August 19, 2014 – Jason B. Damon and Michelle T. Damon v. Strucsure Home Warranty, LLC, and Brian McGill, an individual; Janelle McGill, an individual; Carrie Traub, individually and as a licensed associate real estate broker; Jump, Inc. d/b/a Coldwell Banker Legacy, a New Mexico corporation; Vista Del Norte Development, LLC, a New Mexico Limited Liability Company; and Stillbrooke Homes, Inc., a New Mexico corporation, No. 33,126

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: _______________
Filing Date: August 19, 2014
NO. 33,126
JASON B. DAMON and MICHELLE T.
DAMON,
Plaintiffs-Appellees,
v.
STRUCSURE HOME WARRANTY, LLC,
Defendant-Appellant,
and
BRIAN MCGILL, an individual; JANELLE
MCGILL, an individual; CARRIE TRAUB,
individually and as a licensed associate real
estate broker; JUMP, INC. d/b/a COLDWELL
BANKER LEGACY, a New Mexico corporation;
VISTA DEL NORTE DEVELOPMENT, LLC,
a New Mexico Limited Liability Company; and
STILLBROOKE HOMES, INC., a New Mexico
corporation,
Defendants.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Nan G. Nash, District Judge

Tal Young, P.C.
Steven Tal Young
Albuquerque, NM
for Appellees
Brownstein Hyatt Farber Schreck, LLP
Eric R. Burris
Adam E. Lyons
Albuquerque, NM
for Appellant

OPINION
VANZI, Judge.
{1} 	In this case, we address whether a party to a home warranty contract can
enforce an arbitration provision contained in that warranty against a nonparty who
nevertheless seeks to invoke its benefits. Plaintiffs Michelle and Jason Damon sued
Defendant StrucSure Home Warranty, LLC, (StrucSure) and others for structural
defects in their home. StrucSure filed a motion to compel arbitration pursuant to a
provision in the home warranty it issued to the builder and original purchasers of the
property. The district court denied the motion on the basis that Plaintiffs were not
parties to the StrucSure warranty and, because they did not bargain for or
acknowledge the arbitration provision, they could not be bound by it. We reverse. We
hold that a nonparty who directly seeks the benefits of a warranty agreement is
equitably estopped from refusing to comply with a reasonable arbitration provision
contained in the same agreement.
BACKGROUND
{2} 	StrucSure is a warranty administrator providing express limited warranty
protection for homeowners. The warranty at issue in this case was part of a contract
between the builder (Stillbrooke Homes) and the original purchasers of Plaintiffs’
home. It includes an enrollment application form signed by a representative of

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StrucSure, the builder, and the original owners, as well as a warranty coverage
booklet, which describes the terms of the warranty. The enrollment application form
states that, by signing, the parties specifically acknowledge that they agree with all of
the requirements in the warranty coverage booklet. The warranty coverage booklet
provides that:
[w]ithin the limitations described within these two documents, your
Builder warrants that your home will be free from qualifying structural
defects, and, if provided, will be free from defects in workmanship/
materials and the delivery portion of systems (piping, wiring, ductwork).
It also contains a binding arbitration agreement, which states, in relevant part:
Any claims, disagreements, disputes or controversies involving You,
Your Builder, the Administrator, or the Insurer, or in any combination
thereof, which involves this Warranty, the Builder, the Home, the
construction or sale of the Home by the Builder, or the real property
upon 	which 	the 	Home 	is 	constructed, 	shall 	be 	submitted 	to
arbitration. . . . The decisions of the arbitrator will be final and binding,
and may be entered as such in any legal proceeding before any court
having competent jurisdiction thereof.
A “claim, disagreement, dispute or controversy” is defined as:
an unresolved complaint or claim made under this Warranty; tort
allegations, involving misrepresentation, nondisclosure, execution or
performance of any contract (including this Warranty or this arbitration
agreement); negligence, allegations regarding the breach of the duty of
good faith or fair dealing, construction defects or deceptive trade
practices.
The stated purpose of the arbitration agreement is to allow any party to the contract
“to achieve a legally binding resolution (through an independent third-party

