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Quality Builders Warranty Corporation v. Eastwood Construction Co.

May 1, 2012

QUALITY BUILDERS WARRANTY CORPORATION, PLAINTIFF
v.
EASTWOOD CONSTRUCTION CO., INC. AND EASTWOOD HOMES, INC., DEFENDANTS



The opinion of the court was delivered by: William W. Caldwell United States District Judge

MEMORANDUM

I. Introduction

This is a breach-of-contract action brought by Plaintiff, Quality Builders Warranty Corporation ("QBW"), against Defendants, Eastwood Construction Co., Inc., and Eastwood Homes, Inc. The action, originally brought in the Court of Common Pleas of Cumberland County, was removed to this Court on December 7, 2010.

Defendants, both North Carolina corporations, are homebuilders. They each made agreements with QBW to enroll each new home in QBW's warranty program. QBW alleges that Defendants breached these agreements by attempting to terminate them early. Defendants brought a counterclaim, alleging that QBW breached the agreement by failing to properly handle claims brought by homeowners.

Presently before the court are two motions for summary judgment filed by QBW. In the first motion, QBW seeks summary judgment on Defendants' counterclaim. QBW's second motion requests partial summary judgment on its breach of contract claim against Defendants.

II. Background

On July 1, 1997, Eastwood Construction became a member of QBW's new-home warranty program. (Doc. 50, ¶ 8). Under the Builder Agreement, Eastwood Construction was required to enroll in the warranty program all new homes that it built. (Id. at ¶ 9). The Agreement had no fixed term and "continue[d] until terminated by either party in accordance with the terms of this agreement." (Doc. 1, Exh. 1). Eastwood Construction could terminate the Agreement "upon 30 days advance written notice to QBW." (Id.)

On May 15, 2003, the parties executed an Amendment to the Agreement. (Doc. 50, ¶ 11). In pertinent part, the Amendment modified the Agreement as follows:

1. Builder [Eastwood Construction] shall maintain its membership in QBW's Limited Warranty Program for an additional period of three (3) years to commence upon the below date [May 15, 2003] and submit for enrollment homes which Builder or any affiliate constructs during that time. Builder may not terminate his participation in the QBW Program within that period unless consented to by QBW in writing.

2. Builder's rate will be lowered to $1.15 per thousand. The rate will remain in effect for the period of this Amendment. The Amendment will renew for a like term, unless thirty (30) days prior to the expiration of this term or any extensions either party provides the other thirty (30) days advance written notice that they intend not to extend the period entitling the Builder to a lower rate. If Builder provides notice, QBW will adjust the Builder's rate upward effective at the end of the then current term. .

4. If the terms contained in this Amendment are inconsistent with the Builder Agreement, the terms of this Amendment shall govern. (Doc. 1, Exh. 2, "Amendment to Builder Agreement").

On November 1, 2010, Eastwood Construction sent QBW a letter, stating that it was terminating the Agreement as of December 31, 2010. (Doc. 50, ¶ 23). QBW alleges that the Agreement automatically renews for three-year terms, unless one party provides thirty days notice of non-renewal.Plaintiff argues that the termination letter was sent during the third three-year term, due to expire May 15, 2012.*fn1 Eastwood Construction argues that the Agreement did not automatically renew and could be terminated after the initial three-year term upon thirty days notice.

B. Agreement Between QBW and Eastwood Homes

Effective December 13, 2005, QBW and Eastwood Homes entered into a Builder Agreement and an Addendum pursuant to which Eastwood Homes became a member of Plaintiff's new-home warranty program. (Doc. 47, ΒΆΒΆ 17-18). This Agreement had no fixed term, and Eastwood Homes could terminate ...


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