625 S.W.3d 569
Tex. App.2021Background
- Lennar sold the house to Isaacson in 2014 via a special warranty deed and a "1-2-10" single-family warranty; both instruments contained arbitration provisions.
- Whiteley purchased the house from Isaacson in 2015 and later sued Lennar for negligent construction and breach of implied warranties alleging serious mold from HVAC defects.
- Trial court granted Lennar’s motion to stay and the parties arbitrated under the FAA; the arbitrator denied Whiteley relief and awarded Lennar attorney’s fees, also assessing fees against Big Tex and Xalt (nonparties to the original confirmation/vacatur motions).
- After arbitration, Lennar moved to confirm the award and join Big Tex and Xalt; Whiteley moved to vacate the award arguing she and Lennar were not bound by a valid arbitration agreement.
- The trial court denied confirmation and granted vacatur; Lennar appealed. The court of appeals affirmed, addressing (1) whether vacatur affected Big Tex/Xalt, (2) whether Whiteley was bound by the arbitration clauses in the deed and warranty, and (3) whether Whiteley waived objections by participating in arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court’s vacatur applied to Big Tex and Xalt | Whiteley only sought vacatur as to her and Lennar (no relief requested for Big Tex/Xalt) | Lennar: FAA provides exclusive vacatur grounds; no valid basis shown to vacate awards as to Big Tex/Xalt | Court: Vacatur was not construed to apply to Big Tex/Xalt; they were not parties to the vacatur motion and had no opportunity to be heard |
| Whether the arbitration clause in the special warranty deed runs with the land (binding successor owner) | Whiteley: not bound; clause is personal, not a covenant running with the land | Lennar: clause runs with the land and thus binds Whiteley as successor | Court: clause does not "touch and concern" the land; it is a personal covenant and does not run with the land |
| Whether Whiteley is bound by the single-family warranty arbitration clause (third-party beneficiary or assumption/direct-benefits estoppel) | Whiteley: not bound; she is a non‑signatory without third‑party beneficiary status and her claims do not invoke direct‑benefits estoppel | Lennar: warranty transfers to successor owners; Whiteley is a successor and/or received direct benefits so she must arbitrate | Court: Whiteley is not a clear, intended third‑party beneficiary; direct benefits estoppel does not apply to her claims (claims arose from general tort/statutory duties and pleaded bases were insufficient) |
| Whether Whiteley waived challenge to arbitration by participating in arbitration | Whiteley: preserved challenge and later moved to vacate the award | Lennar: Whiteley voluntarily participated, agreed to arbitrator and rules, and thus waived objections | Court: No waiver for appellate purposes; a threshold question of a valid arbitration agreement remains for court review and Whiteley could challenge in post‑award proceedings; participation did not preclude her vacatur motion |
Key Cases Cited
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (gateway questions and direct‑benefits estoppel principles)
- In re Rubiola, 334 S.W.3d 220 (Tex. 2011) (state contract law governs arbitrability under the FAA)
- Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624 (Tex. 2018) (enumerating theories to bind nonsignatories to arbitration clauses)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (limits of direct‑benefits estoppel where claims arise from general law)
- Inwood N. Homeowners’ Ass’n, Inc. v. Harris, 736 S.W.2d 632 (Tex. 1987) (elements for a covenant to run with the land)
- Blasser v. Cass, 314 S.W.2d 807 (Tex. 1958) (definition of "touches and concerns" the land)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (scope of appellate review of interlocutory orders on arbitration when final judgment confirms or vacates award)