3
arbitration service) of any dispute without resorting to costly and time-consuming
litigation.” Finally, the agreement, which states that it is self-activating, provides that
issues regarding arbitrability are governed by the Federal Arbitration Act (FAA), 9
U.S.C. §§ 1-6 (2012).
{3} 	The original owners conveyed the home to Cartus Financial, which sold the
home to Plaintiffs. The warranty documents were not part of Plaintiffs’ purchase
documents with Cartus, and Plaintiffs did not sign either document comprising the
warranty. Nevertheless, they assert that the warranty “induced” them to buy the home.
At the same time, they assert they did not know about the arbitration agreement in the
warranty until after they purchased the home.
{4} 	The underlying dispute arose after the home began to exhibit signs of structural
failure. Plaintiffs initially filed a warranty claim with StrucSure but ultimately filed
this lawsuit against multiple defendants, including StrucSure. Plaintiffs’ complaint
alleges that StrucSure “served to insure the structural integrity” of their home by
issuing the warranty and conducting the investigation after Plaintiffs discovered the
structural defects and that the warranty made Plaintiffs expect the home and property
were “of a certain quality” and that the defendants, including StrucSure, would honor
the warranty and remedy any structural issues that arose. Plaintiffs also allege
StrucSure was aware of the structural issues with their home and refused to rectify

4
them. The complaint asserts nine claims: breach of contract, unjust enrichment,
negligent misrepresentation, negligence, professional negligence, breach of the New
Mexico Unfair Practices Act, rescission, breach of warranty, and a claim for punitive
damages, although it is unclear which claims are specifically asserted against
StrucSure.
{5} 	StrucSure moved to compel arbitration of Plaintiffs’ claims against it pursuant
to the terms of the arbitration agreement. The district court denied the motion, and
StrucSure timely appealed.
DISCUSSION
{6} 	This Court reviews de novo both the denial of a motion to compel arbitration
and the applicability and construction of a contractual provision requiring arbitration.
Barron v. Evangelical Lutheran Good Samaritan Soc’y, 2011-NMCA-094, ¶ 13, 150
N.M. 669, 265 P.3d 720. The parties do not dispute that the arbitration agreement in
the warranty provision is subject to the FAA. We discuss the district court’s ruling
before turning to the applicability of equitable estoppel to the facts of this case. We
then address Plaintiffs’ alternative arguments as to why the district court’s decision
should be affirmed.
{7} 	The district court in this case relied on two cases in reaching its decision that
Plaintiffs cannot be bound to arbitrate their claims against StrucSure. Both Clay v.

5
New Mexico Title Loans, Inc., 2012-NMCA-102, ¶ 14, 288 P.3d 888, and AT&T
Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986),
expressly state that “arbitration is a matter of contract and a party cannot be required
to submit to arbitration any dispute which he has not agreed to submit.” (Internal
quotation marks and citation omitted.) This language was the linchpin of the district
court’s ruling. Notwithstanding the holdings of Clay and AT&T, however, we are
unpersuaded that these cases are analogous to the issue here. We explain.
{8} 	In Clay, the plaintiff failed to repay a loan secured by his vehicle from New
Mexico Title Loans. Clay, 2012-NMCA-102, ¶ 2. Two employees of the company
hired to enforce the lender’s security interest tried to repossess the plaintiff’s truck.
Id. The plaintiff resisted, and one of the employees shot him, leaving him unable to
walk. Id. After the plaintiff sued the lender, among others, the lender moved to compel
arbitration, invoking a provision in the lending agreement that committed to
arbitration “any claim, dispute or controversy . . . that in any way arises from or
relates to this Agreement or the Motor Vehicle securing this Agreement.” Id.
(alteration and internal quotation marks omitted). The arbitration provision, however,
excluded the lender’s right to enforce its security interest “by using self-help.” Id. ¶ 17
(internal quotation marks omitted). At issue was whether the plaintiff’s claims fell
within the scope of the provision. Id. ¶¶ 14-28. Although we held that the plaintiff’s

