Melissa Dixon v. Weekley Homes, LLC ( 2023 )

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Melissa Dixon and Willard Dixon, Respondents,
v.
Lansing Pattee, Stephanie Pattee, Weekley Homes, L.P.,
d/b/a David Weekley Homes, John Doe, A2Z Advanced
Home Inspections, LLC, Fidelity and Deposit Company
of Maryland, Westchester Fire Insurance Company, and
Gutter Pros, LLC, Defendants,
And
Lansing Pattee and Stephanie Pattee, Third-Party
Plaintiffs,
v.
Gutter Pros, LLC, Third-Party Defendant,
Of whom Weekley Homes, L.P., d/b/a David Weekley
Homes is the Appellant,
And
Lansing Pattee and Stephanie Pattee are the Respondents.
Appellate Case No. 2020-000384
Appeal From Dorchester County
Edgar W. Dickson, Circuit Court Judge
Opinion No. 6040
Heard June 5, 2023 – Filed December 20, 2023
REVERSED
Jennifer Sue Ivey and John Phillips Linton, Jr., both of
Walker Gressette & Linton, LLC, of Charleston, for
Appellant.
Steven L. Smith and Zachary James Closser, both of
Smith Closser, and William King Kalivas, all of
Charleston, for Respondents Lansing Pattee and
Stephanie Pattee.
Gregory L. Hyland, of Walterboro, for Respondents
Melissa Dixon and Willard Dixon.
KONDUROS, J.: This case arises out of Melissa Dixon and Willard Dixon's (the
Dixons') lawsuit alleging the home they purchased from Lansing Pattee and
Stephanie Pattee (the Pattees) was defective. Weekley Homes, LLC, f/k/a
Weekley Homes, L.P. d/b/a David Weekley Homes (Weekley) constructed the
home. Weekley appeals the circuit court's denial of its motion to compel
arbitration. It contends the Pattees' purchase agreement with it (the Agreement)
involved interstate commerce, which the Agreement explicitly stated, and provided
the Federal Arbitration Act (FAA) would apply. We reverse.
FACTS/PROCEDURAL HISTORY
The Pattees entered into the Agreement with Weekley on August 18, 2008, to
purchase the subject property in Summerville and the "residential improvements
constructed, or to be constructed, thereon." Weekley built the home sometime in
2007 and/or 2008, although the parties do not agree exactly when it was
completed. Changes and customizations of the home were made pursuant to the
Agreement. The sale closed on September 10, 2008. The Agreement specified
that the closing was to be completed within five days of Weekley's completion of
its "construction obligations."
Regarding construction of the home, the Agreement provided:
5[.] CONSTRUCTION OBLIGATIONS:
Seller's construction obligations shall be deemed
completed upon the earlier of: (a) when it has completed
construction of the dwelling in substantial conformity
with the Plan referred to herein; or (b) upon final
approval by any applicable governmental authority; or (c)
upon final inspection in accordance with the Home
Warranty program offered by Seller. There is no
guaranteed date of completion and Seller shall have
no liability for failure to complete the dwelling by a
certain date or within a reasonable period of time.
Any statement of construction time is only an
estimate. Construction of the improvements may be
subject to changes in plans, specifications, materials,
fixtures and methods; . . . By closing, Purchaser accepts
the Residence as constructed, except for repairs required
under the terms of the Home Warranty.
The Agreement also provided:
6[.] DECORATOR SELECTIONS, CUSTOM
CHOICES, AND CHANGE REQUESTS: Seller may
allow Purchaser to select some interior decorating
items,[ 1] such as floor coverings and color of appliances
("Decorator Selections" and/or "Custom Choices"), or
make other minimal modifications to the Interior of the
Property ("Change Requests"), if selected and deposits
paid within fourteen (14) days of the Write-Up Date of
this Agreement. Any selections made after this deadline
may be subject to a change order fee. Decorator
Selections may be made only from Seller's designated
catalogs or other approved selection lists or samples.
Under the section entitled Notices and General Provisions, the Agreement states:
1
A checklist accompanying the Agreement suggests the Pattees had been able to
select between options for flooring, appliance color, bath hardware, countertops,
plumbing fixtures, shower enclosures, interior and exterior hardware, lighting
style, interior paint, and backsplash and wall tile.
12[.] ADDITIONAL PROVISIONS: Sellers to
continue hardwoods through Family Room (to door of
Owners Retreat), Kitchen, and Breakfast Rooms. Sellers
to replace laminate kitchen countertops, sink, and faucet
with a first level Quartz countertop (customer's choice), 2
Bowl undermount Stainless Sink and Stainless Faucet.
Sellers to continue crown molding through Study and
Family Room.
Regarding arbitration of disputes, page 4 of the Agreement states:
9[.] DISPUTE RESOLUTION: ANY CLAIM,
DISPUTE OR CAUSE OF ACTION INVOLVING
SELLER OR PURCHASER (INCLUDING ANY
CLAIM OR CAUSE OF ACTION BROUGHT BY
EITHER PARTY AGAINST SUBCONTRACTORS,
SUPPLIERS, MANUFACTURERS, AFFILIATED
COMPANIES, THE DEVELOPER OF THE
PROPERTY, OR ANY OTHER PROVIDER OF
GOODS OR SERVICES IN CONNECTION WITH
THE PROPERTY OR THIS AGREEMENT),
SHALL BE RESOLVED BY BINDING
ARBITRATION, IN ACCORDANCE WITH THE
FEDERAL ARBITRATION ACT (TITLE 9, U.S.
