Appeal by defendants from judgment entered 6 March 2006 by
Judge D. Jack Hooks in Sampson County Superior Court. Heard in the
Court of Appeals 21 February 2007.
Daughtry, Woodard, Lawrence & Starling, by K. Alice Morrison,
for plaintiff-appellees.
Andrew M. Jackson for defendant-appellants.
BRYANT, Judge.
Bobby Gene Smith and The Home Inspector, Inc., a North
Carolina corporation, (defendants collectively) appeal from a
judgment entered 6 March 2006 denying defendants' motion to compel
arbitration with Bobby Ray Edwards and Laura Edwards (plaintiffs
collectively).
Defendant Smith is the sole shareholder, sole director, and
president of The Home Inspector, Inc. In late November 2003,
plaintiffs contracted to purchase a house from Wayne and Wendy
Taylor. Plaintiffs contacted defendants by telephone to arrange a
pre-purchase home inspection. Plaintiffs and defendants entered
into an oral agreement in which defendants agreed to perform the
home inspection and plaintiffs agreed to pay $288 for the
inspection. Defendants performed the home inspection on 16
December 2003. After performing the home inspection, defendants
met plaintiff Bobby Ray Edwards in a shopping center parking lot
one evening and defendants tendered the home inspection report to
plaintiffs and in exchange, plaintiffs paid defendants $288 as
payment in full of the home inspection fee. Also, at that meeting,
defendants presented plaintiffs with a home inspection contract for
plaintiffs' signature.
The home inspection contract, presented to plaintiffs for
their signature after paying defendants and receiving their home
inspection report contained the following agreement:
ARBITRATION: Should the client believe that
The Home Inspector, Inc.[] be liable for any
issues arising out of this inspection, then
client(s) shall communicate said issues in
writing to The Home Inspector, Inc.[] within
ten (10) days of the date of inspection. Ifthe issues cannot be resolved between the
parties, both parties agree to submit the
dispute to binding arbitration in accordance
with the rules of the American Arbitration
Association. Arbitration is to be conducted
by an arbitrator who is a full-time building
inspector with a minimum of six (6) years
experience as a building inspector. The
inspection will be judged in accordance with
the North Carolina Standards of Practice and
Code of Ethics.
Plaintiffs and defendant Smith both signed the written contract
containing the above agreement to arbitrate. There is no evidence
the arbitration agreement had been previously discussed between the
parties. Plaintiffs closed on the house 14 January 2004 and moved
in the next day. Plaintiffs called defendants on 3 March 2004
complaining about a multitude of defects with the home, which
resulted in the filing of this action.
By order entered 28 December 2005, partial summary judgment
was granted in favor of defendants as to the claims of civil
conspiracy and violations of the Unfair and Deceptive Trade
Practices Act; however, plaintiffs' causes of action for fraud and
negligence remained. Defendants then filed a motion seeking to
compel arbitration pursuant to the agreement. After hearing the
matter, the trial court denied the motion in open court on 8
February 2006 and entered a written order on 6 March 2006.
Defendants appeal. For the reasons which follow, we affirm the
judgment of the trial court.
_________________
Defendants argue the trial court erred by: (I) denying their
motion to compel arbitration; (II) finding the home inspectioncontract was not supported by consideration; and (III) entering its
written order.
[1] At the outset, we note the trial court's order denying
defendants' motion to compel arbitration is interlocutory; however,
it is immediately appealable because it affects a substantial right
of defendants, as stated in N.C. Gen. Stat. § 1-277 and N.C. Gen.
Stat. § 7A-27(d)(l) (2005). 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.
Burke v. Wilkins, 131 N.C. App. 687, 688, 507 S.E.2d 913, 914
(1998). We now address the merits of defendants' appeal.
I
[2] Defendants argue the trial court erred by denying their
motion to compel arbitration. We disagree.
The question of whether a dispute is subject
to arbitration is an issue for judicial
determination. The trial court's conclusion
as to whether a particular dispute is subject
to arbitration is a conclusion of law,
reviewable
de novo by the appellate court. The
determination of whether a dispute is subject
to arbitration involves a two pronged
analysis; the court must ascertain both (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 v. Buck, 147 N.C. App. 133, 136, 554 S.E.2d 676, 678 (2001)
(citations and quotations omitted). When the party seeking to
enforce the arbitration agreement has performed a portion of the
services and thereafter presents a written agreement to the other
party, the written agreement, if it substantially changes the termsof the oral agreement, cannot be enforceable.
Southern Spindle &
Flyer Co. v. Milliken & Co., 53 N.C. App. 785, 788, 281 S.E.2d 734,
736 (1981) (“Mere acknowledgement of receipt of the purchase order
form [containing an arbitration clause] did not constitute assent
to its terms.”).
North Carolina General Statutes, Section 1-567.2 requires that
all agreements to arbitrate be in writing at the time of the
agreement.