1On appeal, Plaintiffs also cite Aiken v. World Fin. Corp. of S.C., 644 S.E.2d
705 (S.C. 2007); Campos v. Homes by Joe Boyden, L.L.C., 2006-NMCA-086, 140
N.M. 122, 140 P.3d 543; and Santa Fe Techs., Inc. v. Argus Networks, Inc., 2002-
NMCA-030, 131 N.M. 772, 42 P.3d 122. These cases are discussed in Clay and, like
Clay, address the kinds of claims that are subject to the arbitration clause at issue. See
Clay, 2012-NMCA-102, ¶¶ 21-25. Plaintiffs do not dispute that the claims they
asserted against StrucSure fall under the scope of the arbitration agreement and,
therefore, these cases are inapposite.
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contract claim fell within its scope, we held that the plaintiff’s tort claims against the
lender were not subject to the arbitration agreement. We noted that, “[i]n order to fall
within the scope of the arbitration clause, the claims at issue must bear a ‘reasonable
relationship’ to the contract in which the arbitration clause is found.” Id. ¶ 14 (citation
omitted). And nothing in the provision demonstrated that the plaintiff agreed to
arbitrate claims such as those arising from the shooting during the repossession of his
truck. Id. ¶ 24. At most, Clay deals with the subject matter of the claims subject to
arbitration, not who is bound to arbitrate. 1
{9} 	AT&T Technologies addresses an even more remote issue: whether a court or
an arbitrator must decide in the first instance whether parties to a collective bargaining
agreement intended to arbitrate their grievances concerning layoffs. 475 U.S. at 644.
The answer to that question has no bearing on the issue in this case. In the course of
deciding that issue, the AT&T Technologies Court noted the general rule that “a party
cannot be required to submit to arbitration any dispute which he has not agreed so to

7
submit.” United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574,
582 (1960). There are well recognized exceptions to the general rule, however, and
we turn to them now.
{10} 	The single issue in this case is whether Plaintiffs, as subsequent purchasers of
the home, are bound by the arbitration provision contained in the warranty coverage
booklet originally given to the initial buyers. StrucSure contends that Plaintiffs cannot
voluntarily seek the benefits of the warranty without bearing the burdens of the
arbitration agreement contained in it. StrucSure also asserts that Plaintiffs are bound
by all of the warranty’s provisions, including the arbitration agreement, because they
voluntarily enforced their rights as assignees under the warranty after taking title to
the home. Because we hold that Plaintiffs are equitably estopped from avoiding
arbitration in this case, we need not decide whether they are also assignees under the
warranty.
{11} 	The question of who may be bound by an arbitration provision subject to the
FAA is governed by federal law. Arthur Andersen LLP, 556 U.S. at 630. At least two
federal appellate courts “have recognized five theories for binding nonsignatories to
arbitration agreements: 1) incorporation by reference; 2) assumption; 3) agency; 4)
veil-piercing/alter ego; and 5) estoppel.” Thompson-CSF, S.A. v. Am. Arbitration
Ass’n, 64 F.3d 773, 776 (2d Cir. 1995); see Int’l Paper Co. v. Schwabedissen