CODE) OR THE APPLICABLE STATE
ARBITRATION STATUTE, IF THE FEDERAL
ARBITRATION ACT DOES NOT APPLY.
a[.] Scope of Arbitration. The Arbitration provisions
of this Agreement apply to all claims brought by
through or under Purchaser, their dependents or
other occupants of the Property, whether sounding in
contract, tort, or otherwise, including claims for
emergency or interim relief. The claims, disputes or
causes of action within the scope of arbitration
include, but are not limited to, those arising in
connection with: (i) this Agreement, including the
negotiation, formation, subject matter, breach,
cancellation or termination hereof; (ii) the
development, design, construction, preparation,
maintenance or repair, of improvements to the
Property; (iii) marketing or sale of the Property; (iv)
any representations or warranties, express or implied,
relating to the Agreement or the Property; (v) any
transaction, event or relationship between Purchaser
and Seller, including any subsequent agreement or
alleged agreement between Purchaser and Seller; (vi)
any violations of any statute including, but not limited
to, consumer protection, disclosure, or similar statutes
or regulations (vii) any personal injury or property
damage claim; and/or (viii) any other agreement,
transaction, occurrence or event giving rise to a
dispute over breach of legal duties, rights or
obligations which involve Purchaser and Seller ("the
Dispute"). This arbitration provision shall survive
closing, breach or termination of this Agreement and
shall not be superseded by the doctrines of merger or
waiver.
....
c[.] Administration of Mediation and Arbitration. If
the Dispute arises in connection with an alleged
construction defect the arbitration may be initiated
and administered in accordance with the provisions of
the Home Warranty instead of this Agreement.
....
f[.] Limitations. ANY CLAIM, DISPUTE OR
CAUSE OF ACTION BETWEEN PURCHASER
AND SELLER MUST BE BROUGHT BY
PURCHASER NO LATER THAN TWO (2) YEARS
AFTER THE DATE THE CAUSE OF ACTION
ACCRUES, unless applicable law requires
application of a different period of limitations (i.e.,
prevents a contractual two-year limitations period).
Unless proven otherwise, it shall be presumed that
any such cause of action accrued on the Closing Date;
or, if no closing occurs, on the Acceptance Date. Any
longer periods of limitations are hereby expressly
WAIVED by the parties. An unsuccessful motion or
action to stay an arbitration proceeding based on the
position that It has been commenced after expiration
of limitations shall not waive any party's right to have
the underlying dispute resolved by arbitration.
Each page of the Agreement contains the purchasers' signed initials.
Additionally, the Pattees signed a Homeowner Portfolio Receipt, which states, they
received a sample of the Home Warranty ("Warranty") administered by
Professional Warranty Service Corporation (PWC).2 At the bottom of the front
page of the Warranty it states, "THIS AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION, WHICH MAY BE ENFORCED BY EITHER
PARTY." On the second page it states:
THIS LIMITED WARRANTY PROVIDES: THAT
ANY AND ALL CLAIMS AND DISPUTES
BETWEEN YOU AND US WHICH YOU AND WE
ARE UNABLE TO RESOLVE BY MUTUAL
AGREEMENT, SHALL BE RESOLVED SOLELY
AND EXCLUSIVELY THROUGH FINAL AND
BINDING ARBITRATION IN ACCORDANCE WITH
THE TERMS AND PROCESS DESCRIBED WITHIN
THIS DOCUMENT. BY THIS AGREEMENT, BOTH
YOU AND WE ARE WAIVING THE RIGHT TO
LITIGATE DISPUTES IN COURT.
The Warranty disclaimed any express or implied warranties to the extent permitted
by law and excluded from recovery consequential or incidental damages resulting
from construction defect. Consequential and incidental damages were defined as
injury other than, the cost to correct a construction defect, repair or replace
personal property damaged by the construction defect, and the cost for reasonable
alternative housing necessitated by any construction defect or its repair.
The Warranty further stated:
2
The Warranty included in the record on appeal is an unsigned "Sample
Warranty."
This arbitration agreement is made pursuant to a
transaction involving interstate commerce, and shall be
governed by and interpreted under the Federal
Arbitration Act now in effect and as it may be hereafter
amended (the "FAA") to the exclusion of any
inconsistent state law, regulation or judicial decision.
The award of the arbitrator shall be final and binding and
may be entered as a judgment in any court of competent
jurisdiction.
The Warranty also indicated it was "separate and independent" of the Agreement
and any unenforceable provision on the Warranty were severable from the rest of
the provisions therein. It also contained a provision regarding subsequent
homeowners.
B. Transfer to Subsequent HOMEOWNERS
This LIMITED WARRANTY, subject to all of its terms
and conditions, including but not limited to, its
mandatory binding arbitration provision, will transfer to
new owners of the HOME for the remainder of the
WARRANTY PERIOD. YOU agree to provide this
LIMITED WARRANTY to any subsequent purchaser
of the HOME as a part of the contract of sale of the
HOME. Please see the form "SUBSEQUENT HOME
BUYER ACKNOWLEDGEMENT AND
TRANSFER"[ 3] contained at the end of this document.
The Pattees sold the residence to the Dixons on February 28, 2017. On August 30,
2017, the Dixons filed a complaint against the Pattees, alleging the Pattees sold
them a home with certain defects, including moisture intrusion issues, and the
Pattees knew of the issues but did not reveal the defects to the Dixons prior to the
conveyance. The Dixons alleged causes of action against the Pattees for breach of
3
This provided transfer form includes the statement: "I/we acknowledge and
agree to the Binding Arbitration Procedure contained in the HOME
BUILDER'S LIMITED WARRANTY." The form has instructions for mailing it
in to PWC.
contract, fraud, fraud in the inducement, negligent misrepresentation, and violation
of the South Carolina Residential Property Conditions Disclosure Act.
On July 18, 2018, the Dixons filed an amended complaint, maintaining their claims
against the Pattees, but also adding claims against Weekley; A2Z Advanced Home
Inspections, LLC (A2Z); and John Doe, as unknown construction agents. The
Dixons asserted that during 2007 and 2008 Weekley obtained the necessary
permits to construct a home, built the home, and subsequently sold the home to the
Pattees. They asserted the home was constructed in a defective condition. The
amended complaint asserted three causes of action against Weekley: (1) negligence
and gross negligence; (2) breach of express and implied warranties; and (3)
violation of the South Carolina Unfair Trade Practice Act (SCUTPA). As to the
cause of action for breach of warranties, the Dixons stated:
These Defendants impliedly and/or expressly warranted
that the design, building, construction, and materials
would be performed using the utmost skill and attention
and would be of good and workmanlike quality. Further,
these Defendants impliedly and/or expressly warranted
that the design, building, construction, and materials
would be such that the Subject Property would be
habitable and fit for its intended use as a single family
residence.
