Demas v Terminix Co., Inc., (03-1160) 08/03/2004

Appeal by defendants from an Order entered 13 June 2003 by Judge Benjamin G. Alford in Superior Court of New Hanover County. Heard in the Court of Appeals 20 May 2004.

Robert A. O'Quinn, for plaintiff-appellees.

Maupin Taylor, P.A., by M. Keith Kapp, James E. Gates, and Kevin W. Benedict, and Rountree, Losee & Baldwin, L.L.P., by Charles S. Baldwin, IV, for defendant-appellants.

    HUDSON, Judge.

    Defendant appeals a 13 June 2003 Order denying its Motion to Stay and Application for Order Referring Issues Between Plaintiff and Defendant to Arbitration (“Motion to Compel Arbitration”). As discussed below, we affirm. In 1997, plaintiffs Ronald C. Demas and Sharon Demas, entered into a contract to purchase a house located in Wilmington from P. Cary McEntire and Lucy H. Curry (“sellers”) for $450,000.00. At the time, sellers had in effect asubterranean coverage plan with defendants (collectively “Terminix”.)
    On or about 6 April 1997 , during an inspection of the house, plaintiffs discovered previous termite damage, and informed the sellers. The sellers contacted Terminix for an immediate inspection, which confirmed the damage. Sellers demanded that Terminix take responsibility for the damage and take immediate corrective action so that plaintiffs would not back out of the contract. By letter 15 April 1997, Mr. Kearton, the Terminix area manager said the following:

    To whom it may concern:

    Terminix assumes liability for the repairs to the floor of the Murchison House (area around bay window) and will be repairing same.

    Thank you,

    /s/
    Ed Kearton
    Area Manager

    Thereafter, sellers delivered Mr. Kearton's letter to plaintiffs and their attorney as inducement to purchase the residence irrespective of the termite damage. Plaintiffs purchased the house on 28 April 1997. In October 1997, plaintiffs and Terminix entered into a termite protection contract, which plaintiffs agreed would void the previous contract between Terminix and sellers.
    After closing on the house, plaintiffs began extensive remodeling, and in June of 2002 had reached the point where Terminix could begin its repairs. On 20 June 2002, plaintiffs' attorney contacted Terminix and requested that they honor their agreement. By letter 26 June 2002, Terminix replied to the request as follows:

    Thank you for bringing Mr. Kearton's letter to our attention. Terminix will of course honor the commitment Mr. Kearton saw fit to make. Please forward a copy of the costs involved in repairing the area around the bay window.

    Sincerely,

    /s/
    Paul T. Stepp

On 4 November 2002, plaintiffs sent Terminix an itemized list of labor and materials totaling $34,583.53. By letter 11 November 2002, Terminix declined to pay for the repairs:

    It has come to our attention that the letter written by Mr. Kearton on April 15, 1997 was prior to any contract between Terminix and Dr. and Mrs. Demas. Additionally, the damages to the property . . . were documented as existing damages prior to that agreement.

    For this reason I must respectfully decline to approve the Demas's claim. I anticipate that Dr. and Mrs. Demas will not be satisfied with this decision.

    If you have any additional information that may have bearing on this decision or require anything further, please contact me.

    Respectfully,

    /s/

    Paul T. Stepp
    Damage Claims Manager
    On 22 January 2003, plaintiffs filed this complaint, alleging that Terminix breached its contract with sellers of which plaintiffs were an intended beneficiary. Plaintiffs' complaint did not allege a cause of action or seek compensation for breach of contract arising out of their own termite protection contract with Terminix.
    On 25 March 2003, Terminix moved the court to stay the proceedings and order arbitration based upon an arbitration clause contained in the plaintiffs' contract with Terminix. The trial court denied Terminix' motion to compel arbitration, and Terminix appeals.    Defendant argues that North Carolina has a strong public policy favoring arbitration and that arbitration provisions have been upheld in standard termite coverage contracts. See Red Springs Presbyterian Church v. Terminix Co., 119 N.C. App. 299, 302-303, 458 S.E.2d 270, 272-273 (1995). However, here, plaintiffs are not seeking recovery under their contract with Terminix. Rather, they are seeking recovery as an intended beneficiary of a contract for repairs. This is evidenced by the 15 April 1997 and 26 June 2002 letters written by representatives of Terminix, and entered into between Terminix and sellers. These letter agreements contained no arbitration provisions. They preceded and were separate from the contract for termite protection which did. Thus, since there was no arbitration clause contained in the contract at issue here, we cannot conclude that the trial court erred.
    Affirmed.
    Judges MCCULLOUGH and LEVINSON concur.
    Report per Rule (30)e.

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