Appeal by defendant Association Management Group of Charlotte,
Inc. from order filed 26 March 2004 by Judge J. Gentry Caudill in
Mecklenburg County Superior Court. Heard in the Court of Appeals
13 April 2005.
Richard H. Robertson for plaintiff-appellee.
Baucom, Claytor, Benton, Morgan & Wood, P.A., by Rex C. Morgan
and Jason B. James, for defendant-appellant Association
Management Group of Charlotte, Inc.
BRYANT, Judge.
Association Management Group of Charlotte, Inc.
(“AMG”/defendant) appeals from an order filed 26 March 2004,
denying defendant's motion to compel arbitration.
John D. Moose, Sandra Moose, and Lynn McLellan (plaintiffs)
are members of Versailles Condominium Association and unit owners
in “The Condominium at Versailles,” Building No. 1, located at 2600Park Road, Charlotte, North Carolina (hereinafter “the property”).
On or about 1 December 2001, the property and the common area
immediately surrounding the property were damaged by a fire that
originated in one of the downstairs units in the 2600 building.
The resulting damage to plaintiffs' property was determined to be
“partial destruction” as defined in paragraph 21 of the
declarations and by-laws of the Versailles Condominium Association
(hereinafter the “declarations and by-laws”). Subsequent to the
loss, Versailles contracted with CNE, a general contractor, to
perform necessary structural and cosmetic repairs to plaintiffs'
property as well as all necessary repairs to the common areas and
other portions of the condominium units for which Versailles was
responsible pursuant to the declarations and by-laws.
On 7 March 2003, plaintiffs filed suit naming as defendants:
Versailles Condominium Association; Marilyn Wilhelm, Angie
Stathakis, Richard Vallejo, Cassie Dracos, and Ann Patton, as
Directors and Officers of Versailles Condominium Association, and
Individually (hereinafter “the Board”); Association Management
Group of Charlotte, Inc.; and CNE Services, Inc. (collectively
defendants). In their complaint, plaintiffs asserted causes of
action against Versailles and the Board for breach of fiduciary
relationship, as well as breach of trust. Plaintiffs alleged two
causes of action against AMG and CNE: breach of contract and unfair
or deceptive acts or practices pursuant to N.C. Gen. Stat. §
75-1.1(a).
Plaintiffs' complaint centered around allegations that therepairs to their property and the surrounding common areas were not
performed in a timely and/or workmanlike manner. With respect to
the claims against AMG, plaintiffs alleged, inter alia, they were
third-party beneficiaries of Versailles' contract with AMG for the
management of the condominiums and AMG had failed to “fully and
substantially perform the duties required of it pursuant to its
management contract with [Versailles].”
Counsel for defendants Versailles, the Board, and AMG filed an
answer to plaintiffs' complaint on behalf of all defendants on 12
May 2003, with the exception of CNE who was represented by other
counsel. The answer filed by counsel for defendants Versailles,
the Board, and AMG did not contain a motion to compel arbitration
and stay proceedings.
Following service of plaintiffs' complaint and summons,
discovery was undertaken on behalf of both plaintiffs and all
defendants. Plaintiffs served defendants, including AMG, with
requests for production of documents on 5 May 2003. AMG timely
submitted responses to plaintiffs' request. At the same time, on
16 June 2003, counsel for defendants Versailles, the Board, and AMG
served plaintiffs with defendants' first set of interrogatories and
request for production of documents. Plaintiffs timely responded
to defendants' discovery requests. Additionally, CNE served
plaintiffs with interrogatories and request for production of
documents on 28 May 2003, to which plaintiffs timely responded.
Plaintiffs filed a motion for leave to amend the complaint on
19 September 2003. Plaintiffs' motion was heard at the 30 October2003 session of Mecklenburg County Superior Court with the
Honorable David S. Cayer presiding. The trial court granted
plaintiffs' motion for leave to amend the complaint, and plaintiffs
filed their amended complaint on 10 November 2003.
