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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NORTH CAROLINA COURT OF APPEALS
Filed: 17 July 2007
UNIVERSITY HEIGHTS COMMUNITY
ASSOCIATION and UNIVERSITY
TOWNES HOMEOWNERS ASSOCIATION,
No. 05 CVS 5035
PORTRAIT HOMES CONSTRUCTION CO.
CHANG BROTHERS CONTRACTORS, INC.
and/or CHANG BROTHERS
Third Party Defendant.
Appeal by Defendant from order entered 27 February 2006 by
Judge Albert Diaz in Mecklenburg County Superior Court. Heard in
the Court of Appeals 24 January 2007.
DeVore, Acton, & Stafford, PA, by Fred W. DeVore, III, for
Sellers, Hinshaw, Ayers, Dortch & Lyons, P.A., by Michelle
Price Massingale, for Plaintiffs-Appellees.
By a complaint filed 16 March 2005, Plaintiffs
(See footnote 1)
of action against Defendant
(See footnote 2)
on grounds of negligence and breach of
the implied warranty of habitability with regard to Defendant's
construction of certain dwelling units in two exclusive
residential communit[ies] of single-family attached residential
units[,] named University Heights and University Townes (the
Communities). Pursuant to N.C. Gen. Stat. § 1A-1, Rule 12(b)(6),
on 20 May 2005, Defendant moved to dismiss Plaintiffs' complaint
alleging that (1) the HOA [Homeowners Association] is without
standing to bring the matter and (2) the sole remedy for the HOA is
binding arbitration. Defendant asserted that binding arbitration
was mandatory under a third-party warranty allegedly provided to
each homeowner in the Communities and under the Declaration of
Covenants, Conditions and Restrictions (Declarations) applicable
to each Plaintiff. Defendant's motion came on for hearing on 5
October 2005, and, by order filed 7 November 2005, the Honorable
Albert Diaz denied the motion. Prior to entry of this order, on 4
November 2005, Defendant filed a third-party complaint against
Chang Brothers Contractors, Inc. and/or Chang Brothers
Construction, Inc. (Chang Brothers) alleging the right toindemnification or contribution from Chang Brothers
(See footnote 3)
in the event
of a determination that Defendant was liable to Plaintiffs.
Following this Court's decision in a companion case, Pineville
Forest Homeowners Ass'n v. Portrait Homes Constr. Co., 175 N.C.
App. 380, 623 S.E.2d 620 (2006), (Pineville Forest I),
(See footnote 4)
the consent of the parties[,] on 27 February 2006, Judge Diaz
amended his initial order denying Defendant's motion to dismiss to
include specific findings of fact and conclusions of law, as
required by Pineville Forest I. From this order, Defendant
(See footnote 5)
We affirm the decision of the trial court.
As a threshold matter, we note that [a]n interlocutory order
that denies arbitration affects a substantial right, and thus thisCourt has jurisdiction over an appeal from such an order. King v.
Owen, 166 N.C. App. 246, 248, 601 S.E.2d 326, 327 (2004) (citations
omitted). Accordingly, although the order appealed from is
interlocutory, we review the [o]rder to the extent it involves a
decision concerning the applicability of arbitration[.] See
Pineville Forest I, 175 N.C. App. at 385, 623 S.E.2d at 624.
Moreover, although the record demonstrates that Defendant made only
a Rule 12(b)(6) motion to dismiss before the trial court, the trial
court's order and the parties' arguments to this Court treat
Defendant's motion to dismiss as a motion to compel arbitration.
Therefore, on review we will also treat Defendant's motion to
dismiss as a motion to compel. See Novacare Orthotics &
Prosthetics E., Inc. v. Speelman, 137 N.C. App. 471, 478, 528
S.E.2d 918, 922 (2000) (A motion to dismiss under Rule 12(b)(6) may
be treated as an application to stay litigation and compel
arbitration pursuant to section 1-567.3(a) of the General
Public policy in North Carolina favors settling disputes
through arbitration. Routh v. Snap-On Tools Corp., 108 N.C. App.
268, 423 S.E.2d 791 (1992). However, before a dispute can be
settled in this manner, there must first exist a valid agreement to
arbitrate. Id. at 271, 423 S.E.2d at 794 (citation omitted).
The party seeking arbitration bears the burden of proving the
parties mutually agreed to the arbitration provision. King, 166
N.C. App. at 248, 601 S.E.2d at 327 (citation omitted). When
determining whether the parties mutually agreed to the arbitrationprovision, the law of contracts governs. Burgess v. Jim Walter
Homes, Inc., 161 N.C. App. 488, 588 S.E.2d 575 (2003).
