The trial court did not err by finding that no valid arbitration agreement existed between
defendant title insurance company and plaintiffs, because: (1) defendant failed to meet its burden
to prove the parties mutually agreed to arbitrate their dispute; (2) the record is devoid of any
indication that equitable estoppel was raised by defendant before the trial court; (3) defendant
failed to raise the issue at trial concerning whether plaintiffs' failure to object to the arbitration
provision within a reasonable period of time constituted an acceptance of that provision of the
policy; and (4) the first time an arbitration clause appeared was in the final title policy which was
issued over three months after closing of the pertinent property.
Mitchell, Brewer, Richardson, Adams, Burge & Boughman, by
William O. Richardson, Ronnie M. Mitchell, Coy E. Brewer,
Charles M. Brittain, III, for plaintiffs-appellees.
Maupin Taylor, P.A., by Mark S. Thomas, Ronald R. Rogers, and
Joshua B. Royster, attorneys for defendants-appellants.
STEELMAN, Judge.
Richard and Laura King (plaintiffs) acquired a tract of land
in Fayetteville, North Carolina on 1 October 1999. They intended
to operate a gas station and convenience store on the property.
Prior to closing, plaintiffs hired Millard Owen, III and Owen
Surveying Incorporated (Owen) to survey the property, and hired
William Davis of Cooper, Davis & Cooper, Attorneys at Law, a North
Carolina General Partnership (third party defendants), as theirattorney for the closing. Third party defendants did not order a
commitment for title insurance prior to closing. A policy of title
insurance on the property was issued to plaintiffs on 11 January
2000 by Chicago Title Insurance Company (Chicago Title).
Following the acquisition of the property, plaintiffs
discovered that it was encumbered by an easement to the North
Carolina Department of Transportation. Plaintiffs contend that the
easement renders the property unfit for their intended use. On 26
July 2001 plaintiffs filed a complaint against Owen claiming they
were negligent in conducting the survey of the property. Owen
filed a third party complaint against third party defendants. On
28 February 2003 plaintiffs amended their complaint and added
Chicago Title as a party defendant. On 2 May 2003 Chicago Title
filed its answer, which included a demand for arbitration of
plaintiff's claims against it, a motion to stay claims pending
arbitration, and a motion to dismiss. The motion to stay claims
pending arbitration and to compel arbitration was heard on 2 June
2003. The trial court denied Chicago Title's motion by order dated
25 August 2003. Chicago Title appeals.
In Chicago Title's first assignment of error, it argues that
the trial court erred in finding no valid arbitration agreement
existed between Chicago Title and plaintiffs. We disagree.
An interlocutory order that denies arbitration affects a
substantial right, and thus
this Court has jurisdiction over an
appeal from such an order. Keel v. Private Bus., Inc., 2004 N.C.
App. LEXIS 571 (N.C. Ct. App.. 2004)
;
Raspet v. Buck, 147 N.C. App.
133, 135, 554 S.E.2d 676, 677 (2001)
.
“[W]e note that public policy favors settling disputes by
means of arbitration. However, before a dispute can be settled in
this manner, there must first exist a valid agreement to arbitrate.
The law of contracts governs the issue of whether there exists an
agreement to arbitrate.”
Routh v. Snap-On Tools Corp., 108 N.C.
App. 268, 271, 423 S.E.2d 791, 794 (1992)
(citations omitted). The
party seeking arbitration bears the burden of proving the parties
mutually agreed to the arbitration provision. Milon v. Duke Univ.,
145 N.C. App. 609, 617, 551 S.E.2d 561, 566 (2001) rev'd on other
grounds by 355 N.C. 263; 559 S.E.2d 789 (2002), cert. denied, 536
U.S. 979, 153 L. Ed. 2d 878 (2002).
The trial court's order in this matter made detailed findings
of fact and conclusions of law. On appeal, findings of fact made
by the trial court are binding upon the appellate court in the
absence of an assignment of error challenging those findings. Rural
Plumbing & Heating, Inc. v. Hope Dale Realty, Inc., 263 N.C. 641,
651, 140 S.E.2d 330, 337 (1965); Dollar v. Town of Cary, 153 N.C.
