Court Opinion

ID: 9366904
Source: CourtListenerOpinion
Date Created: 2023-01-29 15:08:06.891864+00
Date Added: 2024-06-11T17:15:55.915926
License: Public Domain

Supreme Court of Texas
                             ══════════
                              No. 22-0331
                             ══════════

           Taylor Morrison of Texas, Inc. and Taylor Woodrow
                   Communities-League City, Ltd.,
                                Petitioners,

                                     v.

 Michelle Ha, Individually and as Next Friend of C.M.X., Minor
  Child 1, A.H.X., Minor Child 2, and H.R.X., Minor Child 3,
                               Respondents

   ═══════════════════════════════════════
               On Petition for Review from the
     Court of Appeals for the Fourteenth District of Texas
   ═══════════════════════════════════════

                              PER CURIAM

       Litigants who seek direct benefits from a contract subject
themselves to its terms, including any arbitration clause within that
contract. In this case, Tony and Michelle Ha, along with their three
minor children, sue Taylor Morrison of Texas, Inc., and Taylor Woodrow
Communities-League City, Ltd., 1 for construction defects in their home.
Though only Mr. Ha signed the purchase agreement, Taylor Morrison

       1Unless otherwise noted, this opinion will refer to Taylor Morrison and
Taylor Woodrow together as “Taylor Morrison.”
seeks to compel Mrs. Ha and the children to arbitrate along with Mr. Ha
on the basis of direct-benefits estoppel.     Mrs. Ha and the children
contend that their claims are not subject to the arbitration clause in Mr.
Ha’s purchase agreement because their claims are not based on the
contract. The trial court denied Taylor Morrison’s motion to compel
arbitration as to Mrs. Ha and the children.        The court of appeals
affirmed. ___ S.W.3d ___, 2021 WL 6050648 (Tex. App.—Houston [14th
Dist.] Dec. 21, 2021). We hold that when a family unit resides in a home
and sues for factually intertwined construction-defect claims concerning
that home, a nonsignatory spouse and minor children have accepted
direct benefits under the signatory spouse’s purchase agreement such
that they may be compelled to arbitrate through direct-benefits
estoppel. This is especially true given the special nature of marital and
parent–child relationships.
       In March 2015, Tony Ha signed a purchase agreement with
Taylor Woodrow 2 for a home in the Mar Bella subdivision of League
City, Texas.    The purchase agreement includes a provision broadly
requiring arbitration of “any and all claims, controversies, breaches or
disputes by or between the parties hereto” that “aris[e] out of or relate[]
to this purchase agreement, the property, the subdivision or community
of which the property is a part, the sale of the property by seller, or any
transaction related hereto,” whether those claims are based in “contract,
tort, statute, or equity.”

       2 Taylor Woodrow is the party listed as the seller in the purchase
agreement. However, the record indicates that Taylor Morrison is a limited
partner in Taylor Woodrow.

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      In February 2020, Mr. Ha sued Taylor Morrison, alleging
construction defects and fraud. He was joined in the lawsuit by his wife,
Michelle Ha, and their three minor children. The Has allege that the
home developed significant mold problems due to construction defects,
resulting in physical illness as well as costs for repairs and mold
remediation. They asserted claims for breach of implied warranties,
negligent construction, fraud in a real-estate transaction, breach of
contract, violation of the Residential Construction Liability Act,
quantum meruit, and violation of the Deceptive Trade Practices Act.
The original petition’s claims did not distinguish between Mr. Ha, Mrs.
Ha, or the children.
      Taylor Morrison moved to compel arbitration with respect to all
five plaintiffs. Taylor Morrison also specially excepted—first to the
original petition, and then to the first amended petition—seeking
greater specificity as to which members of the Ha family were included
in each claim. In the Has’ second amended petition, all five plaintiffs
assert claims for common-law negligence, negligent construction, and
violation of the Residential Construction Liability Act. However, only
Mr. Ha asserts claims for breach of implied warranties, fraud in a real-
estate transaction, breach of contract, and quantum meruit, though Mr.
Ha and Mrs. Ha are both mentioned in the DTPA claim. After the Has
filed their second amended petition, the trial court granted Taylor
Morrison’s motion to compel arbitration as to Mr. Ha but denied the
motion as to Mrs. Ha and the three children.
      On interlocutory appeal, the court of appeals affirmed. The court
noted that Taylor Morrison’s third-party-beneficiary and direct-

