/trees/shrubs (5Gallon) of equivalent value.
An 18" berm will be built along Bee Caves Road until the end of the
driveway.
EXHIBIT C - Page-.22
489

Site Work:
1. All Pavers should be of manufacturer's standard selection and colors.
2. Pavers would be placed on 6" compacted road base and W' sand.
3. Maximum of 3 different colors of pavers to be selected by the owner.
4. Areas to receive pavers are the fo!lowing per plan
a. All Driveways.
b. Areas immediately in front of garages.
c. Area between Garden and sw1mming pool.
6. Landscaping per plan. The garden area and aU landscape area would be
cleaned, graded with 2" of top soil and Bermuda grass with sprinklers
system. All future sprinklers relocation due to the own planting additional
landscaping is excluded.
7. Stone retaining walls shall be of 12" cut limestone dry stacked to 4' high. All
other heights above 4' would be set on mortar with weep holes at 3' O.C. with
a 12" reinforced concrete pad under them. Wrouht iron fence to be installed
around garden area.
8. Stone wall at the upper driveway in front of the upper slab garages will be
12'' engineered reinforced concrete wall and the exposed surfaces would
receive a thin layer of cement commonly known as underpinning.
9. All slab elevations are revised by the Architect and are noted on the record
drawings.
10. Both fountains at the driveway and the area between garden and the
swimming pool is excluded. The other 2 fountains are included. Minimum
size of fountains will be 6' length, 3' width, 18" depth for the basin and the
waterfall will be atleast 8' or higher with entire wall behind covered in
stone/rock
11. All excavated material from the site would be used for:
a. Foundation fills if suitable and is approved by the engineer.
b. Other excavated materials would be used for fill in other areas and
also be used to fill the southwest corner of the upper parking area in
front of garages.
c. All other none suitable excavated materials such as big boulders wilt
be hauled off site.
12. All other area of the site would be fine graded with 2" of top soil and grassed
with automatic sprinkler system. All shrubs & trees to get automatic
EXHIBIT cJ Page'2Y
490

sprinkler except the smalt cut out areas in upper & lower courtyard areas
where there will be non-autom<ited sprinkler.
13. Columns shown on drawings would be of stone columns to rnatch existing.
14·. All new 8' wrought iron fence would be a match to existing.
15. Any light fixture shown on the site would be supplied by the owner
16. Builder will provide a water well as indicated in plans. No storage tank is
included in the bid for storage of water extracted from the well. The
supplied by the well from underground water reservoirs. Builder to insure
proper pressure to run multi=zoned sprinkler system to service the entire
property. This item is not in base bid but this language overrides any
17. A 4' stone retaining wall would be erected around the pool equipment, well
make lt accessible for future servicing activities by owner.
19. All three existing gates would be operable via remote control and access code
pads.
20. Create positive drainage at all location.
21. Builder Guaranties no standing water on the finished property.
22. All Exterior Railing to be constructed with appropriate patterned photograph
attached.
i!
EXHIBIT C- Pa~'e~M."" ·
491

492

Schedule of Values
Contract initiation.<> $43,800

Permit & fees .f 0,() $58,400
Site Excavation fill $58,400
Foundation Part I go() $116,800
Foundation Part 2 7°o $102,200
Framing Ps 0 o $262,800
MEP Rough $73,000
Roofing goo $116,800
Exterior Skin l0°o $146,000
0
Insulation & Sheetrock ) '0 $73,000
Trim & Cabinets 5°'0 $73,000
Painting 3"o $43,800
Flooring .fO,o $58,400
\1 EP Final .fOo $58,400
Septic System $29,200
Landscaping Irrigation JOo $43,800
Dmeways $58,400
Final $43,800
Total 100% $1,-460,000
EXHIBIT C - Page~-~-..r
493

FltED
fn theomc-e of the
Secretary of State of Texas
ARTIClES Of ORGANIZATION
JUL le 2001
OF
Corporations Sectior¥
YEKK CONSTRUCTION SERVICES, U.C
The undersigned, acting as the orgamzer of a llmlted hab1iity company

under the Texas UmJted L!ab11!ty Company Act (the "Act"}, does hereby adopt
the following Arf1c!es of Orgamzation for such l!m1ted llabllliy company:
ARTICLE ONE
The name of the hmited hab!l!ty company is YEKK CONSTRUCTlON
SERVICES, lLC (the "Company").
ARTIClE TWO
The period of the Company's duration !S perpetual, unless the Company
I
1
dissolves in accordance With the terms of 1ts regu!atrons.
ARTICLE THREE
The purpose for which the Company 1s organized is to transact any or all
lawful busmess for which limited !lability companies may be organized under the
Texas Limited Liability Company Act
ARTICLE fOUR
The address of the pnnc1pa! place of buslness of the Company in the State
of Texas, and the address of the rnltial registered oft1ce of the Company in the
· State of Texas, is 401 Lakeway Dr., Austin, Texas 78734, and the name of its initial
reg;stered agent at such address is Pejman Dargaht
EXHIBIT D- Page 1
494

ARTIClE FiVE
The Company will have one or more managers and the names and
addresses of its initial manager !s as follows:
Nome Address
Pe1man Dargah1 401 lakeway Dr., Austin,

TX 78734
ARTIClE SIX
The name of the orgamzer of the Company is Pe1man Dargahi, and h1s
address Is 401 Lakeway Dr., Austin, Texas 78734.
l
2
1
~2-
EXHIBIT D - Page 2
495

00027694397 Filing Number: 709317922
TX2015
ver~ s.c
OS-102
(Rev.9-13132)
micode 13196
Texas Franchise Tax Public Information Report
To be filed by Corporations. Um«ed liabiUty Companies {LLC} and Financial Institutions
This report MUST be $1gned am! flied to satl11fy fnm<:hlse tax requirements
•
11!1 Taxpayer number '( ou have ce n sunder ChaperI 552 and 559
!
17430094841 l I 2015 I
Governm1mt Code, to rl!vlew, request and correct information
we have on fila about you. Contact us at 1-800·252·1381.
J}~~~amCONSTRUCTION SERVICES LLC !1111 __Q Check box if the mailing addr~s nas changed.
_j Socr&t•ry ol State (SOS) foe nvmbar or
~a~"Sao~HOONER DR _____, Comptroller fila rtuml>or
j ZiP Code -
£1KEWAY
lSI!Jle
TX 78738 )Piv$l002 ~ 07093179:22
0 Check box if !here are currently no changes trom previous year; If no information is displayed, complete the applicable information in Sections A. B and C.
!'~'~' o~tHOONER DR LAKEWAY TX 78738

jl"~~~~ fll§'~~6"tfER DR LAKEWAY TX 78738 -j
SECTION A
Officer, director and manaser information is reported as of the date a Public Information
Report is completed. The information is updated annually as part of the franchise tax
report. There is no requireml!nt or procedure lor supplementing the information as
offiCers, directors. or managers change throughout the year.
Name llt'e and mailing address of each off~eer direetor or manager
Ill
!n~e -,----
y
I
'J?E:JMAN DARGAHI MEMBER
i~ec~:s II Tll1111
ll<plrS!Ion
t
m m
2 3 1 1 5
:
d a y 'f
I
Maiitng e(ldress
125 SCHOONER DRIVE flKEWAY I TX
, St"'e
!z~8°73a
Name Ti!io Dir&e!Or
YES
l
!
Ttrm
exp;flf~on I
m m d d y y
;,
j
Mail.ng ad<lr&ss Ci!y ! State ~ ZII"Code
Name nue j Director

fenm
m m d d y y
I YES explretion
l I
; Mailing address
L
City
~
State IZIP Code
SECTION B Enter the tn!ormation required for each ccrporntlon or LLC.lf any, in which this entily owns an ill!erest of 10 percent or more.
' Nam& Qf owned ($ubsidiary) co,p001!ion or limited li&biiily company $lata ol fc>rmatiOil Texat> SOS file number, if any Percentage of owtll!t>hip
1
. State of formation I Texs3 SOS file number, II any Percentage of Owtle1$hlp
~----------------------------------------~~ --------------~---
SECTION C Enter the information required for each corporation or tlC. !I any, lhl!t owns anlllterest of 10 percent or mC>re in this entity or limited
liability company.
[ Nome ol owned {param) corporation or limited liability compeny i T$x&; SOS file number. il any Pell':ent&g~ o! owno~hip
I
Regos!<~rod eg&nt and regowor"d offu:e currently on file {see lnS!NCli<!n$ if you need to make changes)
Aget~t: PEJMAN DARGAHI 0
IOlfko: 125 SCHOONER DRIVE
IIIII llllllllllllllllllllllllllllllllllllllllllll
1024
EXHIBIT E
496

Administrator: Katny Neeley
Date: 11114115
Inspection/Disbursement Sheet for Conslructionl?ermanent Loan New Construction _j
Borrower; Handa, Dhiraj & Ritu Loan Amount: $800,000.00
Location {Lot or Address): 228 Sanostee Cove, Austin, TX 78733 Equity Injection - House: $6'30,000.00 45"2%
Les.; Closing Draw:-::::-===:-::-
House Amount: $1,460,000.00
.------- Builders Schedule of Values Scheduled % Work Construction Draws j

Item# Description lfatue Complete Completed ~ AtnOUI71J
Contract Initiations
1 3.0% $43,800.00 3.ll% $43,800.00 1 2!1912015 $55.-:iOO.OO\
Permit & Fees
2 4.0% + S5MOO.CO 4.0% $58,400.00 2 3i20120i5 $118,990.00
__ 3 Site Excavation!Fift 4.0% $58,400.00 4.!1% $58,400.00 3 512212015 $131.400.00
-------
4 Foundation Part 1 8.0% $116,800.001 S.il% tS1~ 4 711012015 $00.52000
5 Foundation Part 2 --fa%· $102,200.00· 7.0% ! $102,200.00 5 8110/2015 $75.92000
6 Framing 18.0% $282,800.00 113.0% $282,800.00 6 91112015 S62.8DO.OO
7 M/EJP Rough 5.0% $73,000.00 5.0% $73,000.00 7 912112015 $43.800.00
~---
Roofing 1-,s.o~,... •"
$116,800"00 8.0% $116,800"01) 8 9123/2015 843,800.00
9 Exterior Skin (Veneer) 1iJ:(i¢A, $146,000.00 10.0% $146,000.00 9 10116/2015 $6i 320.00
10 !Insulation & Sheetrock 5.0% $73,000.00 5.!)% "$73_,~ 10 1111312015 S43,BOO.OO
11 Trim & cabinets 5.0% $73,000.00 4.9% $70,080.00 11 $0.00
12 I Painting 3.0% $43,800.00 2.!l% $40,880.00 12 $0.00
---- $000
13 Flooring 4.0% $~~ 4.0% $58,400.00 13
14 M/EJP Final 4.0% S68 400 00 ·:_~~- __ _!~~ 14 sooo
' -::.:.::-::
15 Septlc System 2.0% $29,200.00 2.0% $29,200.00 15 $0.00
18 Landscaoino!lrrioation 3.0% $43 800.00 iJ.O% $0"00 16 $0.00
17 Driveways 4"0% $58,400"00 0.6% $8,760.00 17 $0.00
1--
18 Final 3.0% $43 800.00. 0.0% $0.00 16 $0.00
19 0.0% $0"00! 00% ____,.E&Q 19 so.oo
so.oa-t···r;a%-
20
21
--- -----r 0.0%
0.0% $0.00 0.0%
$0,00
$0.00
20
21
$C.OO
so.oo
22 0.0% $0.00 0.0% $0.00 22 so.oo
23 .._+0.0"1- ~------ $0.00 0.0% $0.00 23 $000
24 0.0% $0.00 0.0% $~~ 24 $0.00
25 0.0% $0.00 0.0% ______$~~ 25 SO.OO
26 0.0% $0.00 0.0% $0~-!!@ 26 so.oo
1--·
27
28
~----~--~--·-
I 0.0%
0.0% - $0.00
$0.00
0.0%
0.0%
$0.00
$0.00
27
28
$000
$0.00
29 0.0% $0.00 0.0% $0.00 29 sooo
30
31
O.O"k
0.0%
$0.00
$0.00
0.0%
0.0%
-~
$0.00
30
31
$0.00
SO.OO
32 0.0% $0.00 0.0% $0.00 32 $0.00
33 0.0% $0.00 0.0% $0.00 33 SO.OO
34 0.0% ·---~
$0.00 00% ---~-~ Total Draws $727,750"00
35 -j-
l 0.0% $0"00 ().0'1<>
$0.00
36 0.0% I so.oo 0.0% ~~ Funds Available: -$73,750.00 currently c
37 -·--------------j-9 or,.'!_
~--_________§QJ)_Q ___ .2Q!~-- --~--~2:-!1@ (Work Completad Less Drews)
38 ' 0.0% $0.00
'!.:.~~------~ Loan Balance: $727.750.00
39 0.0"/o $0.00 oo;:t..---+- -~
40 '
0.0% $0.00 OJ!% 1 $0.00 Funds Remaining;
·--so:oo
$72.250.00
41 I 0.0"/o $0.00 l'i.O% I
Total 100% $1,480,000.00 00.0% 1,314,~
-
Funds Remaining 572,250.00
Less 10% Retainage $146, DOO" 00
Available Net of Retainage __(S73, 750.00)_ Funded lh
Rev. 9/2412009
C:IUsorS\PajeiAppData\Locai\Micrcsol!IWindowsiiNetCacheiContentOutiook\1T2SPK!R\Haooa Inspect. Draw Schedule 1 i 12 15
EXHIBIT F
497

King, David A.
From: Kathy Neeley <Kathy.Neeley@Regions.com>

Sent: Friday, November 13, 2015 2:13 PM
To: Paje Dargahi
Cc: raj_handa@yahoo.com
Subjed: Funds Wired
Hello Paje.
Funds have been wire to your account in the amount of $43,800. This is the maximum amount we could get approval to
fund per management. Funding this draw was an exception to policy, and required management approval.
Per the Risk Manager, there will be no further draws from the loan until the project is completed, and required
documentation provided (CO, Final survey, termite soil treatment record/borate materials documentation, and health
department approval for use of new septic system).
Please notify me when the project is 100% complete, so the final inspection can be ordered. Please forward above listed
documents as they become available.
Kathy
Kathy Neeley
. ~ s
Regions Bank dba Regions Mortgage
Construction/Permanent Lending
2050 Parkway Office Circle RCN-1
Birmingham, AL 35244
Phone: (205) 560-7157
Toll Free: (877) 215-3011
Fax: (877) 215-3023
Email: kathy.neeley@reg!ons.com
This message is for the named individuals' use only. It may contain confidential, proprietary or legally privileged
information. No confidentiality or privilege is waived or lost by any accidental transmission. if you receive this message
in error, please immediately destroy it and notify the sender. You must not directly or indirectly, use, disclose, distribute,
print, or copy any part of this message if you are not the intended recipient.
1
EXHIBlTG
498

King. David A.
From: Kathy Neeley <Kathy.Neeley@Regions.com>

Sent: Friday, November 13, 2015 3:36PM
To: Paje Dargahi
Cc: kamran.dargahi@yahoo.com; raj_handa@yahoo.com
Subject: RE: Funds Wired
No sir. Only $72,250 remains because we have already funded over the point of completion and the final10%. By policy
we should have only funded down to the $146,000 but you needed more funding to keep going. So an exception was
made, and you have now been funded down to the last $72,250.
Kathy
Kathy Neeley
Regions Bank dba Regions Mortgage

Construction/Permanent lending
2050 Parkway Office Circle RCN-1
Birmingham, AL 35244
Phone: (205) 560-7157
Toll Free: (877} 215-3011
Fax: (877) 215-3023
Email: kathy.neeley@regions.com
This message is for the named individuals' use only. It may contain confidential, proprietary or legally privileged
information. No confidentiality or privilege is waived or lost by any accidental transmission. If you receive this message
in error, please immediately destroy it and notify the sender. You must not directly or indirectly, use, disclose,
distribute, print, or copy any part of this message if you are not the intended recipient.
"" ~Original Message· ·••

From: Paje Dargahi [mailto:Qaie1@sbcglobal.net]
Sent: Friday, November 13, 2015 3:33 PM
To: Kathy Neeley
Cc: kamran.dargahi@yahoo.com
Subject: Re: Funds Wired
Per this schedule we are still owed $146000 at completion Am i correct?

Paje
>On Nov 13, 2015, at 3:23 PM, Kathy Neeley <Kathy.Neeley@Regions.com> wrote:
>
> Copy attached
>
>Kathy
> _______________________
> Kathy Neeley
>
>
1
EXHIBIT H- Page 1
499

> Regions Bank dba Regions Mortgage
>Construction/Permanent Lending
> 2050 Parkway Office Circle RCN-1
> Birmingham, Al35244
>Phone: (205) 560-7157
>Toll Free: (877) 215-3011
> Fax: (877) 215-3023
> Email: kathy.neeley@regions.com
>
>This message is for the named individuals' use only. It may contain
>confidential, proprietary or legally privileged information. No
>confidentiality or privilege is waived or lost by any accidental
>transmission. If you receive this message in error, please
> immediately destroy it and notify the sender. You must not directly
>or indirectly, use, disclose, distribute, print, or copy any part of
>this message if you are not the intended recipient
2
EXHIBIT H - Page 2
500

Paje Oargahi
From: Kamran Dargahi <kamran.dargahi@yahoo.com>

Sent: Monday, November 16,2015 1:41PM
To: Raj Handa; Paje Dargahi
Subject: 228 Sanostee Cv
Hi Raj,
I am writing this letter to confirm our earlier phone conversation. As I have said repeated times this
Project has been costing us a lot more than what you and I have anticipated.
All the funds that we have received from your bank has been spent on your house with an exception
of some token funds that we received.
The house is 95% completed, and we are ready and willing to bring your house to a successful 100%
completion, so you and your family could move in and enjoy this marvelous home.
I do need your assistant in financial form to achieve this. Currently we are about $150,000 +/-short
to finish our contract. Of course we do want to do the right thing and fulfill our contractual obligation,
but I don't see how we could move forward without your financial help.
We are willing to work with you on this deficit to bring this project to a successful completion
At this time your house is secured and no more activities could be performed unless we are
financially comfortable that we are able to continue paying for work performed by our subcontractors
and suppliers, that is the reason I requested to meet you in person to formulize an agreed plan.
Please advise.
Best
Kamran
1
EXHIBIT I
501

Estimated To Complete:
Juan Tovar Tile works
Rtt~Vv1l Plumbing Plumbing

A!rtro~ HVAC
Room Equipment Sauna

ACtion Wat~r Well ~Mces $4,000.00
502

Proj.ect: 228 Sanostee Cv,
Yekk Construction 'l.t"'l"tlll~t'tf·
Outstanding Invokes:
Contact
Brown Garage Doors

Acth:m Propane Propane
Anchor Ventana &Giazlng Johnsen $4,070,00
. lnsulatkm $2~7SO,OO
.u.'~" ... u···"'·''"'"'

Brian
G,O•. . Paver installation George
Paveston~ LLt 512·296·4404 Guy Unea! $12,290J7
American Eiectrk
Jose . Wood Floor Installer

JuanTovar
Waterloo Plasterir*g
Austin Outhouse J:lumster
JAlGutter
CK&R
Cleaning
m ratai
><
I
ttl
-l
503