App. 309, 310, 569 S.E.2d 731, 733 (2002). In this case, Chicago
Title does not challenge any of the trial court's findings. Our
review is therefore limited to whether those findings support the
trial court's conclusions of law. Rural Plumbing, 263 N.C. at 651,
140 S.E.2d at 337.
In the instant case the trial court found the following facts:
1) plaintiffs purchased the property on 1 October 1999; 2) page 2
of the settlement statement showed that plaintiff's paid $470.00 at
closing to purchase title insurance; 3) at no time did plaintiffs
discuss or negotiate with Chicago Title any arbitration provision;4) plaintiffs did not execute an agreement containing an
arbitration provision; 5) plaintiffs were not provided with any
title insurance contract, agreement or policy containing an
arbitration provision at closing; 6) on 4 January 2000 plaintiffs'
attorney submitted to Chicago Title his final title opinion on
plaintiffs' property; 7) Chicago Title mailed to plaintiffs on or
about 11 January 2000 a copy of a title insurance policy with a
stated effective date of 1 October 1999; 8) the policy of title
insurance did not bear plaintiffs' signatures, nor did it request
plaintiffs to sign and return any documents; 9) no document
containing an agreement to arbitrate was signed by plaintiffs,
discussed with them, or provided to them at the time of closing.
Based on these findings of fact (which are not disputed by
Chicago Title and are thus binding on appeal) the trial court
concluded no valid arbitration agreement existed because Chicago
Title failed to meet its burden to prove the parties mutually
agreed to arbitrate their dispute. The trial court denied Chicago
Title's motion to stay pending arbitration. We hold that the trial
court's findings of fact support its conclusion that Chicago Title
failed to demonstrate that there existed an agreement to arbitrate
between the parties.
This case is governed by the now repealed Uniform Arbitration
Act, N.C. Gen. Stat. Chapter 1, Article 45A.
(See footnote 1)
In the instant case,
plaintiff paid a one time premium of $470.00 at closing for titleinsurance. Plaintiffs did not receive the insurance policy in
question until nearly three and one half months later. Chicago
Title offered no evidence that plaintiffs were aware of the
arbitration clause in the policy at the time they closed on the
property, much less that the clause was the result of independent
negotiation. As this Court stated in Routh,
“an arbitration
clause, such as the one at issue in the present case, is ordinarily
negotiated at the outset of a contractual relationship in an
'arms-length negotiation.'” Routh, 108 N.C. App. at 274, 423 S.E.2d
at 796.
It was Chicago Title's burden to prove the existence of a
valid arbitration agreement, and it was the province of the trial
court to determine if Chicago Title met its burden. Id. at 271-72,
423 S.E.2d at 794.
As part of its argument under its first assignment of error,
Chicago Title argues that plaintiffs are equitably estopped from
denying their agreement to the arbitration provision. North
Carolina Rules of Civil Procedure, Rule 8(c) requires that certain
affirmative defenses, including estoppel and waiver, must be set
forth affirmatively in a party's pleading. In its answer, Chicago
Title pled eight separate defenses to plaintiffs' complaint,
including laches and failure to mitigate damages. Neither estoppel
nor waiver were pled as defenses by Chicago Title in this matter.
The record before this Court is devoid of any indication that
equitable estoppel was raised by Chicago Title before the trial
court. Chicago Title cannot swap horses between courts in order to
obtain a better mount on appeal. Russell v. Buchanan, 129 N.C.
App. 519, 521, 500 S.E.2d 728, 730 (1998), rev' denied, 348 N.C.501, 510 S.E.2d 655 (1998); see also Anderson v. Assimos, 356 N.C.
415, 572 S.E.2d 101 (2002).
Chicago Title further contends that plaintiffs failure to
object to the arbitration provision within a reasonable period of
time constitutes an acceptance of that provision of the policy.
This is an assertion that plaintiff's waived any objection to the
arbitration provision by their conduct. The record in this case is
devoid of any indication that this theory was asserted before the
trial court, and cannot now be raised upon appeal. Russell, 129
N.C. App. at 521, 500 S.E.2d at 730.
We further note that Chicago Title cites the reasoning of the
Alabama Supreme Court in the case of McDougle v. Silvernell, 738
So. 2d 806 (Ala. S.C. 1999) as persuasive on the issue of whether
there was an agreement to arbitrate in this case. In McDougle,
plaintiffs acquired real estate and subsequently learned of defects
in the title. Suit was instituted against the attorneys who
handled the closing and certified the title. The attorneys were
agents for the title insurance company. At closing a commitment
for title insurance was issued to plaintiffs which stated that the
commitment was subject to the conditions and stipulations contained
in the title insurance company's form policy. Subsequent to
closing, a policy of title insurance was issued containing a
provision requiring arbitration of “any controversy or claim”
arising out of the policy. The Supreme Court of Alabama held that
the arbitration clause was incorporated by reference into the
commitment for title insurance and was thus enforceable. The present case is distinguishable from McDougle. There was
no commitment for title insurance issued in this case prior to or
at closing. The first time an arbitration clause appeared was in
the final title policy which was issued over three months after
closing.
This assignment of error is without merit.
Having found that the trial court correctly held that there
was not a valid and enforceable arbitration agreement, we need not
address Chicago Title's remaining assignments of error.
AFFIRMED.
Judges TYSON and BRYANT concur.
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