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benefits-estoppel arguments had already been rejected in the similar
case Taylor Morrison of Texas, Inc. v. Skufca, 2020 WL 5823287, at *4-
9 (Tex. App.—Houston [1st Dist.] Oct. 1, 2020), rev’d, ___ S.W.3d ___
(Tex. Jan. 27, 2023). The court of appeals held that Mrs. Ha and the
three children are likewise not bound to arbitrate under direct-benefits
estoppel or as third-party beneficiaries of the purchase agreement. 2021
WL 6050648, at *4.
       The question before us is whether direct-benefits estoppel
requires Mrs. Ha and the children to arbitrate their claims even though
they did not sign the purchase agreement. 3 “[N]onparties may be bound
to an arbitration clause when the rules of law or equity would bind them
to the contract generally.” In re Weekley Homes, L.P., 180 S.W.3d 127,
129 (Tex. 2005). This Court has recognized several means by which
nonsignatories may be bound to an arbitration clause, one of which is
direct-benefits estoppel. See Jody James Farms, JV v. Altman Grp.,
Inc., 547 S.W.3d 624, 633, 637 (Tex. 2018). “Under ‘direct benefits
estoppel,’ a non-signatory plaintiff seeking the benefits of a contract is
estopped from simultaneously attempting to avoid the contract’s
burdens, such as the obligation to arbitrate disputes.” In re Kellogg
Brown & Root, Inc., 166 S.W.3d 732, 739 (Tex. 2005). A nonsignatory
can seek the benefits of a contract either by suing based on the contract,

       3 Taylor Morrison also argues that the trial court improperly denied the
motion to compel arbitration as to Mrs. Ha and the children by not holding an
evidentiary hearing after the Has filed their second amended petition. Because
we reverse the judgment below on direct-benefits-estoppel grounds, we do not
reach this issue. In addition, Taylor Morrison does not ask us to review the
court of appeals’ third-party-beneficiary holding.

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see In re FirstMerit Bank, N.A., 52 S.W.3d 749, 755 (Tex. 2001), or by
conduct that “deliberately seeks and obtains substantial benefits from
the contract itself,” Weekley Homes, 180 S.W.3d at 132.                If a
nonsignatory seeks the benefits of a contract with an arbitration clause,
then the nonsignatory must arbitrate all claims that fall within the
scope of that arbitration clause.
      This Court has repeatedly applied direct-benefits estoppel in
situations in which nonsignatory family members lived in the home that
was the subject of the suit. For example, in FirstMerit Bank, the parents
purchased a mobile home for their adult daughter and son-in-law. 52
S.W.3d at 752. We held that the daughter and son-in-law were subject
to an arbitration clause in the parents’ financing agreement when the
“petition ma[de] no distinction between the parents’ claims and the
[daughter and son-in-law’s] claims.” Id. at 755-56. But as we later
observed, FirstMerit Bank involved more than just “the format of the
pleadings”: the nonsignatories were “the daughter and son-in-law of the
signatories, the actual occupants of the mobile home, and (according to
the briefs) the future owners to whom the signatories planned to
transfer title.” Weekley Homes, 180 S.W.3d at 134; see also Rachal v.
Reitz, 403 S.W.3d 840, 846 (Tex. 2013) (“[I]n addition to filing suit on the
contract, the Alvarezes’ occupancy of the home and planned future
ownership of it further indicated their acceptance of the contract.”). And
in Weekley Homes, the signatory’s adult daughter was estopped from
avoiding arbitration when her elderly father bought the home intending
to live in it with the daughter’s family, the home was placed in a trust
for which the daughter was the sole beneficiary, the daughter resided in

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the home, and the daughter was actively involved in the home’s
construction and repair. 180 S.W.3d at 129, 133.
       In this case, both the court of appeals and the parties address
whether Mrs. Ha and the children sued on Mr. Ha’s purchase agreement
such that direct-benefits estoppel applies on that basis.           However,
regardless of whether they asserted contract claims, Mrs. Ha and the
children are nevertheless bound to the arbitration provision through
direct-benefits estoppel for a different reason: Mrs. Ha and the children
lived in the home at issue. Like the nonsignatories in FirstMerit Bank
and Weekley Homes, their occupancy of the home indicates that they
accepted the benefits of Mr. Ha’s purchase agreement and therefore may
be compelled to arbitrate along with Mr. Ha.
       The Has’ common occupancy alone would make any other
conclusion surprising.      But splitting the family’s claims between
litigation and arbitration would be especially odd considering the
family-home context and the unique nature of marital and parent–child
relationships. The law and common sense need not be at war regarding
the proposition that a family’s shared home is something that will
directly benefit the entire family. Even if such a proposition were not
generally recognized, the law would nonetheless make it clear. For
example, while the record in this case does not state whether Mr. Ha
and Mrs. Ha were married at the time of the purchase, the pleadings do
claim a community interest in the home for Mrs. Ha. 4 As a general

       4 In its original answer and motion to compel arbitration, Taylor
Morrison asserted that “Mrs. Ha is now married to Tony Ha and she is
therefore his heir as a matter of law,” and the Has’ counsel has stated that he