Rick Triplett
512 480.5633
512480.5833 (fax)
GRAVES DOUGHERTY HEARON&. MOODY rtripictt@gohm.com
A PROfESSIONAL CORPORATION MAiliNG AOPRESS:

P.O. Box 98
Austin, TX 78767-9998
November 18,2015
Mr. Pejman Dargahi Via Certified Mail

125 Schooner Drive Receipt No. 70122920000178777059
Austin, Texas 78738 Return Receipt Requested
and Via First Class Mail
Re: Residential Construction Contract by and between Lakeway

Custom Homes and Renovation ("Builder"), and Dhiraj and
Ritu Handa ("Owner") ccmceming 228 Sanostee Cove, Austin,
Texas 78733 (the "Contract")
Dear Mr. Dargahi:
We represent Dhiraj and Rltu Handa in connection with the Contract You
executed the Contract, individually, effective as of April 4, 2014 and have partially
performed your obligations thereunder. However, we are sending this letter to you
pursuant to Articles XV, XVI and XXVII of the Contract to advise you that you are in
default under the Contract for the following reasons, although there may be other
defaults which we may subsequently advise you of:
1. You have stopped work under the Contract because, according to our
clients, you have no access to funds to complete both the remaining work under the
Contract or to correct defective work on the house which has resulted in leaks. You
made a draw request on November 13, 2015 and failed to advise our clients that you
could do no further work (until November 14, 2015 when you so advised our client,
which was after our clients paying the draw request from the prior day). In stopping
work, you are in default of Article XIV of the Contract.
2. You are in default of Article XII of the Contract in failing to provide to our
clients proof of currently required insurance and a financial statement for Lakeway
Custom Homes and Renovation (which is not a !ega! entity and not registered under
your name as an assumed name).
If you fall to remedy the defaults listed above by Noon, Monday, November 30,
2015, our clients will pursue all available remedies as set forth in Article XVII of the
Contract. If you cure these defaults by such time, our clients agree to refrain from
pursuing remedies for these particular defaults and will comply with their obligations
under the Contract.
2402986.1
401 Congress Avenue Suite 2200 Austin, Texas 78701 512.480.5600 www.gdhm.com
EXHIBIT L- Page 1
504

Mr. Pejman Dargahi
November 18, 2015
Page 2
We also point out that the project covered by the Contract was to have been
substantially completed in August of 2015. In addition to all other remedies available to
our clients, you are liable for the late fee penalty of One Hundred and No/1 00 Dollars
($1 00. 00) per day for each day after the four hundred sixty (460) day deadline the
project remains substantially uncompleted. No valid extension of this deadline has
occurred according to our clients. You have not been deducting these amounts for your
draw requests. Furthermore, our clients have been overcharged, and have paid you,
Seven-three Thousand Seven Hundred Fifty and No/100 Dollars ($73,750.00) in excess
of what you should have invoiced our clients for. Finally, we urge you to keep the
premises secure from vandalism and theft.
If you have any questions or information regarding curing your defaults under the
Contract, please have your attorney call me. Thank you for your attention to these
matters.
Sincerely,
Rick Triplett
RT:kmh
cc: Mr. Dhiraj Handa

Mrs. Ritu Handa
David A King, Esq. (firm)
24029861
EXHIBIT L- Page 2
505

AFFIDAVIT OF TED GUTIERREZ

§
COUNTY OF TRA.VIS §
BEFORE ME, the undersigned authority, em this day personally appeared Ted Guttirez,
knm.vn to me to be the person who signed this Affidavit, who being by me duly sworn, on oath
deposed and stated the foHowing:
1. "My name is Ted Gutierrez. I am over the age of eighteen, I have never been
convicted of a felony or any crime involving moral turpitude, and I am fully qualified to make
this affidavit.
2. "I was hired by Pejman Dargahi as the subcontractor (AT Gutters) to install rain
gutters at 228 Sanostee Cove, Austin, Texas 78733 (the "Project"). J: performed work on the
Project in or around November 2015.
3. have not been paid by Mr. Dargahi for completing the work on the Project,
although 1 have requested payment from him on several occasions. I was paid $4,672 by Mr.
Dargahi for work I performed on a different project on Indigo Lane Georgetown, Texas in
Ju!y2015.
SUBSCRIBED AND SWORN TO BEFORE ME by Ted Gutierrez this ~\day of

January, 2016.
Notary Public in and for The State of Texas
DEREK~
MyNatmyiD#13!1421~
~~23.2019
EXHIBIT M
506

YEKI< CONSTRUCTION SERVICES LLC Account No 215049255
Page 3 of 5
DEBIT
~.., F:~ £7 - - · - - · - 7~h~y

:;- .\.o U<»A- fkcr if 'ZI5o'f97J9
~-
j)5
.D3
...
7/18/2014 $58,415.00 7/24/2014 $0.03
7/l/2014 3009 $2,625.00 7/10/2014 3010 $3,000.00
7/11/2014 3011 $3,750.00 7/22/2014 3012 $250.00
3014
z/1?714 ... .........
--
w-
o-
...........
o..........,
_,._
.,.,..........,
....
7/22/2014 3014 $7,000.00 7/23/2014 3015 $6,000.00
7/24/2014 3016 $2,750.00 7/22/2014 3017 $5,000.00
3018
7h..1J./ti M -MMJT.Jt
""""f-1·+------'! $ ~·a)
7/29/2014
~
3016 $5,000.00
EXHIBIT N - Page 1
507

YEKK CONSTRUCTION SERVICES LLC
~~~-
~
--
~mao
~__J
~ tw'I'CT~
... _ ...
Account No
lJU(I!'lN.tY CU$TOlt HOM£$ &.ReHOVATtC*

f;.JiiBIIJNIIol(,'lXl#DI'i
215049255
Page 3 of 6
u ~ot&&UIIH-
$ to?... '2J)oA)
10/l/2014 $102,200.00 10/1/2014 3043 $2,170.03
u.tte'WAY CUSTOU.KOUU &RtiJ«WA110N

~~'::~ &.<J'3'?f0093
10/1/2014 3044 $2,292.00 10/1/2014 3045 $2,000.00
10/l/2014 3046 $2,500.00 10/2/2014 3047 $2,500.00
UKEWAY CUSTOM WOMB & FI&;NOVA'tHm 3049

tU SCHOOtiDt 00
UJt!WAY, !JO'tl7.:lf
10/6/2014 3048 $21.28 10/8/2014 3049 $510.63
Ulm'WA'If CUSfQM HOM!~ & ft:ENWA'l'IOIII

12&~Dft
IJlJI¥iWAV.1Xm211
10/2/2014 3050 $1,117.00 10/10/2014 3052 $2,000.00
10/8/2014 3053 $10,000.00 10/16/2014 3054 $27,654.05
EXHIBIT N - Page 2
508

YEKK CONSTRUCTION SERVICES LLC Account No 215049255
Page 3 of 6
3/2/2015 3107 $47,966.25 3/3/2015 31.14 $9,500.00
~ I...A.nWAY CUSTOM HOMES A REHOVA110N

t~$CHOOU£n '00
~AY,1X"7t1'»
3/3/2015 3116 $22.86 3/9/2015 3117 $1,162.41
·/~~OMIICM>\54REJIOIIAnooo ~119
IIU.M'lilllfl
,l~s: ,..
\,.lii/PNAV,n<7~
3/23/2015 3118 $2,956.28 3/10/2015 3119 $1,165.51
~"i&!'~,%·.{t
~~/i!/)$"t<AA.< -
~~~<C.·-·~~~----~$3~~.~
3/16/2015 3120 $2,398.30 3/30/2015 3121 $33,000.00
3/19/2015 3122 $86.80 3/17/2015 3123 $700.00
--.v--a-4'11011
... """""""' ..
I,.NiCEIIAY.'I'Xnmt
""<,•1;1. .... ,Y?'O
3/20/2015 3124 $188.36 3/18/2015

EXHfBIT N - Pagef~ 4 · oo
509

YEKK CONSTRUCTION SERVICES LLC Account No 2.15049255
Page 3 of 6
4/1/2015 $21,300.00 4/7/2015 3135 $3.32. 38
4/6/2015 3136 $341.41 4/7/2015 3137 $16,200.00
~----
!ti~.M
~-.,.,.~·ntl!f
4/6/2015 3138 $2,450.01 4/27/2015 3139 $105.00
Ll /.,It£ """"'""'
~~
__,"-·''3·'·: ····"-·-·· 7 ····~··r··-.~-l'l--::::--~ $ ::JC>o. e::
-w-
o---
o-
4/10/2015 3140 $300.00 4/22/2015 3141 $15,000.00
N-
rv-
1.11-
4/14/2015 3142 $3,424.00 4/15/2015 3143 $1,510.00
4/10/2015 3144 $1,200.00 4/21/2015
510

Page 3 of 6
3G:.I98
5/12/2015 3146 $188.36 5/4/2015 3147 $550.00
5/4(2015 3148 $1,000.00 5/7/2015 3150 $7,360.00
5/7/2015 3151 $4,190.00 5/22/2015 3153 $500.00
5/5/2015 3154 $99.67 5/22/2015 3155 $550.00

:· ·-----·····--·· ~··--···········-··· ...
,.... ,~ .. ·-~ -,.,.,._,.._·~- .
~V CUA'tOU 140M!'$ A RSIIOVAncN 3157 -l
~ tlfi~OR
. V4111.WA'f, tt.,.,. ~nJ..;, ~
-~.,LZ-9_//~ - ~
5/11/2015 3157 $225.00 5/4/2015 3159 $1,500.00
5/7/2015 3161 $697.60 5/8(20l.5

EXHfBIT N- Pag~so.oo
511

®
PERI
Visit us online at ProsperityBankUSA.com Statement Date 4/30/2015
29725 1 AT 0.406 Account No 215049255
YEKK CONSTRUCTION SERVICES LLC Page 1 of 6
DBA, LAKEWAY CUSTOM HOMES & RENOVATION
125 SCHOONER DR
LAKEWAY TX 78738-1001
1 11 111 1 •h lllll!llj 1111 1fh II• III 111 111111!. I! lflu!IJ 111 1111 11h
04/0112015 Beginning Balance $132,068.90

2 Deposits/Other Credits + $21,306.68
16 Checks/Other Debits $97,729.68
04/30/2015 Ending Balance 30 Days in Statement Period $55,645.90
Total Enclosures 14
Date Description Amount

04/01/2015 Deposit $21,300.00
04/30/2015 Accr Earning Pymt Added to Account $6.68
Check Number Date Amount Check Number Date Amount Check Number Date Amount
..0
8..... 3135 04-07 $332.38 3140 04-10 $300.00 3145 04-21 $24,585.00
3136 04-06 $341.41 3141 04-22 $15,000.00 3149* 04-23 $66.64
3137 04-07 $16,200.00 3142 04·14 $3,424.00 3158* 04·30 $1,500.00
3138 04-06 $2,450.01 3143 04·15 $1,510.00
3139 04-27 $105.00 3144 04-10 $1,200.00
Date Description Amount

04/03/2015 ACH Payment 3132. AMERICAN EXPRESS ARC PMT 3132 91000012331973 $3,811.52
04/30/2015 Wire Transfer WIRE OUT RELIANT TITLE $26,883.72
04/30/2015 Wire Transfer Fee WIRE FEE $20.00
Total For This Period Total Year-to-Date

Total Overdraft Fees so.oo $0.00
Total Return Item Fees $0.00 $0.00
Date Balance Date Balance Date Balance

04-01 $153,368.90 04-06 $146,765.96 04-10 $128,733.58
04-03 $149,557.38 04-07 $130,233.58 04-14 $125,309.58
NYSE:PB EXHIBIT N- Page 6

512

Page 3 of 7
7/15/2015 3160 $12,850.00 7/13/2015 3186 $1,850.00
7/10/2015 3191 $11,820.00 7/7/2015 3192 $3,100.00

····-· ·-..............._
-
3194
7/10/2015 3193 $770.00 7/15/2015 3194 $3:1,923.00
7/13/2015 3195 $910.00 7/"17/2015 3196 $4,672.00
7/27/2015 3197 $2,500.00 7/14/2015 3198 $3,000.00
7/14/2015 3199 $420.00 7/20/2015
513

Page 3 of 8
11/3/2015 3278 $3,557.33 11/3/2015 3282 $932.03
11/4/2015 3301 $3' 091.00 11/3/2015 3303 $11,620.35
11/16/2015 3312 $3,250.00 11/2/2015 3315 $2,336.31
11/4/2015 3324 $1,933.06 11/25/2015 3331 $3,000.00
11/4/2015 3332 $500.00 11/10/2015 3333 $4,465.18
3334
~--
~4"~~:~.rr~t:U:f1-:-;==:::;;"J s.4W·a?
11/2/2015 3334 $4,000.00 11/9/2015
514

YEKK CONSTRUCTION SERVICES LLC Account No 215049255'
Page 6 of 8
·,
!.Mt%WAYCllllrOM,_,I A -Ani!!<
,=~DR
LNI$.WAY,'TX 7tm
11/17/2015 3368 $1,000.00 11/18/2015 3369 $2,000.00
11/23/2015 3370 $250.00 11/17/2015 3371 $400.00
11/20/2015 3372 $l5B.99 11/24/2015 3373 $180.00
EXHIBIT N - Page 9
515

Page 3 of 5
4/1/2016 3388 $8,289.14 4/12/2016 3389 $154.89
-
-
EXHIBIT N- Page 10
516

Deposite From Deposite From
Journal Entry 228Sanpstee Cv. $Profit Raj Regions Bank
Withdrals
4/4/20141nitial Deposit Drawl 43800

3001 4/29/2014 Synergetic Engineering Foundation Engineering $4,500.00
3002 11-May Travis County Permit fee $790.00
3003 1J:.May Seven Oaks HOAFees $4,500.00
3004 ll·May Jim Beatridge Septic Design $1,550.00
3005 13-Jun WTC PUA Water fees $250.00
3006 13-Jun wrc Wate.r Meter Fee $5,120..00 .C
26,Jun Deposit Draw 2 $58,382.50 c 58382.5

3007 23-Jun Diamond Survaying Correction to Drawing er $U80.oo
3008 28·!un Balcony Trucking Haul .Off Excavation $3,360.00
28~]un Lope.z Trucking Haul Off Excavation $21625.00
3010 8-Ju! PC Concrete Excavation $3,000.00
3011 8·Juf Lopez Trucking Haul Off Excavation $3,750.00
3012 15·Ju~ WTC Water Deposit $250.00
18-M Deposit Draw3 ~58;415.00 c
3013 Void
3014 &-Jut PC Concrete Excavation $7,000.00
3015 18-Jul PC Concrete Excavation $6)000.00
18du1 Lopez Trucking Haul off Excavation $21750.00
3017 21-Ju( Kamran Dargahi Distribution $5,000.00 5000
2.8~Ju1 Pejman Darga hi Distribution $51000;00 5000
301.9 1-Aug PC Concrete Foundation $8,900.00
3020 3·Aug ·City Of Austin Electric Meter $108.36
3021 4·Aug Austin Outhouse Temp. Toilet $123.95
3022 11-Aug Diamond Survaying Form Survey $425.00
3023 12-Aug Diamond Survaying Form Survey ~810.00
3024 13-Aug Capital Pump Foundation $2,018.23
3025 13-Aug Austin Ready Mix Foundation $10}26.53
m 3026 18-Aug Rebar Placement $1,700.00
X 3027 25·Aug RSS Rebar Material $3,890,33
I
3028 23·Aug Capital Pump Foundation $1,102.75
tD
~
3029 25·Aug Lopez Trucking Fill Material $1,400.00
4 3030 25·Aug .PC Concrete Retaining wall $7,000.00
0 3031 28·Aug Balcony Trucking Haul off Excavation $2,800.00
3032 27·Aug Feldt Engineering Framing Design $4,400.00
"0 3033 29·Aug PC Concrete Retaining wall $21000.00
Ol
•tO 3034 29-Aug PC Concrete Retaining wall $2,000.00
ro
...,. 3035 3·Sep Austin Ready Mix Retaining wall Concrete $6,309.30
3036 S·Sep PC Concrete Waterproofing Ret. Wall $4,000.00
YEKK000011
517

S·Sep Deposit Draw4
3037 5-Sep Balcony Trucking Foundation Fill $5,850.00
3038 9·Sep Austin Outhouse Dumpster &Toilet x4 $1,849.46
3039 12-Sep PC Concrete Foundation $6,000.00
3040 19-Sep PC Concrete Foundation $7,000.00
3041 22-Sep Lopez Trucking Fill Material $3,600.00
3042 22•Sep PC Concrete Foundation $600.00
3043 22·Sep CapitaiPump Foundation $.2,170.03
3044 25·Sep Great American Insurance Insurance $2,292.00
3045 PC Concrete Foundation $2,000.00
3046 3o~sep Kamran Dargahi Distribution $2,500.00
3047 30~sep Pejman Oargahl Distribution $2,500.00 2500
3048. l·Oct City Of Austin Elec. Usage $21.28
3049 1-0ct B2B Services Drawing Reproduction $510.63
1-0ct Deposit DrawS
3050 l·Oct DanRookey Electrical $1,117.00
3051 Void
3052 6·0ct PCConcrete Ex~avation @Driveway \ ~2,000,00
3053 6-0ct PC Concrete Driveway Wall $10,000.00
3054 7·0ct Austin Ready Mix Foundation Sn654.0S
3055 7·0ct WTPC BeeCave Water $86.80
3056 7·0ct RSS Foundation Rebar $22A78.92
3057 lO·Oct Stock Building Supply lumber $37,699.85
3058 15·0ct PC Concrete Driveway Wall $5,000.00
3059 16·0ct Austin Outhouse Toilet $221.94
3060 18-0ct PC Concrete Driveway Wall $3,000.00
3061 Void
3062 22-0ct Rtown Plumbing Plumbing Rough $11,500.00
3063 24-0ct PC Concrete DriveyWall $6,000.00
22·0ct Bank Charges Checks $144.61
3064 29-0ct Stock Building Supply Trusses $231919.06
3065 29-0ct City Of Austin Electric Usage $23.06
3066 7-Nov Austin Outhouse Toilet $251.71
m 3067 7-Nov Austin Outhouse Dumpster $1,236.22
X 3068 21-Nov KS Framing Framing Labor $28,500.00
I
3069 19-Nov RSS Rebar Driveway Wall $11533.45
CD
3070 19-Nov Stock Building Supply Lumbe.r $21,005.45
~
3071 28-Nov City Of Austin Water Usage $29.18
0 3072 l·Dec Austin Outhouse Toilet &Trash $188.36
3073 l·Oec WTCPUA Utility $23.27
1J 3074 l·Dec Stock Building Supply lumber
.OJ $20,385.88
tQ 3075 s~oec Stock Building Supp~ lumber $662.94
(I)
1\)
3076 11·Dec Dennis Steel Co. Saddle p.\ate $936.84
3077 16-Dec KS Framing Framing labor $28,500.00
YEKK000012
518

