Miller Bldg. Corp. v. Coastline Associates Ltd. Partnership, 915SC280

• Decision Date: 07 January 1992
• Docket Number: No. 915SC280,915SC280
• Citation: 411 S.E.2d 420,105 N.C.App. 58
• Court: North Carolina Court of Appeals
• Parties: MILLER BUILDING CORPORATION, Plaintiff, v. COASTLINE ASSOCIATES LIMITED PARTNERSHIP, Dewayne H. Anderson, William G. Benton, David Weil, William T. Baird, Faison S. Kuester, Jr., and Historic Preservation 1988 Limited Partnership, Defendants.

Page 420

411 S.E.2d 420

105 N.C.App. 58

MILLER BUILDING CORPORATION, Plaintiff, v. COASTLINE ASSOCIATES LIMITED PARTNERSHIP, Dewayne H.

Anderson, William G. Benton, David Weil, William

T. Baird, Faison S. Kuester, Jr., and

Historic Preservation 1988

Limited Partnership,

Defendants.

No. 915SC280.

Court of Appeals of North Carolina.

Jan. 7, 1992.

Marshall, Williams & Gorham, by Lonnie B. Williams and John D. Martin, Wilmington, for plaintiff appellee.

Deborah L. Nowachek, Goldsboro, for defendants appellants.

COZORT, Judge.

In October 1987 plaintiff Miller Building Corporation (Miller) entered a written contract with defendant Coastline Associates Limited Partnership (Coastline) primarily for the construction of the Coastline Inn in Wilmington, North Carolina. The contract contained an arbitration provision and a provision that Coastline would be charged interest on all late monthly payments. After several late payments, in April 1988 Miller billed Coastline for interest due. Coastline did not pay the interest charge. Construction was completed in July 1989. Plaintiff continued to bill defendant for interest on late payments through February 1990, but defendant did not respond. After receiving no response to a written formal demand for payment, on 27 August 1990, Miller filed suit in New Hanover County Superior Court. By stipulation, the time for responsive pleading was extended until 31 October 1990. On 30 October 1990 defendants filed a motion to stay judicial proceedings and compel arbitration, a motion to disqualify plaintiff's counsel, and an answer. The trial court denied defendants' motion to disqualify on 27 November 1990. On 28 January 1991, the trial court denied defendants' motion to stay the judicial proceedings and compel arbitration and entered an order two days later. Defendant appeals from the trial court's denial of the motion to compel arbitration. We reverse.

The sole issue on appeal is whether the trial court erred in denying the motion to compel arbitration on the basis that defendants had delayed unreasonably in demanding arbitration and had waived any right to arbitration.

In pertinent part the General Conditions of the Contract for Construction entered into by Miller and Coastline provide

4.5. ARBITRATION

4.5.1 Controversies and Claims Subject to Arbitration. Any controversy or Claim arising out of or related to the Contract, or the breach thereof, shall be settled by arbitration....

4.5.4.2 A demand for arbitration shall be made ... within a reasonable time after the Claim has arisen, and in no event shall it be made after the date when institution of legal or equitable proceedings based on such Claim would be barred by the applicable statute of limitations as determined pursuant to Paragraph 13.7. (Emphasis added)

The trial court made the following pertinent findings of fact and conclusions of law:

6. In its Answer, Coastline set up several defenses to payment of interest and for the first time moved for arbitration.

* * * * * *

9. The General Conditions of the contract contained an agreement to arbitrate.

10. Because Coaastline [sic ] failed to respond to the billings for interest and failed to request arbitration, the plaintiff employed counsel and filed suit in August 1990, two years and eight months after the first late payment in December 1987. The demand for arbitration under these circumstances was not made within a reasonable time.

11. Coastline waived any right it had to demand arbitration by its delays in seeking arbitration until after pursuing other motions and after plaintiff had incurred attorneys fees of $3,040.00, which the court finds were substantial.

From the foregoing findings of fact the court makes the following Conclusions of Law:

1. The demand for arbitration was not made in a reasonable time.

2. Coastline waived any right to arbitrate.

On appeal, defendants argue that the trial court erred in denying the motion to stay judicial proceedings and compel arbitration because defendants demanded arbitration within a reasonable time and Miller was not prejudiced by the delay in the demand. We agree.

In Adams v. Nelsen, 67 N.C.App. 284, 312 S.E.2d 896 (1984), modified and aff'd, 313 N.C. 442, 329 S.E.2d 322 (1985), plaintiff professional engineer entered a contract to perform professional design services in connection with a residence for defendants. The contract provided that demand for arbitration be made within the applicable statute of limitations. Plaintiff performed the work. Upon defendants' failure to pay, plaintiff filed suit in district court seeking to enforce a claim of lien. Defendants filed an answer and moved to dismiss the action pursuant to Rule 12(b)(6). The trial court granted the defendants' motion. On appeal, we found the trial court erred in dismissing the suit because there was no defect on the face of plaintiff's complaint and the trial court did not possess the authority to cancel plaintiff's claim of lien. We rejected defendants' argument that plaintiff's complaint was invalid since the parties had previously agreed to arbitrate all disputes. We did find, however, that both parties had waived the right to arbitration. The plaintiff indicated his intent to waive his right, we reasoned, by pursuing the action in court. We then concluded that defendants also waived the right to arbitrate based on the following reasoning:

According to the contract's arbitration provision, to avoid waiver, it was necessary for a party to demand arbitration within the applicable statutory time limit. The statute of limitations governing contract disputes is three years. G.S. 1-52. Defendants, therefore, to have invoked their right to arbitration should have demanded such within three years from the time plaintiff breached the contract's arbitration provision by instituting court action.... Because of their own inaction, defendants are now barred from invoking their arbitration rights.

Id. 67 N.C.App. at 288, 312 S.E.2d at 899 (citation omitted) (emphasis added). Finally, we noted that it was more practical and efficient for the trial judge to determine the waiver issue. Id.

On appeal, the North Carolina Supreme Court affirmed and modified our decision, determining that an arbitration clause does not prevent a party from pursuing a separate legal remedy in court; a 12(b)(6) motion does not oust the court of jurisdiction nor invoke the arbitration provision; and defendant could not demand arbitration after the running of the applicable statute of limitations. Although agreeing with our final resolution of the waiver issue, the Court...