PETER BREVORKA and wife CAROLE BREVORKA,
Plaintiffs
v
.
WOLFE CONSTRUCTION, INC.,
Defendant
Alexander, Ralston, Speckhard & Speckhard, L.L.P., by Stanley
E. Speckhard, for plaintiff-appellees .
Tuggle Duggins & Meschan, P.A., by Kenneth J. Gumbiner, for
defendant-appellant.
THOMAS, Judge.
Defendant, Wolfe Construction, Inc., appeals the denial of its
motion to stay plaintiffs' action pending arbitration.
Defendant contends the trial court erred in concluding that
plaintiffs' claims for relief do not arise under the parties'
limited warranty agreement and are, therefore, not subject to an
arbitration provision. For the reasons herein, we reverse.
On 26 May 1999, plaintiffs, Peter and Carole Brevorka, signed
an "Offer To Purchase and Contract" for a new house constructed by
defendant at 25 Rosebay Lane, Greensboro, North Carolina.
Plaintiffs closed on the house on 4 August 1999. Three weeks
later, on 25 August 1999, plaintiffs received a letter from
defendant offering them an extended limited warranty, referred toas the Quality Builders Warranty Corporation Limited Warranty
Agreement. On 27 August 1999, plaintiffs signed the enrollment
form, acknowledging their receipt of the limited warranty and
acceptance of its terms. The enrollment form reads, in pertinent
part:
C. Both the Builder and the purchaser(s) must
sign this Enrollment form. By signing, the
purchaser acknowledges that he has read the
attached Agreement and has received a copy of
this page and the Agreement itself.
The agreement contains a detailed description of all the
express warranties applicable to plaintiffs' home, some of which
extend up to ten years, and includes the following disclaimer:
10. Other than the Expressed Warranties
contained herein, there are no other
warranties expressed or implied including
Implied Warranty of Merchantability or Implied
Warranty for Particular Purpose.
It also contains a detailed four step Complaint and Claim
Procedure. Step Four of that procedure includes an arbitration
provision which reads, in pertinent part:
D. Step Four. If you disagree with the
investigator's report, you have (30) days to
notify QBW and the Builder, in writing, that
you disagree. In such event, disputes on
covered items shall be submitted for
arbitration to the American Arbitration
Association (AAA) or such other independent
arbitration service as may be designated by
QBW, for resolution in accordance with the
rules and regulations of the AAA or such other
service. You must pay the cost of arbitration
when filing a claim. Such arbitration shall
be a condition precedent to the commencement
of any litigation by the homeowner or builder
arising out of or connected with the rights
and obligations created by this Agreement.
(Emphasis added)
. . . .
If the complaint and claim procedure is not followed and the
arbitration provision is not honored, the agreement states:
If you institute legal proceedings
against the Builder or QBW for any obligation
arising or claimed to have arisen under this
Agreement prior to giving the Builder or QBW
the proper notices and opportunities to cure
provided under this Agreement and prior to
using the dispute settlement procedure herein,
you agree to indemnify the Builder and QBW for
all costs and expenses of such litigation,
including reasonable attorneys' fees,
regardless of whether you have an otherwise
legitimate claim under this Agreement. . . .
Plaintiffs filed the instant complaint on 16 February 2001
asserting claims against defendant for breach of the implied
warranty of habitability or workmanlike construction, breach of
express warranties, willful misrepresentation and negligent
misrepresentation. Plaintiffs allege the house was constructed "in
a manner contrary to and different from the agreement between the
parties," "in a defective manner, with poor and faulty
workmanship," "in a careless and negligent manner," and not "in
compliance with applicable building codes and regulations."
Plaintiffs' complaint identifies twenty-two conditions which they
claim "constitute major structural defects." Plaintiffs also set
forth seven express "warranties and contractual obligations"
allegedly breached by defendant. Finally, plaintiffs allege
defendant and its agents and employees willfully and negligently
made certain false representations prior to and in connection with
the contract for the purchase of the house.
Defendant filed an answer denying the essential allegations ofplaintiffs' complaint and asserting numerous affirmative offenses,
and a counterclaim for breach of contract and unfair and deceptive
trade practices. Defendant later filed a motion to stay plaintiffs'
action pending arbitration and a request for attorneys' fees.
Following a hearing on defendant's motion, the trial court
found that plaintiffs had signed the limited warranty agreement but
concluded their claims did not arise under the agreement.
Therefore, the arbitration provision did not apply and defendant
was not entitled to a stay of plaintiffs' action.
