G. T. Leach Builders, L. L. C-Residential, G. T. Leach Construction, L. P. and Gary T. Leach v. Sapphire Condominiums Association, Inc.

CourtCourt of Appeals of Texas
DecidedAugust 3, 2017
Docket13-16-00293-CV
StatusPublished

This text of G. T. Leach Builders, L. L. C-Residential, G. T. Leach Construction, L. P. and Gary T. Leach v. Sapphire Condominiums Association, Inc. (G. T. Leach Builders, L. L. C-Residential, G. T. Leach Construction, L. P. and Gary T. Leach v. Sapphire Condominiums Association, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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G. T. Leach Builders, L. L. C-Residential, G. T. Leach Construction, L. P. and Gary T. Leach v. Sapphire Condominiums Association, Inc., (Tex. Ct. App. 2017).

Opinion

NUMBER 13-16-00293-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI – EDINBURG

G.T. LEACH BUILDERS, L.L.C.- RESIDENTIAL, G.T. LEACH CONSTRUCTION, L.P. AND GARY T. LEACH, Appellants,

v.

SAPPHIRE CONDOMINIUMS ASSOCIATION, INC., Appellee.

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

MEMORANDUM OPINION Before Justices Rodriguez, Contreras, and Longoria Memorandum Opinion by Justice Longoria

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

2 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

3 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.

4 C. The Association’s Lawsuit

After the end of Sapphire V.P.’s period of declarant control, the individual

residence owners gained the right under the Declaration to elect the Association’s board

of directors. The Association, acting through an elected board of directors, filed suit in

August 2015 against appellants G.T. Leach, Sapphire V.P.,1 and multiple other

defendants involved with developing and constructing Sapphire Condominiums. The

Association alleged claims against Sapphire V.P. and G.T. Leach for negligence,

negligence per se, breach of implied warranties, breach of fiduciary duty, negligent

misrepresentation, and various violations of the Texas Deceptive Trade Practices Act

(DTPA).

G.T. Leach filed a motion seeking to compel the Association to arbitrate pursuant

to the arbitration clause in the Contract.2 G.T. Leach acknowledged the Association did

not sign the Contract but pointed out that the Contract bound the “partners, successors,

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G. T. Leach Builders, L. L. C-Residential, G. T. Leach Construction, L. P. and Gary T. Leach v. Sapphire Condominiums Association, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/g-t-leach-builders-l-l-c-residential-g-t-leach-construction-l-p-texapp-2017.