Brevorka v. Wolfe Const., Inc.

• Decision Date: 31 December 2002
• Citation: 573 S.E.2d 656,155 NC App. 353
• Court: North Carolina Court of Appeals
• Parties: Peter BREVORKA and wife Carole Brevorka, Plaintiffs, v. WOLFE CONSTRUCTION, INC., Defendant.

573 S.E.2d 656

155 NC App. 353

Peter BREVORKA and wife Carole Brevorka, Plaintiffs, v. WOLFE CONSTRUCTION, INC., Defendant.

No. COA02-5.

Court of Appeals of North Carolina.

December 31, 2002.

Alexander, Ralston, Speckhard & Speckhard, L.L.P., by Stanley E. Speckhard, Greensboro, for plaintiff-appellees.

Tuggle Duggins & Meschan, P.A., by Kenneth J. Gumbiner, Greensboro, for defendant-appellant.

THOMAS, Judge.

Defendant, Wolfe Construction, Inc., appeals the denial of its motion to stay plaintiffs' action pending arbitration.

Defendant contends the trial court erred in concluding that plaintiffs' claims for relief do not arise under the parties' limited warranty agreement and are, therefore, not subject to an arbitration provision. For the reasons herein, we reverse.

On 26 May 1999, plaintiffs, Peter and Carole Brevorka, signed an "Offer To Purchase and Contract" for a new house constructed by defendant at 25 Rosebay Lane, Greensboro, North Carolina. Plaintiffs closed on the house on 4 August 1999. Three weeks later, on 25 August 1999, plaintiffs received a letter from defendant offering them an extended limited warranty, referred to as the Quality Builders Warranty Corporation Limited Warranty Agreement. On 27 August 1999, plaintiffs signed the enrollment form, acknowledging their receipt of the limited warranty and acceptance of its terms. The enrollment form reads, in pertinent part:

C. Both the Builder and the purchaser(s) must sign this Enrollment form. By signing, the purchaser acknowledges that he has read the attached Agreement and has received a copy of this page and the Agreement itself.

The agreement contains a detailed description of all the express warranties applicable to plaintiffs' home, some of which extend up to ten years, and includes the following disclaimer:

10. Other than the Expressed Warranties contained herein, there are no other warranties expressed or implied including Implied Warranty of Merchantability or Implied Warranty for Particular Purpose.

It also contains a detailed four step Complaint and Claim Procedure. Step Four of that procedure includes an arbitration provision which reads, in pertinent part:

D. Step Four. If you disagree with the investigator's report, you have (30) days to notify QBW and the Builder, in writing, that you disagree. In such event, disputes on covered items shall be submitted for arbitration to the American Arbitration Association (AAA) or such other independent arbitration service as may be designated by QBW, for resolution in accordance with the rules and regulations of the AAA or such other service. You must pay the cost of arbitration when filing a claim. Such arbitration shall be a condition precedent to the commencement of any litigation by the homeowner or builder arising out of or connected with the rights and obligations created by this Agreement. (Emphasis added)

....

If the complaint and claim procedure is not followed and the arbitration provision is not honored, the agreement states:

If you institute legal proceedings against the Builder or QBW for any obligation arising or claimed to have arisen under this Agreement prior to giving the Builder or QBW the proper notices and opportunities to cure provided under this Agreement and prior to using the dispute settlement procedure herein, you agree to indemnify the Builder and QBW for all costs and expenses of such litigation, including reasonable attorneys' fees, regardless of whether you have an otherwise legitimate claim under this Agreement....

Plaintiffs filed the instant complaint on 16 February 2001 asserting claims against defendant for breach of the implied warranty of habitability or workmanlike construction, breach of express warranties, willful misrepresentation and negligent misrepresentation. Plaintiffs allege the house was constructed "in a manner contrary to and different from the agreement between the parties," "in a defective manner, with poor and faulty workmanship," "in a careless and negligent manner," and not "in compliance with applicable building codes and regulations." Plaintiffs' complaint identifies twenty-two conditions which they claim "constitute major structural defects." Plaintiffs also set forth seven express "warranties and contractual obligations" allegedly breached by defendant. Finally, plaintiffs allege defendant and its agents and employees willfully and negligently made certain false representations prior to and in connection with the contract for the purchase of the house.

Defendant filed an answer denying the essential allegations of plaintiffs' complaint and asserting numerous affirmative offenses, and a counterclaim for breach of contract and unfair and deceptive trade practices. Defendant later filed a motion to stay plaintiffs' action pending arbitration and a request for attorneys' fees.

Following a hearing on defendant's motion, the trial court found that plaintiffs had signed the limited warranty agreement but concluded their claims did not arise under the agreement. Therefore, the arbitration provision did not apply and defendant was not entitled to a stay of plaintiffs' action.