Plaintiffs' amended complaint set forth new factual
allegations against AMG, as well as new causes of action against
AMG for breach of the implied covenant of good faith and fair
dealing. The new factual allegations against AMG included, but
were not limited to, paragraph 47 of the amended complaint, which
stated:
At all times herein alleged, the Defendant AMG
knew that the Association and the Directors
and Officers of the Association stood in a
confidential and fiduciary relationship to the
Plaintiffs, and that this relationship imposed
a fiduciary duty upon the Association and the
Directors and Officers for whom and in whose
place and stead AMG was acting.
In response to plaintiffs' amended complaint, counsel for
defendants Versailles and the Board filed an amended answer and
motion to dismiss. AMG filed a motion to compel arbitration
pursuant to the arbitration clause of the contract between
Versailles and AMG - the contract under which plaintiffs claim
third-party beneficiary status - and a motion to dismiss.
AMG's motions were heard at the 11 February 2004 session of
Mecklenburg County Superior Court with the Honorable J. Gentry
Caudill presiding. The trial court denied AMG's motion to dismiss,
and allowed plaintiffs' oral motion to amend their complaint a
second time to properly allege third-party beneficiary status
pursuant to the contract between AMG and Versailles. With respect to AMG's motion to compel arbitration, the trial
court, after reviewing the affidavits filed by the parties, entered
the following findings of fact:
10. AMG, as a matter of right, engaged in
extensive discovery procedures as provided for
by the Rules of Civil Procedure, N.C.G.S. §
1A-1, Rule 26, et seq. However, in
arbitration parties may only engage in
discovery with permission of the arbitrator as
provided for by the Uniform Arbitration Act
pursuant to N.C.G.S. §1-567.8 or the Revised
Uniform Arbitration Act pursuant to N.C.G.S.
§1-569.17. As such, AMG has utilized and
benefited [sic] from discovery procedures
under the Rules of Civil Procedure; discovery
procedures that would be within the discretion
of the arbitrator if this matter were referred
to arbitration.
11. Plaintiffs, according to the affidavit
submitted by Plaintiffs' counsel, have paid a
total of $32,854.00 in legal fees and costs to
date in pursuing this civil action. A
significant portion of this is attributable to
providing information to AMG, and would not
have been incurred had AMG sought arbitration
without delay.
Based upon these findings of fact, the trial court made the
following conclusions of law:
7. If arbitration were now ordered, Plaintiffs
would be prejudiced by Defendant AMG's delay
in seeking arbitration.
8. By its acts and conduct, AMG has impliedly
waived any right, which it may have to
arbitration pursuant to the agreement to
arbitrate.
Despite finding the management agreement contained a valid and
enforceable arbitration provision that was in force and binding
upon the parties, the trial court denied AMG's motion to compel
arbitration.
_________________________
[2] The dispositive issue on appeal is whether the trial court
erred in denying defendant's motion to compel arbitration
(See footnote 1)
.
As a preliminary matter, we note the denial of a motion to
compel arbitration is interlocutory in nature.
Raspet v. Buck, 147
N.C. App. 133, 135, 554 S.E.2d 676, 677 (2001). This Court,
however, has held “'the right to arbitrate a claim is a substantial
right which may be lost if review is delayed, and an order denying
arbitration is therefore immediately appealable.'”
Boynton v. ESC
Med. Sys., Inc., 152 N.C. App. 103, 106, 566 S.E.2d 730, 732 (2002)
(citation omitted).
When a party claims a dispute is covered by an agreement to
arbitrate and the other party denies the existence of an
arbitration agreement, the trial court must determine whether an
arbitration agreement actually exists. N.C.G.S. § 1-567.3 (2001).
“The question of whether a dispute is subject to arbitration is anissue for judicial determination.”
Raspet, 147 N.C. App. at 136,
554 S.E.2d at 678. This judicial determination involves the
two-step process of ascertaining: “(1) whether the parties had a
valid agreement to arbitrate, and also (2) whether 'the specific
dispute falls within the substantive scope of that agreement.'”
Raspet, 147 N.C. App. at 136, 554 S.E.2d at 678 (citation omitted).
Only when a valid arbitration agreement exists can a matter be
settled by arbitration. N.C.G.S. § 1-567.2 (2001). “[T]he party
seeking arbitration must show that the parties mutually agreed to
arbitrate their disputes.”
Routh v. Snap-On Tools Corp., 108 N.C.