. . . These Defendants have breached said warranties by
designing, developing, manufacturing, constructing,
distributing, selling and/or repairing Subject Property
and/or the manufactured components installed into and/or
onto said residence in such manner as to be in violation
of applicable building codes, standard building practices,
relevant product specifications, accepted building
component manufacturing standards and accepted
construction industry standards and practices.
On August 16, 2018, the Pattees answered the Dixons' amended complaint,
denying the allegations, raising multiple defenses, and cross-claiming against
Weekley seeking equitable indemnification. Weekley answered the Dixons'
amended complaint on August 24, 2018, raising numerous defenses and asserting
that the Dixons' claims should be resolved by arbitration. On September 11, 2018,
Weekley also filed an answer to the crossclaims for equitable indemnification
asserted by the Pattees.
On November 21, 2018, Weekley filed a motion to compel arbitration for all
claims asserted against it, stating, "The factual allegations offered in support of
each of the causes of action further demonstrate that the claims arise out of or
relate to the home, the warranty, and/or the contract. Consequently, all claims in
this case are within the scope of the arbitration provision." Weekley filed an
affidavit from John Burchfield, General Counsel for Weekley, in support, stating
that "[b]ecause [the Agreement] included the construction of the home and allowed
the Pattees to make certain decisions customizing that construction, the contract
implicates interstate commerce." He further provided, "The contract includes a
mandatory binding arbitration provision providing for the arbitration of all disputes
including but not limited to disputes arising out of the contract; the development,
design or construction of the property; the marketing or sale of the property; any
warranties, express or implied, relating to the property." The records submitted by
Burchfield as exhibits to his affidavit show that the Pattees made $15,275 worth of
customizations.
On January 1, 2019, the Dixons amended their complaint again. The Dixons'
second amended complaint added allegations against two surety companies that
allegedly issued license bonds to Weekley and a negligence cause of action against
Gutter Pros, LLC. The second amended complaint asserted two causes of action
against Weekley: (l) breach of express and implied warranties and (2) an unfair
trade practices cause of action. This complaint did not assert negligence and gross
negligence claims against Weekley, unlike the first amended complaint, although it
did raise negligence claims against other parties.
On January 16, 2019, Weekley answered the Dixons' second amended complaint
asserting arbitration as a defense and incorporating its pending motion to compel
arbitration. On January 21, 2019, the Pattees answered the Dixons' second
amended complaint and asserted the same equitable indemnification cross-claims
against Weekley as they had in a prior responsive pleading. On February 1, 2019,
Weekley filed an answer in response to the Pattees' crossclaims.
On February 11, 2019, Weekley filed a memorandum of law in support of its
motion to compel arbitration. It maintained the Dixons' two claims against them,
breach of warranty and violation of the SCUTPA, fell within the arbitration
provisions of the Agreement and, "[t]o the extent the [Dixons] argue the arbitration
provision cannot be enforced against them because they are non-signatories to the
agreement to arbitrate, that argument fails" because they "have sued Weekley for
breach of the express warranty issued to the Pattees, which included the provision
for mandatory arbitration." It also argued the Pattees' cross-claim against it for
equitable indemnification fell within the broad mandatory arbitration provisions
because the Dixons' claims against the Pattees arise from the construction of the
home.
On February 12, 2019, the circuit court held a hearing on several matters including
the motion to compel arbitration. At the hearing, the Dixons and Pattees argued
the Burchfield affidavit was insufficient to demonstrate the transaction involved
interstate commerce as he did not have personal knowledge of the transaction. The
Dixons also argued they had not alleged a breach of contract claim against
Weekley, instead they alleged "negligence, gross negligence, breach of the implied
and/or expressed warranties, [and] merchantability, you know, workmanlike
manner" and also an Unfair Trade Practices Act claim." As relates to the actual
construction of the home, the Dixons asserted although the Agreement was signed
on August 18, 2008, "permits were pulled for this property in 2007" and "only last
up to one year unless renewed." They closed on their property September 10th of
2008, "approximately 20 days later, which certainly did not leave room to build a
home . . . ." The Dixons argued "we're dealing with a contract for the sale of real
estate, not for construction, not for custom elements." They argued Bradley v.
Brentwood Homes 4 stated a purchase sale agreement was an intrastate transaction,
not an interstate transaction, therefore did not involve federal preemption by the
FAA. The Dixons contended that because the FAA did not apply, the agreement
should be examined under the South Carolina Uniform Arbitration Act (SCUAA)
and the agreement here did not meet the requirements of it.
The Dixons also argued they "were not signatories to this purported agreement."
They asserted the separate document warranty, "which it's been represented as
accepted by the Pattees, is a sample document that has not been signed by anyone."
They stated they "don't base any claim on warranty because, chances are, based on
a—common knowledge and experience, that an expressed warranty concerning the
issues that we're dealing with in this case would [have] expired anyway if we even
had that as, as of the—any sort of basis for asserting a claim." 5
4
Bradley v. Brentwood Homes, Inc., 398 S.C. 447, 730 S.E.2d 312 (2012).
5
The Dixons also argued the agreement was barred from being enforced by the
Statute of Frauds. However, they did not plead the statute of frauds. See Shirey v.
Bishop, 431 S.C. 412, 424, 848 S.E.2d 325, 331 (Ct. App. 2020) ("[T]he party
seeking the protection of the statute of frauds must plead it." (emphasis added by
The Pattees argued the Agreement which contained the arbitration provision did
not involve construction of the home. In further attacking Burchfield's affidavit,
the Pattees asserted the affidavit did not "go through the choices they actually
[made] and say where those materials came from." The Pattees additionally argued
that the Agreement was an adhesion contract and the arbitration provision was
unconscionable towards them. They asserted D.R. Horton 6 was on point with
respect to the arbitration provision.