3078 25·Dec Stock Building Supply Lumber $9,448.16
3079 n~oec The Haul Guys Trassh removal $2,800.00
3080 22·Dec GTown lumber Cedar Beams $7,582.91
3081 25-Dec Stock Building Supply Lumber $3,249.38
3082 25-0ec WTCPUA Utility $86.80
3083 28·Dec City Of Austin Electric Usage $28.86
3084 28·Dec Stock Building Supply lumber $575.77
29·Dec Deposit $262,800.00 ' 262800
3085 3·Jan Pella Windows Windows $60,880.47
30.86 3-Jan Austin Outhouse Trash &Toilet $806.47
3087 7·Jan The Haul Guys Trash Removal $595.38
3088 7-Jan Stock Building Supply lumber $8,249.12
3089 B·Jan WTCPUA Utility $86.80
3090 20·Jan. Stock Building Supply Lumber $12,009.48
3091 20-Jan The Haul Guys Trash Removal $2,192.06
3092 19-Jan Compu Sign Signage $162.38
3093 19·Jan RSS Rebar $3,937.20 c
3094 23-Jan Void $0.00 $0.00
Visa Cash Day Laborer Clean up $300.00
3095 23·Jan Austin Outhouse Trash &Toilet $712.29
3096 26~an Austin Outhouse Trash $618.11
3097 28·Jan Alrtron HVAC $211580.65
3098 29-Jan The Haul Guys Trash $649.50
3099 He.b VSE Septic Septic Installation $15,000.00
3100 2-Feb City Of Austin Electric Usage $22.86
Heb Deposit C06,7,U1,12& 13 $19;162.00 c 19162
310.1 Heb Sherwin Williams Paint Material $497.73
3102 6-Feb Fernando Nava Clean up $960.00
3103 6·Feb KS Framing Framing Labor $20,000.00
3104 6-Feb Herberto Guavara Painting $2,000.00
3105 6·Feb Stock Building Supply Lumber $353.93
3106 10-Feb WTCPUA Utility $86.80
3107 14·Dec Precision Roofing Roofing $47,966.25
m 3108 12-Feb Herberto Guavara Painting $650.00
X 3109 14-Feb Fernando Nava Clean up $540.00
I
3110 20·Feb Austin Outhouse Trash &Toilet $806.47 c
20-Feb Deposit $55,400.00 c
20-Feb Depos.it Raj $17,600.00 c 17600
0 3111 16-Feb C&C Sheetmetal Flashing $162.38
19-Feb Dennis Steel Co. Structural Steel $173.20
"'0 3113 20-Feb Austin Outhouse Trash $618.11
ID
(Q
qy 3114 20·Feb VSE Septic Septic Installation $9,500.00
27-Feb Herberto Guavara Painting $5,000.00
w
3116 28-Feb City Of Austin Elettric Usage $22.86
YEKK000013
519

3117 3·Mat Sherwin WiUiams Paint Materia! $1,162.41
3118 6·Mar VSE Septic Septic Installation $2,956.28
3119 6·Mar Stock Building Supply lumber $1,165.51
3120 5-Mar Webco Fireplaces $2,398.30
3121 11-Mar American Electric Electrical $33;000.00
3.122 11·Mar WTCPUA Utility $86.80
3123 13-Mar. Ceasar Vargas Steel Labor $700.00
3124 15-Mar Austin Outhouse Toilet $188.36
3125 15-Mar- Webster Plumbing Rough $504.00
3126 15-Mar KS Framing Framing Labor $8,500.00
3127 15·Mar CK&R Cabinets Cabinets $10164.1.00
3128 17·Mar Austin Energy Electrical pull Design $611.95 c
20·Mat Deposit $118,990.00 c 11.8990
3129 20·Mar Ce.asar Vargas Steel labor $1,500.00
3130 28-Mar Stock Building Supply lumber $1,693.98
3131 27·MarVoid $0.00
31.32 28·Mar AAA Steel Steel Stairs $3,811.52
3133 27·Mar KS Framing Framing Labor $7,000.00
3134 27·Mar KS Framing Framing Labor $2,075.00
3135 27-Mar Pella Windows Windows $332.38
3136 30-Mar Stock Building Supply Lumber $341.41
3137 30-Mat Firetrol Fire Sprinkler System $16.,200.00 c
l·Apr Deposit Fire Sprinkler System {Raj) $21,300.00 c 21300
3138 1-Apr GTown Lumber Cedar Beams $2AS0.01
3139 l·Apt JLM Sto.rage $105.00
3140 2·Apr Airtron HVAC $300.00
3141 10-Apr Waterloo Plastering Stucco $15,000;00
3142 10-Apr Sova Construction Fiberglass Showers $3,424.00
3143 10·Apr American Electric Electrical Ws $1,510.00
3144 10-Apr Siavash Vaseghl PC Concrete $1,200.00 1200
17·Apl River City Drywall SheetRock $241585.00
3146 20·Apr Austin Outhouse Toilet $188.36
20-Apr Valpac Advertizing $550.00 550
m 3148 21-Apr A.Rahmani WEB Design $1,000.00 1000
X 3.149 21-Apr Sherwin Williams. Paint Material $66.64
I
3150 24·Apr VSE Septic Septic lnsta.llation $71360.00
OJ
~
3151 27-Apr Firetrol Fire Sprinkler System $4,190.00
-i 3152 27-Apf AAA Steel Steel Stairs Material $6,051.53
0 3153 27-Apr VSE Septic Septic Installation $500,00
28·Apt WTCPUA Utility $99.67
ij
ru 28-Apr VSE Septic Excavation $550.00
(Q 3156 28·Apr Prosperity Bank Destribution $26,883.72 26883.72
(D
3157 29-Apw Compu Sign Signage $225.00
~
30-Apr Paje Darga hi Salery $11500.00 1500
YEKK000014
520

3159 30-Apr Kamran Dargahi Salery ~1,500.00 1500
3.160 4-May Action Water well Water Well $12,850.00
3161 4·May Stock Building Supply lumber $697.60
3162 S·May Elena Flores Clean up $470.00
3163 lS·May Waterloo Plastering Stucco $25,000.00
3164 20"May Johnson Insulation Insulation $12,262.00
3.165 18·May WTCPUA Utility c
22-May Deposit $131,400.00 c 131400
3166 B-May Ceasar Vargas Steellabor $500;00
3167 18·May American Electric tlectrital C0 1S $245.00
3168 22•May Columns $1,500.00
3169 26-May Stock Building Supply Lumber
3.170 2-Jun AAA Steel Steel Material $4,224.58
.3171 27-May Ceasar Vargas Steel Labor $400.00
3172 29"May River City Drywall Sheet Rock $10,875.00
3173 2-Jun Kamran Dargahi Salery ~S~OOMO 5000
3174 2·Jun Paje Dargahl Salery ~5,000.00 5000
3175 Nun RTown Plumbing Plumbing Rough $11,200.00
3176 3-Jun Waterloo Plastering Stucco $20,000.00
3177 7-Jun VSE Septic Excavation $4,257;50
3178 Void $0.00
3179 7·Jun Sherwin Williams Paint Material $49.28
3180 7-Jun Castle Electric Electrical Trench ~150.00
3181 10~Jun American Electric Electrical CO's $650.00
3182 16-Jun WTCPUA Utility 599.19
16-Jun Austin Outhouse Toilet $188.36
3184 16-Jun Austin Outhouse Dumster x3 $11933.24
3185 Void $0.00
3186 16-Jun VSESeptic Excavation ~uso.oo
3187 Void $0.00
3188 25-Jun AJ Trucking Sand for tile $380.00
3189 1·Jul AAASteel Steel Stairs $6,795.22
3190 27·Jun Javier Sanches Tllede.livery $753.00
m 3191 1-Jul River City Drywall Rock $11,820.00
X 3192 3·Jul Bulldog Construction Poles $3,100.00
I
3193 6-Jul River City Drywall Sheet Rock CO's $770.00
O'J
3194 lD·M CK&H Cabinets Cabinets $31,923.00
-1 Deposit $90,520.00 c 90520
0 3195 Firetrol Fire sptikler System $910.00
3196 7-lul AT Gutters $41672.00
ij
Ol Mun.iozlron works Rails and stairs $2,500.00
(C 3198 10.Ju! Bul.ldog Construction Retaining wall $3,000.00
CD
3199 lO·Jul Morido Rodrigus Clean UP $420.00
Ol
3200 9-Jul Capital City Insurance Insurance extention $Uso.oo
YEKK000015
521

3201 13·Ju! VSE Septic Excavation $541.25
13·MVSE Septic Excavation $811.88
3203 13·Jul WTCPUA Utility $117.04
3204 13-Jut Stock Building Supply Trim Material $7,873.11
3205 14~1ul Juan Tovar Tile Labor $7,000.00
3206 Eustia Mendez Drywall Repair $1,000.00
lS·M Bulldog Construction Retaining wall $3,000.00
3Z08 14!.M Munioz Iron works Stairs $2,500.00
3209 14~.M Fredy Garcia Wall Excavation $1,650.00
3210 lHul River City Drywall Trawl Finish $10,880.00
3211 lS·M Cobra Stone Retaining wall stone $1,974.80
3212 17·zul Bulldog Construction Retaing wall Footing $1,900.00
3213 2Q.fut Waterlog. Plastering On Hold $l010C Stucco $0.00
3214 20·M Cobra Stone Stone $3,920.40
3215 20·M Sherwin Wllllams Paint Material $1,014.39
22-:lul Deposit Poo!(Raj) $.17,000.00 .c 17000
3216 22,,1u1 Herberto Guavara Painting $4,000.00
3217 24-Jul Juan Tovar Tile Labor $2,000.00
27-Ju! K5 Framing Framing Labor $200.00
3219 29-Jui Precision Hoofing Roofing $15,988.75
322.0 27-Jul Stock Building Supply Trim Materlal $7,027.33
3221 Void
3222 1-Aug Cobra Stone Stone $7,928.08
3223 l"Aug Floor &Decor Tile material $26,968.11
3224 31-Jul Herberto Guavara Painting $3,000.00
1-Aug AJ Trucking Sand $780.00
Hug Marion Campos Retaing wall stone work $11850.00
3227 6-Aug C&C Sheetmetal Masonery Lintals $55.21
3228 6·Aug VSE Septic Excavation/Haul off $3,671.58
3229 10-Aug Sherwin Williams Paint Material $5,735.73
323.0 lO·Aug Stock Building Supply Trim $91706.46
3231 7·Aug Herberto Guavara Painting $5,000.00
3232 7-Aug Marion Campos Masonery $4,000.00
m 10-Aug Deposit $75,920.00 c 75920
X 3233 10-Aug JCa.r!os Sa.nches Clean up $110.00
I
~
3234 8·Aug Den am Pools Pool $17,000.00
...ro 14·Aug Herberto Guavara Painting $51000.00
-l 3;:36 20-Aug WTCPUA Utility $103.66
0 3237 21-Aug Ricky Maze Trim Labor $101000.00
3238 21·Aug VSE Septic Excavation/Haul off $M71.46
11 19-Aug. Deposit 1
C0 sl13110,16·18120·24(Raj)
cu 4743D
[} 3239 17-Aug Marion Campos Masonery work $4,000.00
(!)
3240 21-Aug Herberto Guavara Painting $51000.00
0)
3241 21-Aug Bulldog Constructlo.n Concrete work footings $1,350.00
YEKK000016
522

3242 24-Aug Brown Garage doors Garage doors $t634.50
3243 24-Aug Great American Insurance Insurance extention bala $44.00
3244 24-Aug Oenall\ Pools Pool $6,674.09
3245 24-Aug Siavash Vaseghi PC Concrete $900.00 900
3246 24-Aug Bulldog Construction Concrete at BBQ $300.00
3247 24-Aug Travis County Septic permit extention $65.00
3248 ll·Sep Floor &Decor Tile &Wood Floor mater $31,676.68
3249 30,Aug City Of Austin Electric usage $24.43
30-Aug Sherwin Williams Paint Material
3251 30-Aug Stock Building Supply Trim Material ~543.15
3252 28·Aug Herberto Guavara PC!inting $4,000.00
3253 31·Aug AJ Trucking Sand $1,299,00
3254 Void
3255 3.1·Aug Javier.Sanches Tile delivery $5.50.00
3256 28-Aug American Electric substation Manhole ~2,375.00
3257 Void $0:00
1·Sep De posit $62,800.00 c 62800
3258 4'Sep Herberto Guevara painting $5,000.00
3259 Serdan Granite Granite labor $3,000.00
3260 10-Sep Dena IIi Pools Pool $17,755.57
3261 g.sep Floor &Der.or Tile material $950.00
3262 10-Sep Cobra Stone hold $8,022.42 Stone $0.00
3263 10-Sep Stock Building Supply Trim $567.43
3264 10-Sep Juan Tovar Tile labor ~8,750.00
3265 Herberto Guavara painting $3,000.00
3266 17-Sep WfCPUA Utility $99.19
3267 Bul.ldog .Construction Concrete footings $3,150.00
3268 15·Sep Precision Roo.fing Roofing ~7,413.00
3269 18-Sep Serdan Granite Granite Labor $2,000.00
21·Sep Deposit $43,800.00 c 43800
3270 Cobra Stone Stone $2,271.93
3271 9/21/2015 Great American Insurance Insurance $1,350.00
23-Sep Deposit $43,800:00 c 43800
m 3272 21·Sep AJ Trucking Road base $1,335.01
X 3273 Marion Campos Masonery $5,500.00
I
3274 24-Sep Javier Sanches Tile de.livery $675.00
co 3275 Void
-1 327.6 25·Sep McCoys Cement $362.25
0 3277 25-Sep McCoys Steel Angles $168.83
3278 23-Sep VSE Excavation/haul off
"0 3279 2S·Sep Shenoy Granite Granite Material $13,083.1.1
ru
(0 3280 28-Sep Serdan Granite Granite labor $1,437.50
CD
28-Sep Cobra Stone Stone $1,474.80
-...J
3282 28-Sep VSE Septic Excavation/haul off $932.03
YEKK000017
523

Cash 25-Sep Home depot Metal &Paint $293.09
3283 28-Sep Munioz Iron works Railing $3,000.00
3284 28-Sep Home depot Protection paper ~129.58
3285 30-Sep Bulldog Construction Concrete fo.oting $700.00
3286 30-Sep City Of Austin Electric vsage $23.79
3287 30~Sep Jose street grass maintenancE $50.00
3288 l·Oct Juan Tovar Tile labor $7,000.00
3289 2·0ct Munioz Iron works Railing/fence $21000.00
3290 Void
3291 2-0ct Serdan Granite Granite labor $1,200.00
3292 2-0ct Cobra Stone St.one $l,712.08
3293 5-0ct McCoys Cement $113.85
3294 Void $0.00
3295 7~0ct Austin Outhouse Toilet $94.18
3296 7·0ct AJ Trucking Sand $380.00
3297 9·0ct Marion Campos Stone labor $5,000;00
3298 9·0ct Herberto Guavara Painting $1,500.00
3299 Void $0.00
3300 9·0ct Bedrock Stone Texas Cement $724.83
3301 9·0ct Juan Tovar Tile labor $31091.00
3302 9•0ct Serdan Granite Granite labor $11000.00
3303 5·0Ct Airtron HVAC $11,620.35
Visa 14·0ct Hull Supply Co~ Hollow Metal Door $531.78
3204 1S·Oct Bulldog Construction Concrete work $1,650.00
12·0ct Texas Concrete Curb cut Curb cut $560.00
3306 13-0ct Munioz.lron works Railing $2,000.00
3307 13·0ct Munioz Iron works Fencing $5,000.00
3308 13·0ct Asa Oliver Excavation for Propane t $750.00
3309 14-0ct Shenoy Gran it~ Granite at tubs x2 $2A68.45
3310 15·0ct WTCPUA Utility $108.12
3311 16-0ct Ricky Maze Trim labor $1,630.00
3312 16-0ct Juan Tovar Tile labor $31250.00 c
16·0ct Deposit Co#2 $10,000.00 c 10000
16-0ct Deposit $61,320.00 c 61320
3313 16-0ct Marion Campos Masonery $5,000,00
Qj
3314 16·0ct Bedrock Stone Texas Cement $750.81
3315 29·0ct Action Propane Propane Tank $2/336.31
-i Void $0.00
0
,
ru
3317
33.18
3319
23-0ct Rent Equipment Co.
23-0d Juan Tovar
23·0ct Herberto Guavara
Bobcat Rental
Tllelabor
Painting
$905.51
$1,820.00
$1,500.00
<0 3320 23-0ct Siavash Vaseghi PC Concrete $1,000.00
(!)
3321 23-0ct Bulldog Construction Bobcat Work $1AOO.OO
co 23-0ct Cobra Stone Stone
3322
YEKK000018
524

3323 23-0ct Serdan Granite Grante labor $2,000.00
3324 26-0ct AJ Trucking Road base $1,933.06
3325 26-0ct AJ Trucking Road base $3,239.19
3326 1-Nov American Express Tile, Steel &Granite $2,649.19
3327 29-0ct McCoys Waterproofing Material $1,284.80
3328 2.9-0ct McCoys Waterproofing Material $346.38
3329 29-0ct Herberto Guavara Painting $2,500.00
3330 29-0ct Herberto Guavara Painting $1,000.00
3331 31-0ct Munioz Iron works Railing $3,000.00
30·0ct BrigntCieaning Co. Interior cleanup $500.00
3333 1-Nov Ferguson Supply Waterheaters x3 $4,465.18
3334 30-0ct Marlon Carnpos Masonery ~4,000.00
3.335 30·0ct 1&5Hardwood Flooring Hardwood flooring $220.00
3336 Void $0,00
3337 30•0ct B2B Copies Drawing repro. $25.68
3338 30-0ct Ceasar Arroyo Waterproofing labor ~500.00
3339 S·Nov Austin Outhouse hold $618.11 Trash &Toilet $0.00
3340 3-Nov AJ Trucking Road base $1,000.00
3341 3-Nov Fredy Garcia Excavation @wa II $3,000.00
3342 3·Nov Horne depot Waterrooflng material $145.79
3343 3-Nov Rent Equipment Co. Jack hammer rental ~40.59
3344 3-Nov McCoys Waterproofing Material
3345 3-Nov Bright Cleaning Co. Interior cleanup ~100,00
3346 4-Nov HFTTools pumps x2
3347 5-Nov Rent EquipmerttCo. Jack hammer rental $70.36
3348 6~Nov McComis inspection Pool Inspection ~75.00
3349 6-Nov Sherwin Williams Paint material $.299.15
3350 6-Nov Stock Building Supply Trim Material
3351 6·Nov Alanto tchererria Cone ret Approaches $1,500.00
3352 6-Nov Jose Robert Concrete approach $400.00
3353 6-0ct Peter Carrillo Ditch Excavation @rear $210.00
3354 6-0ct Jose Quintana Wood Floor labor $2,000.00
3355 13·Nov American Electric hold $10,000 Electrical $0.00
m 3356 20-Nov American Electric hold $7,600 Electrical ~0.00
X 3357 20-Nov American Electric hold $4400 Electrical $0,00
I
3358 13-Nov Brown Garage doors hold $2358 Garage doors $0.00
OJ
6·Nov Mi!rion Campos Masonery $3,000.00
-i 3360 s,Nov AJTrucking Sand
0 3361 13-Nov Paverstone LLC hold ~12,290 Pavers ~0.00
3362 9-Nov McCoys Waterproofing Material $322.10
]
Q) 10-Nov City OfAustin Electric usage $47.47
(Q 3364 10-Nov Bedro.ck Stone Texas Cement $107.10
ro 3365 10-Nov Alanzo Echererria Concrete approach $1,700.00
co 13-Nov Deposit $43,800.00 c 43800
YEKK000019
525

3366 nNov Texano Home remodeling BBQ Framingx 2 $85.0.00
3367 15-Nov WTCPUA Utility $103,66
Visa 16-Nov Deposit Over draft $1,000.00 c
3368 16-Nov Lakeway Custom Homes over draft, reimbersmen $1,000.00
3369 16-Nov AJ Trucking Sand $2,000:00
3370 16-Nov Todd Knopp Consultation $250.00 250
3371 17-Nov Elena Flores Clean up $400.00
3372 18-Nov Stock Building SuppN Trim $158.99
33'73 19-Nov Peter Carrillo Clean up $180.00
3374 30-Nov City Of Austin ElectriC usage $120.87
3375 3-Dec Glass Texas Mirrors &shelving $1,041.00
3·Dec Void $0.00
3377 3-0ec. Lost Pine drywall Sheetrock repair@ Wp $700.00
3378 3•Dec. RTown Plumbing Plumbing $7,805.00
3379 14-0ec WTCPUA Utility $108.12
3380 12/22/2015 Tommy Luong Window cleaning $1,000.00
3381 1/4/2016 Stock Building Supply Sauna Lumber $1,211.54
3382 1/7/2016 GTown Lumber Lumber $1,188.15
3383 1/11/2016 City Of Austin Electric $34.33
3384 1/12/2016 WTCPUA Utility $90.27
3385 1/14/2016 Tommy Luong Window cleaning ~350.00
3386 3/15/2016 C&C Sheetmetal Flashing $206..76
3387 5/16/2016 WTCPUA Utility $199.41
3388 3/28/2016 Williamson County Propert Tax lots 411 &4! 8289J4
3389 4/4/2016 Williamson County Propert Tax lots 411 &4! $154.89 154.89
Totals $1,503,.639.50 $132,492.0.0
Amount Spent on the Project using. Profit $See Attached
Total ProfitWithdrawls $57,474.40

m
X
I
ro
·-{
YEKK000020
526

From; Mariana Hernandez <mhd2122@gmail.com>
Sent: Friday, May 08, 2015 10:26 AM
To; Paje Dargahi
Subject: Invoice #067455- Elena Flores Cleaning Services
Attachments: DOCOOO.pdf
f\.1r. Dargahi,
Please find attached Elena's invoice, please confirm received.
Please contact her for any questions you may have or any other business inquiries al (512) 690- !093.
Thank you,
EXHIBIT P1
527

528

Prosperi! y Bank ACCOU!'ff-NUM~- PORTFOLIO NUMBER ----r
?_~049255 YEKK CON~-~-----J
1415 Ranch Rd 620 South
ACCOUNT OWNER(S) NAME & ADDRESS
Austin, TX 78734-6317
YEKK CONSTRUCTION SERVICES LLC
Reviewed By: Date:
DBA LAKEWAY CUSTOM HOMES & RENOVATION
Scanned By Date:
OWNERSHIP OF ACCOUNT· CONSUMER (Select one by placing your initial~
Inext to account selected.)