App. 268, 271-72, 423 S.E.2d 791, 794 (1992). “The trial court's
findings regarding the existence of an arbitration agreement are
conclusive on appeal where supported by competent evidence, even
where the evidence might have supported findings to the contrary.”
Sciolino v. TD Waterhouse Investor Servs., Inc., 149 N.C. App. 642,
645, 562 S.E.2d 64, 66 (2002). The trial court's determination of
whether a dispute is subject to arbitration, however, is a
conclusion of law reviewable
de novo.
Raspet, 147 N.C. App. at
136, 554 S.E.2d at 678.
Here, the trial court found a valid arbitration agreement
existed, but defendant waived its right to arbitration by
undertaking actions which would prejudice plaintiffs if arbitration
were compelled.
Cyclone Roofing Co. v. David M. LaFave Co., 312
N.C. 224, 229, 321 S.E.2d 872, 876 (1984).
A party may be prejudiced if, for example, it
is forced to bear the expenses of a lengthy
trial; evidence helpful to a party is lost
because of delay in the seeking ofarbitration; a party's opponent takes
advantage of judicial discovery procedures not
available in arbitration; or, by reason of
delay, a party has taken steps in litigation
to its detriment or expended significant
amounts of money thereupon.
Cyclone Roofing Co., 312 N.C. at 229-30, 321 S.E.2d at 876-77,
(internal citations omitted). “Waiver of a contractual right to
arbitration is a question of fact.”
Id. In this regard,
“[f]indings of fact, when supported by any evidence, are conclusive
on appeal. Conclusions of law, even if stated as factual
conclusions, are reviewable.”
Prime South Homes, Inc. v. Byrd, 102
N.C. App. 255, 258, 401 S.E.2d 822, 825 (1991) (quoting
Fairchild
Realty Co. v. Spiegel, Inc., 246 N.C. 458, 465, 98 S.E.2d 871, 876
(1957)). Nevertheless, when there is evidence in the record which
supports the trial court's findings of fact, and those findings
support its conclusions of law that a party has waived its right to
compel arbitration, the decision must be affirmed.
Prime South
Homes, 102 N.C. App. at 261, 401 S.E.2d at 827.
Defendant contends the trial court erred in concluding
defendant had waived its right to compel arbitration, and
specifically alleges certain findings of fact are not supported by
the evidence. The trial court based its denial of defendant's
motion on the following conclusions of law:
7. If arbitration were now ordered, Plaintiffs
would be prejudiced by Defendant AMG's delay
in seeking arbitration.
8. By its acts and conduct, AMG has impliedly
waived any right which it may have to
arbitration pursuant to the agreement to
arbitrate.
The trial court supported its conclusions of law by the
following findings of fact which AMG alleges are not supported by
the evidence:
10. AMG, as a matter of right, engaged in
extensive discovery procedures as provided for
by the Rules of Civil Procedure, N.C.G.S. §
1A-1, Rule 26, et seq. However, in
arbitration parties may only engage in
discovery with permission of the arbitrator as
provided for by the Uniform Arbitration Act
pursuant to N.C.G.S. §1-567.8 or the Revised
Uniform Arbitration Act pursuant to N.C.G.S.
§1-569.17. As such, AMG has utilized and
benefited [sic] from discovery procedures
under the Rules of Civil Procedure; discovery
procedures that would be within the discretion
of the arbitrator if this matter were referred
to arbitration.
11. Plaintiffs, according to the affidavit
submitted by Plaintiffs' counsel, have paid a
total of $32,854.00 in legal fees and costs to
date in pursuing this civil action. A
significant portion of this is attributable to
providing information to AMG, and would not
have been incurred had AMG sought arbitration
without delay.
Defendant contends the evidence does not support the findings
in paragraph 10. Defendant further contends that since the court
made no findings the witnesses deposed would have been available to
attend an arbitration hearing, the record does not support a
finding defendant took advantage of discovery procedures that would
be unavailable in arbitration. Defendant argues, therefore, the
court's conclusion defendant waived its right to compel arbitration
is not supported by the evidence.
Defendant relies upon the authority of
Sullivan v. Bright, 129
N.C. App. 84, 497 S.E.2d 118 (1998); however, its reliance is misplaced.