Weekley argued the Dixons' assertion that this was a complaint for negligence
against Weekley was untrue because the complaint stated which party each cause
of action was against and the only two causes of action in the second amended
complaint against Weekley were breach of warranty and unfair trade practices. It
argued the Dixons' contention that they were not trying to sue under the Agreement
or Warranty was belied by the language in their complaint which alleged "Weekley
impliedly and/or expressly warranted" to do certain things. Weekley argued that
this was a "[Bradley v. ]Brentwood Homes issue": "Is it just the simple sale of a
piece of property . . . or does this contract include elements of construction." It
contended Burchfield's affidavit provided that because the contract involved the
customization of the house, it was more than a purchase agreement. It argued the
contract itself also supported that contention; Paragraph 5 entitled "construction
obligations" was about half a page and provided "construction of the improvements
may be subject to changes in plans, specifications, materials, fixtures, methods." It
stated "the next paragraph include[d] custom choices and change order requests."
It asserted "this contract is more than just the sale of a piece of property because,
by its very terms, it includes things other than that. "It also pointed to footnote 8 of
Brentwood Homes in which the court provided that if the contract had involved the
construction of a house, the court would have compelled arbitration under the FAA
because construction contracts implicate interstate commerce. The circuit court
stated it would take the matter under consideration.
Following the hearing, Weekley filed an affidavit of Tim Dupree in further support
of its motion to compel arbitration. Dupree attested that the following specific
materials were purchased for the Pattees' home from manufacturers or suppliers
outside of South Carolina: appliances: Kentucky; roofing shingles: Minnesota;
hardwood flooring: North Carolina; countertops: Minnesota; sinks purchased:
court) (quoting Am. Wholesale Corp. v. Mauldin, 128 S.C. 241, 243, 122 S.E. 576,
576 (1924))).
6
Smith v. D.R. Horton, Inc., 417 S.C. 42, 790 S.E.2d 1 (2016).
California; faucets: North Carolina; and crown molding: Georgia. Dupree further
attested that those materials were transported from outside of South Carolina to the
property.
On October 9, 2019, the circuit court denied the motion to compel arbitration in a
Form 4 order with no findings, along with other matters, stating: "After careful
consideration, the Court respectfully denies the motion to compel arbitration, the
motion to dismiss, and the motion for summary judgment. The court finds that
there is sufficient evidence based upon the pleadings, discovery, motions, to
withstand the motion for summary judgment and continue with the case."
On October 14, 2019, Weekley filed a motion to reconsider, alter, or amend the
order. On February 10, 2020, the circuit court held a hearing on Weekley's motion.
At the outset of the hearing, the court stated "what I normally do is . . . I decide
whether or not I'm going to hear it again. Okay? And I did not decide to hear it
again. Okay?" No actual arguments on the motion were made at the hearing and
the circuit court issued an order stating "I have reviewed and considered the
Motion to Reconsider and all supporting documents, affidavits and memoranda on
file and, after due consideration find and conclude that the Court's previous ruling
should stand undisturbed." This appeal followed. 7
STANDARD OF REVIEW
Unless the parties otherwise provide, the question of the arbitrability of a claim is
an issue for judicial determination. Zabinski v. Bright Acres Assocs., 346 S.C. 580,
596, 553 S.E.2d 110, 118 (2001). Determinations of arbitrability are subject to de
novo review, but if any evidence reasonably supports the circuit court's factual
7
The Dixons and the Pattees are all Respondents. However, only the Dixons filed
a Respondent's brief. Rule 208(a)(4), SCACR, provides in part: "Upon the failure
of respondent to timely file a brief, the appellate court may take such action as it
deems proper." Such action may include reversal. See Turner v. Santee Cement
Carriers, Inc., 277 S .C. 91, 96, 282 S.E.2d 858, 860 (1981) (noting the
respondent's failure to file a brief alone would justify reversal); Robinson v.
Hassiotis, 364 S.C. 92, 93 n.2, 610 S.E.2d 858, 859 n.2 (Ct. App. 2005); see also
Wierszewski v. Tokarick, 308 S.C. 441, 444 n.2, 418 S.E.2d 557, 559 n.2 (Ct. App.
1992) (stating that when the respondent failed to file a brief, "it [was] proper to
reverse on the points presented rather than to search the record for reasons to
affirm").
findings, this court will not overrule those findings. Stokes v. Metro. Life Ins. Co.,
351 S.C. 606, 609-10, 571 S.E.2d 711, 713 (Ct. App. 2002).
LAW/ANALYSIS
I. Application of the FAA – Interstate Commerce
Weekley argues the circuit court erred in denying its motion to compel arbitration
when an enforceable arbitration agreement covered the scope of the claims asserted
in this dispute and the agreement explicitly provided that the transaction involved
interstate commerce and that the FAA would apply to the resolution of any claim,
dispute or cause of action involving the Agreement. We agree. 8
"'[T]he basic purpose of the [FAA] is to overcome courts' refusals to enforce
agreements to arbitrate,' and 'ensure that arbitration will proceed in the event a state
law would have a preclusive effect on an otherwise valid arbitration agreement.'"
Dean v. Heritage Healthcare of Ridgeway, LLC, 408 S.C. 371, 379, 759 S.E.2d
727, 731 (2014) (alteration by court) (first quoting Allied-Bruce Terminix Cos. v.
Dobson, 513 U.S. 265, 270 (1995), then quoting Bradley, 398 S.C. at 453, 730
S.E.2d at 315). Accordingly, "unless the parties specifically contracted otherwise,
the FAA . . . appl[ies] whenever an arbitration agreement involves interstate
commerce." Id. "[T]he reach of interstate commerce—and thus the FAA—was
coextensive with the broad reach of the Commerce Clause." Id. "Thus, in practice,
arbitration agreements enjoy a strong presumption of validity in federal and state
courts." Id. at 380, 759 S.E.2d at 731-32.
