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An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority.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
PINEVILLE FOREST HOMEOWNERS
No. 04 CVS 14862
PORTRAIT HOMES CONSTRUCTION CO.;
ALLIED LANDSCAPE SYSTEMS, INC.;
AMERICAN BUILDING MAINTENANCE CO.
OF GEORGIA; PREFERRED BUILDING
MAINTENANCE; ALPHA AND OMEGA
CONSTRUCTION COMPANY; DOGGETT
CONCRETE CONSTRUCTION COMPANY;
DOGGETT CONCRETE, INC.; J. WATSON
MASONRY, INC.; WITTEN LUMBER CO.,
INC.; ALLSHIELD CONSTRUCTION
COMPANY, L.L.C. and WU SIDING
Appeal by Defendant Portrait Homes Construction Company from
order entered 7 March 2006 by Judge W. Robert Bell in Mecklenburg
County Superior Court. Heard in the Court of Appeals 24 January
DeVore, Acton, & Stafford, PA, by Fred W. DeVore, III, for
Defendant-Appellant Portrait Homes Construction Company.
Sellers, Hinshaw, Ayers, Dortch & Lyons, P.A., by Michelle
Price Massingale, for Plaintiff-Appellee.
By a complaint filed 9 September 2004, Plaintiff
(See footnote 1)
causes of action against Portrait Homes Construction Company
(See footnote 2)
on grounds of negligence and breach of the implied
warranties of habitability and quality and fitness with regard to
Defendant's construction of certain improvements in Plaintiff's
residential community of Pineville Forest (the Community).
Pursuant to Rule 12(b)(6) of the North Carolina Rules of Civil
Procedure, on 28 September 2004, Defendant moved to dismiss
Plaintiff's 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. On 15 October
2004, Defendant moved to dismiss or stay Plaintiff's complaint
pending binding arbitration. In its motion, Defendant asserted
that each member of the homeowners association purchased a home
subject to the Covenants and Restrictions
(See footnote 3)
and that Article XII
of the Covenants and Restrictions requires disputes pertaining to
issues between the defendant and the plaintiff (and its members) to
be adjudicated through binding arbitration[.] In addition,Defendant argued that the sales contract excludes all warranties
except for the third party warranty provided to the homeowners[.]
On 3 November 2004, Plaintiff moved to amend its complaint and
add as John Doe certain defendant subcontractors, alleging that
Defendant hired subcontractors to supply services and materials
and to perform work on the Pineville Forest Community . . . [and
that] Plaintiff has been unable to ascertain the identity of the
defendant subcontractors[.] On 20 December 2004, the Honorable W.
Robert Bell allowed Plaintiff's motion to amend its complaint.
(See footnote 4)
That same day, Judge Bell denied Defendant's motion to dismiss and
motion to stay and compel arbitration.
On 13 January 2005, Defendant gave notice of appeal from Judge
Bell's order. In an opinion filed 3 January 2006, this Court
determined that portions of Defendant's appeal were interlocutory
and not immediately appealable. Pineville Forest Homeowners Ass'n
v. Portrait Homes Constr. Co., 175 N.C. App. 380, 623 S.E.2d 620
(2006) (Pineville Forest I). Additionally, this Court remanded
the case for findings of fact regarding the validity and
applicability of the arbitration provisions in the Covenants and
Restrictions and the alleged third-party warranty. Id. at 387, 623
S.E.2d at 625 (citations omitted). Based on the direction provided
by this Court, on 7 March 2006, Judge Bell entered an amended order
containing specific findings of fact and conclusions of law, again
denying Defendant's motions to dismiss Plaintiff's complaint orstay that action pending arbitration. From Judge Bell's amended
order, Defendant appeals. For the reasons set out below, we affirm
the order of the trial court.
Defendant argues that the trial court erred in denying its
motions to dismiss because Plaintiff must participate in binding
arbitration as required by the third-party warranty allegedly
accepted by the individual homeowners in the Community and by the
Covenants and Restrictions applicable to the Community.
An interlocutory order that denies arbitration affects a
substantial right, and thus this Court 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.
