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G.T. Leach Builders, L.L.C. v. Sapphire Condominiums Association, Inc.

Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg

August 3, 2017


         On appeal from the 138th District Court of Cameron County, Texas.

          Before Justices Rodriguez, Contreras, and Longoria.


          NORA L. LONGORIA Justice.

         Appellants G.T. Leach Builders, L.L.C.-Residential (G.T. Leach Builders), G.T. Leach Construction, L.P., and Gary T. Leach (collectively, G.T. Leach), appeal an order denying their motion to compel arbitration of appellee Sapphire Condominiums Association, Inc.'s lawsuit. We affirm.

         I. Background

         Sapphire V.P., L.P. (Sapphire V.P.) was a limited partnership in the business of developing a luxury condominium complex on South Padre Island called Sapphire Condominiums. At the beginning of this project, Sapphire V.P. executed a general construction contract (Contract) with appellant G.T. Leach Builders to act as its general contractor. The Contract contained a clause in which the parties agreed to submit to binding arbitration "[a]ny [c]laim arising out of or related to the Contract." The arbitration proceeding would be subject to the provisions of the Texas Arbitration Act (TAA).

         G.T. Leach Builders and Sapphire V.P. agreed in section 13.2.1 of the Contract that they bound "themselves, their partners, successors, assigns[, ] and legal representatives to the other party hereto and to [the] partners, successors, assigns[, ] and legal representatives of such other party . . . in respect to covenants, agreements[, ] and obligations in the Contract Documents."

         A. Creation of the Condominium

         Sapphire V.P. legally formed Sapphire Condominiums in November 2005 by recording a Residential Declaration (Declaration) in the official records of Cameron County. See Tex. Prop. Code Ann. § 82.051(a) (West, Westlaw through Ch. 49, 2017 R.S.) (setting out the legal requirements of a declaration creating a condominium under the Uniform Condominium Act). The Declaration recited that Sapphire V.P., as the "Residential Declarant, " owned the entire complex in fee simple but now subdivided it into fee-simple estates. Each estate was composed of an individual residence and an undivided interest in the common elements. Sapphire V.P. continued to own each estate as the "Residence Owner" under the Declaration until selling the estate to a new owner. Sapphire V.P. retained several rights as the Residential Declarant related to finishing construction of the complex that we explain in detail below.

         The Declaration further recited that Sapphire V.P. created a residence association, the Sapphire Condominiums Association (Association), as a Texas nonprofit corporation. The Association was composed of the owners of each individual estate and would be responsible for various tasks related to operating, preserving, and maintaining the condominium complex. Section 82.102 of the Uniform Condominium Act also conferred various powers on the Association unless inconsistent with the Declaration. See generally id. § 82.102(a) (West, Westlaw through Ch. 49, 2017 R.S.) (setting out the powers of a condominium unit owners' association).

         Under the terms of the Declaration, Sapphire V.P. exercised a period of "residential declarant control" over Sapphire Condominiums beginning on the date the Declaration was filed and ending either three years after the date the first deed to an estate was recorded or 120 days after the deeds to 75% of the residences had been recorded, whichever date came earlier. During this period, Sapphire V.P. possessed the right under the Declaration to appoint the Association's board of directors.

         B. Damage from Hurricane Dolly

         While construction was still ongoing, Hurricane Dolly caused extensive damage to Sapphire Condominiums. Sapphire V.P. filed suit against its insurance brokers alleging they allowed its builder's risk policy to expire several days before the storm and be replaced by a permanent policy. Sapphire V.P. sought to recover millions of dollars in damages from the storm that were allegedly uncovered by the permanent policy but would have been covered under the builder's risk policy. G.T. Leach Builders, L.L.C. v. Sapphire, VP, LP, 456 S.W.3d 570, 574 (Tex. App.-Corpus Christi 2013) aff'd in part, rev'd in part, 458 S.W.3d 502 (Tex. 2015) (G.T. Leach Builders I).

         Sapphire V.P. later added as defendants appellant G.T. Leach Builders, two of its subcontractors, an engineering contractor, and one of the engineering contractor's employees. Id. Sapphire V.P. alleged that these defendants' negligence and contractual breaches resulted in construction defects which caused the complex to sustain water damage from the storm leading to the uncovered losses. Id. G.T. Leach Builders filed a motion to compel arbitration under the arbitration clause in the Contract. The other defendants filed similar motions even though none of them were signatories to the Contract. Id. at 575. The trial court denied all of the defendants' motions to compel.

         The defendants appealed to this Court. Sapphire V.P. did not dispute an enforceable agreement to arbitrate existed but raised the affirmative defenses of statute of limitations and waiver. Id. at 577. This Court agreed that the statute of limitations barred arbitration and did not reach the waiver issue. Id. at 578-79. This Court rejected the arguments of the non-signatory defendants that the Contract gave them the right to compel arbitration or that Sapphire V.P. was equitably estopped from denying arbitration. Id. at 580-85. The Texas Supreme Court reversed in part, rejecting both of Sapphire

         V.P.'s affirmative defenses, and ordered it to arbitrate its claims against G.T. Leach Builders. G.T. Leach Builders, LLC v. Sapphire V.P., LP, 458 S.W.3d 502, 511-23 (Tex. 2015) (G.T. Leach Builders II). The Court affirmed the denial of the other defendants' motions to compel arbitration. Id. at 523-32.

         C. The ...

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