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matter, property acquired by either spouse during the marriage is
community property. See TEX. FAM. CODE § 3.002. And if a property
serves as the family’s homestead, a spouse has vested rights even when
that homestead is the other spouse’s separate property. See Laster v.
First Huntsville Props. Co., 826 S.W.2d 125, 129 (Tex. 1991); see also
United States v. Rodgers, 461 U.S. 677, 685-86 (1983). For example, the
Texas Constitution prohibits an owner from selling or abandoning
homestead property without the consent of the owner’s spouse. See TEX.
CONST. art. XVI, § 50(b); see also TEX. FAM. CODE § 5.001. Therefore, a
spouse is clearly receiving direct benefits from the purchase of a home
that serves as homestead property, regardless of whether the home is
community or separate property.
       The parent–child relationship also carries important weight in
the arbitration context.      Parents are entrusted with the care and
protection of their children. While the minor children themselves may
not have made the decision to live in the home—and while a minor’s own
contracts are generally voidable 5—fit parents are presumed to act in
their children’s best interests. See Tenet Hosps. Ltd. v. Rivera, 445
S.W.3d 698, 706 (Tex. 2014). Common sense dictates that, when parents
move their family into a new home, they are necessarily seeking direct

did not know why Mrs. Ha did not sign the purchase agreement. In any event,
the Has’ second amended petition notes that Mrs. Ha has a community interest
in the home as Mr. Ha’s wife.
       5See Dairyland Cnty. Mut. Ins. Co. v. Roman, 498 S.W.2d 154, 158 (Tex.
1973). The purpose of this rule is to protect children both from those who would
take advantage of them and from their own lack of maturity. See Cummings
v. Powell, 8 Tex. 80, 90 (1852); Ferguson v. Houston, E & W.T. Ry. Co., 11 S.W.
347, 348 (Tex. 1889).

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benefits for their minor children. Regardless, parents have a legal duty
to provide their children with shelter and other necessities. See TEX.
FAM. CODE § 151.001(a)(3).
       Moreover, as a general matter, parents may sign arbitration
agreements on behalf of their children.              See id. § 151.001(a)(7)
(recognizing the right of parents to make “decisions of substantial legal
significance” concerning their children). 6 Parents may equitably bind
their children to an arbitration agreement through direct-benefits
estoppel by suing based on the contract on their child’s behalf. See id.
(recognizing parents’ right to represent their children in legal action);
Taylor Morrison of Tex., Inc. v. Skufca, ___ S.W.3d at ___ (Tex. Jan. 27,
2023); In re Ford Motor Co., 220 S.W.3d 21, 23-24 (Tex. App.—San
Antonio 2006, orig. proceeding). In the same way, parents may also
equitably bind their children to an arbitration agreement through
direct-benefits estoppel by seeking direct benefits for their children from
the contract outside of litigation.
       From these principles, it follows that when a nonsignatory spouse
and children live in a family home purchased by the signatory spouse,
the nonsignatory family members have accepted direct benefits from the
purchase agreement such that they may be compelled through direct-
benefits estoppel to arbitrate when the family sues as an integrated unit

       6 In rare cases, an arbitration agreement signed by a parent on a child’s
behalf may be unenforceable, such as when a parent’s interests are adverse to
the child’s interests. See Fortune v. Killebrew, 23 S.W. 976, 976-77 (Tex. 1893)
(declining to enforce an arbitration agreement related to distribution of the
maternal grandfather’s estate when the father’s interests were adverse to
those of his minor children).

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for factually intertwined construction-defect claims. 7 Mrs. Ha and the
children may therefore be compelled to arbitrate along with Mr. Ha.
       Without hearing oral argument, we grant the petition for review,
reverse the judgment of the court of appeals, and remand to the trial
court to issue an order consistent with this opinion and for further
appropriate proceedings. See TEX. R. APP. P. 59.1.

OPINION DELIVERED: January 27, 2023

       7 We note that, in a case with similar facts, the Fifth Circuit has
previously made an Erie guess that we would not hold that minor children
must arbitrate along with their parents. See Fleetwood Enters., Inc. v.
Gaskamp, 280 F.3d 1069, 1071-72, 1074-77 (5th Cir. 2002) (holding that minor
children who alleged personal injuries from formaldehyde exposure in their
family’s mobile home were not required to arbitrate their claims). Since then,
however, our case law on binding nonsignatories to arbitration agreements has
undergone significant development. See Weekley Homes, 180 S.W.3d at 131
n.16. Particularly relevant here, Weekley Homes recognized that direct-
benefits estoppel can apply based on a nonsignatory seeking direct benefits
from the contract outside of litigation. See id. at 132-35. We doubt that the
Fifth Circuit would make the same Erie guess today in light of our
jurisprudence.

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