"To ascertain whether an arbitration agreement implicates interstate commerce and
the FAA, 'the court must examine the agreement, the complaint, and the
surrounding facts,' focusing particularly on 'what the terms of the contract
specifically require for performance.'" Id. at 380, 759 S.E.2d at 732 (quoting
8
Our supreme court recently determined the inclusion of a provision stating the
FAA applies to any disputes arising under a contract would not, in and of itself, be
controlling. See Hicks Unlimited, Inc., v. Unifirst Corp., 439 S.C. 623, 630, 889
S.E.2d 564, 567 (2023) (finding parties may not "agree—preemptively—that a
court may apply the FAA's federal preemption power to their contract without first
peeking behind the curtain to ensure interstate commerce is involved").
Nevertheless, in this case, because we conclude the Agreement involved interstate
commerce, as discussed infra, the FAA is controlling.
Bradley, 398 S.C. at 455, 730 S.E.2d at 316). "This is generally a very fact-
specific inquiry." Id."[I]n determining whether the FAA applies to a particular arbitration agreement, a
court considers whether the contract concerns a transaction involving interstate
commerce." Cape Romain Contractors, Inc. v. Wando E., LLC, 405 S.C. 115, 122,
747 S.E.2d 461, 464 (2013). "Under the reach of the Commerce Clause, 'Congress
has authority to regulate (1) "the use of the channels of interstate commerce," (2)
"the instrumentalities of interstate commerce, or persons or things in interstate
commerce . . ." and (3) "those activities having a substantial relation to interstate
commerce."'" Id. (quoting United States v. Gould, 568 F.3d 459, 470 (4th Cir.
2009)). "Channels of commerce are 'the interstate transportation routes through
which persons and goods move.'" Id. (quoting United States v. Ballinger, 395 F.3d
1218, 1225 (11th Cir. 2005) (quoting United States v. Morrison, 529 U.S. 598, 613
n.5 (2000) (noting channels of interstate commerce include highways, railroads,
navigable waterways, airspace, telecommunications networks and even national
securities markets))). "Instrumentalities of interstate commerce, by contrast, are
the people and things themselves moving in commerce . . . ." Id. (quoting
Ballinger, 395 F.3d at 1226 (identifying automobiles, airplanes, boats, shipments
of goods, pagers, telephones and mobile phones as instrumentalities of interstate
commerce)).
The Dixons argued the Agreement was for the sale of real estate, not for the
construction of a home or for custom elements contained therein. They argued
Bradley v. Brentwood Homes stated a purchase sale agreement was an intrastate
transaction, not an interstate transaction, therefore did not involve federal
preemption by the FAA.
In Bradley, the court explained the contract was not for the construction of a home,
but an already complete home, noting "the Home Purchase Agreement specifically
provides that Bradley agreed to purchase a completed dwelling rather than contract
for the construction of a dwelling. Notably, the provisions of the Agreement
providing for 'New Construction,' 'House Plan,' 'Options,' and 'Color Selection,' are
eliminated as 'N/A' and were not signed by Bradley." 398 S.C. at 458, 730 S.E.2d
at 318. The court found the affidavit of Brentwood Homes' representative was
"inapposite as his attestation that out-of-state materials, suppliers, and
subcontractors were used for the construction of the residence has no bearing on
the purchase of the completed dwelling." Id. The court determined that "[b]ecause
the essential character of the Agreement was strictly for the purchase of a
completed residential dwelling and not the construction, . . . the FAA does not
apply as these types of transactions have historically been deemed to involve
intrastate commerce." Id. at 459, 730 S.E.2d at 318. However, the court clarified
"had the Agreement actually encompassed the construction of the residence, it
would have been subject to the FAA as our appellate courts have consistently
recognized that contracts for construction are governed by the FAA." Id. at 458
n.8, 730 S.E.2d at 318 n.8
In Damico, the homeowners argued the contracts did not involve interstate
commerce and therefore, the builder could not compel the homeowner to arbitrate
under federal law (the FAA). Damico v. Lennar Carolinas, LLC, 437 S.C. 596,
608, 879 S.E.2d 746, 753 (2022). The supreme court disagreed, finding, "[t]he
transactions here manifestly involve interstate commerce, as they involved the
construction of new homes built to Petitioners' specifications rather than the
purchase of pre-existing homes." Id. (citing Bradley, 398 S.C. at 458 n.8, 730
S.E.2d at 318 n.8 ("[O]ur appellate courts have consistently recognized that
contracts for construction are governed by the FAA."); Episcopal Hous. Corp. v.
Fed. Ins. Co., 269 S.C. 631, 640, 239 S.E.2d 647, 652 (1977) (explaining that
contracts requiring the construction of a new building implicate interstate
commerce because it would be "virtually impossible" to construct the building
"with materials, equipment[,] and supplies all produced and manufactured solely
within the State of South Carolina").
In this case, contrary to the Dixons' position, the language of the Agreement and
the record demonstrates the Agreement was not for the purchase of a completed
home but involved at a minimum the completion of custom elements in the home
which fall within the parameters of construction. A checklist accompanying the
Agreement suggests the Pattees had been able to select options for flooring,
appliance color, bath hardware, countertops, plumbing fixtures, shower enclosures,
interior and exterior hardware, lighting style, interior paint, and backsplash and
wall tile. Provision 12 of the Agreement, titled ADDITIONAL PROVISIONS,
designates specific directions for the additional laying of hardwood floor, the
extension of crown molding, the replacement of laminate countertops with quartz,
and the installation of specified sinks and faucets. The records submitted by
Burchfield as exhibits to his affidavit show that the Pattees made $15,275 worth of
customizations, and Dupree's affidavit attested to shingles, appliances, hardwood
flooring, countertops, sinks, faucets and crown molding being purchased outside of
South Carolina.
Neither the Dixons nor the Pattees have provided any evidence to support their
contention that the contract between the Pattees and Weekley was to purchase a
fully-constructed home. They did not provide any affidavits or records in support;
merely, their attorneys' arguments that based on when the permits were issued, the
home had to have already had been completed. 9 Weekley provided evidence in the
form of affidavits and the Agreement itself that the transaction here did not involve
the sale of a completed home and did involve interstate commerce. Consequently,
we conclude the FAA did apply.
II. The Pattees' Claims against Weekley
Weekley contends the circuit court erred in denying a motion to compel arbitration
with respect to the Pattees' claim against Weekley, because the Pattees' claim falls
within the scope of the arbitration provisions, and it is undisputed that the
agreement is enforceable. We agree.