8
Maschinen & Anlagen GMBH, 206 F.3d 411, 417 (4th Cir. 2000). We believe the
appropriate principle for evaluating whether Plaintiffs here are bound by the
arbitration provision in the warranty is estoppel, commonly referred to as “equitable
estoppel.” In the arbitration context, equitable estoppel “recognizes that a party may
be estopped from asserting that the lack of his signature on a written contract
precludes enforcement of the contract’s arbitration clause when he has consistently
maintained that other provisions of the same contract should be enforced to benefit
him.” Int’l Paper Co., 206 F.3d at 418; see Trinity Health Sys. v. MDX Corp., 180
Ohio App.3d 815, 2009 Ohio 417, 907 N.E.2d 746, at ¶ 25 (observing that a party to
a contract may raise equitable estoppel where the nonparty attempts “to enforce some
aspect of the contract” and noting that relying on one part of the contract may estop
the nonparty from avoiding an arbitration clause in the contract). Consequently, a
nonparty “is estopped from refusing to comply with an arbitration clause when it
receives a direct benefit from a contract containing an arbitration clause.” Int’l Paper
Co., 206 F.3d at 418 (internal quotation marks and citation omitted).
{12} 	This Court has twice touched upon the doctrine of equitable estoppel in the
arbitration context, but we have never ultimately decided whether New Mexico would
apply the doctrine against a nonparty claimant under facts similar to this case. See
Murken v. Suncor Energy, Inc., 2005-NMCA-102, ¶¶ 6-13, 138 N.M. 179, 117 P.3d

9
985; Horanburg v. Felter, 2004-NMCA-121, ¶¶ 17, 18, 136 N.M. 435, 99 P.3d 685.
In Horanburg, we considered whether a nonparty to an arbitration agreement could
bind a party to the agreement to arbitrate—the reverse of the situation in this case.
2004-NMCA-121, ¶ 18. Although we observed that nonparties to an arbitration
agreement generally “are not bound by the agreement and are not subject to, and
cannot compel, arbitration[,]” we recognized that there are exceptions to this general
rule, including an exception for equitable estoppel. Id. ¶¶ 16-17. However, we
concluded that, even assuming New Mexico recognizes equitable estoppel in the
arbitration context, applying it was inappropriate under the facts of the case. Id. ¶ 18.
In Murken, we considered whether a party to an arbitration agreement could bind a
nonparty to arbitrate. Murken, 2005-NMCA-102, ¶¶ 6-13. There, as here, the
defendant was a party to the agreement and sought to enforce the agreement against
the plaintiff, who was not. Id. ¶ 13. This Court noted that “even if New Mexico
recognized the doctrine of equitable estoppel in the arbitration context, its application
would not be appropriate in [the] case” because the nonparty plaintiff was not “alleged
to have embraced and directly benefitted from the agreement[.]” Id. ¶¶ 12, 13.
{13} 	The facts of this case are markedly different from Murken. Here, Plaintiffs filed
a warranty claim with StrucSure and then later sued StrucSure, claiming the warranty
issued to the builder and original owners induced them to buy their home and that

10
StrucSure failed to fulfill the duties it owed Plaintiffs under the warranty. Clearly,
Plaintiffs’ case against StrucSure hinges on its asserted rights under the warranty
agreement from which they seek to directly benefit. We recognize that Plaintiffs
contend they never signed the arbitration agreement and that, even though they were
aware of the warranty before they purchased the home, they did not know it included
the arbitration agreement until after they purchased the home. However, unlike the
Murken plaintiff, Plaintiffs here voluntarily seek to directly benefit from the warranty
by enforcing some of its terms while simultaneously attempting to avoid one of its
perceived burdens.
{14} 	Although we have no case on point, we find persuasive decisions from other
jurisdictions that have applied equitable estoppel under a similar set of facts. For
example, in International Paper Co., a buyer who was dissatisfied with an industrial
saw sued the manufacturer based on a contract between the manufacturer and
distributor. 206 F.3d at 413. The manufacturer sought to compel arbitration based on
a provision in the manufacturer-distributor contract to which the buyer was not a
party. Id. at 414-15. As in this case, the buyer argued that it had no knowledge of and
could not be bound by the contract containing the arbitration provision. Id. at 415. The
federal district court rejected the buyer’s argument and reasoned that, because the
buyer sought to take advantage of certain commitments made by the manufacturer to