UNIFORM SINGLE-PARTY OR MULTIPLE-PARTY ACCOUNT saECTION
FORM NOTICE: THE TYPE OF ACCOUNT YOU SaECT MAY DETERMINE
125 SCHOONER DRIVE
HOW PROPERTY PASSES ON YOUR DEATH. YOUR 1MLL MAY NOT AUSTIN, TX 78738
CONTROL THE DISPOSITION OF FUNDS HaD IN SOME OF THE,
FOLLOWINGACCOUNTS. J
0
l DATE OPENED --..>!..:l"-"-'..!.1':-"-ii.....,:tr:lr>'!f-"'
$-±fr~~~~=t.J~
-·----·-··SINGLE-PARTY ACCOUNT \AHI·IOUT "P.O. D." (Payable on l
Death) DESIGNA T!ON i INITIAL DEPOSIT
0 CASH ~
0 SINGLE--PARTY ACCOUNT
Death) DESIGNATION
1MTH "P.O.O.'' (Payable on II HOME TaEPHONE # ..,(5'-'1.:2.._)~4-'-'i5,_-.z.3.::.64""0"-------·---
DRIVffi'S LICENSE# - - - - - - - - - - - - - - - - - -
0 - - - - MULTIPLE-PARTY ACCOUNT WITHOUT RIGHT OF 6-MA!L paie1 @sbcglobal. net
SURVIVORSHIP
EMPLOYER _ _ _ _ _ - - - - - - - - - - - - - - - - · - - 1
fJ -----MULTIPLE-PARTY
SURVIVORSHIP
0----- MULTIPLE-PARTY ACCOUNT

SURVIVORSHIP AND "P.O.D."
ACCOUNT 1MTH
1MTH
(Payable
RJGHT
RJGHT
on
OF
OF
Death)
l BUSINESS PHONE# @..1.?.)415-3640 ------ ----~--~- !i
Name and address of someone who will al~-=-~::~o_::::n-== I
DESIGNATION
0 . CONVENIENCE ACCOUNT Number of signatures required for withdrawal
0 ____ TRUST ACCOUNT (name beneficiaries below) t:IMILESGNAT-5) ALLQWID? 0 YES ~ NO
0 -----TRUST ACCOUNT SUBJECT TO SEPARATE AGREEMENT
0 - - - OTHffi
DATED: - - - - - - - - - - - - - - - - - - - · - - - - - · - - - i
j
I
I SIGNATURE(S) - The undersigned certifies the accuracy of the information !Jelshe

]
NAME OR NAMES OFBENEAC!ARIES: has provided and acknowledges receipt of a completed copy of this form. The
undersigned authorizes tile financial institution to verify credit and employment
history and/or have a credit reporting agency prepare a credit report on the
undersigned, as Individuals. The undersigned also acknowledge the rece1p! of a copy
1
and agree to the terms of the fo!!owing agreement(s) and/or disciosure(s):
R9 Terms & Conditions ~ Truth in Savings ~ Funds Availability
I ~ Electronic Fund Transfers R9 Privacy R9 Substitute Checks
0
0
OWNERSHIP OF.ACCOIJNT- BUSINESS PURPOSE
SOLE PROPRIETORSHIP
CORPORATION: 0 FOR PROFIT
~ LIMITED LIABILITY COMPANY
0 I (1)' [X
NOT FOR PROFIT
l
0 Common Features 0
--·--------l-
0 PARTNERSHIP
1I BUSINESS:
0
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EXHIBIT QPage 1 ct 1
529

From: Paje Dargahi <paje1@sbcglobal.net>
Sent: Tuesday, June 17, 2014 12:45 PM
To: raj_handa@yahoo.com
Cc: kamran.dargahi@yahoo.com
Subject: 228 Sanostee Draw-2
Follow Up Flag: Follow up

Flag Status: Flagged
Mr. Handa,
I hope to find you well.

We have received our final permits on June 2, 2014.
Per our construction contract agreement, please remit draw-2 in the amount of$
58400
Following please note our Bank wiring instruction:
Prosperity Bank
Lakeway Branch
1415RR62oS
Lakeway TX 78734
512-261-U22
Acct# 21504925,5
Thank you
Paje Dargahi
Lakeway Custom Homes & Renovation, LLC.
(512)415-3640
EXHIBIT R
530

LIEN AFFIDAVIT- SUBCONTRACTOR/SUPPLIER
{Texas Property Code ss: 53.054, 53.056, 53.103)
STATE OF TEXAS
COUNTY OF TRAVIS
CLAIMANT: Cobra Stone Inc., P. 0. Box 705, Jarrell, TX 76537 claims a mechanics or
materialman's lien on the reai property and improvements in the County of Travis, TX, described:
Property !D: 495230, consisting of 1.5330 acres, lot 1 Blk A Seven Oaks Sec 4 as fully
described in a deed recorded at 2011169746 TR in the City of Austin, County of Travis,
State of Texas
Commonly known as: 228 Sanostee Cove, Austin, TX 78733
The owner or reputed owner is: Dhiraj & Ritu Handa, 228 Sanostee Cove, Austin, TX 78733
Said claim is for the sum of $9,562.55 plus interest at the legal rate from November 13, 2015, which is
due and unpaid to claimant (after deducting any just credit and offsets) for Iaber services, equipment
and/or materials furnished by claimant consisting of Autumn Blend Sandstone Flagstone.
The work or materials were furnished during the month of November, 2015.
Claimant furnished materials or labor pursuant to a contract with lakeway Custom Homes llC, 125
Schooner Drive, lakeway, TX 78738, Contractor.
The amount of $9,562.55 remains unpaid and is due and owing under said contract and claimant asserts
a lien on said improvements and premises to secure the payment of the amount claimed. The Claimant
provided the required Notice to the Owner on December 31, 2015 and Contractor on December 31,
2015.
I am duly authorized to make and do make this affidavit on behalf of said claimant.
File No: 102819-15~1
Submitted, Signed and Prepared by:
Olivia Lara
Cobra Stone Inc.
P. 0. Box 705
Jarrell, TX 76537
EXHIBIT S - Page 1
531

Cobra Stone Inc.
BY:
_kRXtl-) --------
STATE OF:
COUNTY OF: 1:J_ 1\ \\(\ ft'\:'{JY)
5 appeared
PEiRA HERRERA
MY COMMISSION EXPIRES
May28,2011J
File No:
EXHIBIT S - Page 2
532

Print Label Page 1 of 1
Lienguard Inc. US POSTAGE AND FEES PAID

1000 Jorie Boulevard, Suite 270 FIRST-CLASS
OAK BROOK IL 60523-3066 Jan 04 2016
Mailed from ZIP 60523
1 oz first Class Mail
USPS CERTIFIED MAIL Letter Rate (No surcharge)
071500777793
1111
94071102 0088 2866 909910
Lakewav Custom Homes LLC
125 Schooner Drive
LAKEWAYTX 78738-1002
FOLD ALONG THIS LINE
https://www .certifiedmaillabels.com/print-label/ EXHIBITS- Paq%no 16

533

NOTICE OF lJNPAID BALANCE AND DEMAND FOR PAYMENT FOR LABOR
PERFORMED AND/OR MATERIALS DELIVERED
January 15, 2016
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
NO. 7013 3020 0000 9781 6308
Dhiraj & Ritu Handa

1704 Randolph Ridge Trail
Austin, TX 78746-7395
RE: 228 Sanostee Cove, Austin, TX
1. Pursuant to Texas Property Code Section 53.056, you are hereby notified that the
invoices, statements, or billings attached to this notice is/are a true and accurate
account of labor and materials furnished to YEKK Construction, LLC, the original
contractor, during the month ofNovember of2015 in com1ection with improvements
on the above referenced job site.
2. The amount of$4,070.00, is now unpaid on this account.
3. You are further notified that if this account remains unpaid, you may be personally
liable and your property subjected to a lien unless you withhold payments from
YEKK Construction, LLC, your original contractor, in an amount necessary to pay
this claim or unless this claim is otherwise settled.
4. Richard Danek, the undersigned, hereby makes demand upon you for the payment of
$4,070.00, the amount due on the attached invoice, statement or billing.
~0~
Richard Danek
Vice-President
Anchor Ventana Glass
c.c. YEKK Construction, LLC

125 Schooner Drive
Lakeway, TX 78738
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
NO. 7013 3020 0000 9781 6315
EXHIBIT S - Page 4
534

If a subcontractor or supplier who furnishes materials or performs labor for construction
of improvements on your property is not paid, your property may be subjected to a lien
for the unpaid amount if:
(1) After receiving notice of the unpaid claim from the claimant, you fail to
withhold payment to your contractor that is sufficient to cover the unpaid
claim until the dispute is resolved.
(2) During construction and for 30 days after completion of construction, you fail
to retain 10 percent of the contract price or 10 percent of the value of the
work performed by your contractor.
If you have complied with the law regarding the 10 percent retainage and you have
withheld payment to the contractor sufficient to cover any written notice of claim and
have paid that amount, if any, to the claimant, any lien claim filed on your property by a
subcontractor or supplier, other than a person who contracted directly with you, will not
be a valid lien on your property. In addition, except for the required 10 percent retainage,
you are not liable to subcontractor or supplier for any amount paid to your contractor
before you received written notice of the claim.
EXHIBITS- Page 5
535

"< ""'' • :::.
ANCIHOR ;{fi;!
ANCHOR-VENT ANA GLASS "VENTP·J'-lA
1609 CBJSHOLM TRAIL ROAD
ROlJND ROCK, TX 78681
Phon~(512)388-9400 INVOICE NO
Fax: (512) 388-5311 2342
Karen Johnston
Sales
Rep (512) 238-5116
KJOHNSTON@VENTANAMA
SOLD
YEKK CONSTRUCTION, LLC SHIP
TO DBA: LAKEWAY CUSTOM HOMES TO
125 SCHOONER DR. KAMRAN @ YEKK

LAKEWAY, TX 78738 228 SANOSTEE COVE
MAP 552K
Austin, TX 78733
21 24" FRAMELESS SHOWER DOOR 960.00 1,920.00

IN MSTR, BATH 3 AND BATH 4. 1
I I
MSTR & BATH 4 HINGED ON LEFT. I
BATH 3 HINGED ON RIGHT.**NOTE/
I' t MSTR BATH MAY NOT PASS 1 1
I CODE, OPENING IS ONLY 23 1/8. I i i
--t-----1~ · 28" ·FRAMELESS SHOWER DOOR 1 990.oo-t- 99o.oo l
I IN GUEST BATH, HINGED ON l I !
------------f-------:-+--------.,..,--=-c-:c-
1 ENCLOSURE IN POOL BATH, I I

1' DOOR HINGED ON RlGHT WALL, I I
l 1 FIXED PANEL IN CHANNEL. l !
------~ ---nj ;~~~~~~~i~!~~~~~;cL~~~-T~-------·--·a.oo -r----o.oo
1 3/8" TEMPERED GLASS ARE 84"
I
-t· I
1
I TALL**
I ..uP BATH #4 sHoWER oN :
I
o.oo!-o.oo
L I I ~~~~~~ :~~§~RDE~~-T~LE _L_ _ _L___ j
TOTAL AMOUNT 4,070.00
EXHIBIT S - Page 6
536

CAUSE NO. D-1-GN-16-001279

Plaintiffs, §
§
§
PEJMt\N DARGAID, §
HOMES Acl\fD RENOVATION, §
AFFIDA VlT OF DBIRAJ HANDA

§
COUNTY OF IRA VIS §
BEFORE ME, the undersigned authority, on this day personally appeared Dhiraj Handa,
known to me to be the person who signed this Mfidavit, who being by me duly sworn, on oath
deposed and stated the following:
1. "My name is Dhiraj Handa. I am over the age of eighteen, I have never been
convicted of a felony or any crime involving moral turpitude, and I am fully qualified to make
this affidavit.
2. "I hired Pejman Dargahi and Kamran Dargahi (the "Builders") for construction of
a single family residence at 228 Sanostee Cove, Austin, Texas 78733 (the "Project") on April 4,
2014. Before entering into the contract for the Project, Pejman Dargahi and Kamran Dargahi
represented to me that they would open an account at Prosperity Bank (Account# 215049255)
for the purpose of using funds deposited by me or my bank lender for the Project. Pejman
Dargahi and Kamran Dargahi represented to me that the funds deposited into Account #
215049255 would only be used for the Project. Pejman Dargahi and Kamran Dargahi continued
to represent to me after work had commenced on the Project that the funds deposited into
Account # 215049255 were only being used for the Project. There were no deposits made into
this account except by me or my bank lender. Based on Pejman Dargahi's and Kamran
Dargahi's representations that my payments would be used solely for the Project, I agreed to
enter into the contract for the Project. Had I known that that they were not going to use aH of my
payments solely for the Project, I would not have entered into the contract. Had Pejman Dargahi
or Kamran Dargahi disclosed to me during the course of the Project that they were not using all
of my payments for the Project, I would have ceased making progress payments upon learning
this information.
537

3. "For each progress payment, Pejman Dargahi and Kamran Dargahi represented to
me and assured me that all inspections were being properly conducted and subcontractors were
being paid for work petformed. Relying on these representations, I agreed to continue making
progress payments until the last payment was made in November 2015. For Change Order 3
(Water Well~ $20,000), Kamran Dargahi assured me that the Builders had paid the subcontractor
in full for installing the water well. Based on this representation, I paid the Builders $20,000 as
agreed upon in the Change Order on August 18, 2015.
4. "In November 2015, the Builders asked for a tenth construction draw, allegedly to
continue making progress on the Project. Once the $43,800 payment was approved and paid on
November 13, 2015, the Builders almost immediately stopped work on the Project and
abandoned the building site. Prior to halting work on the Project, the Builders had never
disclosed to me that they had been using any of my payments for any purpose other than
completion of the Project, nor did they ever disclose to me that they believed they were entitled
to divert payments from my construction account at Prosperity Bank. During the course of their
work on the Project, the Builders did not provide me access to the bank statements for the
Project's construction account, which was controlled by the Builders.
5. "Since the inception of the Project, I have paid $114,892.00 to the Builders for
agreed Change Orders and in addition, have paid, directly or through my construction lender
(Regions Bank), $1,387,750 towards progress payments per the contract for the Project
6. "Since the Builders abandoned the Project in November 2015, I have received
multiple notices from subcontractors of liens on the subject property due to the Builders' failure
to pay the subcontractors for their services, including, but not limited to, Anchor Mirror and
Glass (for $4,070), Arnold Serdan Granite (for $7,637.50), and Cobra Stone (for $9,562.55).
7. "Since the Builders abandoned the Project in November 2015, I have had to spend
over $130,000 above the contract price and excluding agreed change orders in order to partially
complete the Builders' unfinished work."
SUBSCRIBED AND SWORN TO BEFORE ME by Dh.iraj Handa this _f_day of

December, 2016.
,, -, ~~<:i~" ~ etA...~
VANESSA AlVMADO Notary Public in and for The State of Texas
Notary 10 II 130796682
My Commission Expires
August 25. 2020
538

CAUSE NO. D-1-GN-16-001279

Plaintiffs, §
§
§
PEJMAN DARGAHI, et al. §
ORDER G~~TING PLAINTIFFS' TRADITIONAL MOTION FOR PARTIAL

SUMMARY JUDGMENT ON CLAIMS FOR VIOLATION OF TRUST FUND ACT,
COMMON LAW FRAlJD, STATUTORY FRAUD, AND BREACH OF CONTRACT
On this day, the Court considered Plaintiffs' Traditional Motion for Partial Summary
Judgment The Court having considered the submissions of the parties, and having heard
argument of counsel, FINDS that Plaintiffs' Motion is well taken and should be granted.
IT IS THEREFORE ORDERED that Plaintiffs' Traditional Motion for Partial Summary
Judgment be, and hereby is, GRANTED as to the following: (i) all Defendants' liability for
violation of the Texas Construction Trust Fund Act, Section 162.03l(a), Tex. Prop. Code, and
violation of Defendants' fiduciary duties to Plaintiffs thereunder; (ii) all Defendants' liability for
common law fraud; (iii) all Defendants' liability for statutory fraud under Section 27.01, Tex.
Bus. & Comm. Code; and (iv) Defendants Pejman Dargahi's and Yekk: Construction Services,
LLC, d/b/a Lakeway Custom Homes and Renovation's liability for breach of contract.
It is FURTHER ORDERED that Plaintiffs shall recover actual damages, prejudgment
interest, attorneys' fees, and costs from Defendants in an amount to be determined at a future
hearing or trial. Whether Plaintiffs are entitled to exemplary damages and in what amount shaH
be determined at a future hearing or trial.
Dated: ~~~·-··---
JUDGE PRESIDING
539

03-17-00386-CV 1
1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUME
2 TRIAL COURT CAUSE NO. D-1-GN-16-001279
COURT OF APPEALS NO. 03-17-00386-CV
FILED IN
3 3rd COURT OF APPEALS
AUSTIN, TEXAS
4 DHIRAJ HANDA AND RITU ) IN THE DISTRICT
6/19/2017 COURT
2:46:47 PM
HANDA, ) JEFFREY D. KYLE
5 Plaintiffs, ) Clerk
)
6 VS. )
) TRAVIS COUNTY, TEXAS
7 PEJMAN DARGAHI, KAMRAN )
DARGAHI, AND YEKK )
8 CONSTRUCTION SERVICES, )
LLC, D/B/A LAKEWAY CUSTOM )
9 HOMES AND RENOVATION, )
Defendants. ) 261ST JUDICIAL DISTRICT
10
11
12 _______________________________________________________
13
14 HEARING ON MOTION FOR PLEA IN ABATEMENT
15 AND MOTION TO COMPEL ARBITRATION
16
17 _______________________________________________________
18
19
20 On the 24th day of May, 2017, the following
21 proceedings came on to be heard in the above-entitled
22 and numbered cause before the Honorable Amy Clark
23 Meachum, Judge Presiding, held in Austin, Travis
24 County, Texas:
25 Proceedings reported by machine shorthand.