Defendant contends all of plaintiffs' claims fall within the
scope of the limited warranty agreement and are, therefore, subject
to arbitration prior to litigation. Plaintiffs counter that: (1)
no agreement to arbitrate exists because the limited warranty
agreement is not a contract between the parties; and (2) the rights
and obligations they seek to enforce predate and exist independent
of the limited warranty.
Initially, we note that the trial court's order is
interlocutory because it fails to resolve plaintiffs' claims. See
Raspet v. Buck, 147 N.C. App. 133, 135, 554 S.E.2d 676, 677 (2001).
While interlocutory orders are generally not immediately
appealable, this Court has consistently held that an order denying
arbitration may be immediately appealed because it involves a
substantial right, the right to arbitrate a claim, which may be
lost if appeal is delayed. Id.; Martin v. Vance, 133 N.C. App.
116, 119, 514 S.E.2d 306, 308 (1999); Burke v. Wilkins, 131 N.C.
App. 687, 688, 507 S.E.2d 913, 914 (1998). In considering a motion to compel arbitration, the trial court
must determine (1) whether the parties have a valid agreement to
arbitrate, and (2) whether the subject in dispute is covered by the
arbitration agreement. Ragan v. Wheat First Sec., Inc., 138 N.C.
App. 453, 455, 531 S.E.2d 874, 876 (citing Paine Webber Inc. v.
Hartmann, 921 F.2d 507, 511 (3d Cir. 1990)), disc. review denied,
353 N.C. 268, 546 S.E.2d 129 (2000). The trial court's conclusion
is reviewable de novo by this Court. Raspet, 147 N.C. App. at 136,
554 S.E.2d at 678.
We first address plaintiffs' argument that there is no
agreement to arbitrate because the limited warranty agreement does
not constitute a contract between the parties. Specifically,
plaintiffs contend their signatures on the enrollment form merely
acknowledge they received and read the agreement but do not bind
them to its terms, in particular the arbitration provision. We
disagree.
"Enrollment" is defined as "the act or an instance of
enrolling," while "enrolling" is defined as "entering one's name on
a list, esp. as a commitment to membership." Oxford American
Dictionary (1999), p. 319. By signing an enrollment form, the
signatories are by definition committing to something. The
enrollment form here repeatedly refers to the limited warranty
agreement. Thus, we reject plaintiffs' contention that they are
not contractually bound by the terms of the limited warranty.
Included in the limited warranty is an agreement to arbitrate
any disputes or claims arising thereunder. The duty to read aninstrument, or have it read before signing it, is a positive one,
and one who signs a written contract without reading it when able
to do so is bound by the contract unless the failure to read is
justified by some special circumstances. See Massey v. Duke
University, 130 N.C. App. 461, 464-65, 503 S.E.2d 155, 158 (1998);
see also Mills v. Lynch, 259 N.C. 359, 362, 130 S.E.2d 541, 543-44
(1963); Davis v. Davis, 256 N.C. 468, 472, 124 S.E.2d 130, 133
(1962). There are no special circumstances present here.
Accordingly, we conclude the parties have a valid agreement to
arbitrate all claims arising under the limited warranty.
Next, we determine whether plaintiffs' claims for relief fall
within the scope of the arbitration agreement. See Rodgers
Builders v. McQueen, 76 N.C. App. 16, 23, 331 S.E.2d 726, 731
(1985) ("only those disputes which the parties agreed to submit to
arbitration may be so resolved"). In so doing, we are guided by
the strong state and federal public policy favoring the settlement
of disputes by arbitration. See Moses H. Cone Hospital v. Mercury
Constr., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 785 (1983), superseded
by statute on other grounds as stated in Bradford-Scott Data v.
Physician Computers Network, 128 F.3d 504 (7th. Cir. 1997); Morgan
v. Smith Barney, Harris Upham & Co., 729 F.2d 1163 (8th Cir. 1984);
Johnston County v. R. N. Rouse & Co., 331 N.C. 88, 91, 414 S.E.2d
30, 32 (1992); Servomation Corp. v. Hickory Construction Co., 316
N.C. 543, 544, 342 S.E.2d 853, 854 (1986); Cyclone Roofing Co. v.
LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984); Raspet,
147 N.C. App. at 135, 554 S.E.2d at 678; Rodgers Builders, 76 N.C.App. at 24-25, 331 S.E.2d at 731. "[This] strong public policy
requires that the courts resolve any doubts concerning the scope of
arbitrable issues in favor of arbitration." Johnston County, 331
N.C. App. at 91, 414 S.E.2d at 32.
