Terminix International Co. v. Stabbs

TERMINIX INTERNATIONAL COMPANY v. James
STABBS and Iris Stabbs

96-488                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered October 14, 1996


1.   Appeal & error -- denial of motion to compel arbitration is
     appealable order. -- A trial court's denial of a motion to
     compel arbitration is an appealable order.

2.   Arbitration -- written agreements to arbitrate have no
     application to tort matters -- complaint stated cause of
     action in tort. -- Under Arkansas law, certain matters are not
     arbitrable, regardless of the language used in an arbitration
     agreement; written agreements to arbitrate have no application
     to tort matters, and, here, the complaint in effect at the
     time of the hearing stated a cause of action in tort rather
     than contract.  

3.   Civil procedure -- pleadings -- when party may amend. -- In
     the absence of objection by an opposing party asserting
     prejudice or undue delay, a party may amend his complaint at
     any time without leave of the court.

4.   Torts -- party to contract may sue on independent tort claim.
     -- The existence of a contractual relationship between parties
     does not preclude the institution of a tort action; a party to
     a contract may sue on an independent tort claim; that is not
     to say that the supreme court will declare a matter
     nonarbitrable merely because of the manner in which a party
     chooses to characterize his action; the claim must
     legitimately sound in tort.  

5.   Arbitration -- appellees stated legitimate tort claim -- trial
     court correctly refused to compel arbitration. -- Appellees'
     amended complaint contained allegations against appellant that
     could be characterized as affirmatively wrongful acts or
     misfeasance of the type that would result in a foreseeable,
     unreasonable risk of harm; a termite company's failure to
     properly inspect a residence and report on the extent of
     damage can be said to involve a foreseeable, unreasonable risk
     of harm to potential buyers of the residence; appellees stated
     a legitimate tort claim, and the trial court was correct in
     refusing to compel arbitration of that portion of the action.


     Appeal from Mississippi Circuit Court; David Burnett, Judge;
affirmed.
     Lyons, Emerson & Cone, by: Jim Lyons, for appellant.
     Mike Everett, for appellees.
     