2
1 APPEARANCES
2
3 FOR THE PLAINTIFFS:
4 DAVID A. KING
SBOT NO. 24083310
5 GRAVES, DOUGHTERTY, HEARON & MOODY
6 Austin, Texas 78701
Phone: (512) 480-5722
7
8
FOR THE DEFENDANTS:
9
RUSSELL CLINAGE
10 SBOT NO. 24006148
STEPHANIE H. LUGO
11 SBOT NO. 00793927
BUSH, RUDNICKI, BUSH, SHELTON, P.C.
12 2508 Ashley Worth Boulevard, Suite 200
Austin, Texas 78738
13 Phone: (512) 263-8408
14
15
16
17
18
19
20
21
22
23
24
25

3
1 INDEX
2 VOLUME 1
3 HEARING ON MOTION FOR PLEA IN ABATEMENT
4 AND MOTION TO COMPEL ARBITRATION
5
6 MAY 24, 2017
7 Page Vol.
8 Announcements............................ 4 1
9 Argument by Mr. Clinage.................. 4 1
10 Argument by Mr. King..................... 10 1
16 TAKEN UNDER ADVISEMENT................... 29 1
17 Adjournment.............................. 32 1
18 Court Reporter's Certificate............. 33 1
19
20
21
22
23
24
25

4
1 THE COURT: This is GN-16-1279, Handa vs.

2 Dargahi. Let me go ahead and take for the record now
3 the attorney announcements.
4 MR. CLINAGE: Russell Clinage and
5 Stephanie Lugo for defense, Your Honor.
6 THE COURT: Thank you.
7 MR. KING: David King for the plaintiffs,
8 Your Honor.
9 THE COURT: And then it's a plea in
10 abatement and a motion to compel; is that correct?
11 MR. CLINAGE: That is correct, Your
12 Honor.
13 THE COURT: Then you may proceed.
14 ARGUMENT BY MR. CLINAGE
15 MR. CLINAGE: Thank you, Your Honor. As
16 I mentioned, my name is Russell Clinage, and together
17 with my co-counsel, Stephanie Lugo, we are here on our
18 motion to compel. This case involves my client, who
19 was the builder, and the two principal owners of the
20 building company, in the construction of a home for the
21 plaintiffs in this case.
22 As with most home cases, this -- this
23 matter had a written contract between the parties. The
24 contract at issue is attached to our motion to compel.
25 And, Your Honor, if I may approach?

5
1 THE COURT: Uh-huh.

2 MR. CLINAGE: Here is a copy of the
3 contract itself -- and you've got it -- which forms the
4 basis of the agreement of the parties. As I'm sure the
5 Court is aware, a motion to compel arbitration is
6 premised upon two findings. Number one, an agreement
7 between the parties; and number two, that the disputes
8 at issue fall within the scope of the agreement itself.
9 As -- as indicated, this agreement has a
10 binding arbitration clause in it. Although the
11 original document, I believe, lacked page numbers, the
12 relative page number on the exhibit that I handed to
13 you is Bates stamped No. 57, which actually contains
14 the arbitration clause in it.
15 And it states, that if a dispute arises
16 between Lakeway Custom Homes and Renovation and
17 owner -- which in this case are the plaintiffs -- which
18 cannot be resolved in good faith through informal
19 discussions, the parties agree to submit the dispute to
20 mediation before resulting -- resorting to any
21 litigation, other than a suit or seek injunctive
22 relief. If mediate -- mediation is required, the
23 parties shall jointly agree upon a mediator acceptable
24 to both parties.
25 If a dispute cannot be resolved through

6
1 mediation, both parties agree to submit the dispute to

2 binding arbitration supervised by the Arbi- --
3 supervised -- excuse me -- by the American Arbitration
4 Association, and it goes on to list the address of such
5 arbitration association.
6 The agreement further states that the
7 decision of the arbitrator shall be final and binding
8 upon both owner and Lakeway Custom Homes and
9 Renovation, and judgment may be entered upon it in any
10 court with proper jurisdiction.
11 Your Honor, this case involves -- and I
12 would ask the Court to take judicial notice of the
13 pleadings on file by plaintiff in this case. But it
14 involves complaints regarding the construction of the
15 residence, as well as the handling of the construction
16 funds that were used to purchase materials, supplies,
17 and labor that were used by my client.
18 It is our assertion that these disputes
19 fall under this agreement, and that there is a binding
20 agreement, and that the scope of the agreement
21 encompasses all of the complaints as listed and set
22 forth in the plaintiffs' petition.
23 The plaintiff did file a response today
24 to our motion. Ironically, our motion -- and -- and
25 one of the issues that the plaintiff has -- has alleged

7
1 is that of waiver and -- and has asserted that time has

2 expired, which would indicate that a waiver would be
3 appropriate in this case.
4 One of the other issues is that the
5 filing of our motion was on the eve of a summary
6 judgment filed in this case. By way of history, this
7 case was filed last year, I believe, in March,
8 specifically March 24th, 2016, and an answer was filed
9 in this case in May of 2016. Answering on behalf of
10 the defendants at that time was different counsel. We
11 were brought in as counsel when the existence of
12 insurance was actually discovered. We substituted in
13 in October of last year. And as admitted in
14 plaintiffs' response, we immediately began discussing
15 at that time the existence of the arbitration
16 agreement.
17 During that time, we indicated to the
18 plaintiffs' counsel that there were documents that need
19 to be assembled that would be necessary for the
20 defense, specifically to respond to their allegations
21 of the misappropriation of trust funds.
22 During the process of assembling those
23 documents, a summary judgment was filed while we were
24 in the process of assembling those documents. We
25 immediately filed for our arbitration. Again, at that

8
1 point, having only filed an answer in this case. I

2 believe it's going to be plaintiffs' argument that we
3 have substantially invoked the judicial process when,
4 in fact, at the time we had filed -- the only thing
5 that's been done was, again, defending the suit,
6 responding to plaintiffs' own discovery at that point,
7 and as well as, again, trying to assemble the documents
8 that were necessary to defend this suit.
9 At the time of -- of the hearings that
10 were scheduled to occur in last December 2016, a Rule
11 11 was entered into. That Rule 11 was filed with this
12 Court December 16th, 2016. I think that Rule 11 is
13 somewhat illustrative in this case in that -- in that
14 it indicates that the -- the summary judgment was
15 pulled down, our motion to compel was pulled down, and
16 so that the documents could be assembled that we were
17 originally seeking.
18 In addition to that, there was an
19 agreement that if -- should the parties elect to take
20 any depositions at the time, which related only to the
21 arbitration, they could, in fact, do so. But that in
22 no instance could a summary judgment be heard without
23 our motion to compel being heard first. We would argue
24 that that in and of itself indicates -- it was our
25 intention that a motion to compel was going to be first

9
1 and foremost of any action to be taken in this case

2 whatsoever.
3 The parties did attempt to work through
4 various issues in the beginning of this year. There
5 was an attempt to enter into a second agreement with
6 respect to arbitration. That failed, and the parties
7 did indicate that they wanted this motion to be heard.
8 So it is based upon that agreement that
9 we come forward, Your Honor, at this time. We would
10 argue and I would reserve some of my time in rebuttal
11 to allow plaintiffs to put on their argument. But we
12 would argue that the inquiries that are to be seen here
13 or -- or examined here are the existence of the
14 agreement and the scope of that agreement, and we
15 believe we've met those in this case.
16 And we would ask the Court to grant --
17 abate this case in its current state and order the
18 plaintiffs in this case to initiate arbitration
19 pursuant to the terms and conditions of the arbitration
20 agreement that was entered into and signed by the
21 plaintiffs.
23 MR. CLINAGE: Thank you.
24 THE COURT: Yes.
25 MR. KING: Thank you, Your Honor. I'm

10
1 going to give you -- may I approach and give you one

2 handout?
3 THE COURT: Sure.
4 MR. KING: I've also got a notebook that
5 has the parties' pleadings for this hearing. Thank
6 you, Your Honor.
8 MR. KING: Your Honor, I probably won't
9 be referring to the notebook very much, if at all, but
10 I will be referring to some of the material that's in
11 this shorter handout. So I'll just be going along with
12 that.
13 THE COURT: Okay. Thank you.
14 ARGUMENT BY MR. KING
15 MR. KING: To start off, there are two
16 grounds here to deny the motion to compel arbitration.
17 The first ground is, that arbitration has been waived.
18 As admitted, it's been nine months since the lawsuit
19 was filed. And under the law -- under Texas law, a
20 number of cases, that is the range of time where you
21 see courts denying motions to compel arbitration based
22 on waiver.
23 The second ground is that the arbitration
24 clause, on its face, only applies to one of the
25 defendants here. So regardless of waiver, we believe

11
1 all the defendants have waived arbitration, but at a

2 minimum, two of the defendants are not even subject to
3 the arbitration clause.
4 Now, before I go through those two
5 points, I would like to just give you a little bit more
6 background on the case. Because in our view, this
7 isn't your typical construction case where you always
8 see these arbitration clauses. And so I'd like to just
9 give a little bit more background --
10 THE COURT: Sure.
11 MR. KING: -- on that. And you can see
12 sort of a timeline on the facts on the third page of
13 the handout. So the contract in this case to build
14 plaintiffs' home was signed back in April of 2014. It
15 was to build a home for the plaintiffs for a fixed
16 price of $1.46 million.
17 Between April of 2014 and November of
18 2015, the defendants worked on building the house, and
19 the plaintiffs made payments, not only using their own
20 money, but using a construction loan. And the bank had
21 a -- had a schedule of when payments were permitted
22 based on the work that was completed.
23 Up until November of 2015, plaintiffs
24 made those payments. And by November of 2015,
25 95 percent of the contract had been paid out. That was

12
1 when the defendants approached the construction lender,

2 Regents Bank, and said, We need additional monies. In
3 response, the bank said, you have received more than
4 you're entitled to. You haven't done enough work to
5 get another payout.
6 Defendants' response was to go to
7 plaintiffs and say, We're not going to do any more of
8 this work unless you pay us additional monies beyond
9 the fixed price of the contract. And so that is when
10 the defendants walked off of the project. After they
11 walked off of the project, the plaintiffs discovered
12 the scope of what had happened here.
13 It wasn't just that the defendants were
14 asking for more money than they'd already completed.
15 That was learned quickly. They had finished 90 percent
16 of the project. They'd been paid for 95 percent, and
17 they wanted more money. What plaintiffs also
18 discovered after that time was that many subcontractors
19 were not being paid by the defendants.
20 So not only had defendants been overpaid,
21 but they weren't even paying the money to the subs to
22 the tune of over $100,000. And, finally, and most
23 troubling, after the lawsuit was filed, through
24 discovery, plaintiffs learned that the defendants had
25 been diverting many -- a -- a large sum of payments

13
1 from plaintiffs to various costs that had nothing to do

2 with the construction project. They were using the
3 money for their personal expenses, to pay for cars, to
4 pay for real estate, to pay for attorney's fees, to pay
5 for attorney's fees in this case using plaintiffs'
6 money. So this is -- this is just by way of
7 background. This is more than just a construction
8 defect case, which occur routinely. This is -- is of a
9 different type.
10 Now, turning to the actual merits of
11 the --
12 THE COURT: Have you just sued on the
13 contract, or have you brought other claims?
14 MR. KING: That's exactly right, Your
15 Honor.
16 THE COURT: Okay.
17 MR. KING: There is a claim on the
18 contract, but there are numerous additional claims.
19 The one that's probably most important to point out is
20 the Texas Construction Fund -- Trust Fund Act is in the
21 Property Code, and it governs how general contractors
22 can use funds that are paid by owners.
23 So there's a claim under that for breach
24 of fiduciary duties, for -- for misappropriation of
25 funds. There's a claim for unjust enrichment, there's

14
1 a claim for fraud based on this misappropriation, there

2 is a claim under the Texas Theft Act, and then, of
3 course, there is a -- a contract claim for breach of
4 contract against all of the defendants.
5 There's also a defect claim because,
6 after the whole project was done, we also discovered
7 that the work that had been done had been done
8 defectively. So there is -- there are numerous claims.
9 This is not just a contract claim.
10 Now, I just want to turn to the timeline
11 of the litigation to show the evidence of waiver.
12 That's on the fourth page of the handout. So this is
13 not just a case where an answer was filed, and that's
14 it. There's actually a whole lot of stuff that
15 occurred here without arbitration ever being mentioned.
16 And as counsel here today notes, the
17 defendants were represented by different counsel for
18 many months, and so there's new counsel here today.
19 And it's true that once new counsel came in, quickly
20 thereafter, they mention the arbitration clause. But
21 that ignores the many months before then when the
22 counsel for the defendants at that time, Kemp Gorthey,
23 never mentioned it and left plaintiffs to believe that
24 there was -- there was no intent to enforce the
25 arbitration clause.

15
1 So plaintiffs filed suit in March 2016.

2 The defendants represented by different counsel
3 answered, without mentioning the arbitration clause,
4 without adding any defense invoking the arbitration
5 clause. Thereafter, in May, the plaintiffs filed an
6 amended petition with an expert re- -- report attached,
7 demonstrating that plaintiffs were engaging in expert
8 discovery.
9 June 2016, plaintiffs served discovery
10 requests, many discovery requests on defendants. And
11 over the next couple of months, defendants engaged in
12 the discovery process. They served -- they produced
13 numerous documents. There -- there were -- numerous
14 documents were produced.
15 There was a dispute with opposing counsel
16 at that time over the delay that was associated with
17 that, and a motion to compel was filed by plaintiffs.
18 But never once did defendants raise the arbitration
19 clause or contend that they didn't have to produce
20 documents because of the arbitration clause, and
21 eventually the documents were produced.
22 Around the same time period, in a phone
23 call, I talked with counsel for defendants, and we
24 discussed setting the trial date. And defendants'
25 counsel at that time gave me his dates of availability.

16
1 THE COURT: This is still Mr. Gorthey,

2 right? We're still --
3 MR. KING: That's right --
4 THE COURT: They haven't come in yet?
5 Okay.
6 MR. KING: That's right, Your Honor.
7 Then October 2016, that's when defendants retained new
8 counsel. And after that time, although new counsel did
9 raise the arbitration clause, counsel did not
10 immediately file -- file a motion to compel
11 arbitration. Instead, they continued to engage in the
12 discovery process.
13 They produced additional documents to
14 plaintiffs. And importantly, they served discovery
15 requests on a third party, plaintiffs' bank, and -- and
16 got documents in response to that discovery requests.
17 The only time --
18 THE COURT: Hold on one second.
19 MR. KING: Sure.
20 (Off the record.)
21 THE COURT: And let's go back on the
22 record, and you can proceed.
23 MR. KING: Thank you, Your Honor. And so
24 when did defendants file their motion to compel
25 arbitration? It was a week after plaintiffs -- after

17
1 collecting the documents that, in our view, demonstrate

2 liability, filed a motion for summary judgment. That's
3 when they invoked the arbitration clause.
4 And I'll -- and -- and now I'd like to
5 turn to the rule on waiver. That's on Page 3. The
6 standard that's already been mentioned is there are two
7 points that need to be proven substantially invoking
8 the judicial process, and the second is detriment to
9 the other party.
10 And the important one here is indication
11 of the judicial process. I think that's what we're all
12 focusing on here today. The Perry case, the Supreme
13 Court case cited there, lists a variety of factors that
14 the Court should take -- should take into
15 consideration. They're not dispositive, but there are
16 multiple factors that are noted.
17 And I've listed on Page 6 all the factors
18 that weigh in favor of waiving arbitration. How long
19 did defendants wait? They waited nine months. In
20 Perry, it was 14 months. I cite another case in the
21 briefing where the -- where it was 11 months. It's in
22 the range where courts will find waiver.
23 What's the reason for the delay? There's
24 no reason for the delay. The fact that a different
25 lawyer was representing defendants for some of that

18
1 time period, as far as I note, does not provide any

2 legal reason to defend against waiver.
3 The defendants, of course, knew about the
4 arbitration clause. It was attached to pleadings
5 throughout the case. It was defendants' contract.
6 Importantly, the engagement of pretrial matters, courts
7 pay a lot of consideration to that. In here, we have a
8 number of ways in which defendants have engaged in
9 pretrial matters.
10 Time and expense that the plaintiffs
11 committed. There's an affidavit in the record showing
12 that over 150 hours were spent on this by plaintiffs at
13 a cost of over $35,000. And eve of trial, that's in
14 numerous cases, courts will really focus on that. Here
15 you have a situation which is very much akin to that.
16 Where you have not a trial, but a ruling on summary
17 judgment within weeks, and you have the other side, as
18 soon as that judgment is pending or resolution of it is
19 on the table, there's a motion to compel arbitration to
20 try to avoid reaching the merits. Under these facts,
21 it's very akin to the case where you see a defendant
22 moving to compel arbitration shortly before trial.
23 And I'll just note prejudice, the second
24 factor. That's discussed on -- on 7 and 8. It's well
25 established in the case law that costs and fees

19
1 incurred by plaintiffs during the time period of delay

2 is evidence of prejudice. There's evidence of that,
3 clearly here, that's in the record.
4 I'd also note that another source of
5 prejudice is any discovery that the defendants obtained
6 prior to arbitration. Here the defendants sought third
7 party discovery and obtained it. We don't know if they
8 would be able to obtain that in arbitration. That's
9 additional prejudice.
10 And I just want to note, generally in
11 this type of case, general prejudice to plaintiffs here
12 is just the delay that has happened. We have a case
13 where the evidence shows in our summary judgment motion
14 that these individual defendants, their net worth
15 plummeted between the time before lawsuit was filed and
16 months after lawsuit was filed.
17 And there's a serious concern on
18 plaintiffs' side that by the time there's a judgment
19 obtained, we're going to have defendants that will not
20 be able to satisfy that judgment. And that is why
21 there was a -- an effort to get a resolution through a
22 summary judgment motion and move this case along. Now,
23 that covers waiver.
24 I just want to very shortly touch on who
25 can invoke the arbitration clause. That's starting on