The question of whether a dispute is subject to arbitration
is a question of law for the trial court, and its conclusion is
reviewable de novo. Pineville Forest I, 175 N.C. App. at 385-86,
623 S.E.2d at 624 (citing Raspet v. Buck, 147 N.C. App. 133, 554
S.E.2d 676 (2001)). To make this determination, this 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, 147 N.C. App. at
136, 554 S.E.2d at 678 (quotations and citation omitted).
Defendant first contends that by allegedly accepting a third-
party warranty in lieu of all other warranties, Plaintiffs, through
the individual homeowners, agreed to submit the disputes at issue
to binding arbitration. We disagree.
Assuming arguendo that the acceptance of a third-party
warranty by the individual homeowners would require Plaintiffs to
participate in arbitration, Defendant has made no showing that the
individual homeowners accepted a third-party warranty, and thus,
there is no evidence that a valid agreement to arbitrate exists.
In the Record on Appeal, Defendant included an affidavit from Scott
Sokoloski, a company manager for Defendant, averring that all
homeowners were provided with a copy of the [third-party] warranty
at the time of purchase. Defendant has also included a copy of
the third-party warranty that was allegedly provided to theindividual homeowners. However, there is no evidence in the record
before this Court that any homeowner agreed, by a contract with
Defendant or with the third-party warranty company, to accept a
third-party warranty in lieu of all other warranties. In the
absence of evidence that the individual homeowners agreed to accept
the alleged third-party warranty in lieu of all other warranties,
including the implied warranty of habitability on which Plaintiffs'
lawsuit is based, Defendant has failed to prove the existence of an
agreement to arbitrate pursuant to the alleged third-party
warranty. Therefore, the trial court did not err in denying
Defendant's motion to compel arbitration. See Raspet, supra. This
argument is overruled.
Defendant next argues the trial court erred in denying its
motion to dismiss because Plaintiffs must participate in binding
arbitration as required by their respective Declarations. Again,
In the case at bar, the second prong of the Raspet
determinative. That is, assuming arguendo
that Plaintiffs and
Defendant agreed by their respective Declarations to resolve
certain disputes through arbitration, under the unambiguous terms
of their agreements, their dispute here is outside the scope of
Section 12.2(e) of each Declaration provides that any suit in
which all parties are not Bound Parties shall be exempt from the
provision requiring binding arbitration. Bound Parties isdefined by Section 12.1 as the Association, Declarant
[(Defendant)], all Persons subject to this Declaration, and any
Person not otherwise subject to this Declaration who agrees to
submit to this Article[.]
In this case, by a complaint filed 4 November 2005, Defendant
added Chang Brothers as a third-party defendant to this litigation.
Chang Brothers is not listed as a Bound Party in the alleged
agreement nor does the record reflect that Chang Brothers agreed to
subject itself to the article governing arbitration. Therefore,
under section 12.2(e) of the alleged arbitration agreement, the
addition of Chang Brothers to the suit exempts the parties from the
requirement of participation in binding arbitration. We also note
that Defendant, the party seeking to enforce the arbitration
clause, is the party who brought Chang Brothers into this case,
thus exempting the case from arbitration. Accordingly, this
assignment of error is overruled.
For the reasons stated, the order of the trial court denying
Defendant's motion to dismiss is affirmed.
Judges TYSON and STROUD concur.
Report per Rule 30(e).
Plaintiffs are two individual homeowners associations for
residential communities in Charlotte, North Carolina, and are non
profit corporation[s] organized and existing under the laws of
Defendant is an Illinois corporation organized and existing
in . . . North Carolina with one of its principal places of
business in Mecklenburg County, North Carolina. Defendant
developed the residential communities which are the subject of
Chang Brothers is a North Carolina corporation with its
principal place of business in Mecklenburg County, North
Carolina[,] and is a subcontractor that Defendant engaged to
complete some of the construction in the Communities.
After this Court issued its opinion in Pineville Forest I
the Honorable W. Robert Bell issued an amended order containing
specific findings of fact and conclusions of law in that case.
Defendant appealed Judge Bell's amended order and that appeal
(Pineville Forest II
) is a companion case to the case decided in
Plaintiffs contend that Defendant's appeal should be
dismissed pursuant to Rule 3 of the North Carolina Rules of
Appellate Procedure because Defendant's notice of appeal was not
timely filed. Specifically, Plaintiffs argue that because
Defendant did not give notice of appeal from the trial court's
initial order denying its Rule 12(b)(6) motion to dismiss,
Defendant lost the right to appeal from the trial court's amended
decision. However, Defendant did timely give notice of appeal from
Judge Diaz's amended order which replaced and superceded the
initial order. Accordingly, Defendant's notice of appeal from
Judge Diaz's amended order vested this Court with jurisdiction to
review that order.
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