Longhorn Canyon Partners, L.P. v. BFS Texas Sales, LLC ( 2023 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-23-00178-CV
LONGHORN CANYON PARTNERS, L.P., APPELLANT
V.
BFS TEXAS SALES, LLC, APPELLEE
On Appeal from the 459th District Court
Travis County, Texas
Trial Court No. D-1-GN-23-000969, Honorable Karin Crump, Presiding
August 21, 2023
MEMORANDUM OPINION 1
Before QUINN, C.J., and DOSS and YARBROUGH, JJ.
Sometimes parties create the very problems they ask the court to resolve. That
occurred here when Longhorn Canyon Partners, L.P. prematurely sued a myriad of
subcontractors, withheld service of citation upon them, and instead sought their joinder in
an arbitration between it and a third-party, Longhorn Canyon Condominiums Association.
Yet, the one subcontractor involved in this appeal, BFS Texas Sales, LLC, was not a party
1 Because this matter was transferred from the Third Court of Appeals, we apply its precedent when
it conflicts with that of the Seventh Court of Appeals. TEX. R. APP. P. 41.3.
to the arbitration agreement between Longhorn and the Association. And, instead of
waiting to be served with citation, BFS filed an answer, moved for a no-evidence summary
judgment, and contested Longhorn’s request of the trial court to stay proceedings pending
arbitration. The trial court denied the motion to stay and granted summary judgment,
denying Longhorn recovery against BFS. Shortly thereafter, the arbitrators decided to
release from arbitration BFS and many other entities Longhorn had initially succeeded in
joining as parties to that process. Now, Longhorn complains of the trial court’s decision
to deny the stay and grant summary judgment. We reverse.
Issue One—Stay
Regarding the first issue, Longhorn is not contending that the arbitrators somehow
erred in freeing BFS from arbitration. Rather, it believes that prosecution of the suit should
have been stayed irrespective of whether BFS was a party. This is purportedly so
because of the issues involved in both proceedings. We sustain the issue.
The denial of a stay is reviewed under the standard of abused discretion. Ashton
Grove L.C. v. Jackson Walker L.L.P., 366 S.W.3d 790, 794 (Tex. App.—Dallas 2012, no
pet.). Discretion is abused when the trial court acts unreasonably, arbitrarily, or without
reference to any guiding rules or principles. Id. An example of that occurs when the court
fails to apply the law correctly. In re E.H.L.V., No. 09-20-00191-CV, 2022 Tex. App.
LEXIS 3874, at *4 (Tex. App.—Beaumont June 9, 2022, pet. denied) (mem. op.).
Our Supreme Court declared that when an issue is pending in both arbitration and
litigation, the former should be given priority to the extent that it is likely to resolve issues
material to the latter. In re Merrill Lynch & Co., 315 S.W.3d 888, 891 (Tex. 2010). Thus,
litigation involving those not party to an arbitration agreement should be stayed if
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continuation may undermine issues to be resolved in arbitration between parties to the
agreement. Id.At bar, the underlying dispute being addressed via arbitration is whether Longhorn
defectively constructed various buildings. 2 No one questions that Longhorn and the
Association had an agreement to arbitrate the matter. Nor does anyone dispute that the
Association accuses Longhorn of engaging in defective construction. Furthermore, via
its lawsuit against BFS and other subcontractors, Longhorn asserts that the
subcontractors negligently constructed the buildings in question, breached their contracts
when constructing them, and owed it a duty of indemnification and contribution against
claims such as those of the Association. In other words, Longhorn posits that if there are
defects in construction, as urged by the Association, then the subcontractors are
responsible and subject to liability for them. This scenario leads us to conclude that
issues material to the arbitration are also issues material to the lawsuit, the very least of
which is the existence of defective construction. To permit the adjudication of that in the
trial court, with its concomitant expenses and temporal delays, could impede and
undermine Longhorn’s right to have same determined through arbitration.
Moreover, permitting arbitration to proceed could affect material issues susceptible
to trial, depending on the arbitrator’s decision. 3 For example, an arbitrator rejecting the
Association’s claims could impact the foundation of Longhorn’s claims against the
subcontractors. Thus, our circumstances fall within the scope of Merrill’s rule, and the
2 The existence of defective framing is one complaint levied by the Association. Allegedly, BFS
was hired to perform some of the framing.
3 We withhold comment on whether an arbitrator’s decision binds entities who were not required to
arbitrate.
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trial court’s decision failed to heed it. And, we find the error harmful given that BFS’s
liability, or lack thereof, for purportedly existing defects was subsequently adjudicated by
the trial court.
We do not ignore BFS’s contention that invoking the judicial process somehow
waived Longhorn’s right to arbitration. Yet, its being a non-party to the arbitration
agreement between Longhorn and the Association leaves us wondering how it can
complain about the decision of Longhorn and the Association to arbitrate. Nevertheless,
initiating suit does not mean that a party like Longhorn ipso facto waived arbitration. See
Perry Homes v. Cull, 258 S.W.3d 580, 590 (Tex. 2008) (stating that the Supreme Court
has never found that filing suit waives arbitration). This is especially so when that same
party evinced its intent to adjudicate the entire matter through arbitration by attempting to
join the subcontractors in the arbitration process. So, prematurely filing suit against BFS
did not result in Longhorn’s waiving arbitration with the Association.
We say prematurely because a right to indemnity does not generally accrue until
the person seeking same incurs liability, i.e., liability becomes fixed. J.M.K. 6, Inc. v.
Gregg & Gregg, P.C., 192 S.W.3d 189, 200 (Tex. App.—Houston [14th Dist.] 2006, no
pet.); see Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 211 (Tex. 1999)
(stating that “limitations could not have began to run before Kellogg’s indemnity claim
became fixed and certain” and “Kellogg’s claim did not become fixed and certain until
judgment was signed in Valero I”). Longhorn had yet to be found liable, via arbitration,
for the supposed defects when it sued the subcontractors. So, as observed by BFS, it
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could have waited and avoided the predicament at issue. 4 Precious resources like judicial
time are better spent on adjudicating matters not so easily avoided.
We reverse the trial court’s decision denying Longhorn’s motion to stay litigation
pending arbitration. That also obligates us to reverse the trial court’s summary judgment
favoring BFS since the matter should have been stayed. The cause is remanded to the
trial court for further proceedings.
Brian Quinn
Chief Justice
4 Longhorn apparently thought suit was appropriate to stem the running of limitations. Yet,
commencing suit alone does not halt limitations; suit coupled with diligence in serving citation does. Proulx
v. Wells, 235 S.W.3d 213, 215 (Tex. 2007); Gant v. DeLeon, 786 S.W.2d 259, 260 (Tex. 1990). By deciding
to forego service of citation upon BFS and the other subcontractors, Longhorn’s suit did not serve its
supposedly intended purpose.
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