20
1 Page 9. It is defendants' burden to prove that a valid

2 arbitration exists as to all of the defendants. And
3 the general rule is that a nonparty to the arbitration
4 clause cannot invoke the -- the arbitration clause. On
5 the face of the arbitration clause on Page 10, there in
6 bold, the parties are the owner, plaintiffs, and
7 Lakeway Custom Homes and Renovation. The individual
8 defendants, the Dargahis, are not parts to that
9 contract, and, in fact, in -- in the record, in the
10 evidence that we've attached, the Dar- -- Dargahis --
11 Dargahis have explicitly said that they are not bound
12 by the contract.
13 So what we have here is they're trying to
14 play it both ways. They don't want to be bound by the
15 contract for liability, but they want to take advantage
16 of the arbitration clause and have the protection of
17 that, and that's just not permissible.
18 I -- this was not raised by defendants,
19 but I want the -- want Your Honor to know about it,
20 because I suspect it would be something you've seen
21 before. Nonparties can be brought under an arbitration
22 clause through equitable estoppel. This is not a case
23 where you have that because equitable estoppel is
24 specifically for breach of contract claims.
25 Here we have claims against the

21
1 individual defendants that fall far outside of the

2 contract, and I've listed those on Page 11. So in --
3 in the case that the defend- -- the defendants bring
4 that up now, I just wanted the Court to know that
5 that's not going to apply to these -- the other claims
6 outside the contract claim. Thank you.
7 THE COURT: All right. No. I don't have
8 anything. Thank you. You get the final word.
10 MR. CLINAGE: Thank you, Your Honor.
11 First -- first and foremost, I -- I want to -- I feel
12 the need to correct several misstatements by the
13 opposing counsel. Number one, I hear nine months out
14 of the gun. When he files the lawsuit in March and an
15 answer is filed in May, and suddenly in October we're
16 mentioning arbitration -- nine months, that's not --
17 doesn't get us there. It may be later in time now, but
18 I would challenge counsel, as an officer of the court,
19 to deny that we have not been engaged in conversations,
20 as well as discussed Rule 11s that have put us here in
21 May of 2017 at this hearing. So to argue waiver at
22 this time and argue the delay of time is -- is not only
23 disingenuous, but is improper.
24 Number two, he argues that only one
25 defendant is covered by this arbitration clause. Not

22
1 only have court of appeals, but the Supreme Court has

2 dealt with this issue, specifically when it deals with
3 the construction of homes and it's specifically a U.S.
4 home's case. And it says, The U.S. Supreme Court has
5 held that none of the individuals who have an
6 independent duty to provide anything of the purchaser,
7 as a result of being non- -- nonsignatories, they are
8 also covered by the content and the binding nature of
9 an arbitration clause when it comes to construction.
10 There was a great deal of time devoted by
11 Mr. King that said, Because this has to do with money,
12 and there were several statements that were made
13 without any evidence, mind you, but there were several
14 statements made with respect to construction funds --
15 funds that were used in this case, what happened to
16 them, where they went, et cetera.
17 Number one, I would argue that, but for
18 construction funds at the entrance of a contract, the
19 agreement between the parties and the ability for a
20 builder to provide the bricks and sticks to respond to
21 those funds, you would not have an agreement. That's
22 the very essence of a construction agreement is, is a
23 builder takes money and turns it into bricks and
24 sticks. So the handling of that money goes to the
25 essence of the contract. So we could not ask for a

23
1 more appropriate topic to be encompassed within an

2 arbitration agreement regarding a construction
3 contract.
4 As -- as for his argument regarding the
5 eve of the summary judgment, again, I think that is
6 disingenuous to the Court in that the summary judgment
7 was brought as a partial summary judgment. It was not
8 even brought -- it was only brought on liability alone,
9 ironically, on the documents that were trying to be
10 obtained by defendant. He makes this statement to the
11 Court that several sets of discovery were exchanged.
12 Again, I would challenge counsel. There
13 was one set of request for production sent by the
14 plaintiff. There was a disclosure sent by the
15 plaintiff, and there were one set of documents
16 requested by the defendant of a third party, the lender
17 in this case, again, to look at the documents
18 surrounding the transaction that we're here about
19 today, which we believe is encompassed within the scope
20 of the agreement to arbitrate.
21 There were not hundreds of sets of
22 discovery, not a single deposition has been taken in
23 this case, no liability -- I mean, no damages would
24 have been proven. And as we think we're getting
25 documents together -- as he mentioned, a motion to

24
1 compel had to be filed, as we think we're getting

2 documents together to respond and prepare this case,
3 suddenly, poof, we get a surpri- -- summary judgment
4 out of the block nine months, as he likes to say, after
5 the case had even been filed. Probably one of the
6 quicker summary judgments, other than the one when no
7 one shows up, as we saw here earlier today.
8 We think we have a binding summary
9 judgment -- I mean, I'm sorry, a binding arbitration
10 clause. No one has disputed that agreement. The two
11 other named defendants, their affidavits supporting
12 their ownership of the entity are contained within this
13 file, and the subject matter that we are here talking
14 about is the payment for bricks and sticks at the end
15 of the day, no matter how the plaintiffs want to
16 proceed.
17 It would be unfair for the principals of
18 a company to have to defend themselves in this Court --
19 THE COURT: What about all the other
20 claims? What about -- there's -- there's a -- other
21 claims, other than the breach of contract claim?
22 MR. CLINAGE: The 162 claim, Your Honor,
23 what he's talking about, the Texas Property Code claim,
24 is the specific claim that deals with the receipt of
25 construction funds, and the application of those funds

25
1 towards the construction of the project.

2 That's exactly my point, Your Honor, is
3 that what we're talking about is the construction of a
4 house, how it was built, how it was paid for, and what
5 does it look like today at the end of the day? You
6 know, he's claiming that there are -- there are
7 complaints regarding defects.
8 And although he's alleged all of this
9 discovery has -- expert discovery has gone forward, his
10 client has produced one expert who's produced a report.
11 That is the extent of the expert discovery.
12 So when we're talking about all of these
13 claims, they're all centering around that same
14 construction contract, whether it be breach of
15 contract, extra contractual, we're all dealing with the
16 same house, the same individuals, the same piece of
17 property.
18 THE COURT: Thank you. Do you want to
19 say one more thing?
21 MR. KING: I'll be just really quick. I
22 just want to -- I just -- I think there might have been
23 one misunderstanding. I -- I think that counsel said
24 that I said there were multiple requests for
25 production. If -- if that was the understanding,

26
1 that's not right. There was one request for production

2 with many, many requests in it. It was over 100
3 requests for -- requests within that request for
4 production. One point --
5 THE COURT: I -- I don't know that he
6 said that, and I didn't take that up if he did.
7 MR. KING: Okay.
8 THE COURT: And I'll just have you know,
9 I -- I didn't -- I -- I don't -- I mean, I have lots of
10 attorneys come before me and make borderline arguments,
11 but if they have been -- they have been -- while
12 advocacy, I don't believe any of it has been
13 disingenuous. I wasn't at all confused about what
14 happened, so I didn't -- I will say that on the record.
15 I don't think that. So if you're standing up to defend
16 your honor, I don't think it needs to be defended.
17 MR. KING: No, Your Honor. I -- well, I
18 won't defend my honor anymore. I do want to point out,
19 though, the one point there. Counsel talked about the
20 essence of the contract. The case that's on Page 11,
21 the Supreme Court case that I gave you --
22 THE COURT: Uh-huh.
23 MR. KING: -- that language is -- is just
24 very important. Estoppel does not apply even if the
25 claim refers to or relates to the contract. And then

27
1 it refers to, If claims arising from law through the

2 statutes, torts, and other common law duties or federal
3 law, rather than the contract. And I just want to
4 point out, those are the claims we have here.
5 We've got the -- the Property Code claim,
6 we've got unjust enrichment, we have negligence, we
7 have fraud. Those are all the claims that, even if
8 they refer to or relate to the contract, estoppel does
9 not apply to them.
12 MR. CLINAGE: Your Honor, if -- if I may
13 just add one thing and approach. There is a case on
14 point from 2012 that specifically addresses the
15 inclusion of all of these other claims that the Court
16 had inquired, including claims under 162. And I would
17 direct --
18 THE COURT: I -- I -- just so you tell
19 me, because I don't practice in this area, and I am a
20 full jurisdiction court. I have general jurisdiction.
21 162, is that the Texas Construction Trust Fund Act?
22 MR. CLINAGE: Yes, ma'am.
23 THE COURT: All right. Thank you.
24 MR. CLINAGE: And -- and if I could
25 direct the Court's attention to Page 7 of the opinion

28
1 that I've handed to you, that's Courtland Building

2 Company vs. Jalal Family Partnership. It's Court of
3 Appeals, 14th District Court out of Houston,
4 November 20th, 2012, 403 S.W.3d 265. Specifically when
5 referring to claims under Section 28 of the Property
6 Code, which is the Residential Construction Liability
7 Act, which would be the -- the baseline cause of action
8 that plaintiffs would have for defective work, coupled
9 with Texas Property Code 162, which is their other
10 claim.
11 The court simply, very concisely
12 summarizes that these allegations of statutory vio- --
13 violations are predicated on the existence of the
14 contract itself. They arise out of or relate to the
15 contract and are subject to arbitration.
16 THE COURT: Thank you. Yes.
18 MR. KING: I can easily respond to that,
19 Your Honor. Two different issues here. One is the
20 scope of an arbitration clause when you're already a
21 party to it. The other one is equitable estoppel when
22 you're a nonparty. This does not relate to equitable
23 estoppel.
24 THE COURT: But you do agree that the
25 party, if we get this far, it's not waiver, that yet

29
1 construction would still have this argument?

2 MR. KING: Your Honor, this is the first
3 time I've looked at this.
4 THE COURT: Okay.
5 MR. KING: But I -- based on what
6 counsel's represented right now, that would be my
7 expectation, that Yekk as a party would be, but the
8 individuals, they're under a different standard. The
9 equitable estoppel standard is explained right here by
10 the Supreme Court in G.T. Leach.
11 THE COURT: All right. Thank you.
13 MR. CLINAGE: If I could, Your Honor, 162
14 cannot be -- you must be an individual to have vi- --
15 violated 162. A corporation cannot misapply trust
16 funds. So try as you might, it's the individual itself
17 that is covered by 162, not the corporation. The
18 corporation --
19 THE COURT: All right.
20 MR. CLINAGE: -- would be under the 28.
21 TAKEN UNDER ADVISEMENT
22 THE COURT: I'll look at the case. I'll
23 dig in a little bit. And so I'm going to take it under
24 advisement, and I will let you gentlemen know.
25 MR. KING: Just one other housekeeping

30
1 matter, Your Honor. We've already attached all of our

2 evidence to our motion, and I move to admit the
3 evidence that's in the notebook I gave you in -- on the
4 record.
5 THE COURT: Does opposing counsel have
6 any objection?
7 MR. CLINAGE: If I could, Your Honor, let
8 me look at it. I'm not sure if I've actually seen this
9 before, since I just got it.
10 MR. KING: I'll represent that it's --
11 it's just our motion -- our -- our response to your
12 motion, and it's a copy of your motion.
13 MR. CLINAGE: Didn't see your response --
14 THE COURT: Wait.
15 MR. CLINAGE: -- in that I left Dallas
16 before it was filed.
17 THE COURT: Hold on. Let's do this. I'm
18 not going to admit a bunch of pleadings. If there's
19 evidence that you want to admit, I'll admit evidence,
20 but I'm not just going to turn around and admit a bunch
21 of pleadings.
22 So if you want to admit things, we can
23 admit it, if it's evidence, if it's like the contract
24 or letter. But all the parts of the record, I mean, I
25 take judicial notice of the file, and I'll take

31
1 judicial notice of the file.

2 MR. KING: I understand that. In that
3 case, I would only ask to admit the evidence and not
4 the pleadings that are attached as exhibits.
5 THE COURT: Again, I'll do that. I
6 just -- you need to piece it out. You can't hand her a
7 notebook. You need to hand her Exhibit 1, Exhibit 2,
8 Exhibit 3, and then I need to hear from opposing
9 counsel about whether or not he has any objections.
10 MR. KING: Okay.
11 THE COURT: So figure out what you want
12 to admit. I mean, it's also attached, isn't it, to
13 everything?
14 MR. KING: It is.
15 THE COURT: So I've taken judicial notice
16 of the file, so it's your call.
17 MR. CLINAGE: Your Honor, I guess without
18 going through this page by page -- I'm not from --
19 local here, so I drove in. And so when he filed this
20 today, I did not see it. I would ask, since you're
21 going to take it under advisement, that I have an
22 opportunity to review this and possibly lodge my
23 objections, if any, rather -- you know, depending on
24 how long it may take me to go through this.
25 THE COURT: Well, he -- he has the floor,

32
1 and I said if he wants to pull his evidence out and go

2 one by one, if he thinks that's what he needs to do to
3 have a complete record -- I'm not making a judgment
4 call one way or the other -- then he can sit here and
5 do it. But I'm not going to be admitting like the
6 answer. The -- I mean, I -- I will be admitting things
7 that need to be evidence. So just think about how you
8 want to do it.
9 MR. KING: I -- I think I'll just rest on
10 what we've already pled.
11 THE COURT: All right. Which I've taken
12 judicial notice of. All right. Thank you. Let's go
13 off the record.
14 (Court adjourned.)
15
16
17
18
19
20
21
22
23
24
25

33
1 STATE OF TEXAS )
)
2 COUNTY OF TRAVIS )
3 I, Alicia Racanelli, Official Court Reporter in and
4 for the 201st District Court of Travis County, State of
5 Texas, do hereby certify that the above and foregoing
6 contains a true and correct transcription of all
7 portions of evidence and other proceedings requested in
8 writing by counsel for the parties to be included in
9 this volume of the Reporter's Record, in the
10 above-styled and numbered cause, all of which occurred
11 in open court or in chambers and were reported by me.
12 I further certify that this Reporter's Record of
13 the proceedings truly and correctly reflects the
14 exhibits, if any, offered in evidence by the respective
15 parties.
16 I further certify that the total cost for the
17 preparation of this Reporter's Record is $ 184.00 and
18 was paid by Defendants.
19 WITNESS MY OFFICIAL HAND on this the 19th day of
20 June, 2017.
21
22 /s/ Alicia Racanelli
Alicia Racanelli, Texas CSR No. 3591
23 Expiration Date: 12/31/2018
Official Court Reporter, 201st District Court
24 Travis County, Texas
P.O. Box 1748, Austin, Texas 78767
25 Telephone (512) 854-4028

Caution
As of: August 4, 2017 7:15 PM Z
SEB, Inc. v. Campbell

Court of Appeals of Texas, Third District, Austin
March 2, 2011, Filed
NO. 03-10-00375-CV
Reporter
2011 Tex. App. LEXIS 1588 *; 2011 WL 749292
conspiracy.
SEB, Inc. d/b/a Circle B Mobile Homes; Sam P.
Bath, Jr.; and Larry Cousins, Appellants v. Alvie Overview
Campbell and Julia Campbell, Appellees
The customers purchased a manufactured home
Prior History: [*1] FROM THE DISTRICT from appellants in 2004. In 2006, the customers
COURT OF TRAVIS COUNTY, 353RD sued appellants and others, and discovery ensued.
JUDICIAL DISTRICT. NO. D-1-GN-07-00756, In 2010, appellants filed a motion to compel
HONORABLE PAUL R. DAVIS, JR., JUDGE arbitration. The trial court denied the motion, but
PRESIDING. the court reversed and remanded with instructions.
Tex. Civ. Prac. & Rem. Code Ann. § 51.016 applied
Disposition: Reversed and Remanded.
to this appeal because it was initiated after the
Core Terms effective date of the statute. The claims asserted
against appellants arose out of or related to the
arbitration, arbitration agreement, discovery, home purchase, and therefore were covered by the
parties, mobile home, motion to compel arbitration, arbitration agreement. Appellants did not seek a
compel arbitration, waived, trial court, asserted judicial resolution of the dispute with the customers
claim, invoked, right to arbitration, judicial process, or filed affirmative claims. While appellants did not
enforceability, pet, co-defendant, depositions, file the motion to compel arbitration until 45
requests, manufactured home, determinations, months after the suit was filed, delay alone was
disputes, noticed, cause of action, opposing party, generally insufficient to establish waiver.
activities, responding, purchaser, applies, entity, Appellants' predominantly defensive measures
novo responding to the customers' actions did not
substantially invoke the litigation process, for
Case Summary waiver purposes, to the customers' detriment. The
customers, by deciding to initiate the lawsuit,
Procedural Posture voluntarily incurred expenses and assumed liability
Appellants, a company, its president, and its for such. Appellants did not waive the right to
salesman, challenged a decision of the District arbitration.
Court of Travis County, 353rd Judicial District
(Texas), which denied their motion to compel Outcome
arbitration against appellee customers. The The court reversed the order denying the motion to
customers had sued alleging deceptive trade compel arbitration. The court remanded with
practices, breach of contract, promissory estoppel, instructions that the trial court compel arbitration of
trespass to chattel, negligence, fraud, and the claims.