A claim for equitable indemnity may arise when "a first party is liable to pay a
second party for a loss or damage the second party incurs to a third party." Rock
Hill Tel. Co. v. Globe Commc'ns, Inc., 363 S.C. 385, 389, 611 S.E.2d 235, 237
(2005) (quoting First Gen. Servs. of Charleston, Inc. v. Miller, 314 S.C. 439, 442,
445 S.E.2d 446, 449 (1994)). "The right to indemnity arises by operation of law 'in
cases of imputed fault or where some special relationship exists between the first
and second parties.'" Id. (quoting First Gen. Servs. of Charleston, Inc., 314 at 442,
445 S.E.2d at 449). A claim for indemnification "exists whenever the relation
between the parties is such that either in law or in equity there is an obligation on
one party to indemnify the other, as where one person is exposed to liability by the
wrongful act of another in which he does not join." Id. (quoting Stuck v. Pioneer
Logging Mach., Inc., 279 S.C. 22, 24, 301 S.E.2d 552, 553 (1983)).
In the instant case, the Pattees allege any damages they suffer as a result of the
Dixons' claims against them should be paid by Weekley because Weekley
defectively constructed the home.
The Pattees initialed every page of the Agreement, including those containing the
arbitration provisions, fully executed the signature page of the Agreement and
acknowledged receipt of a sample of the Home Warranty which contained the
relevant Warranty arbitration provisions. The Pattees have not asserted any basis
for avoiding the arbitration agreements contained in the Agreement and Warranty,
9
No permits are included in the Record. In its answer to the Dixon's complaint,
Weekley admitted "it obtained a permit during 2007 [and] denie[d] a permit was
obtained in 2008"
other than their assertion the FAA does not apply, which we have resolved against
them. Furthermore, the Pattees have not disputed that their claim against Weekley
for equitable indemnification is within the scope of the arbitration agreements
contained in the Agreement and Warranty. Even if there were some doubt as to the
scope or applicability of the relevant arbitration agreements, such doubts are
resolved in favor of arbitration given the FAA's liberal federal policy favoring
arbitration agreements. See Landers v. Fed. Deposit Ins. Corp., 402 S.C. 100, 109,
739 S.E.2d 209, 213 (2013) ("A clause which provides for arbitration of all
disputes 'arising out of or relating to' the contract is construed broadly."). In this
case, the claim for equitable indemnification arises from the construction of the
home and the Pattees relied on the Agreement to assert a special relationship
between themselves and Weekley as purchaser and seller. For all the foregoing
reasons, we conclude the Pattees' claims are subject to arbitration pursuant to the
FAA.
III. The Dixons' Claims
Weekley contends the circuit court erred in denying its motion to compel
arbitration with respect to the Dixons' claims because their causes of action are
dependent upon the agreements that require arbitration and are within the scope of
the arbitration agreements. We agree.
"Generally, arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so to submit." Pearson
v. Hilton Head Hosp., 400 S.C. 281, 288, 733 S.E.2d 597, 600 (Ct. App. 2012)
(quoting Int'l Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d
411, 416 (4th Cir. 2000)). "[T]he presumption in favor of arbitration applies to the
scope of an arbitration agreement; it does not apply to the existence of such an
agreement or to the identity of the parties who may be bound to such an
agreement." Wilson v. Willis, 426 S.C. 326, 337, 827 S.E.2d 167, 173 (2019)
(quoting Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 496 (Tex. App. 2011)
(emphasis added)). "Even the exceptionally strong policy favoring arbitration
cannot justify requiring litigants to forego a judicial remedy when they have not
agreed to do so." Id. (quoting Carr, 337 S.W.3d at 496). "Moreover, because
arbitration, while favored, exists solely by agreement of the parties, a presumption
against arbitration arises where the party resisting arbitration is a nonsignatory to
the written agreement to arbitrate." Id. at 337-38, 827 S.E.2d at 173. "Whether an
arbitration agreement may be enforced against nonsignatories, and under what
circumstances, is an issue controlled by state law." Id. at 338, 827 S.E.2d at 173-
74.
"Well-established common law principles dictate that in an appropriate case a
nonsignatory can enforce, or be bound by, an arbitration provision within a
contract executed by other parties." Pearson, 400 S.C. at 288, 733 S.E.2d at 600
(quoting Int'l Paper Co., 206 F.3d at 416-17). "South Carolina has recognized
several theories that could bind nonsignatories to arbitration agreements under
general principles of contract and agency law, including (1) incorporation by
reference, (2) assumption, (3) agency, (4) veil piercing/alter ego, and (5) estoppel."
Wilson, 426 S.C. at 338, 827 S.E.2d at 174.
"[A] party may be estopped from asserting that the lack of his signature on a
written contract precludes enforcement of the contract's arbitration clause when he
has consistently maintained that other provisions of the same contract should be
enforced to benefit him." Id. (quoting Int'l Paper Co., 206 F.3d at 418) (emphasis
added by court). "To allow [a plaintiff] to claim the benefit of the contract and
simultaneously avoid its burdens would both disregard equity and contravene the
purposes underlying enactment of the Arbitration Act." Pearson, 400 S.C. at 290,
733 S.E.2d at 601 (alteration in original) (quoting Int'l Paper Co., 206 F.3d at
418). When "plaintiffs sue and seek relief based on contracts containing arbitration
clauses, courts have applied equitable estoppel." Wilson, 426 S.C. at 344, 827
S.E.2d at 177 (citing Int'l Paper Co., 206 F.3d at 417-18 (applying equitable
estoppel and holding the nonsignatory plaintiff could not bring claims to enforce
the guarantees and warranties issued by the defendant in a contract with another
party without complying with an arbitration provision contained in that contract)).
"A nonsignatory is estopped from refusing to comply with an arbitration clause
when it receives a direct benefit from a contract containing an arbitration clause."