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 asserts that the third-party warranty
allegedly accepted by the individual homeowners requires Plaintiff
to participate in arbitration. We disagree.
Assuming arguendo that the acceptance of a third-party
warranty by the individual homeowners would require Plaintiff 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 one Land and Building
Contract signed by Marilyn F. Kesler (Kesler) as Purchaser
which states: Seller's warranties are solely in accordance with
its limited warranty, a copy of which is available for inspection
at Seller's office and will be delivered to Purchaser at closing.
These provisions are incorporated herein and are in lieu of allother warranties, expressed or implied. Defendant also included
an application for a third-party warranty, again signed by Kesler.
That application states in pertinent part that
[t]his warranty is invalid until a valid
sticker . . . is attached to the . . .
warranty book . . . . Purchaser understands
and agrees that, if the warranty is validated,
it is provided by the Builder in lieu of all
other warranties, . . . and Builder makes no
warranty, express or implied as to [quality
or] fitness for a particular purpose,
merchantability, habitability or otherwise,
except as expressly set forth in the Program.
(Emphasis added). Finally, Defendant included an example of the
third-party warranty allegedly provided to all homeowners.
There is no evidence in the documents provided by Defendant,
however, that any homeowner, other than Kesler, signed a Land and
Building Contract, signed an application for the third-party
warranty, or was provided a copy of the third-party warranty.
Furthermore, although Defendant provided the contract and
application signed by Kesler, there is no evidence that the third-
party warranty allegedly furnished to Kesler has the required
validation sticker. Therefore, by the express terms of the
warranty application it required, Defendant has failed to show that
the warranty purportedly given to and accepted by Kesler is valid.
Accordingly, Defendant has not proved the existence of an agreement
to arbitrate pursuant to an alleged third-party warranty. See
Raspet, supra. The trial court thus did not err in denying
Defendant's motions to dismiss Plaintiff's complaint or to compel
arbitration based on the alleged third-party warranty. This
argument is overruled.
With regard to Defendant's additional argument that the
Covenants and Restrictions mandate binding arbitration, the second
prong of the Raspet
test determines the issue between the parties.
That is, assuming arguendo
that Plaintiff and Defendant agreed by
their Covenants and Restrictions to resolve certain disputes
through arbitration, under the unambiguous terms of the agreement,
their dispute here is outside the scope of arbitrable issues.
Section 12.2(e) of the Covenants and Restrictions provides
that any suit in which all parties are not Bound Parties shall be
exempt from the provision requiring binding arbitration. Bound
Parties is defined 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 order entered 20 December 2004, Judge Bell
granted Plaintiff's motion to amend its original complaint to add
as unnamed defendants, subcontractors that supplied services and
materials . . . and perform[ed] work on the Community.
Additionally, by order entered 17 March 2005, Judge Bell granted
Plaintiff's motion to substitute the names of the unnamed
subcontractors in Plaintiff's complaint. These subcontractors are
not listed as Bound Part[ies] in the alleged agreement nor does
the record reflect that the subcontractors agreed to subject
themselves to the article governing arbitration. Therefore, under
section 12.2(e) of the alleged arbitration agreement, the additionof the subcontractors to the suit exempts the parties from the
requirement of participation in binding arbitration. Accordingly,
this assignment of error is overruled.
For the reasons stated, the order of the trial court is
Judges TYSON and STROUD concur.
Report per Rule 30(e).
Plaintiff is a homeowners association for a residential
community in Charlotte, North Carolina, and is a non-profit
corporation organized and existing under the laws of this State.
Defendant is a corporation organized and existing under the
laws of . . . Illinois which is authorized to conduct business in
. . . North Carolina and which maintains a principal place of
business in Mecklenburg County, North Carolina. Defendant
developed the residential community which is the subject of
The Covenants and Restrictions were drafted and recorded in
the Mecklenburg County Register of Deeds by Defendant and govern
various aspects of property rights, maintenance, insurance, and
dispute resolution in the Community.
On 17 March 2005, Judge Bell granted Plaintiff's motion to
substitute for John Doe the names of the subcontractors that
appear in the caption of this opinion.
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