SEB, Inc. v. Campbell, 2011 Tex. App. LEXIS 1588 (Tex. App. – Austin 2011, no pet.) (mem. op.)
LexisNexis® Headnotes HN2[ ] Alternative Dispute Resolution,

Judicial Review
Business & Corporate In a matter subject to the Federal Arbitration Act, a
Compliance > ... > Pretrial person may take an appeal or writ of error to the
Matters > Alternative Dispute court of appeals from the judgment or interlocutory
Resolution > Judicial Review order of a district court, county court at law, or
county court under the same circumstances that an
Civil Procedure > Appeals > Appellate appeal from a federal district court's order or
Jurisdiction > Interlocutory Orders decision would be permitted by 9 U.S.C.S. § 16.
Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (Supp.
Business & Corporate 2010). The court has not addressed the standard of
Compliance > ... > Arbitration > Federal review applicable to appeals brought pursuant to §
Arbitration Act > Orders to Compel Arbitration 51.016. However, in appeals of orders denying
arbitration under the Texas Arbitration Act, the
Civil Procedure > ... > Writs > Common Law
court also applies a no-evidence standard to the trial
Writs > Mandamus
court's factual determinations and a de novo review
HN1[ ] Alternative Dispute Resolution, to its legal determinations.
Judicial Review
Business & Corporate
Until recently, orders denying motions to compel
Compliance > ... > Arbitration > Federal
arbitration subject to the Federal Arbitration Act
Arbitration Act > Scope
were not subject to interlocutory appeal; instead,
they were reviewed in mandamus proceedings HN3[ ] Arbitration, Federal Arbitration Act
using an abuse-of-discretion standard. Under that If the parties do not explicitly state which statute
standard the appellate court defers to the trial applies, the courts must look to the contract
court's factual determinations if they are supported between the parties, applying the Federal
by evidence, but the appellate court reviews the Arbitration Act if the contract involves interstate
trial court's legal determinations de novo. As commerce.
amended in 2009, Tex. Civ. Prac. & Rem. Code
Ann. § 51.016 now permits courts to review such Business & Corporate
orders by appeal. Compliance > ... > Pretrial
Matters > Alternative Dispute
Business & Corporate Resolution > Judicial Review
Compliance > ... > Pretrial
Matters > Alternative Dispute Civil Procedure > Appeals > Standards of
Resolution > Judicial Review Review > De Novo Review
Civil Procedure > Appeals > Standards of Business & Corporate

Review > De Novo Review Compliance > ... > Arbitration > Federal
Arbitration Act > Orders to Compel Arbitration
Compliance > ... > Arbitration > Federal Civil Procedure > Appeals > Appellate
Arbitration Act > Orders to Compel Arbitration Jurisdiction > Interlocutory Orders
Civil Procedure > Appeals > Appellate HN4[ ] Alternative Dispute Resolution,
Jurisdiction > Interlocutory Orders Judicial Review
The appellate court applies the same standard when
Page 2 of 12
reviewing an interlocutory order denying a motion Civil Procedure > Appeals > Standards of
to compel arbitration regardless of whether the Review > Questions of Fact & Law
appeal is brought pursuant to the Texas Arbitration
Act or is authorized by Tex. Civ. Prac. & Rem. HN6[ ] Federal Arbitration Act, Arbitration
Code Ann. § 51.016. The appellate court will defer Agreements
to the trial court's factual determinations if Whether an enforceable agreement to arbitrate
supported by the evidence, review its legal exists is a legal question that the appellate court
determinations de novo, and reverse the trial court's reviews de novo.
order only if the appellate court concludes that the
trial court abused its discretion by denying the Contracts Law > Defenses > Fraud &
motion to compel arbitration. Misrepresentation > General Overview
Business & Corporate HN7[ ] Defenses, Fraud & Misrepresentation

Absent fraud, misrepresentation, or deceit, parties
Compliance > ... > Alternative Dispute
are bound by terms of contract signed.
Resolution > Arbitration > Arbitrability
Evidence > Burdens of Proof > Allocation
Business & Corporate Arbitration Act > Arbitration Agreements
Arbitration Act > Arbitration Agreements
Compliance > ... > Contracts Law > Formation
Evidence > Burdens of Proof > Burden Shifting of Contracts > Execution
HN5[ ] Arbitration, Arbitrability HN8[ ] Federal Arbitration Act, Arbitration

A party seeking to compel arbitration must Agreements
establish the existence of a valid, enforceable The Federal Arbitration Act (FAA) does not require
arbitration agreement and that the asserted claims an arbitration agreement to be signed, so long as it
fall within the agreement's scope. The party seeking is in writing and agreed to by the parties. Although
arbitration has the initial burden to present evidence FAA requires arbitration agreement to be written, it
of an arbitration agreement. Once the existence of does not expressly require agreement to be signed
an arbitration agreement has been established, a by parties. Moreover, a contract can still be
presumption attaches favoring arbitration. The effective if signed by only one party.
burden then shifts to the opposing party to present
evidence that the agreement was procured in an
unconscionable manner or induced or procured by
Resolution > Arbitration > Arbitrability
fraud or duress; that the other party has waived its
right to compel arbitration under the agreement; or Business & Corporate Law > Agency
that the dispute falls outside the scope of the Relationships > Duties & Liabilities > General
agreement. Overview
Business & Corporate Business & Corporate Law > ... > Directors &
Compliance > ... > Arbitration > Federal Officers > Scope of Authority > General
Arbitration Act > Arbitration Agreements Overview
Civil Procedure > Appeals > Standards of HN9[ ] Arbitration, Arbitrability
Review > De Novo Review
Page 3 of 12
When the principal is bound by the terms of a valid detriment. Whether a party has waived arbitration
arbitration agreement, its agents, employees, and by litigation conduct is a question of law, which the
representatives are also covered by the agreement. appellate court reviews de novo. A strong
The scope of an arbitration agreement may be presumption against waiver exists, and any doubts
extended to claims against agents of the principal are resolved in favor of arbitration. Implying
bound by the agreement when all the agents' waiver from a party's actions is appropriate only if
allegedly wrongful acts relate to their behavior as the facts demonstrate that the party seeking to
agents of the principal, and those acts were within enforce arbitration intended to waive its arbitration
the scope of the claims covered by the arbitration right.
provisions for which the principal would be liable.
Parties to contract containing arbitration provision Business & Corporate
generally intend to include disputes about agent's Compliance > ... > Alternative Dispute
actions because actions of corporate agent on Resolution > Arbitration > Waiver
behalf of corporation are deemed corporation's acts.
Extending the scope of an arbitration provision to HN11[ ] Arbitration, Waiver
an agent of the party who agreed to arbitration Waiver must be decided on a case-by-case basis
furthers the policy favoring arbitration and the looking at the totality of the circumstances. Factors
parties' intent to provide a single forum for considered in determining whether a party has
resolving disputes arising under an agreement. substantially invoked the judicial process include
how much discovery has been conducted and who
Business & Corporate initiated it, whether the discovery related to the
Compliance > ... > Pretrial merits rather than arbitrability or standing, how
Matters > Alternative Dispute much of the discovery would be useful in
Resolution > Judicial Review arbitration, and whether the movant sought
judgment on the merits. Whether the movant is a
Civil Procedure > Appeals > Standards of plaintiff or defendant is also relevant to the
Review > De Novo Review consideration, but does not alone justify a finding
of waiver or change the totality of the
Evidence > Inferences & circumstances test.
Presumptions > Presumptions
Business & Corporate Compliance > ... > Alternative Dispute
Compliance > ... > Alternative Dispute Resolution > Arbitration > Waiver
Resolution > Arbitration > Waiver
HN12[ ] Arbitration, Waiver
Civil Procedure > Appeals > Standards of Delay alone is generally not sufficient to establish
Review > Questions of Fact & Law waiver.
HN10[ ] Alternative Dispute Resolution,
Judicial Review
Resolution > Arbitration > Waiver
The standard for determining waiver of the right to
Evidence > Relevance > Relevant Evidence
arbitration, however, is the same under both the
Texas Arbitration Act and the Federal Arbitration
Act. Courts will not find that a party has waived a
right to enforce an arbitration agreement by taking HN13[ ] Arbitration, Waiver
part in litigation unless the party has substantially The court does agree that in certain circumstances
invoked the judicial process to the opposing party's the litigation activities of a co-defendant may be
Page 4 of 12
relevant to the question of whether a party seeking absent explanations and evidentiary support, will
arbitration invoked the judicial process, as, for not establish prejudice for waiver of arbitration
example, when a co-defendant moves for summary purposes.
judgment on an issue common to all defendants.
Civil Procedure > Appeals > Standards of
Business & Corporate Review > Abuse of Discretion
Resolution > Arbitration > Waiver HN16[ ] Standards of Review, Abuse of
Discretion
Civil Procedure > Discovery & A trial court exceeds its discretion if it acts in
Disclosure > General Overview arbitrary or unreasonable manner or without
reference to guiding rules or principles.
Evidence > Inferences &
Presumptions > Inferences Counsel: For Appellant: Mr. Jeffrey C. Tasker,
Tasker & Peterson, PLLC, Flower Mound, TX.
HN14[ ] Arbitration, Waiver
Waiver of arbitration requires a showing of For Appellee: Mr. James C. Mosser, Mosser Law
prejudice. Even substantially invoking the judicial PLLC, Dallas, TX.
process does not waive a party's arbitration rights
Judges: Before Chief Justice Jones, Justices
unless the opposing party proves that it suffered
Puryear and Pemberton.
prejudice as a result. A court should not ordinarily
infer waiver based on prejudice if a party seeking Opinion by: J. Woodfin Jones
arbitration has conducted only a minimal amount of
discovery, and the party opposing arbitration has Opinion
not met its burden of showing sufficient prejudice.
Taking unfair advantage of discovery proceedings
MEMORANDUM OPINION
that would not have been available in arbitration
might constitute sufficient prejudice to infer This is an interlocutory appeal from a trial court's
waiver. However, when only a minimal amount of order denying a motion to compel arbitration. In a
discovery has been conducted, and such discovery single issue, appellants SEB, Inc. d/b/a Circle B
may also be useful for the purpose of arbitration, Mobile Homes ("SEB"), Sam P. Bath, Jr., and
courts do not ordinarily infer waiver based on Larry Cousins (collectively, "Circle B") contend
prejudice to the party opposing arbitration. A party the trial court erred because the claims asserted
who requests a significant amount of discovery is against them by appellees Alvie Campbell and Julia
not prejudiced by getting it and taking it to Campbell are subject to a valid arbitration
arbitration to the same degree as a party who agreement and Circle B did not waive the right to
produces significant discovery outside the stricter arbitration. We reverse the trial court's order and
discovery limits of arbitration. The rules and remand the cause with instructions that the trial
procedures of the American Arbitration Association court compel arbitration of the Campbells' claims
permit the arbitrator to allow discovery. against Circle B.
Business & Corporate BACKGROUND

Resolution > Arbitration > Waiver The Campbells purchased a manufactured home
from SEB in 2004. Bath was SEB's president, and
HN15[ ] Arbitration, Waiver Cousins was a salesman for SEB involved in the
Generalized complaints about delay and expense, sale. The home was manufactured by Cavco
Page 5 of 12
Industries, [*2] Inc. ("Cavco"). The Campbells also argued that SEB was not a signatory to the
purchased the land on which the manufactured Arbitration Agreement and therefore could not
home was located from 967, Ltd. ("967"). enforce it. The Campbells contend that the only
Cottonwood Enterprise, Inc. ("Cottonwood") was parties to the Arbitration Agreement are the
967's general partner, and Doug Lewis was Campbells and "Circle B Homes," an entity they
Cottonwood's vice president. In August 2006, the claim did not exist at the time the Arbitration
Campbells filed suit against SEB, Bath, Cousins, Agreement was signed, is not presently a party to
Cavco, 967, and Cottonwood asserting causes of the litigation, and is not the entity from whom the
action arising out of the negotiation and sale of the Campbells purchased [*4] their manufactured
home and land. Specifically, the Campbells alleged home.2
causes of action for violations of the Texas
Deceptive Trade Practices Act, breach of contract, After a hearing, the trial court denied Circle B's
promissory estoppel, trespass to chattel, negligence, motion to compel arbitration without specifying the
negligence per se, common law fraud, fraud in a grounds for its ruling. This appeal followed.
real estate transaction, and civil conspiracy.1
STANDARD OF REVIEW
Over the next 45 months, the Campbells pursued
their claims against these defendants by serving In its motion to compel arbitration, Circle B sought
discovery, responding to discovery requests, and to compel arbitration under the Federal Arbitration
responding to dispositive motions filed by Cavco, Act ("FAA"), 9 U.S.C. §§ 1-16 (2006) and/or the
Texas Arbitration Act ("TAA"), Tex. Civ. Prac. &
967, Cottonwood, and Lewis. Circle B's litigation
Rem. Code Ann. §§ 171.001-.098 (West 2005). The
activities during that time included responding to
Arbitration Agreement does not specify which law
the Campbells' discovery requests, responding to
applies, and neither the parties nor the trial court
limited discovery from co-defendant Cavco,
has taken a position on the governing law.3
serving the Campbells with requests for disclosure,
noticing two depositions that ultimately were not In the end, however, there is no material difference
taken, [*3] and participating in depositions of Alviebetween the two standards. HN1[ ] Until recently,
Campbell and Julia Campbell that were noticed by orders denying motions to compel arbitration
a co-defendant. subject to the FAA were not subject to interlocutory
In June 2010, Circle B filed a motion to compel appeal; instead, they were reviewed in mandamus
arbitration of the claims asserted against it by the proceedings using an abuse-of-discretion standard.
Campbells, relying on a document titled See Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266,
"Arbitration Agreement" that the Campbells signed 272-73 (Tex. 1992). Under that standard we defer to
on the day they closed on the home and land the trial court's factual determinations if they are
purchase. The Arbitration Agreement was signed
by Bath under the company name "Circle B 2 There is no dispute that the Campbells purchased the home from
Homes." In their response and objection to the SEB, Inc. d/b/a Circle B Mobile Homes.
motion to compel arbitration, the Campbells 3
Although the Arbitration Agreement recites that its "validity and
asserted that Circle B had waived the right to enforceability" [*6] are governed by the FAA, it does not indicate
arbitration by substantially invoking the judicial whether that statute or the TAA governs other aspects of an
process to their prejudice. At the hearing on the arbitration proceeding pursuant to the agreement. Furthermore, the
motion to compel arbitration, the Campbells also record does not include a copy of the sales contract for the mobile
home purchase. See In re L&L Kempwood Assocs., L.P., 9 S.W.3d
125, 127 (Tex. 1999) HN3[ ] ("[I]f the parties do not explicitly
state which statute applies, the courts must look to the contract
1
The Campbells later amended their petition to assert causes of between the parties, applying the FAA if the contract involves
action against Lewis. interstate commerce.").
Page 6 of 12
supported by evidence, but we review the trial [*7] agreement and they did not waive their right to
court's legal determinations [*5] de novo. In re arbitrate. HN5[ ] A party seeking to compel
Labatt Food Serv., L.P., 279 S.W.3d 640, 643 (Tex. arbitration must establish the existence of a valid,
2009). As amended in 2009, section 51.016 of the enforceable arbitration agreement and that the
civil practice and remedies code now permits asserted claims fall within the agreement's scope. In
courts to review such orders by appeal: re Oakwood Mobile Homes, Inc., 987 S.W.2d 571,
573 (Tex. 1999). The party seeking arbitration has
HN2[ ] In a matter subject to the [FAA], a the initial burden to present evidence of an
person may take an appeal or writ of error to arbitration agreement. Id. Once the existence of an
the court of appeals from the judgment or arbitration agreement has been established, a
interlocutory order of a district court, county presumption attaches favoring arbitration. Henry v.
court at law, or county court under the same Gonzalez, 18 S.W.3d 684, 689 (Tex. App.—San
circumstances that an appeal from a federal Antonio 2000, pet. dism'd by agr.). The burden then
district court's order or decision would be shifts to the opposing party to present evidence that
permitted by 9 U.S.C. Section 16. the agreement was procured in an unconsionable
manner or induced or procured by fraud or duress;
Tex. Civ. Prac. & Rem. Code Ann. § 51.016 (West that the other party has waived its right to compel
Supp. 2010). Section 51.016 applies to this appeal arbitration under the agreement; or that the dispute
because it was initiated after September 1, 2009, falls outside the scope of the agreement. In re
the effective date of the statute. This Court has not Oakwood Mobile Homes, Inc., 987 S.W.2d at 573.
addressed the standard of review applicable to
appeals brought pursuant to section 51.016. Is There a Valid Arbitration Agreement
However, in appeals of orders denying arbitration
under the TAA, we also apply a no-evidence HN6[ ] Whether an enforceable agreement to
standard to the trial court's factual determinations arbitrate exists is a legal question that we review de
and a de novo review to its legal determinations. novo. J. M. Davidson, Inc. v. Webster, 128 S.W.3d
See Trammell v. Galaxy Ranch Sch., L.P., 246 223, 227 (Tex. 2003). At the hearing on the
S.W.3d 815, 820 (Tex. App.—Dallas 2008, no pet.). [*8] motion to compel arbitration, SEB introduced
into evidence a document titled "Arbitration
Therefore, HN4[ ] we apply the same standard Agreement" dated October 29, 2004 (the
when reviewing an interlocutory order denying a "Arbitration Agreement"). This agreement
motion to compel arbitration regardless of whether provides:
the appeal is brought pursuant to the TAA or is This Arbitration Agreement ("Agreement") is
authorized by civil practice and remedies code executed contemporaneously with an
section 51.016. We will defer to the trial court's installment or sales contract ("Contract") for
factual determinations if supported by the evidence, the purchase of a manufactured home
review its legal determinations de novo, and reverse ("Home") as described in the Contract by the
the trial court's order only if we conclude that the purchaser ("Purchaser") from the selling
trial court abused its discretion by denying the retailer ("Retailer").
motion to compel arbitration. See id. ...
DISCUSSION All claims, disputes, and controversies arising

