Taylor Morrison of Tex., Inc. v. Skufca ex rel. KSX

660 S.W.3d 525

TAYLOR MORRISON OF TEXAS, INC. and Taylor Woodrow Communities-League City, Ltd., Petitioners,

v.Erin SKUFCA AS NEXT FRIEND OF KSX and KSXX, Minor Children, Respondents

No. 21-0296

Supreme Court of Texas.

OPINION DELIVERED: January 27, 2023

Kurt Kuhn, Austin, Carl J. Wilkerson, James Watts Rudnicki, Arlington, for Petitioners.

Shaun Wesley Hodge, Craig Eiland, Galveston, Patrick Gurski, for Respondent.

Manuel (Ned) Munoz, Jr., Houston, Elana S. Einhorn, for Amicus Curiae.

PER CURIAM

Litigants who sue based on a contract subject themselves to its terms, including any arbitration clause within that contract. In this case, Jack and Erin Skufca, along with their minor children, sue Taylor Morrison of Texas, Inc., and Taylor Woodrow Communities-League City, Ltd.,¹ for construction defects in their new home. The narrow question of pleading that Taylor Morrison presents is whether the children joined the breach-of-contract claim in the petition and may therefore be compelled to arbitrate along with their parents² on the basis of direct-benefits estoppel. We hold that the Skufcas’ petition, which did not distinguish between the parents’ claims and the children's claims, unambiguously reflects the children as joining their parents in asserting the breach-of-contract claim and that the children therefore may be compelled to arbitrate.

In September 2016, Jack and Erin Skufca signed a purchase agreement with Taylor Woodrow³ to build a home in the Mar Bella subdivision of League City, Texas. The purchase agreement includes an arbitration provision 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."

The Skufcas allege that less than a year after they moved in, the home developed significant mold issues that caused their minor children to be continuously ill. In August 2019, the Skufcas sued both Taylor Woodrow and Taylor Morrison for construction defects and fraud. Their petition listed Mr. and Mrs. Skufca as plaintiffs individually, as well as Mrs. Skufca as next friend of the couple's two minor children. The Skufcas asserted a number of claims, including 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 Texas Deceptive Trade Practices Act. Though at times the Skufcas’ petition used both "Plaintiff" in the singular and "Plaintiffs" in the plural, the petition does not differentiate between the parents and the children when asserting each cause of action.

After the Skufcas filed suit, Taylor Morrison moved to abate the proceedings and compel arbitration of all the claims based on the arbitration provision in the parents’ purchase agreement. The trial court denied the motion to compel as it pertained to the children. Taylor Morrison appealed that order. The court of appeals affirmed, holding that the children are not third-party beneficiaries of the purchase agreement and that direct-benefits estoppel does not apply. 2020 WL 5823287, at *5-9 (Tex. App.—Houston [1st Dist.] Oct. 1, 2020).

The question before us is whether the Skufca children joined the breach-of-contract claim such that they must arbitrate along with their parents even though they did not sign the purchase agreement.⁴ "[A] litigant who sues based on a contract subjects him or herself to the contract's terms." In re FirstMerit Bank, N.A. , 52 S.W.3d 749, 755 (Tex. 2001). If any one of the children's claims is based on the parents’ purchase agreement, then the children must arbitrate all claims that fall under the scope of the purchase agreement's arbitration clause. See In re Weekley Homes, L.P. , 180 S.W.3d 127, 132 (Tex. 2005).

The Skufcas’ petition demonstrates that the children sued based on their parents’ purchase agreement. The caption of the petition lists all four individuals—Mr. and Mrs. Skufca individually, and Mrs. Skufca as next friend of the two children—as plaintiffs. None of their causes of action distinguishes between the parents and the children. For example, in the breach-of-contract claim, the Skufcas state:

• "Plaintiffs had a valid, enforceable contract in place, issued by Defendant. The Plaintiffs were the beneficiary [sic ] of the contract."

• "The Plaintiffs fully performed their contractual obligations by paying for the service of the construction of their home."

• "The actions by Defendant and their designated agents constitute a material breach of Defendant's contract with the Plaintiffs. As a result of this breach of contract, the Plaintiffs have suffered the damages that are described in this petition, the producing cause of which are Defendants’ actions."

By contrast, in the damages section of their petition, the Skufcas do specify which individuals are included in a particular use of the term "Plaintiffs": "Plaintiffs (Mrs. Skufca and the two minors, KSX and KSXX specifically) have suffered physical injury and illness." The fact that the Skufcas do not similarly specify that only certain family members are included in their breach-of-contract claim provides further evidence that the claim's use of "Plaintiffs" includes all four plaintiffs.

In reaching the opposite conclusion, the court of appeals reasoned that "a holistic review of the pleading" indicates that "the petition is insufficiently specific to conclude that the children are joining their parents’ breach of contract cause of action." 2020 WL 5823287, at *7. The court of appeals noted that the petition's factual allegations concerning the children focus on personal injuries suffered from mold exposure. Id. at *6. Moreover, the breach-of-contract cause of action is premised on allegations that could only come from the parents, and "[t]he children had no legal basis to sue for breach of the contract." Id. at *7. In the view of the court of appeals, this context supports "reading ‘Plaintiffs’ as limited to the children's parents, suing in their individual capacities." Id.⁵

We disagree. The Skufcas’ petition does not distinguish between individual family members in asserting the family's claims, but that does not lead to the outcome that the court of appeals reached. Our decision in FirstMerit Bank helps explain why. In that case, the parents purchased a mobile home for their adult daughter and her husband. 52 S.W.3d at 752. The parents’ financing agreement included an arbitration clause. Id. Though the daughter and her husband were not signatories to the contract, the "original petition ma[de] no distinction between the parents’ claims and the [daughter and son-in-law's] claims." Id. at 755-56. Because the daughter and son-in-law "fully joined" the parents’ contract claims, id. at 755, they "subjected themselves to the contract's terms, including the Arbitration Addendum," id. at 756.

Any factual...