Taylor Morrison of Texas, Inc. and Taylor Woodrow Communities-League City, Ltd. v. Erin Skufca as Next of Friend of Ksx and Ksxx, Minor Children ( 2023 )

Supreme Court of Texas
══════════
No. 21-0296
══════════
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
═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the First District of Texas
═══════════════════════════════════════
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
1Unless otherwise noted, this opinion will refer to Taylor Morrison and
Taylor Woodrow together as “Taylor Morrison.”
the breach-of-contract claim in the petition and may therefore be
compelled to arbitrate along with their parents 2 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 Woodrow 3 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
2 The court of appeals addressed the parents’ challenge to the
arbitration agreement in a separate interlocutory appeal that is not before us.
See Taylor Morrison of Tex., Inc. v. Skufca, 650 S.W.3d 660 (Tex. App.—
Houston [1st Dist.] 2021, no pet.).
3 Taylor Woodrow is the party listed as the seller in the purchase
agreement. However, the record indicates that Taylor Morrison is a limited
partner of Taylor Woodrow.
2
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. ___ S.W.3d
___, 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.
Taylor Morrison does not seek review of the court of appeals’ third-
4
party-beneficiary holding.
3
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.
4
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
5The court of appeals employed similar reasoning to determine that the
children also did not join the claims for statutory fraud in a real-estate
transaction or breach of implied warranties. 2020 WL 5823287, at *7.
5
parents’ contract claims, id. at 755, they “subjected themselves to the
contract’s terms, including the Arbitration Addendum,” id. at 756.
Any factual distinctions between this case and FirstMerit Bank
are immaterial to the question of whether direct-benefits estoppel
applies based on the children’s asserted contract claims. If anything,
the children’s status as minors who necessarily lived in the family home
with their parents makes today’s outcome even easier to reach. What
matters, though, is the central common point: the Skufcas’ petition does
not differentiate between the parents’ and the children’s causes of
action. By the petition’s own terms, the children fully joined the breach-
of-contract claim. 6
The breach-of-contract claim includes allegations that Taylor
Morrison failed to “perform[] the services that were contracted” and did
not “honor[] the warranty issued at the time of issuance.” Because these
claims “must be determined by reference” to the purchase agreement,
they satisfy direct-benefits estoppel. Weekley Homes, 180 S.W.3d at 132.
6 A minor’s own contract is generally “voidable at the election of the
minor.” Dairyland Cnty. Mut. Ins. Co. v. Roman, 498 S.W.2d 154, 158 (Tex.
1973); but see Johnson v. Newberry, 267 S.W. 476, 478 (Tex. Comm’n App.
1924, judgm’t adopted) (noting that for contracts for necessaries such as
housing, minors are still liable for the reasonable value of the benefits
received). But even for a voidable contract, a minor may not “enforce portions
that are favorable to him and at the same time disaffirm other provisions that
he finds burdensome.” Dairyland Cnty. Mut. Ins. Co., 498 S.W.2d at 158.
Minors may not “retain the benefits of a contract while repudiating its
obligations.” Id.
6
The children thus sued based on the contract and are subject to its
terms, including the arbitration clause. 7
We note, however, that our decision does not mean that the
children may avoid arbitration simply by amending the petition to allege
only tort or other noncontractual claims. While this case most clearly
presents the pleading issue for our review, direct-benefits estoppel also
applies when a nonsignatory seeks direct benefits from the contract
outside of litigation. See id. at 132-35. Because the Skufca children
lived with their parents in the home at issue and sued for factually
intertwined construction-defect claims, that basis for direct-benefits
estoppel serves as an additional reason to compel arbitration here. See
Taylor Morrison of Tex., Inc. v. Ha, ___ S.W.3d ___ (Tex. Jan. 27, 2023).
Therefore, 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 Because the children’s breach-of-contract claim alone suffices for
direct-benefits estoppel and thus to compel the children to arbitrate all their
claims pursuant to the arbitration clause, we do not address whether their
implied-warranty or statutory-fraud claims are also based in contract such
that those claims would independently trigger direct-benefits estoppel.
7