out of or relating in any way to the sale,
In a single issue, Circle B contends that the trial purchase, or occupancy of the Home including,
court erred because the claims asserted against it by but not limited to, any negotiations between the
the Campbells are subject to a valid arbitration parties, the design, construction, performance,
Page 7 of 12
delivery, condition, installation, financing, The Campbells maintain that the Arbitration
repair or servicing of the Home and any Agreement is "not valid or enforceable" by SEB
warranties, either express or implied, pertaining because it was not signed by SEB. In this regard,
to the Home, and including claims for equitable the Campbells assert that Sam P. Bath's signature
relief or claims based on contract, tort, statute, on behalf of "Circle B Homes" is insufficient to
or any alleged breach, default, or constitute execution of the Arbitration Agreement
misrepresentation, will be resolved by binding by SEB. But the Arbitration Agreement expressly
arbitration administered by the American provides that any contests to its validity or
Arbitration Association ("AAA") under its enforceability shall be determined by the provisions
Commercial Arbitration Rules. Any contests to of HN8[ ] the Federal Arbitration Act, which does
the validity or enforceability of this Agreement not require an arbitration agreement to be signed,
shall be determined [*9] by the provisions of so long as it is in writing and agreed to by the
the Federal Arbitration Act and the rules of the parties. See In re AdvancePCS Health L.P., 172
AAA. S.W.3d 603, 606 (Tex. 2005); Security Serv. Fed.
... Credit Union v. Sanders, 264 S.W.3d 292, 301 (Tex.
CIRCLE B HOMES App.—San Antonio 2008, no pet.); In re
6610 E Ben White Autotainment Partners Ltd. P'ship, 183 S.W.3d 532,
Austin, Texas 78741 535 (Tex. App.—Houston [14th Dist.] 2006, orig.
By: /s/ Sam P. Bath proceeding); see also Valero Ref., Inc. v. M/T
X /s/ Alvie Campbell Lauberhorn, 813 F.2d 60, 63-64 (5th Cir. 1987)
X /s/ JCampbell (although FAA requires arbitration agreement to be
written, it does not expressly require agreement to
The Campbells acknowledge that (i) they signed be signed by parties). Moreover, a contract can still
the Arbitration Agreement as part of the process by be effective if signed by [*11] only one party. See
which they acquired the mobile home; (ii) they DeClaire v. G & B McIntosh Family Ltd. P'ship.,
were the purchaser of the mobile home, and 260 S.W.3d 34, 44 (Tex. App.—Houston [1st Dist.]
therefore they are the "Purchaser" referred to in the 2008, no pet.). The Arbitration Agreement includes
Arbitration Agreement; and (iii) they purchased the nothing to indicate that it was not effective unless
mobile home from SEB. The Campbells do not signed by all parties. Consequently, even if we
assert that there was fraud, deceit, or agreed with the Campbells' assertion that SEB did
misrepresentation involved in their signing the not actually sign the Arbitration Agreement, such
Arbitration Agreement. Accordingly, the alleged failure would not, in this case, constitute a
Campbells are bound by the agreement. See In re bar to the agreement's validity or enforceability.
McKinney, 167 S.W.3d 833, 835 (Tex. 2005)
HN7[ ] (absent fraud, misrepresentation, or The Campbells next contend that SEB is not a party
deceit, parties are bound by terms of contract to the Arbitration Agreement because (1) the name
signed). In its verified motion to compel arbitration, SEB, Inc. d/b/a Circle B Mobile Homes does not
SEB stated that it entered into the Arbitration appear in the text of the agreement, and (2) the
Agreement with the Campbells. Bath, SEB's party that signed the agreement was "Circle B
president, signed the Arbitration Agreement on Homes," not "Circle B Mobile Homes." Although
behalf of "Circle B Homes." SEB moved to compel the Arbitration Agreement does not refer to SEB by
arbitration on the ground that SEB and the name, it does refer to the "selling retailer" of the
Campbells agreed at closing that all disputes arising mobile home, which all parties agree was SEB.
out of or relating to the Campbells' purchase Moreover, the fact that the agreement was signed
[*10] of the mobile home would be resolved by by Sam P. Bath under the company name "Circle B
binding arbitration. Homes" supports, rather than undermines, the
Page 8 of 12
conclusion that SEB is a party to the Arbitration Ins. Group, Inc., 192 S.W.3d 759, 762 (Tex. 2006)
Agreement. Circle B Mobile Homes is a d/b/a of (parties to contract containing arbitration provision
SEB, the company from which the Campbells generally intend to include disputes about agent's
bought [*12] their mobile home. Sam P. Bath is its actions because actions of corporate agent on
president. Bath's signature on the Arbitration behalf of corporation are deemed corporation's
Agreement is consistent with, and is further acts). Extending the scope of an arbitration
evidence supporting, SEB's contention that the provision to an agent of the party who agreed to
purchaser and the seller of the mobile home in arbitration furthers the policy favoring arbitration
question agreed to arbitrate any disputes arising and the parties' [*14] intent to provide a single
from that transaction. We reject the Campbells' forum for resolving disputes arising under an
suggestion that the omission of the word "Mobile" agreement. See McMillan, 66 S.W.3d at 481 (citing
from the signature block proves that the agreement Pritzker v. Merrill Lynch, Pierce, Fenner, & Smith,
is between them and an entity wholly unrelated to Inc., 7 F.3d 1110, 1121 (3rd Cir. 1993)).
SEB called "Circle B Homes"—an entity the
Campbells acknowledge does not exist. The only In the present case, the Campbells specifically
reasonable conclusion is that the omission of the alleged that their claims against Bath and Cousins
word "Mobile" was an oversight, and that Bath's arose out of actions taken within the course and
signature evidences that the retailer (SEB) agreed scope of their employment with SEB. The causes of
to the arbitration provision. We hold that the action alleged against Bath and Cousins all arose
evidence conclusively shows that the Campbells out of or are related to the Campbells' home
and SEB agreed to arbitrate any disputes arising out purchase. On appeal, the Campbells do not dispute
of or related to the Campbells' purchase of the that they have asserted claims against Bath and
manufactured home. We further conclude, and the Cousins, as agents of SEB, that relate to the
Campbells do not contend otherwise, that the manufactured home purchase. Rather, they contend
claims asserted against SEB in this lawsuit all arise that "no entity to which [] Bath and Cousins were
out of or relate to the home purchase and are agents is a party to the alleged Arbitration
therefore covered by the Arbitration Agreement. Agreement." Because we have concluded that SEB
is a party to the Arbitration Agreement, the
The Arbitration Agreement also applies to the Campbells' only stated objection to Bath's and
claims asserted [*13] against Bath and Cousins. Cousins's motion to compel arbitration fails. We
HN9[ ] When the principal is bound by the terms hold that the claims asserted by the Campbells
of a valid arbitration agreement, its agents, against both Bath and Cousins are covered by the
employees, and representatives are also covered by Arbitration Agreement.
the agreement. See In re Merrill Lynch Trust Co.,
123 S.W.3d 549, 555 (Tex. App.—San Antonio Did Circle B Waive the Right to Arbitration
2003, orig. proceeding); McMillan v. Computer
The Campbells assert that Circle B waived the right
Translation Sys. & Support, Inc., 66 S.W.3d 477,
to [*15] arbitration by participating in the
481 (Tex. App.—Dallas 2001, orig. proceeding).
underlying litigation for 45 months before moving
The scope of an arbitration agreement may be
to compel arbitration. As previously noted, neither
extended to claims against agents of the principal
the trial court nor the parties indicate whether this
bound by the agreement when all the agents'
action is governed by the TAA, the FAA, or both,
allegedly wrongful acts relate to their behavior as
and the agreement fails to specify which law
agents of the principal, and those acts were within
applies. HN10[ ] The standard for determining
the scope of the claims covered by the arbitration
waiver of the right to arbitration, however, is the
provisions for which the principal would be liable.
same under both the TAA and the FAA. See Sedillo
McMillan, 66 S.W.3d at 481; see also In re Vesta
Page 9 of 12
v. Campbell, 5 S.W.3d 824, 825 (Tex. App.— either by the Campbells or by other parties to the
Houston [14th Dist.] 1999, no pet.). Courts will not litigation. Circle B did not seek a judicial resolution
find that a party has waived a right to enforce an of the dispute with the Campbells, nor has it filed
arbitration agreement by taking part in litigation affirmative claims or dispositive motions. This is
unless the party has substantially invoked the not a case in which the party seeking arbitration
judicial process to the opposing party's detriment. turns to arbitration only after failing to obtain a
See In re Bank One, N.A., 216 S.W.3d 825, 827 satisfactory result in court. See In re Bruce
(Tex. 2007); In re Serv. Corp. Int'l, 85 S.W.3d 171, Terminix Co., 988 S.W.2d at 704. While Circle B
174 (Tex. 2002). Whether a party has waived did not file the motion to compel arbitration until
arbitration by litigation conduct is a question of 45 months after the suit was originally filed,
law, which we review de novo. See Perry Homes v. HN12[ ] delay alone is generally not sufficient to
Cull, 258 S.W.3d 580, 587 (Tex. 2008). A strong establish waiver. See In re Vesta Ins. Group, Inc.,
presumption against waiver exists, and any doubts 192 S.W.3d at 763.
are resolved in favor of arbitration. See In re D.
Wilson Constr. Co., 196 S.W.3d 774, 783 (Tex. The Campbells argue that this Court should also
2006); In re Bruce Terminix Co., 988 S.W.2d 702, consider the activities of co-defendant Cavco
705 (Tex. 1998). [*16] Implying waiver from a because of "Cavco's consent to arbitration, its status
party's actions is appropriate only if the facts as a beneficiary [of the Arbitration Agreement], and
demonstrate that the party seeking to enforce considering that the Campbells will be forced to
arbitration intended to waive its arbitration right. arbitrate their claims against Cavco." As an initial
See EZ Pawn Corp. v. Mancias, 934 S.W.2d 87, 89 matter, we note that Cavco did not file a motion to
(Tex. 1996). compel arbitration and, because the issue is not
before us, we express no opinion as to whether
HN11[ ] Waiver must be decided on a case-by- Cavco has waived any right to arbitration it may
case basis looking at the totality of the have [*18] under the Arbitration Agreement.
circumstances. See Perry Homes, 258 S.W.3d at HN13[ ] We do agree, though, that in certain
591. Factors considered in determining whether a circumstances the litigation activities of a co-
party has substantially invoked the judicial process defendant may be relevant to the question of
include how much discovery has been conducted whether a party seeking arbitration invoked the
and who initiated it, whether the discovery related judicial process, as, for example, when a co-
to the merits rather than arbitrability or standing, defendant moves for summary judgment on an
how much of the discovery would be useful in issue common to all defendants. In this case,
arbitration, and whether the movant sought however, Cavco moved for summary judgment on
judgment on the merits. Id. at 591-92. Whether the causes of action asserted against it based on
movant is a plaintiff or defendant is also relevant to particular facts not generally applicable to other co-
the consideration, but does not alone justify a defendants. Disposition of Cavco's motion for
finding of waiver or change the "totality of the summary judgment thus had no effect on the claims
circumstances test." Id. at 592. asserted against SEB, Bath, or Cousins. We
decline, therefore, to attribute Cavco's litigation
Circle B's use of the judicial process was limited to activities to Circle B.
filing answers, serving a first and later an amended
request for disclosure, noticing two depositions that Not only did the Campbells fail to show that Circle
ultimately were not taken, and participating in the B substantially invoked the judicial process, they
depositions of Alvie Campbell and Julia Campbell also failed to establish that they suffered resulting
that were [*17] noticed by co-defendant Cavco. prejudice. See Perry Homes, 258 S.W.3d at 595
The remainder of the discovery was propounded HN14[ ] (waiver of arbitration requires showing
Page 10 of 12
of prejudice); In re Bruce Terminix Co., 988 S.W.2d useful in an arbitration proceeding. There is no
at 704 ("Even substantially invoking the judicial indication that Circle B obtained sensitive
process does not waive a party's arbitration rights documents or information through the discovery
unless the opposing party proves that it suffered process that they would not have been able to
prejudice as a result."). A court should not obtain in the arbitration proceeding. See Williams
ordinarily [*19] infer waiver based on prejudice if a Indus., Inc. v. Earth Dev. Sys. Corp., 110 S.W.3d
party seeking arbitration has conducted only a 131, 135 (Tex. App.—Houston [1st Dist.] 2003, no
minimal amount of discovery, and the party pet.).
opposing arbitration has not met its burden of
showing sufficient prejudice. See In re D. Wilson At the hearing on the motion to compel arbitration,
Constr. Co., 196 S.W.3d at 783. Taking unfair the Campbells' attorney attempted to establish
advantage of discovery proceedings that would not prejudice by stating that he had "well over a
have been available in arbitration might constitute hundred thousand dollars [*21] in just hard
sufficient prejudice to infer waiver. See Structured attorney's fees working on motions, depositions,
Capital Res. Corp. v. Arctic Cold Storage, LLC, and preparation to try this case." The supreme court
237 S.W.3d 890, 895 (Tex. App.—Tyler 2007, no has rejected a similar argument when, as here, the
pet.). However, when only a minimal amount of pre-trial costs were "largely self-inflicted" because
discovery has been conducted, and such discovery the plaintiff sent "far more discovery requests than
may also be useful for the purpose of arbitration, he received" and the party seeking arbitration did
courts do not ordinarily infer waiver based on not engage in extensive discovery. See In re Vesta
prejudice to the party opposing arbitration. See In Ins. Group, Inc., 192 S.W.3d at 763 (no waiver
re D. Wilson Constr. Co., 196 S.W.3d at 783; In re when discovery activities of party seeking to
Vesta Ins. Group, Inc., 192 S.W.3d at 763; In re compel arbitration were limited to serving standard
Bruce Terminix Co., 988 S.W.2d at 703. Counsel request for disclosure, noticing four depositions,
for Circle B questioned two witnesses during and sending request for production). Counsel for
depositions noticed by Cavco. Circle B also the Campbells further testified that his clients
responded to discovery propounded by the would be prejudiced because "his fee agreement
Campbells. While the Campbells conducted a addresses acting as trial counsel in this matter, and
significant amount of discovery, Circle B did not does not address the issues of acting as arbitration
serve the Campbells with any discovery beyond counsel." He stated that the Campbells would be
routine requests for [*20] disclosure. In Perry "forced to obtain new counsel" for an arbitration.
Homes, the supreme court observed that a party Assuming the truth of this assertion, the Campbells
who requests a significant amount of discovery is created this problem themselves by choosing to
not prejudiced by getting it and taking it to enter into such an agreement despite knowing that
arbitration to the same degree as a party who they had agreed to arbitrate these claims. Any
produces significant discovery outside the stricter prejudice they may suffer as a result of their
discovery limits of arbitration. 258 S.W.3d at 600. decision to retain an attorney who [*22] was unable
Moreover, the Arbitration Agreement states that or unwilling to represent them in an arbitration
arbitration is to be conducted in accordance with proceeding is, like the expense of discovery they
the rules and procedures of the American conducted, "self-inflicted." The Campbells' attorney
Arbitration Association. Those rules permit the also stated at the hearing that the added delay and
arbitrator to allow discovery. See In re Bruce expense of arbitration would prejudice the
Terminix, 988 S.W.2d at 704-05. It is not clear Campbells, but HN15[ ] "generalized complaints
what, if any, information Circle B or the Campbells about delay and expense, absent explanations and
obtained through discovery that would not be evidentiary support, will not establish prejudice."
Structured Capital Res. Corp., 237 S.W.3d at 896;
Page 11 of 12
see also Texas Residential Mortgage, L.P. v. principles).

Portman, 152 S.W.3d 861, 864 (Tex. App.—Dallas
2005, no pet.) (party arguing waiver of arbitration CONCLUSION
identified no work she had done nor cost incurred
For the reasons stated above, we reverse the trial
in anticipation of trial that she would not also have
court's order denying Circle B's motion to compel
done or incurred in anticipation of arbitration
arbitration. We remand the cause with instructions
hearing); Associated Glass, Ltd. v. Eye Ten Oaks
that the trial court compel arbitration of the
Invs., Ltd., 147 S.W.3d 507, 514 (Tex. App.—San
Campbells' claims against SEB, Bath, and Cousins
Antonio 2004, orig. proceeding) (party urging
in accordance with the terms of the Arbitration
waiver of arbitration did not submit evidence of
Agreement.4
increased expense and therefore failed to show
prejudice); Transwestern Pipeline Co. v. Horizon J. Woodfin Jones, Chief Justice
Oil & Gas Co., 809 S.W.2d 589, 592 (Tex. App.—
Dallas 1991, writ dism'd) (party who voluntarily Before Chief Justice Jones, Justices Puryear and
incurred legal fees by initiating suit did not show Pemberton
prejudice).
Reversed and Remanded
We conclude [*23] that Circle B's predominantly
Filed: March 2, 2011
defensive measures in response to the Campbells'
actions did not substantially invoke the litigation
process to the Campbells' detriment or prejudice. End of Document
Moreover, the fact that the Campbells may have
expended funds for legal fees is insufficient to
establish prejudice. By deciding to initiate and
prosecute their lawsuit, the Campbells voluntarily
incurred these expenses and assumed liability for
these costs. They cannot now rely on those very
expenses and costs to establish prejudice and
prevent Circle B from invoking the right to compel
arbitration. Nothing before us demonstrates that
these same expenses would not have been incurred
during arbitration, nor that they will not provide a
benefit to the Campbells in resolving this dispute in
that forum.
We conclude that the Campbells and Circle B were

parties to a valid and enforceable arbitration
agreement, and that Circle B did not waive the right
to arbitration by substantially invoking the judicial
process to the Campbells' detriment. It was
therefore an abuse of discretion for the trial court to
deny Circle B's motion to compel arbitration. See
Bowie Mem'l Hosp. v. Wright, 79 S.W.3d 48, 52 4
In its brief, Circle B requests this Court to render judgment ordering
(Tex. 2002) HN16[ ] (trial [*24] court exceeds its all parties to arbitration. As previously noted, the issue of the
discretion if it acts in arbitrary or unreasonable arbitrability of the Campbells' claims against parties other than SEB,
manner or without reference to guiding rules or Bath, and Cousins is not before us in this appeal, and we express no
opinion with regard to that issue.
Page 12 of 12

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Dargahi v. Handa - Appellant&#39;s Amended Brief

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ACCEPTED

PEJMAN DARGAHI, KAMRAN DARGAHI, and YEKK CONSTRUCTION

DHIRAJ HANDA and RITU HANDA, Appellees

Accelerated Appeal from the 261st Judicial District Court

APPELLANTS’ AMENDED BRIEF

BUSH RUDNICKI SHELTON, P.C.

ATTORNEY FOR APPELLANTS

ORAL ARGUMENT REQUESTED

Appellants/Defendants: Pejman Dargahi, Kamran Dargahi, and

Carl J. Wilkerson (trial and appeal) James Rudnicki (trial court)

Appellees/Plaintiffs: Dhiraj Handa and Ritu Handa

David A. King (trial and appeal) Graves, Dougherty, Hearon &

Identity of Parties and Counsel.......................................................ii

Texas Supreme Court

G.T. Leach Builders, LLC v. Sapphire V.P., LP,

Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266 (Tex. 1992)…………………………10

In re Kaplan Higher Educ. Corp., 235 S.W.3d 206 (Tex. 2007)…………………….14

Knapp Med. Ctr. v. De La Garza,

Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008)…………………………………16

Richmont Holdings, Inc. v. Superior Recharge Sys, L.L.C.,

In re U.S. Home Corp., 236 S.W.3d 761 (Tex. 2007)………………………...11,12,14

In re Vesta Ins. Group, Inc., 192 S.W.3d 759 (Tex. 2006)…………………………..12

Texas Court of Appeals

Prevost v. Insurance Advisors, Inc., 46 S.W.3d 289

In re Susan Newell Custom Home Builders, Inc., 420 S.W.3d 459

Tex. R. App. P. 26.1(b)………………………………………………………….2

Tex. R. App. P. 28.1(b)…………………………………………………………..2

TEX. CIV. PRAC. & REM. CODE §51.016…………………………………………...6,8

Nature of The case on appeal concerns enforcement of an arbitration

Interlocutory The Honorable Amy Clark Meachum, Judge Presiding, signed

Trial court: 261st Judicial District Court, Travis County, Texas

APPELLANTS’ AMENDED BRIEF 1

Appellate restrictions regarding perfection of accelerated appeals precluded

Appellant’s pursuit of further opportunity to be heard in the trial court. Tex. R.

argument before this Court should be permitted.

1. The trial court abused its discretion by denying Appellants’ motion to

APPELLANTS’ AMENDED BRIEF 2

Appellants are homebuilder Yekk Construction Services, LLC d/b/a

members/managers Pejman Dargahi and Kamran Dargahi. CR 112-114/App. F; CR

CR 114/App. F. In 2014, Lakeway Custom Homes, through Pejman Dargahi, and

the parties agreed that:

 LAKEWAY CUSTOM HOMES AND RENOVATION shall provide all

 Owner and LAKEWAY CUSTOM HOMES AND RENOVATION each

 If a dispute arises between LAKEWAY CUSTOM HOMES AND

APPELLANTS’ AMENDED BRIEF 3

CR 501-505/App. H; CR 537-538/App. H. Despite their informal discussions and

mediation, they could not resolve their dispute. CR 109/App. F; CR 308/App. H.

The Handas filed suit against Appellants in March 2016, alleging:

 Plaintiffs have made progress payments totaling … 95% of the

 Dargahi disclosed to Plaintiffs that he was still “$150,000 +/-

 Dargahi ceased all construction work on the Project despite

 Dargahi owed more than $120,000 to at least seventeen

 Dargahi and his brother, Kamran, had been systematically

APPELLANTS’ AMENDED BRIEF 4

Appellants answered the Handas’ lawsuit by general denial in May 2016. CR

15/App. C. In August 2016, Appellants’ counsel entered into a Rule 11 agreement

about Appellants’ responses to the Handas’ requests for production and

Appellants responded to requests for production. CR 352/App. H; CR 338-

351/App. H. Appellants substituted their counsel of record in October 2016. CR 17.

need immediate attention”, specifically: their request to schedule the depositions

Appellants’ supplemental production. CR 427-428/App. H. Appellants sought

discovery from the custodian of records of the Handas’ construction lender

Regions Bank by Notice of Intention to Take Deposition By Written Questions and

accompanying Subpoena Duces Tecum. CR 429-445/App. H. On December 8,

Dargahi v. Handa - Appellant's Amended Brief

Dargahi v. Handa - Appellant's Amended Brief

SEB, at 5-6 (citations omitted)/App. J.

SEB, at 15-16 (citations omitted)/App. J.

salesman. See SEB, at 1-2/App. J. In response to the SEB parties’ motion to

are also covered by the agreement.” SEB at 13-14/App. J.

enforce it against Appellees. See SEB at 13-14/App. J.