Opinion
No. COA06-790
Filed: 5 June 2007 WITHDRAWN BY THE COURT: 21 June 2007.
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 2007.
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.
Mecklenburg County No. 04 CVS 14862.
By a complaint filed 9 September 2004, Plaintiff alleged causes of action against Portrait Homes Construction Company ("Defendant") 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" 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[.]"
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 Plaintiff's lawsuit.
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 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. That same day, Judge Bell denied Defendant's motion to dismiss and motion to stay and compel arbitration.
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.
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 Defendant's argument regarding the third-party warranty was 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. 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 or stay 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.
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By its first argument, Defendant contends that by allegedly accepting a third-party warranty in lieu of all other warranties, Plaintiff, through the individual homeowners in the Community, agreed to submit the disputes at issue to binding arbitration. This issue is interlocutory and not immediately appealable, and is therefore dismissed.
In Pineville Forest I, 175 N.C. App. at 384-85, 623 S.E.2d at 624, Defendant, represented by the same attorney, argued to this Court that Judge Bell erred in failing to dismiss and compel arbitration in Plaintiff's causes of action because of an "alleged acceptance of a third-party warranty [that] . . . [barred the] suit." As stated, this Court held that Defendant's argument in this respect raised an interlocutory issue that did not involve a substantial right and was therefore not immediately appealable. Accordingly, this Court dismissed Defendant's argument that a third-party warranty barred Plaintiff's lawsuit. Because this argument has already been considered and rejected in this case, Defendant's assertion of the same argument on this appeal violates Rule 34 of the North Carolina Rules of Appellate Procedure. See N.C. R. App. P. 34(a)(1) (appeals should not be taken that are "not well grounded in fact and warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law").
In a companion case to this case, University Heights v. Portrait Homes Constr. Co., ___ N.C. App. ___, ___ S.E.2d ___ (June 5, 2007) (COA06-746) (unpublished), we express concern that Defendant brought forward the same argument that had been rejected months earlier in Pineville Forest I. However, in this case the actions of Defendant's attorney cause more than concern for this Court; rather, because Defendant brings forward an argument that has already been considered and rejected in this case, we find Defendant's argument offensive. Furthermore, because the impetus for Judge Bell's amended order was our opinion in Pineville Forest I, it is clear that Defendant's attorney was keenly aware of our decision and either chose not to read Pineville Forest I or to disregard it. The work of this Court is not idle and, unless reversed, we are bound by our previous decisions. See In re Civil Penalty, 324 N.C. 373, 379 S.E.2d 30 (1989).
If Defendant's counsel wanted reconsideration of the third-party warranty argument, he was free to petition this Court for rehearing or petition our Supreme Court for discretionary review. He did neither. Without such action, this Court's opinion in Pineville Forest I stands. We caution Defendant's counsel that appellate practice is not sandlot baseball; absent prior judicial approval by either the grant of a motion for rehearing by the same Court, or the grant of a petition for consideration by a higher Court, there are no "do overs." For these reasons, we conclude that sanctions against Defendant's attorney are warranted. See N.C. R. App. P. 34(a) (allowing an appellate court, "on its own initiative . . . [to] impose a sanction against a[n] . . . attorney . . . when the court determines that an appeal or any proceeding in an appeal was frivolous"). Accordingly, we "remand the matter to the trial court for the determination of an appropriate sanction within the scope of Rule 34(b)(2) (3) of the North Carolina Rules of Appellate Procedure." McGowan v. Argo Travel, Inc., 131 N.C. App. 694, 695, 507 S.E.2d 601, 602 (1998) (citing N.C. R. App. P. 34(c)).
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Defendant next argues that the trial court erred in denying its motion to dismiss because Plaintiffs must participate in binding arbitration as required by the Covenants and Restrictions. We disagree.
"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 arbitration provision, 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).
In this case, the second prong of the 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 on 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 addition of 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, Defendant's appeal is dismissed in part and the order of the trial court denying Defendant's motion to dismiss or to compel arbitration is affirmed. This case is remanded to the trial court for determination of an appropriate sanction.
APPEAL DISMISSED IN PART, AFFIRMED IN PART, AND REMANDED.
Judges TYSON and STROUD concur.