Parsons v. Homes, Appellate Case No. 2014–000782

• Citation: 791 S.E.2d 128,418 S.C. 1
• Decision Date: 17 August 2016
• Docket Number: Appellate Case No. 2014–000782,Opinion No. 27655
• Court: United States State Supreme Court of South Carolina
• Parties: Ralph Wayne Parsons, Jr., and Louise C. Parsons, Respondents, v. John Wieland Homes and Neighborhoods of the Carolinas, Inc., Wells Fargo Bank, N.A., and South Carolina Bank & Trust, N.A., Defendants, Of which John Wieland Homes and Neighborhoods of the Carolinas, Inc. is Petitioner.

418 S.C. 1

791 S.E.2d 128

Ralph Wayne Parsons, Jr., and Louise C. Parsons, Respondents,

v. John Wieland Homes and Neighborhoods of the Carolinas, Inc., Wells Fargo Bank, N.A., and South Carolina Bank & Trust, N.A., Defendants,Of which John Wieland Homes and Neighborhoods of the Carolinas, Inc. is Petitioner.

Appellate Case No. 2014–000782

Opinion No. 27655

Supreme Court of South Carolina.

Heard May 7, 2015

Filed August 17, 2016

Rehearing Denied October 24, 2016

G. Trenholm Walker and Ian W. Freeman, both of Pratt–Thomas Walker, PA, of Charleston, for Petitioner.

Herbert W. Hamilton, of Hamilton Martens Ballou & Carroll, LLC, of Rock Hill, for Respondents.

CHIEF JUSTICE PLEICONES:

We granted certiorari to review a Court of Appeals' decision affirming a circuit court order which denied petitioner's (“JWH”) motion to compel arbitration. Parsons v. John Wieland Homes and Neighborhoods of the Carolinas, Inc. , Op. No. 2013–UP–296 (S.C. Ct. App. refiled August 28, 2013). We reverse.

FACTS

In 2002, JWH purchased approximately sixty-five acres of land for the development of a residential subdivision. The land was previously utilized as a textile-related industrial site. Following the purchase, JWH demolished and removed all visible evidence of the industrial site and removed various underground pipes, valves, and tanks remaining from the industrial operations.

JWH then began selling lots and “spec” homes on the sixty-five acres. In 2007, respondents (“the Parsons”) executed a purchase agreement to buy a home built and sold by JWH (“the Property”).¹ Paragraph 21 of the purchase agreement for the Property states the purchaser has received and read a copy of the JWH warranty (“Warranty”) and consented to the terms thereof, including, without limitation, the terms of the arbitration clause. The Parsons initialed below the paragraph. Upon executing the purchase agreement, the Parsons were provided a “Homeowner Handbook” containing the Warranty. The arbitration clause is set forth in paragraph O of the Warranty's General Provisions. The Parsons signed an acknowledgment of receipt of the handbook dated the same date as the purchase agreement.

In 2008, the Parsons discovered PVC pipes and a metal lined concrete box buried on their Property. The PVC pipes and box contained “black sludge,” which tested positive as a hazardous substance. JWH entered a cleanup contract with the South Carolina Department of Health and Environmental Control. JWH completed and paid for the cleanup per the cleanup contract.²

The Parsons claim they were unaware the Property was previously an industrial site and contained hazardous substances. In 2011, the Parsons filed the present lawsuit alleging JWH breached the purchase agreement by failing to disclose defects with the Property, selling property that was contaminated, and selling property with known underground pipes. The Parsons further alleged breach of contract, breach of implied warranties, unfair trade practices, negligent misrepresentation, negligence and gross negligence, and fraud.

JWH moved to compel arbitration and dismiss the complaint. The motion asserted that all of the Parsons' claims arose out of the purchase agreement, and the Parsons clearly agreed that all such disputes would be decided by arbitration. The circuit court denied the motion and found the arbitration clause was unenforceable for two reasons.

First, the circuit court found that because the arbitration clause was located within the Warranty booklet, its scope was limited to claims under the Warranty. The circuit court further found that because the Warranty was limited to claims caused by a defect or deficiency in the design or construction of the home, the Parsons' claims fell outside the scope of the arbitration clause, and, thus, the arbitration clause was unenforceable.

Second, the circuit court applied the outrageous torts exception to arbitration enforcement³ and found that because the Parsons alleged outrageous tortious conduct, namely, the intentional and unforeseeable conduct of JWH in failing to disclose concealed contamination on the Property, the arbitration clause was unenforceable.⁴

The Court of Appeals affirmed the circuit court's finding that the scope of the arbitration clause was restricted to Warranty claims and declined to address the circuit court's application of the outrageous torts exception doctrine.

We granted JWH's petition for a writ of certiorari to review the Court of Appeals' decision.

ISSUE

Did the Court of Appeals err in affirming the circuit court's ruling that the arbitration clause was unenforceable?

LAW/ANALYSIS

The Court of Appeals found the circuit court correctly determined the arbitration clause was unenforceable. We disagree.

The determination whether a claim is subject to arbitration is reviewed de novo . Gissel v. Hart , 382 S.C. 235, 240, 676 S.E.2d 320, 323 (2009)

. Nevertheless, a circuit court's factual findings will not be reversed on appeal if any evidence reasonably supports the findings. Simpson v. MSA of Myrtle Beach, Inc. , 373 S.C. 14, 22, 644 S.E.2d 663, 667 (2007) (citing Thornton v. Trident Med. Ctr., L.L.C. , 357 S.C. 91, 94, 592 S.E.2d 50, 51 (Ct. App. 2003) ).