Plaintiffs' complaint sets forth claims for breach of the
implied warranty of habitability or workmanlike construction,
breach of express warranties, willful misrepresentation and
negligent misrepresentation. We consider each in turn.
In Hartley v. Ballou, 286 N.C. 51, 209 S.E.2d 776 (1974), the
Supreme Court stated the implied warranty governing the sale of a
dwelling by the builder-vendor as follows:
[I]n every contract for the sale of a
recently completed dwelling, and in every
contract for the sale of a dwelling then under
construction, the vendor, if he be in the
business of building such dwellings, shall be
held to impliedly warrant to the initial
vendee that, at the time of the passing of the
deed or the taking of possession by the
initial vendee (whichever first occurs), the
dwelling, together will all its fixtures, is
sufficiently free from major structural
defects, and is constructed in a workmanlike
manner, so as to meet the standard of
workmanlike quality then prevailing at the
time and place of construction; and that this
implied warranty in the contract of sale
survives the passing of the deed or the taking
of possession by the initial vendee.
Id. at 62, 209 S.E.2d at 783; accord Griffin v. Wheeler-Leonard &
Co., 290 N.C. 185, 200, 225 S.E.2d 557, 566-67 (1976). This
implied warranty arose in the instant case when the parties closed
on the house and plaintiffs received the deed.
However, the law allows a builder and a purchaser to enter
into a binding agreement that such implied warranty does not applyto their particular transaction. Griffin, 290 N.C. at 202, 225
S.E.2d at 567. Such exclusion must be clear and unambiguous and
reflect that the parties intend such a result. Id. Here, the
limited warranty agreement, which was signed by both parties,
states that, other than the express warranties contained therein,
"there are no other warranties express or implied" covering
plaintiffs' purchase of the house. The words "there are no other
warranties express or implied" are sufficient to exclude the
implied warranty of habitability or workmanlike construction from
the parties' transaction. Accordingly, plaintiffs contractually
relinquished their right to sue in a court of law for breach of
such implied warranty.
Plaintiffs also allege defendant breached certain express
warranties which predate and exist independent of the limited
warranty agreement. They claim that such warranties can be found
in the purchase contract, homeowner's manual and closing punch
list.
However, the "Offer To Purchase and Contract" in this case
makes no mention of any express warranties and contains a standard
merger clause declaring that the entire agreement of the parties is
contained in the writing. See Clifford v. River Bend Plantation,
Inc., 312 N.C. 460, 463, 323 S.E.2d 23, 25 (1984). Further, the
disclaimer provision in the limited warranty agreement expressly
disclaims any and all express warranties other than those contained
therein. Accordingly, we conclude that the only express warranties
contained in the parties' transaction for the house are thosestated in the agreement. Pursuant to the arbitration provision,
any dispute concerning those warranties must be submitted to
arbitration prior to litigation.
In their remaining claims, plaintiffs allege defendant
willfully misrepresented certain material facts and negligently
supplied false information in connection with the contract for the
purchase of the house. However, courts generally agree "that
whether a claim falls within the scope of an arbitration clause and
is thus subject to arbitration depends not on the characterization
of the claim as tort or contract, but on the relationship of the
claim to the subject matter of the arbitration clause." Rodgers
Builders, 76 N.C. App. at 24, 331 S.E.2d at 731.
In Bos Material Handling v. Crown Controls Corp., 137 Cal.
App. 3d 99, 105-06, 186 Cal. Rptr. 740, 742-43 (1982), the court
interpreted an arbitration clause in a dealer agreement. The
clause provided that "[a]ny controversy or claim arising out of or
relating to this agreement, or the breach thereof, shall be settled
by arbitration . . ." That court held the language to be
sufficiently broad to include tort as well as contract claims which
"'have their roots in the relationship between the parties which
was created by the contract,'" including the plaintiff's claims for
wrongful termination of the dealership, fraud, unfair competition,
restraint of trade, and wrongful misrepresentation.
Similarly, in Rodgers Builders, this Court interpreted the
language in an arbitration clause that "[a]ll claims, disputes and
other matters in question . . . arising out of, or relating to, theContract Documents or the breach thereof, . . . shall be decided by
arbitration . . ." It was held sufficiently broad to encompass
that plaintiff's claims for tortious conduct on the part of
defendants which occurred in connection with the formation,
performance and alleged breach of the contract between the parties.
These included the plaintiff's claim for punitive damages based on
the defendant's negligent or fraudulent misrepresentation as to the
owner of the property to which the contract related. Rodgers
Builders, 76 N.C. App. 25-26, 331 S.E.2d at 732.