Pearson, 400 S.C. at 290, 733 S.E.2d at 601 (internal quotation omitted) (quoting
Int'l Paper Co., 206 F.3d at 418). "[A] nonsignatory cannot be bound without
receiving a direct benefit from or pursuing a claim . . . integrally related to the
contract containing the arbitration clause." Id. at 291, 733 S.E.2d at 602 (internal
quotation omitted) (quoting Int'l Paper Co., 206 F.3d at 418 n.6). In International
Paper, the Fourth Circuit found International Paper, the purchaser of a saw
manufactured by Schwabedissen and distributed by Wood Systems, sought a direct
benefit from the agreement between the manufacturer and distributor and made a
claim integrally related to that agreement when it sued Schwabedissen for breach
of the terms and warranties contained therein. 206 F.2d at 414-18. Consequently,
International Paper was estopped from contesting the arbitration agreement in the
contract. Id. at 418.
"[A] party may not rely on the contract when it works to its advantage, and
repudiate it when it works to its disadvantage." Pearson, 400 S.C. at 295, 733
S.E.2d at 604 (internal quotation omitted) (quoting Jackson v. Iris.com, 524 F.
Supp. 2d 742, 749). "When 'a signatory seeks to enforce an arbitration agreement
against a non-signatory, the doctrine estops the non-signatory from claiming that
he is not bound to the arbitration agreement when he receives a "direct benefit"
from a contract containing an arbitration clause.'" Id. (quoting at Jackson, 524 F.
Supp. 2d at 749-50).
When a claim depends on the contract's existence and
cannot stand independently—that is, the alleged liability
"arises solely from the contract or must be determined by
reference to it"—equity prevents a person from avoiding
the arbitration clause that was part of that agreement.
But "when the substance of the claim arises from general
obligations imposed by state law, including statutes, torts
and other common law duties, or federal law," direct-
benefits estoppel is not implicated even if the claim refers
to or relates to the contract or would not have arisen "but
for" the contract's existence.
Wilson, 426 S.C. at 343, 827 S.E.2d at 176 (emphasis added by court) (quoting
Jody James Farms, JV v. Altman Grp., Inc., 547 S.W.3d 624, 637 (Tex. 2018).
The arbitration provisions contained in the Agreement and Warranty are
enforceable against the Dixons because, while they are not parties or signatories to
the relevant agreements, the Dixons expressly rely on the Agreement and Warranty
in alleging their breach of warranty claim against Weekley. The second amended
complaint states "Weekley impliedly and/or expressly warranted that the design,
building, construction, and materials would be performed using the utmost skill
and attention and would be of good and workmanlike quality. Further, Weekley
impliedly and/or expressly warranted that the design, building, construction, and
materials would be such that the Subject Residence would be habitable and fit for
its intended use as a single-family residence." (emphasis added). They cannot
therefore repudiate the arbitration provisions contained therein on the basis of
being nonsignatories.
With regard to the SCUTPA claim, the Dixons' reliance on the Agreement or
Warranty is not as clear. However, they fail to address in their respondents' brief
Weekley's argument that the claim is subject to arbitration. See First Union Nat'l
Bank v. FCVS Communications, 321 S.C. 496, 502, 469 S.E.2d 613, 617 (Ct. App.
1996) (noting if respondent fails to answer to an issue in his brief, the appellate
court may treat the failure to respond as a confession that the appellant's position is
correct). Consequently, we conclude the Dixons' claims are subject to arbitration.
IV. The Dixons' Additional Arguments (Additional Sustaining Grounds)10
The Dixons raise two additional sustaining grounds on appeal—
violation of the SCUAA and unconscionability.
[A] respondent . . . may raise on appeal any additional
reasons the appellate court should affirm the lower
court's ruling, regardless of whether those reasons have
been presented to or ruled on by the lower court. It
would be inefficient and pointless to require a respondent
to return to the judge and ask for a ruling on other
arguments to preserve them for appellate review. It also
could violate the principle that a court usually should
refrain from deciding unnecessary questions.
I'On, L.L.C. v. Town of Mt. Pleasant, 338 S.C. 406, 419, 526 S.E.2d 716, 723
(2000). However, "an appellate court is less likely to rely on such a ground when
10
Because the circuit court issued a Form 4 order with no findings and did not
make any indication of findings at the hearing, we do not know on what ground the
circuit court denied the motion to compel arbitration. This court has recently
reiterated that a circuit court is allowed to issue a Form 4 order when ruling on a
motion to dismiss. See Santos v. Harris Inv. Holdings, LLC, 439 S.C. 214, 219,
886 S.E.2d 483, 485 (Ct. App. 2023) (citing to the language of Rule 52(a), SCRCP
which provides "[f]indings of fact and conclusions of law are unnecessary on
decisions of motions under Rules 12 or 56 or any other motion except as provided
in Rule 41(b)" and concluding the circuit court properly acted within its discretion
when granting a motion to dismiss via Form 4 order); see also Borg Warner
Acceptance Corp. v. Darby, 296 S.C. 275, 279, 372 S.E.2d 99, 101-02 (Ct. App.
1988) (holding Rule 52(a)'s requirement that a court in an action tried without a
jury "find the facts specially and state separately its conclusions of law thereon"
was "merely directory and provide[d] no basis for invalidating a judgment").
the respondent has failed to present it to the lower court." Id. at 421, 526 S.E.2d at
724. "An appellate court may not rely on Rule 220(c), SCACR, . . . when the
court believes it would be unwise or unjust to do so in a particular case. It is
within the appellate court's discretion whether to address any additional sustaining
grounds." Id. at 420, 526 S.E.2d at 723.
"While a respondent may raise on appeal any additional sustaining grounds
appearing in the record, even where those reasons have not been ruled on by the
lower court, we are reticent to invoke an alternative sustaining ground where the
ground is not raised in the appellate brief." Alexander v. Houston, 403 S.C. 615,
620 n.4, 744 S.E.2d 517, 520 n.4 (2013). "Invoking an additional sustaining
ground under such circumstances would generally be unfair to an unaware
appellant." Id.With regard to unconscionability, the Pattees mentioned the issue at the circuit
court hearing in reference to the D.R. Horton case, but the Dixons did not argue
unconscionability in front of the circuit court. However, because this case involves
the possibility of enforcing an unconscionable arbitration agreement, we will
consider it as an additional sustaining ground.
