672 S.W.3d 367
Tex.2023Background
- Lennar contracted with original buyer Isaacson in a Purchase and Sale Agreement (PSA) that incorporated a "1-2-10" Limited Warranty and contained broad arbitration clauses; Lennar also recorded a Special Warranty Deed with an attached Exhibit A arbitration provision.
- Isaacson later sold the house to Whiteley, who sued Lennar for mold-related negligent construction and breaches of implied warranties (habitability and workmanship).
- Lennar moved to stay and compel arbitration; the trial court stayed and the parties arbitrated under the FAA.
- The arbitrator denied Whiteley relief and awarded Lennar fees and costs (also awarding against subcontractors Big Tex and Xalt).
- Whiteley moved to vacate the award; the trial court vacated the award as to Whiteley and the court of appeals affirmed.
- The Texas Supreme Court held Whiteley was bound to arbitrate under direct-benefits estoppel, reversed the court of appeals in part, rendered judgment confirming the award against Whiteley, and remanded for further proceedings as to the subcontractors.
Issues
| Issue | Whiteley (Plaintiff) Argument | Lennar (Defendant) Argument | Held |
|---|---|---|---|
| Whether Whiteley is bound to arbitrate under the PSA via direct-benefits estoppel | Not a party; claims aren’t derivative of PSA; implied warranties derive from common law | Whiteley’s claims arise from and must be determined by reference to the PSA and incorporated warranty, so estoppel binds her | Yes — direct-benefits estoppel applies; Whiteley must arbitrate and award is confirmed |
| Whether the arbitration clause attached to the recorded deed (Exhibit A) runs with the land and binds successors | Exhibit A does not "touch and concern" the land and thus does not run with it | Exhibit A is a covenant running with the land and binds successors/assigns | Not decided on the merits (court resolved case on direct-benefits estoppel and did not reach this argument) |
| Whether Whiteley assumed PSA obligations or is a third‑party beneficiary | No assumption; purchase from Isaacson via separate deed; no direct third‑party beneficiary status | Whiteley assumed or is a third‑party beneficiary of the warranty/PSA terms, so must arbitrate | Not reached (unnecessary after estoppel holding) |
| Whether Whiteley waived objection to arbitration by participating in arbitration | Did not waive; never agreed to arbitrate with Lennar | Waived by litigation conduct and failure to timely object in arbitration | Not reached as independent ground — court confirmed award on estoppel and found no preserved alternate vacatur grounds |
| Whether the trial court vacated or should have confirmed the award as to subcontractors (Big Tex, Xalt) | Whiteley sought vacatur; trial court order ambiguous as to nonparties | Award should be confirmed as to subcontractors; they were not properly before trial court earlier | Supreme Court agreed trial court did not adjudicate awards as to subcontractors; those parties later intervened and further proceedings remain pending |
Key Cases Cited
- In re Kellogg Brown & Root, Inc., 166 S.W.3d 732 (Tex. 2005) (equitable estoppel/direct‑benefits estoppel can bind non‑signatories to arbitration when claims are based on contract)
- In re Weekley Homes, L.P., 180 S.W.3d 127 (Tex. 2005) (courts decide gateway arbitrability and whether a nonparty is bound unless clear delegation)
- G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502 (Tex. 2015) (claim must depend on contract and cannot stand independently to compel arbitration of nonparty)
- Jody James Farms, JV v. Altman Grp., 547 S.W.3d 624 (Tex. 2018) (who is bound by arbitration is a function of intent; courts may look to alternative theories to bind non‑signatories)
- Gupta v. Ritter Homes, Inc., 646 S.W.2d 168 (Tex. 1983) (implied warranties in a builder–vendor contract extend to subsequent purchasers)
- Centex Homes v. Buecher, 95 S.W.3d 266 (Tex. 2002) (distinguishes implied warranties of workmanship and habitability; disclosures can waive habitability only in narrow circumstances)
- Kamarath v. Bennett, 568 S.W.2d 658 (Tex. 1978) (definition of warranty of habitability)
- Baby Dolls Topless Saloons, Inc. v. Sotero, 642 S.W.3d 583 (Tex. 2022) (party seeking arbitration must show valid agreement and dispute within scope)
- Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S. Ct. 524 (2019) (arbitrator/broker delegation principle — courts may enforce delegation clauses unless clearly inapplicable)