Carr v. Heart of the N. Home Inspection, Inc.

• Citation: 2022 WI App 7,970 N.W.2d 580 (Table)
• Decision Date: 20 July 2021
• Docket Number: Appeal No. 2020AP984
• Parties: Catherine R. CARR and Travis Carr, Plaintiffs-Appellants, v. HEART OF the NORTH HOME INSPECTION, INC., Defendant-Respondent, Amtrust International Underwriters Designated Activity Company, Security Health Plan of Wisconsin, Inc., Roger L. Rivard, Personally and as Trustee of the Roger L. and Bernadine L. Rivard Living Trust, Bernadine L. Rivard, Personally and as Trustee of the Roger L. and Bernadine L. Rivard Living Trust, and Hastings Mutual Insurance Company, Defendants.
• Court: Court of Appeals of Wisconsin

970 N.W.2d 580 (Table)

2022 WI App 7

Catherine R. CARR and Travis Carr, Plaintiffs-Appellants,

v. HEART OF the NORTH HOME INSPECTION, INC., Defendant-Respondent,Amtrust International Underwriters Designated Activity Company, Security Health Plan of Wisconsin, Inc., Roger L. Rivard, Personally and as Trustee of the Roger L. and Bernadine L. Rivard Living Trust, Bernadine L. Rivard, Personally and as Trustee of the Roger L. and Bernadine L. Rivard Living Trust, and Hastings Mutual Insurance Company, Defendants.

Appeal No. 2020AP984

Court of Appeals of Wisconsin.

July 20, 2021

PER CURIAM.

¶1 Catherine and Travis Carr (collectively, "the Carrs") appeal an order granting Heart of the North Home Inspection, Inc.’s motion to stay the underlying action and compel arbitration. The Carrs argue that their personal injury action does not arise out of a contract as required by WIS. STAT. § 788.01 (2019-20),¹ the statute governing enforceability of arbitration clauses in contracts. The Carrs further argue that any obligation to arbitrate under the contract with their home inspector does not extend to their claims against Heart of the North because it was not a party to the inspection contract. The Carrs alternatively argue that if the arbitration clause applies here, it should nevertheless be deemed void as unconscionable and against public policy. For the reasons discussed below, we reject these arguments and affirm the order.

BACKGROUND

¶2 Heart of the North is owned and operated solely by Jeffrey Martino, a registered home inspector. On May 29, 2019, Martino performed an inspection on a Rice Lake home that the Carrs intended to purchase. On the day of the inspection, the parties executed a two-page "Inspection Agreement" that included a dispute resolution clause that provided, in relevant part:

Inspector and Client (and any other person claiming to have relied upon the inspection report) specifically agree that any controversy or claim arising out of or relating to the inspection or other services provided under this contract, or breach thereof, including any negligence, tort or other claims, against the person who performed the inspection, shall be resolved exclusively by arbitration.

¶3 The Carrs purchased the home on June 14, 2019, and approximately six weeks later, the deck on the property collapsed, injuring Catherine. The Carrs filed the underlying action against Heart of the North, alleging that Heart of the North "and/or its agents and employees" conducted a home inspection for the Carrs "and negligently failed to identify unsafe conditions of an outside deck." The Carrs further alleged that as a proximate result of the negligence, Catherine suffered personal injuries and Travis was damaged by the loss of consortium and marital property. The complaint was subsequently amended to identify Heart of the North's insurer and to add claims against the previous owners and their insurer.² Notably, the Carrs did not name Martino as a party to the lawsuit.

¶4 Heart of the North filed a motion to stay circuit court proceedings pursuant to WIS. STAT. § 788.02, and to compel arbitration under the dispute resolution clause of the inspection agreement. After a hearing, the circuit court stayed proceedings and ordered the Carrs and Heart of the North to arbitrate the claims between them. This appeal follows.

DISCUSSION

¶5 The Carrs argue that their personal injury action does not arise out of the inspection agreement as required by WIS. STAT. § 788.01 and, therefore, they cannot be compelled to arbitrate under the terms of that agreement. Whether the Carrs’ claims fall within the purview of § 788.01 presents a question of statutory interpretation that we review de novo. See Truttschel v. Martin , 208 Wis. 2d 361, 364-65, 560 N.W.2d 315 (Ct. App. 1997). The goal of statutory interpretation is to ascertain the legislature's intent. City of Racine v. Waste Facility Siting Bd. , 216 Wis. 2d 616, 621, 575 N.W.2d 712 (1998). Any effort at statutory construction must begin with the plain language of the statute itself. Id. If the statute is unambiguous on its face, generally we do not look further. Id. The statute provides, in relevant part:

A provision in any written contract to settle by arbitration a controversy thereafter arising out of the contract , or out of the refusal to perform the whole or any part of the contract, or an agreement in writing between 2 or more persons to submit to arbitration any controversy existing between them at the time of the agreement to submit, shall be valid, irrevocable and enforceable except upon such grounds as exist at law or in equity for the revocation of any contract.

Sec. 788.01 (emphasis added).