11
the distributor in the manufacturer-distributor contract, “it was bound by all
commitments in that contract, including the arbitration provision.” Id. The Fourth
Circuit Court of Appeals agreed and, applying principles of equitable estoppel, upheld
the district court’s decision. 	Id. 	at 416. The appeals court observed that the
manufacturer-distributor contract provided part of the factual foundation for every
claim asserted by the buyer; the complaint alleged that the manufacturer failed to
honor the warranties in the contract, and the buyer sought damages in accordance with
that contract. Id. at 418. Thus, it reasoned, the buyer could not “seek to enforce those
contractual rights and avoid the contract’s requirement that any dispute arising out of
the contract be arbitrated.” Id. (internal quotation marks omitted).
{15} 	In Ex parte Dyess, 709 So. 2d 447, 448 (Ala. 1997), a customer who was
injured while test driving a car brought suit against the car dealership’s insurer under
the uninsured motorist provision of a policy issued to the dealership. There, as here,
the plaintiff sought a benefit under the policy while attempting to avoid the arbitration
clause in the policy. Id. at 449-50. The Alabama Supreme Court determined that under
those circumstances, the plaintiff could not “pick and choose the portions of the
contract that he wants to apply.” Id. at 451. It concluded that to enforce the uninsured
motorist provision and not to enforce the arbitration clause would be inconsistent with
the FAA and with decisions of the United States Supreme Court. Id.; see also Avila

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Group, Inc. v. Norma J. of Cal., 426 F. Supp 537, 542 (S.D.N.Y. 1977) (“To allow
[the nonparty] to claim the benefit of the contract and simultaneously avoid its
burdens would both disregard equity and contravene the purposes underlying
enactment of the [FAA].”).
{16} 	Based on the reasoning of the above cases, we hold that Plaintiffs, having
voluntarily chosen to seek a direct benefit from the warranty by attempting to enforce
its terms against StrucSure, may not now seek to repudiate one of the warranty’s
provisions. If Plaintiffs wished to exempt themselves from the arbitration clause, they
could have chosen not to claim and enforce any of the rights under the warranty.
However, once Plaintiffs voluntarily sought to embrace and invoke the benefits
created by the warranty, they could not avoid the arbitration provision in the warranty.
{17} 	On appeal, Plaintiffs make several alternative arguments as to why the
arbitration provision should not be imposed upon them. First, Plaintiffs contend that
StrucSure did not prove in the district court that it had a valid arbitration agreement
with the original owners and, therefore, Plaintiffs cannot be bound by a contract to
arbitrate. Plaintiffs’ argument is without merit. StrucSure attached the signed home
enrollment application and the arbitration provision to its motion to compel
arbitration, and Plaintiffs never contested their validity. Moreover, if there was no
valid warranty between StrucSure and the original owners, Plaintiffs, as subsequent

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owners, would have no basis upon which to state any warranty claims against
StrucSure. See Camino Real Mobile Home Park P’ship v. Wolfe, 1995-NMSC-013,
¶ 18, 119 N.M. 436, 891 P.2d 1190 (“The party relying on the breach of warranty
must prove the existence of a warranty, the breach thereof, causation, and damages.”),
overruled on other grounds by Sunnyland Farms, Inc. v. Cent. N.M. Elec. Co-op, Inc.,
2013-NMSC-017, 301 P.3d 387.
{18} 	Plaintiffs also contend that enforcing the arbitration agreement against them
would be unfair and unconscionable and that the agreement is a procedurally
unconscionable contract of adhesion. The district court did not rule on either of these
arguments, and Plaintiffs provide no support for their generalized assertions on
appeal. We therefore do not address them here. See Muse v. Muse, 2009-NMCA-003,
¶ 72, 145 N.M. 451, 200 P.3d 104.
{19} 	We conclude that the doctrine of equitable estoppel is appropriate in this case.
Plaintiffs seek to receive a direct benefit from the agreement, and their claims against
StrucSure are therefore also subject to the arbitration provision contained in the
warranty coverage booklet. The district court’s ruling is reversed.
CONCLUSION
{20} 	For the reasons set forth above, we reverse.

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{21} 	IT IS SO ORDERED.
_______________________________
LINDA M. VANZI, Judge
WE CONCUR:
_________________________________
MICHAEL D. BUSTAMANTE, Judge
_________________________________
CYNTHIA A. FRY, Judge