(See footnote 1)
Two or more parties may agree in writing to
submit to arbitration any controversy existing
between them at the time of the agreement, or
they may include in a written contract a
provision for the settlement by arbitration of
any controversy thereafter arising between
them relating to such contract or the failure
or refusal to perform the whole or any part
thereof. Such agreement or provision shall be
valid, enforceable, and irrevocable except
with the consent of all the parties, without
regard to the justiciable character of the
controversy.
N.C. Gen. Stat. § 1-567.2 (2002).
The cases relied upon by defendants in support of their
argument that the trial court should have compelled arbitration are
inapposite.
See Red Springs Presbyterian Church v. Terminix Co.,
119 N.C. App. 299, 302, 458 S.E.2d 270, 273 (1995) (A valid
agreement to arbitrate exists where the language is clear and
unambiguous and the parties signed the contract agreeing to submit
any disputes for arbitration prior to the start of the contract)
;
see also Revels v. Miss N.C. Pageant Org., Inc., 176 N.C. App. 730,
734, 627 S.E.2d 280, 283 (2006) (Arbitration held enforceable where
“it is clear that Revels assented to all terms of the contract
including the arbitration clause. Revels' signature appears at the
end of the contract on the signature line and, further, Revels
placed her initials on each page of the contract, including the one
containing the arbitration clause. No ambiguity exists as to
whether there was assent to each of the terms.”).
In the instant case, the parties entered into an oral
agreement in which defendants agreed to perform a home inspection
and plaintiffs agreed to pay $288 for the inspection. Defendant
Smith inspected the house, then later met with plaintiff, and only
during that meeting did defendant seek to have plaintiff sign a
written contract with additional terms including an arbitration
agreement. Defendant Smith performed the home inspection on the
basis of an oral contract. Thus, under North Carolina law, the
oral agreement between the parties for the performance of a home
inspection could not contain an enforceable agreement to arbitrate.
N.C.G.S. § 1-567.2 (2002). Therefore, although both parties signed
a written agreement, the trial court properly held the parties did
not enter into a valid written agreement to arbitrate. Upon
de
novo review of this issue, we determine the trial court properly
denied defendants' motion to compel arbitration. This assignment
of error is overruled.
II
Defendants argue the trial court erred by finding the homeinspection contract was not supported by consideration. Because we
have determined the trial court properly found there was no valid
written agreement to arbitrate, we deem it unnecessary to reach
defendants' second issue.
III
[3] Defendants argue the trial court erred by entering its
written order. Defendants state the written order rendered on 6
March 2006 held the home inspection contract was “unconscionable”
and “the provisions of the written contract, specifically the
clauses referring to arbitration and the limitation of liability,
are unenforceable and against public policy.” Accordingly,
defendants contend the written order fails to adequately capture
the oral order discussed in open court at the 8 February 2006
hearing and is invalid. We disagree.
N.C. Gen. Stat. § 1A-1, Rule 58, Entry of judgment states:
Subject to the provisions of Rule 54(b), a
judgment is entered when it is reduced to
writing, signed by the judge, and filed with
the clerk of court. The party designated by
the judge or, if the judge does not otherwise
designate, the party who prepares the
judgment, shall serve a copy of the judgment
upon all other parties within three days after
the judgment is entered.
N.C. Gen. Stat. § 1A-1, Rule 58 (2005). “A trial court has the
authority under N.C.G.S. § 1A-1, Rule 58 to make a written judgment
that conforms in general terms with an oral judgment pronounced in
open court[.]”
Morris v. Bailey, 86 N.C. App. 378, 389, 358 S.E.2d
120, 127 (1987). If the written judgment conforms generally with
the oral judgment, the judgment is valid.
Id. As evidenced by the transcript, the issues of
unconscionability of the contract and limitation of liability were
brought to the trial court's attention. In fact, the trial court
inquired whether there would be any evidence that plaintiffs “had
heard anything about an arbitration clause or [] limited liability
prior to [] hiring [the home inspector.]” Defense counsel replied
“[n]o, your honor.” After hearing from plaintiffs' counsel that
the alleged contract (which included the arbitration and limited
liability clauses) was unconscionable, the trial court then
rendered the following oral order:
THE COURT: All right. Well, I'd like an
order prepared finding that there was
apparently an oral agreement for this
inspection. I take it that the price was
agreed upon or at least discussed when the
oral agreement was made, is that correct?
MR. JACKSON: Yes, Your Honor. It was done by
telephone.
THE COURT: Okay. And that the work was
performed. That the defendant chose to produce
his written report and to receive his pay. He
then asked for, and the plaintiffs did sign, a
written agreement which did provide for
arbitration. That this arbitration agreement
had never been previously discussed; that
there was no additional consideration to the
plaintiffs for this. Their consideration for
the inspection, having already been received,
accepting the report, that they were already
obligated to pay, that the arbitration
agreement is thus invalid, and that the matter
will not go to arbitration, it's for a court
of law.
The language the trial court used, particularly stating that the
arbitration agreement had never been discussed, addresses the
unconscionability of the contract. We therefore hold that thewritten order of the trial court conforms with the oral judgment
pronounced in open court. This assignment of error is overruled.
Affirmed.
Judges MCCULLOUGH and LEVINSON concur.
Footnote: 1