¶6 The Carrs argue that their personal injury claims cannot arise out of the subject contract within the meaning of WIS. STAT. § 788.01 because "[a] party's deficient performance of a contract does not give rise to a tort claim." Atkinson v. Everbrite, Inc. , 224 Wis. 2d 724, 729, 592 N.W.2d 299 (Ct. App. 1999). In Atkinson , this court acknowledged that the negligent performance of a duty created by contract cannot, without more, create a separate cause of action in tort. Id. The Carrs, however, fail to recognize that "a breach of contract ... may create the state of things which furnishes the occasion of a tort." Colton v. Foulkes , 259 Wis. 142, 146, 47 N.W.2d 901 (1951). In Colton , our supreme court explained that "where there is a general duty, even though it arises from the relation created by, or from the terms of, a contract, and that duty is violated, either by negligent performance or negligent nonperformance, the breach of the duty may constitute actionable negligence." Id. at 146-47. Because general duties may arise from a contractual relationship, a negligence claim can be a controversy arising out of a contract, as contemplated under § 788.01.

¶7 Here, the Carrs’ complaint alleged that Heart of the North negligently performed the inspection of their property and, as a proximate result of that alleged negligence, Catherine suffered personal injuries. The Carrs nevertheless contend that while their personal injury claims relate to the contract, they do not arise from the contract, as contemplated under WIS. STAT. § 788.01. We are not persuaded. Heart of the North had no duty to the Carrs to inspect the property or to provide the results of that inspection absent the inspection agreement. Therefore, if the Carrs have any claim against Heart of the North, including one based on an allegedly failed inspection, it necessarily arises out of the inspection agreement.

¶8 Moreover, as Heart of the North emphasizes, federal courts have enforced the arbitration of tort claims under the Federal Arbitration Act, 9 U.S.C. § 2 (2018), which utilizes language similar to WIS. STAT. § 788.01.³ See, e.g. , Pickering v. Urbantus, LLC , 827 F. Supp. 2d 1010, 1017 (S.D. Iowa 2011) (enforcing arbitration clause for tort claim arising from assisted living services provided under a contract); see also Fyrnetics (Hong Kong) Ltd. v. Quantum Group, Inc. , 293 F.3d 1023, 1030 (7th Cir. 2002) (recognizing that plaintiffs cannot escape contractual obligation to arbitrate by casting their claim as one arising in tort). Because the controversy regarding the Carrs’ personal injury claims arises out of the inspection agreement, § 788.01 requires enforcement of the agreement's arbitration provision.

¶9 The Carrs alternatively argue that Heart of the North cannot pursue arbitration under the inspection agreement because it was not a party to the agreement. The interpretation of a written contract is a question of law that we review de novo. Tang v. C.A.R.S. Prot. Plus, Inc. , 2007 WI App 134, ¶27, 301 Wis. 2d 752, 734 N.W.2d 169. Although we review questions of law independently, we benefit from the circuit court's analysis. Northern States Power Co. v. National Gas Co. , 232 Wis. 2d 541, 545, 606 N.W.2d 613 (Ct. App. 1999).

¶10 "[T]he cornerstone of contract construction is to ascertain the true intentions of the parties as expressed by the contractual language." State ex rel. Journal/Sentinel, Inc. v. Pleva , 155 Wis. 2d 704, 711, 456 N.W.2d 359 (1990). We "determine what the parties contracted to do as evidenced by the language they saw fit to use." Id. "Contract language is considered ambiguous if it is susceptible to more than one reasonable interpretation." Danbeck v. American Fam. Mut. Ins. Co. , 2001 WI 91, ¶10, 245 Wis. 2d 186, 629 N.W.2d 150. "When the terms of a contract are plain and unambiguous, we will construe the contract as it stands." State v. Peppertree Resort Villas, Inc. , 2002 WI App 207, ¶14, 257 Wis. 2d 421, 651 N.W.2d 345. If the terms of a contract are ambiguous, we must consider extrinsic evidence to determine the parties’ intent. Farm Credit Servs. v. Wysocki , 2001 WI 51, ¶12, 243 Wis. 2d 305, 627 N.W.2d 444. Moreover, background principles of state contract law apply to ascertain whether a contract between certain parties has been formed in the first instance. Arthur Andersen LLP v. Carlisle , 556 U.S. 624, 630 (2009).

¶11 Here, the Carrs argue that they and Martino, individually, are the only parties to the inspection agreement as: (1) Martino was the inspector referenced in the agreement; (2) Heart of the North did not sign the agreement; (3) and there was no mutual meeting of the minds to form a contract with Heart of the North. We are not persuaded. As an initial matter, the Carrs’ argument in this regard appears to be inconsistent with their complaint. As noted above, the complaint alleges that Heart of the North, its agents, or its employees negligently failed to identify unsafe conditions of the deck. Yet now they claim that Heart of the North was not a party to the agreement under which the inspection was completed, nor was Heart of the North the "inspector" as contemplated by the agreement. If Heart of the North was not a party to the inspection agreement, however, it had no duty to inspect the...