A. SCUAA
The Dixons argue the arbitration provision is unenforceable under the SCUAA.11
They contend the notice contained in the Agreement does not comply with section
15-48-10(a) because (1) it is neither typewritten nor stamped; (2) it is not
underlined; (3) and it is not displayed on the first page of the document. They
maintain these technical failures—both individually and collectively—preclude
enforcement of arbitration under South Carolina law. We decline to address this
additional sustaining ground because even if the Agreement violates the SCUAA
requirements, our decision that the FAA is controlling is dispositive. See Zabinski,
346 S.C. at 592, 553 S.E.2d at 116. ("While the parties may agree to enforce
arbitration agreements under state rules rather than FAA rules, the FAA will
preempt any state law that completely invalidates the parties' agreement to
arbitrate."); Bradley, 398 S.C. at 453, 730 S.E.2d at 315 (finding the builder's
concession the contract violated the SCUAA was not dispositive because even
though "an application of the South Carolina law would have rendered the parties'
arbitration agreement completely unenforceable, consideration of the applicability
of the FAA is required" and "[t]he FAA is intended to ensure that arbitration will
11
S.C. Code Ann. §§ 15-48-10 to -240.
proceed in the event a state law would have preclusive effect on an otherwise valid
arbitration agreement").
B. Unconscionability
The Dixons also assert the arbitration provision is unconscionable. They contend
the Agreement is an adhesion contract, and the Pattees, and by extension the
Dixons, had little-to-no bargaining power. We conclude this issue is abandoned on
appeal. 12
The Dixons correctly point out that the beginning point of an unconscionability
analysis is whether the complaining party had a meaningful choice in consenting to
the terms of the agreement or whether it was a contract of adhesion. "The
touchstone of the [unconscionability] analysis begins with the presence or absence
of meaningful choice." Damico at 612, 879 S.E.2d at 755. "[A] party seeking to
prove an arbitration agreement is unconscionable must allege he lacked a
meaningful choice as to the arbitration clause specifically, not merely that he
lacked a meaningful choice as to the contract as a whole." Id. at 613, 879 S.E.2d at
755. "Whether one party lacks a meaningful choice . . . typically speaks to the
fundamental fairness of the bargaining process." Id. (quoting D.R. Horton, 417
S.C. at 49, 790 S.E.2d at 4. "[I]n determining whether an absence of meaningful
choice taints a contract term, . . . courts must consider, among all facts and
circumstances, the relative disparity in the parties' bargaining power, the parties'
relative sophistication, and whether the plaintiffs are a substantial business concern
of the defendant." Id.
"Parties frequently claim they lack a meaningful choice when a contract of
adhesion is involved." Id. at 613, 879 S.E.2d at 756. "[A]dhesion contracts are
'standard form contracts offered on a take-it or leave-it basis with terms that are not
negotiable.'" Id. (quoting D.R. Horton, 417 S.C. at 49, 790 S.E.2d at 4). "Because
contracts of adhesion are non-negotiable, '[a]n offeree faced with such a contract
has two choices: complete adherence or outright rejection.'" Id. (quoting Lackey v.
Green Tree Fin. Corp., 330 S.C. 388, 394, 498 S.E.2d 898, 901 (Ct. App. 1998)
12
The Agreement also contains a severability provision. However, because we do
not find the arbitration provisions unconscionable, we need not address that issue.
See Whiteside v. Cherokee County School Dist. No. One, 311 S.C. 335, 340, 428
S.E.2d 886, 889 (1993) (appellate court need not address remaining issues when
disposition of prior issue is dispositive).
(citation omitted). Although "[a]dhesion contracts are not per se unconscionable,"
courts view them with "considerable skepticism," as it is doubtful the parties had a
true agreement to submit disputes to arbitration, due to one party having virtually
no input in the terms and language. Id."[A]dhesive contracts are not unconscionable in and of themselves so long as the
terms are even-handed." Id. at 614, 879 S.E.2d at 756 (emphasis omitted).
"[U]nconscionability requires a finding of a lack of meaningful choice coupled
with unreasonably oppressive terms. Thus, an adhesion contract with fair terms is
certainly not unconscionable, and the mere fact a contract is one of adhesion does
not doom the contract-drafter's case." Id. The supreme court has "taken judicial
cognizance of the fact that a modern buyer of new residential housing is normally
in an unequal bargaining position as against the seller." D.R. Horton, Inc., 417
S.C. at 50, 790 S.E.2d at 4 (citing Sapp v. Ford Motor Co., 386 S.C. 143, 147-48,
687 S.E.2d 47, 49-50 (stating that South Carolina's "courts have shifted from
following the doctrine of caveat emptor ('let the buyer beware') to the doctrine of
caveat venditor ('let the seller beware')")).
As noted in the caselaw above, the second part of the unconscionability analysis
involves determining whether the terms of the agreement are so one-sided and
oppressive that no reasonable person would accept them. The Dixons' argument
focuses solely on the Agreement as being a contract of adhesion. They cite to no
authority or specific provisions in the Agreement or Warranty that are oppressive
or one-sided. As a result, we find their unconscionability argument is not
preserved for our consideration as a critical portion of the analysis is only referred
in a conclusory fashion and is unsupported by authority. See Equivest Fin., LLC v.
Ravenel, 422 S.C. 499, 506, 812 S.E.2d 438, 441 (Ct. App. 2018) ("When a party
provides no legal authority regarding a particular argument, the argument is
abandoned and the court will not address the merits of the issue."); Glasscock, Inc.
v. U.S. Fid. & Guar. Co., 348 S.C. 76, 81, 557 S.E.2d 689, 691 (Ct. App. 2001)
("[S]hort, conclusory statements made without supporting authority are deemed
abandoned on appeal and therefore not presented for review.").
CONCLUSION
Based on all of the foregoing, the decision of the circuit court denying Weekley's
motion to compel arbitration is
REVERSED.
VINSON, J., and LOCKEMY, A.J., concur.