The policy of the United States and of South Carolina is to favor arbitration of disputes. Zabinski v. Bright Acres Assocs. , 346 S.C. 580, 590, 553 S.E.2d 110, 115 (2001)

. Arbitration is a matter of contract law and general contract principles of state law apply to a court's evaluation of the enforceability of an arbitration clause. Simpson , 373 S.C. at 24, 644 S.E.2d at 668. (citations omitted).

I. Scope

The Court of Appeals affirmed the trial court's finding that because the arbitration clause was located within the Warranty, the scope of the arbitration clause was limited to claims covered by the Warranty. We hold the Court of Appeals erred in affirming this finding.

To determine whether an arbitration clause applies to a dispute, a court must determine whether the factual allegations underlying the claim are within the scope of the arbitration clause. Zabinski , 346 S.C. at 597, 553 S.E.2d at 118

(citing Hinson v. Jusco Co. , 868 F.Supp. 145 (D.S.C. 1994) ; S.C. Pub. Serv. Auth. v. Great W. Coal , 312 S.C. 559, 437 S.E.2d 22 (1993) ). The heavy presumption in favor of arbitrability requires that when the scope of the arbitration clause is open to question, a court must decide the question in favor of arbitration. Landers v. Fed. Deposit Ins. Corp. , 402 S.C. 100, 109, 739 S.E.2d 209, 213 (2013) (quoting Am. Recovery Corp. v. Computerized Thermal Imaging, Inc. , 96 F.3d 88, 94 (4th Cir. 1996) (quoting Peoples Sec. Life Ins. Co. v. Monumental Life Ins. Co ., 867 F.2d 809, 812 (4th Cir. 1989) )).

Paragraph 21 of the purchase agreement provides, in pertinent part:

21. Warranty and Arbitration . Purchaser and Seller hereby agree that, in connection with the sale contemplated by this agreement, Purchaser will be enrolled in the John Wieland Home and Neighborhoods 5–20 Extended Warranty program, booklet revision date 04/06 (JWH Warranty), the JWH Warranty being incorporated herein by reference .... PURCHASER ACKNOWLEDGES THAT PURCHASER HAS RECEIVED AND READ A COPY OF THE CURRENT JWH WARRANTY AND CONSENTS TO THE TERMS THEREOF, INCLUDING, WITHOUT LIMITATION, THE BINDING ARBITRATION PROVISIONS CONTAINED THEREIN....

(Capitalization, bold, and underline in original).

Paragraph O of the Warranty provides, in pertinent part:

Mandatory Binding Arbitration . Wieland and Homebuyer(s) will cooperate with one another in avoiding and informally resolving disputes between them....

Any and all unresolved claims or disputes of any kind or nature between [petitioner] and Homebuyer(s) arising out of or relating in any manner to any purchase agreement with Wieland (if any), this warranty, the Home and/or property on which it is constructed, or otherwise, shall be resolved by final and binding arbitration conducted in accordance with this provision, and such resolution shall be final. This applies only to claims or disputes that arise after the later of: (a) the issuance of the final certificate of the occupancy for the home, or (b) the initial closing of the purchase of the Home by the initial Homebuyer(s). This specifically includes, without limitation, claims related to any representations, promises or warranties alleged to have been made by Wieland or its representatives; rescission of any contract or agreement; any tort; any implied warranties; any personal injury; and any property damage.

....

WIELAND AND HOMEBUYER(S) HEREBY ACKNOWLEDGE AND AGREE THAT THE ARBITRATION PROCEDURE SET FORTH HEREIN SHALL BE THE SOLE AND EXCLUSIVE REMEDY FOR THE RESOLUTION OF ANY AND ALL DISPUTES ARISING AFTER THE INITIAL CLOSING OF THE PURCHASE OF THE HOME BY THE INITIAL HOMEBUYER(S). WIELAND AND HOMEBUYERS HEREBY WAIVE ANY AND ALL OTHER RIGHTS AND REMEDIES AT LAW, IN EQUITY OR OTHERWISE

WHICH MIGHT OTHERWISE HAVE BEEN AVAILABLE TO THEM IN CONNECTION WITH ANY SUCH DISPUTES.

(Capitalization, bold, and underline in original).

The plain and unambiguous language of the arbitration clause provides that all claims, including ones based in warranty, be subject to arbitration. Accordingly, we find the Court of Appeals erred in affirming the circuit court's finding that because the arbitration clause was located within the Warranty, its scope was limited to claims covered by the Warranty. See Jackson Mills, Inc. v. BT Capital Corp. , 312 S.C. 400, 403, 440 S.E.2d 877, 879 (1994)

(“Arbitration clauses are separable from the contracts in which they are imbedded.” (quoting Prima Paint Corp. v. Flood & Conklin , 388 U.S. 395, 402, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967) )); see also Zabinski , 346 S.C. at 592, 553 S.E.2d at 116

(finding that like other contracts, arbitration clauses will be enforced in accordance with their terms (citing Volt Info. Scis. Inc. v. Board of Trs. , 489 U.S. 468, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) )).

II. Outrageous Torts Exception

In 2007, this...