     Bradley D. Jesson, Chief Justice.
     Appellees James and Iris Stabbs filed a complaint in circuit
court alleging that a home which they had purchased in 1992 had
lost all its value due to termite infestation.  The lawsuit named
the appellant Terminix and four others as defendants.  Terminix
asked the trial judge to compel arbitration of the case.  Part of
the case was ordered into arbitration, but the Stabbses were
allowed to pursue the remainder of their case in circuit court. 
Terminix appeals from that ruling and contends that the entire case
should have been ordered into arbitration.  We affirm the trial
court's decision.
     In October of 1992, Mr. and Mrs. Stabbs began negotiating to
buy a home in the Blytheville area.  The home was owned by Mr. and
Mrs. Lambert.  The sale was handled by Logan Real Estate, although
it is not clear whether Logan was operating as the agent for the
buyer or the seller.  On October 15, 1992, Terminix was engaged to
perform certain repairs on the substructure of the home.  A
contract entitled "Sub-Structure Service Agreement" was entered
into whereby Terminix agreed to place two sets of supports under
the bathroom for $300.00.  The purchaser on the contract was listed
as "Logan Real Estate for James W. Stabbs," and the contract was
signed by a representative of Logan Real Estate.  On October 19,
1992, Terminix issued a "Termite Protection Plan" to James W.
Stabbs.  The Plan provided that, in exchange for an annual fee,
Terminix would provide protection against subterranean termite
damage occurring after October 19, 1992.  Both of these documents
contained arbitration clauses.  
     On October 20, 1992, Terminix executed a Veterans
Administration/Department of Housing and Urban Development form
entitled, "Wood Destroying Insect Information Existing
Construction."  The information in the form was to be used in
evaluating property for a VA or HUD loan.  Terminix stated in the
form that the property had once contained visible evidence of
infestation but noted that the problem had been corrected by the
use of additional supports.  The form was signed by a Terminix
representative on October 20, 1992 and by Mr. and Mrs. Stabbs, who
acknowledged its receipt, on October 23, 1992.  Closing occurred on
October 23, 1992, with the Stabbses paying $53,500 for the
property.      
     On June 15, 1995, Mr. and Mrs. Stabbs filed suit against
Terminix, Logan Real Estate, Logan Finance Company, and Mr. and
Mrs. Lambert for "fraud and deceit and for breach of contract." 
The Logan defendants and the Lamberts were sued for
misrepresentation; Terminix was sued on the contract count.  The
Stabbses alleged that Terminix had breached the October 20 VA/HUD
"contract" by failing to properly inspect the premises, failing to
correct termite damage, and failing to notify Mr. and Mrs. Stabbs
of the extent of the termite damage.  The October 15 Sub-Structure
Service Agreement and October 19 Termite Protection Plan were not
mentioned.  The prayer for relief sought the purchase price of the
house, $53,500, from all defendants jointly and severally, punitive
damages from the Lambert and Logan defendants, and attorney fees
from Terminix.
     Terminix filed a motion to compel arbitration of the case on
the grounds that both the Sub-Structure Service Agreement and the
Termite Protection Plan contained arbitration clauses.  Mr. and
Mrs. Stabbs responded that they were not basing their contract
claim on those instruments but on the VA/HUD "contract" which had
no arbitration clause.  Additionally, they said, they had not
signed either the Sub-Structure Agreement or the Protection Plan. 
     Prior to the hearing on the motion to compel arbitration, Mr.
and Mrs. Stabbs amended their complaint to remove all reference to
a breach of contract claim.  Instead of alleging that Terminix had
breached its contract, they claimed that Terminix had been
negligent in failing to properly inspect the property and in
failing to report its condition.  Terminix filed no objection to or
motion to strike the amended complaint.
     After a hearing, the trial judge split the cause of action
into arbitrable and non-arbitrable claims.  He declared that
damages occurring after October 19, 1992, were subject to
arbitration; all other claims were cognizable in a negligence
action.  Terminix appeals and argues that the entire case should be
subject to arbitration.  We note that a trial court's denial of a
motion to compel arbitration is an appealable order.  See American
Ins. Co. v. Cazort, 316 Ark. 314, 871 S.W.2d 575 (1994).
     Terminix contends that, because the arbitration clauses in the
Sub-Structure Agreement and the Protection Plan cover any
controversy or claim "arising out of or relating to" those
agreements, Mr. and Mrs. Stabbs have agreed to arbitrate their
claims.  To a great extent, Terminix relies on case law from the
federal courts and from other jurisdictions to argue that use of
such broad language -- "arising out of or relating to" -- renders
arbitrable any claim with a connection to the contract.  However,
the Federal Arbitration Act and the laws of other jurisdictions do
not restrict the scope of arbitration as we do in this state. 
Under Arkansas law, certain matters are not arbitrable, regardless
of the language used in an arbitration agreement.  Written
agreements to arbitrate have no application to tort matters,  Ark.
Code Ann.  16-108-201 (1987) (in effect at the time these
contracts were executed);  see also Lancaster v. West, 319 Ark.
293, 891 S.W.2d 357 (1995);  Jim Halsey Co. v. Bonar, 284 Ark. 461,
683 S.W.2d 898 (1985), and the complaint in effect at the time of
the hearing stated a cause of action in tort rather than contract. 
In the absence of objection by an opposing party asserting
prejudice or undue delay, a party may amend his complaint at any
time without leave of the court.  ARCP Rule 15(a).  Additionally,
we have recognized that the existence of a contractual relationship
between parties does not preclude the institution of a tort action. 
A party to a contract may sue on an independent tort claim.  Quinn
Cos. v. Herring-Marathon Group, Inc., 299 Ark. 431, 773 S.W.2d 94
(1989).  That is not to say that we will declare a matter non-
arbitrable merely because of the manner in which a party chooses to
characterize his action.  The claim must legitimately sound in
tort.  
     In Westark Specialties, Inc. v. Stouffer Family Ltd.
Partnership, 310 Ark. 225, 836 S.W.2d 354 (1992), we addressed the
issue of whether a party to a contract had legitimately stated a
cause of action in tort.  Westark leased a building to Stouffer. 
The lease provided that Westark would maintain the building's
sprinkler system.  During the course of the lease, the sprinkler
pipes froze, cracked, and flooded the premises.  Stouffer's
inventory was damaged and it filed suit against Westark for
negligence and breach of contract.  Westark, having certain
defenses available to it under the contract, moved to strike the
tort claim.  We said the following: 

     Generally, a breach of contract is not treated as a tort
     if it consists merely of a failure to act (nonfeasance)
     as distinguishable from an affirmatively wrongful act
     (misfeasance).  The courts, however, have tended to
     extend the tort liability for misfeasance whenever the
     conduct involves a foreseeable, unreasonable risk of harm
     to the plaintiff's interests.

     We decided that water damage from a poorly maintained
sprinkler system was foreseeable and that the action was cognizable
in tort.  Similarly, the Stabbs's amended complaint contained
allegations against Terminix that could either be characterized as
affirmatively wrongful acts or misfeasance of the type that would
result in a foreseeable, unreasonable risk of harm.  A termite
company's failure to properly inspect a residence and report on the
extent of damage can be said to involve a foreseeable, unreasonable
risk of harm to potential buyers of the residence.  Mr. and Mrs.
Stabbs stated a legitimate tort claim, and the trial court was
correct in refusing to compel arbitration of that portion of the
action.
     Affirmed.