The language of the arbitration provision here is likewise
sufficiently broad to include plaintiffs' claims for willful and
negligent misrepresentation. The claims concern whether the house
was constructed in a workmanlike manner and in accordance with the
express warranties plaintiffs allege existed independent of the
limited warranty agreement. However, any such express warranties
were disclaimed by plaintiffs when they signed the enrollment form
for the limited warranty. The only warranties that now exist are
those present in the agreement.
The arbitration provision applies to any "covered items" and
matters "arising out of or connected with the rights and
obligations created by the [limited warranty]." We conclude there
is a sufficiently strong connection between plaintiffs'
misrepresentation claims and the express warranties set forth in
the parties' agreement to bring the claims within the arbitration
provision.
The limited warranty agreement entered into by the parties isvalid and effective and the claims raised in the complaint are
either excluded by the terms of the parties' agreement or fall
within the scope of the arbitration provision. Accordingly, the
trial court erred in denying defendant's motion to stay plaintiffs'
action pending arbitration. The order is reversed and the cause
remanded for entry of a stay of plaintiffs' action pending
arbitration.
Reversed and remanded.
Judge TYSON concurs.
Chief Judge EAGLES dissents in a separate opinion.
EAGLES, Chief Judge, dissenting.
I respectfully dissent from the portion of the majority's
opinion which holds that the plaintiffs contractually relinquished
their right to sue in a court of law for breach of implied
warranty. The majority concludes that language in the limited
warranty agreement served to waive plaintiffs' implied warranty of
habitability or workmanlike quality of construction. I disagree.
The doctrine of implied warranty of habitability requires
that a dwelling and all of its fixtures be 'sufficiently free from
major structural defects, and . . . constructed in a workmanlike
manner, so as to meet the standard of workmanlike quality then
prevailing at the time and place of construction.' Allen v.
Roberts Constr. Co., 138 N.C. App. 557, 571, 532 S.E.2d 534, 543,
disc. review denied, 353 N.C. 261, 546 S.E.2d 90 (2000) (quoting
Hartley v. Ballou, 286 N.C. 51, 62, 209 S.E.2d 776, 783 (1974)). The implied warranty of workmanlike quality of construction [or
habitability] does not exist by reason of a representation or
inducement made by the builder-vendor, nor does it exist by reason
of a representation or inducement made by the builder's sales
agent, the real estate broker. Instead, it exists by operation of
law. Griffin v. Wheeler-Leonard & Co., 290 N.C. 185, 202, 225
S.E.2d 557, 568 (1976) (emphasis in original).
[A] builder-vendor and a purchaser could enter into a binding
agreement that such implied warranty would not apply to their
particular transaction. Id. at 202, 225 S.E.2d at 567. However,
[s]uch an exclusion, if desired by the parties to a contract for
the purchase of a residence, should be accomplished by clear,
unambiguous language, reflecting the fact that the parties fully
intended such result. Id. at 202, 225 S.E.2d at 568 (emphasis
added).
Here, the language that purports to exclude the warranties is:
Other than the Expressed Warranties contained herein, there are no
other warranties expressed or implied including Implied Warranty of
Merchantibility or Implied Warranty for Particular Purpose, which
implied warranties are specifically excluded. This language does
not clearly and unambiguously show that both parties intended to
exclude the implied warranty of habitability or workmanlike quality
of construction.
Further, the limited warranty agreement in its General Terms
Governing Interpretation and Operation provides that: This
agreement is separate and apart from your contract with yourBuilder. It cannot be altered or amended in any way by any other
agreement which you have. Contractual disputes shall not involve
[Quality Builders Warranty Corporation (QBW)].
Here, the defendant is Wolfe Construction, the residential
homebuilder from whom plaintiffs bought their home. [A]
builder-vendor impliedly warrants to the initial purchaser that a
house and all its fixtures will provide the service or protection
for which it was intended under normal use and conditions. Lyon
v. Ward, 28 N.C. App. 446, 450, 221 S.E.2d 727, 729 (1976)
(emphasis added). The warranty arises by operation of law and
imposes strict liability on the builder-vendor. Becker v. Graber
Builders, Inc., 149 N.C. App. 787, 792, 561 S.E.2d 905, 909 (2002)
(emphasis added). The limited warranty agreement, by its terms,
is separate and apart from plaintiffs' contract with Wolfe
Construction.
Accordingly, I would hold that the plaintiffs are not barred
by the limited warranty agreement with QBW from maintaining an
action for breach of the implied warranty of habitability or
workmanlike quality of construction against the builder, Wolfe
Construction. For these reasons, I would affirm the order of the
trial court.
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