Defendant contends all of plaintiffs' claims fall within the scope of the limited warranty agreement and are, therefore, subject to arbitration prior to litigation. Plaintiffs counter that: (1) no agreement to arbitrate exists because the limited warranty agreement is not a contract between the parties; and (2) the rights and obligations they seek to enforce predate and exist independent of the limited warranty.

Initially, we note that the trial court's order is interlocutory because it fails to resolve plaintiffs' claims. See Raspet v. Buck, 147 N.C.App. 133, 135, 554 S.E.2d 676, 677 (2001)

. While interlocutory orders are generally not immediately appealable, this Court has consistently held that an order denying arbitration may be immediately appealed because it involves a substantial right, the right to arbitrate a claim, which may be lost if appeal is delayed. Id.; Martin v. Vance, 133 N.C.App. 116, 119, 514 S.E.2d 306, 308 (1999); Burke v. Wilkins, 131 N.C.App. 687, 688, 507 S.E.2d 913, 914 (1998).

In considering a motion to compel arbitration, the trial court must determine (1) whether the parties have a valid agreement to arbitrate, and (2) whether the subject in dispute is covered by the arbitration agreement. Ragan v. Wheat First Sec., Inc., 138 N.C.App. 453, 455, 531 S.E.2d 874, 876 (citing PaineWebber Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir.1990)), disc. review denied, 353 N.C. 268, 546 S.E.2d 129 (2000). The trial court's conclusion is reviewable de novo by this Court. Raspet, 147 N.C.App. at 136,554 S.E.2d at 678.

We first address plaintiffs' argument that there is no agreement to arbitrate because the limited warranty agreement does not constitute a contract between the parties. Specifically, plaintiffs contend their signatures on the enrollment form merely acknowledge they received and read the agreement but do not bind them to its terms, in particular the arbitration provision. We disagree.

"Enrollment" is defined as "the act or an instance of enrolling," while "enrolling" is defined as "entering one's name on a list, esp. as a commitment to membership." Oxford American Dictionary (1999), p. 319. By signing an enrollment form, the signatories are by definition committing to something. The enrollment form here repeatedly refers to the limited warranty agreement. Thus, we reject plaintiffs' contention that they are not contractually bound by the terms of the limited warranty.

Included in the limited warranty is an agreement to arbitrate any disputes or claims arising thereunder. The duty to read an instrument, or have it read before signing it, is a positive one, and one who signs a written contract without reading it when able to do so is bound by the contract unless the failure to read is justified by some special circumstances. See Massey v. Duke University, 130 N.C.App. 461, 464-65, 503 S.E.2d 155, 158 (1998)

; see also Mills v. Lynch, 259 N.C. 359, 362, 130 S.E.2d 541, 543-44 (1963); Davis v. Davis, 256 N.C. 468, 472, 124 S.E.2d 130, 133 (1962). There are no special circumstances present here. Accordingly, we conclude the parties have a valid agreement to arbitrate all claims arising under the limited warranty.

Next, we determine whether plaintiffs' claims for relief fall within the scope of the arbitration agreement. See Rodgers Builders v. McQueen, 76 N.C.App. 16, 23, 331 S.E.2d 726, 731 (1985) ("only those disputes which the parties agreed to submit to arbitration may be so resolved"). In so doing, we are guided by the strong state and federal public policy favoring the settlement of disputes by arbitration. See Moses H. Cone Hospital v. Mercury Constr., 460 U.S. 1, 24, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983), superseded by statute on other grounds as stated in Bradford-Scott Data v. Physician Computer Network, 128 F.3d 504 (7th. Cir.1997)

; Morgan v. Smith Barney, Harris Upham & Co., 729 F.2d 1163 (8th Cir.1984); Johnston County v. R.N. Rouse & Co., 331 N.C. 88, 91, 414 S.E.2d 30, 32 (1992); Servomation Corp. v. Hickory Construction Co., 316 N.C. 543, 544, 342 S.E.2d 853, 854 (1986); Cyclone Roofing Co. v. LaFave Co., 312 N.C. 224, 229, 321 S.E.2d 872, 876 (1984); Raspet, 147 N.C.App. at 135,

554 S.E.2d at 678; Rodgers Builders, 76 N.C.App. at 24-25,

331 S.E.2d at 731. "[This] strong public policy requires that the courts resolve any doubts concerning the scope of arbitrable issues in favor of arbitration." Johnston County, 331 N.C. at 91,

414 S.E.2d at 32.

Plaintiffs' complaint sets forth claims for breach of the implied warranty of habitability or workmanlike construction, breach of express warranties, willful misrepresentation and negligent misrepresentation. We consider each in turn.

In Hartley v. Ballou, 286 N.C. 51, 209 S.E.2d 776 (1974), the Supreme Court stated the implied warranty governing the sale of a...