Sullivan construed N.C. Gen. Stat. § 1-567.8(b), which
makes depositions in arbitration dependent upon witness
availability. The issue in
Sullivan was whether a witness who had
been deposed under the Rules of Civil Procedure would have been
unavailable to attend an arbitration hearing, and under N.C. Gen.
Stat. § 1-567.8(b) subject to deposition in arbitration anyway.
Because there was no evidence in the record one way or the other,
it is to be expected that the court would find no waiver of
arbitration rights. The court's duty was to decide the case before
it on the record, and not speculate about availability of a witness
outside the record.
Sullivan is distinguishable from the case
under consideration.
The applicable North Carolina General Statutes provide “[o]n
application of a party and for use as evidence, the arbitrators may
permit a deposition to be taken . . . of a witness who cannot be
subpoenaed or is unable to attend the hearing.” N.C. Gen. Stat. §
1-567.8(b) (2001). Plaintiffs in this lawsuit are not witnesses
who cannot be subpoenaed or are unable to attend the arbitration
hearing. They filed the lawsuit and are vitally interested in it.
They appeared for their depositions voluntarily, and without being
subpoenaed. They are local residents residing at the same
addresses where they resided when they filed this lawsuit, and they
could have been subpoenaed to attend an arbitration hearing.
Defendant did not present any evidence to the contrary.
Accordingly, plaintiffs would not be subject to being deposed inarbitration.
(See footnote 2)
By taking their depositions before requesting
arbitration, defendant took advantage of a discovery procedure not
available in arbitration in order to gain access to evidence.
Having benefitted therefrom, defendant demanded arbitration,
cutting off plaintiffs' ability to obtain discovery. When
defendant's motion to compel discovery was heard, plaintiffs were
in need of obtaining discovery from defendant, and were actively
pursuing necessary discovery. Plaintiffs' motion to compel
discovery against defendant was heard at the same hearing that
resulted in the order appealed from, and defendant was ordered to
respond to plaintiffs' discovery requests within 30 days of the
entry of the order. In addition, plaintiffs were actively seeking
to take the depositions of a former employee of defendant who was
in charge of the Association account and the Nationwide Insurance
Company adjuster who handled the fire loss claims for the
Association's carrier.
Defendant further contends no evidence exists as to the amount
of legal fees and costs which plaintiffs have been required to pay
by reason of defendant's delay in requesting arbitration. Again,
defendant relies upon
Sullivan and again its reliance is misplaced.
In
Sullivan, the trial court found the unnamed insurance carrier
incurred significant expense as a result of the plaintiff's delayin seeking arbitration. Our Court determined the record evidence
did not support this finding “since there is no statement
indicating how much money [the carrier] spent by reason of
plaintiff's forbearance.”
Sullivan, 129 N.C. App. at 87, 497
S.E.2d at 121. Such is not the case here.
There is evidence in the record which supports the trial
court's findings of fact that plaintiffs “have paid a total of
$32,854.00 in legal fees and costs to date in pursuing this civil
action [and a] significant portion of this is attributable to
providing information to AMG, and would not have been incurred had
AMG sought arbitration without delay.” Plaintiffs submitted a
detailed billing record which itemized the attorney's fees incurred
by plaintiffs from the date they employed their attorney to file
suit through December 2002, prior to defendant requesting
arbitration. The charges included time spent preparing for and
participating in depositions, drafting written discovery responses
and requests, and preparing for and appearing in court. These
costs resulted from defendant's delay in demanding arbitration, and
would not have been incurred had defendant made a timely demand for
arbitration.
As stated previously, when there is evidence in the record
which supports the trial court's findings of fact, and those
findings support its conclusions of law that a party has waived its
right to compel arbitration, the decision must be affirmed.
Prime
South Homes, 102 N.C. App. at 261, 401 S.E.2d at 827. In this
case, the trial court's findings of fact are supported by theevidence and the conclusions of law are supported by the findings
of fact. Therefore, defendant has impliedly waived its right to
compel arbitration. This assignment of error is overruled.
Affirmed.
Judges McGEE and STEELMAN concur.
Footnote: 1