Beazer Homes Corp. v. Bailey

• Decision Date: 08 September 2006
• Docket Number: No. 5D05-2229.,5D05-2229.
• Citation: 940 So.2d 453
• Parties: BEAZER HOMES CORP., Fabian Chiriboga, et al., Appellants, v. Edward BAILEY, Jill R. Bailey, et al., Appellees.
• Court: Florida District Court of Appeals

940 So.2d 453

BEAZER HOMES CORP., Fabian Chiriboga, et al., Appellants, v. Edward BAILEY, Jill R. Bailey, et al., Appellees.

No. 5D05-2229.

District Court of Appeal of Florida, Fifth District.

September 8, 2006.

Rehearing Denied October 27, 2006.

Steven L. Brannock, of Holland & Knight LLP, Tampa, and Thomas M. Burke and Christopher Annunziato of Holland & Knight LLP, Orlando, for Appellant.

Kathleen M. Skambis and Christopher C. Skambis of The Skambis Law Firm, Orlando, for Appellee.

SHARP, W., Senior Judge.

Beazer Homes Corporation (Beazer), a contractor who sold lots to, and built homes for, the plaintiffs involved in this lawsuit, and Fabian Chiriboga (Chiriboga) and Ralph Rosen (Rosen), Beazer's sales representatives, appeal from a non-final order that denied their motions to compel arbitration.¹ This lawsuit commenced when four home buyers, the Baileys, the Heningers, the Margolis and the Magees (Buyers) sued Beazer, Chiriboga and Rosen, for various causes of action, which stem from alleged oral misrepresentations and failures to disclose, committed by Beazer's sales agents. Each of the contracts between Beazer and the respective buyers, contain an agreement to arbitrate controversies arising out of the contract. We reverse and remand.

The Buyers alleged that they bought lots and built homes after Chiriboga and Rosen promised them that, from their lot and home, they would have an unobstructed view of a golf course, which was adjacent to the subdivision in which the lots were sold. Beazer owned the lots, but it did not develop the subdivision nor did it have any interest in the golf course. The Buyers alleged that Chiriboga and Rosen convinced them to purchase specific lots "with a golf course view," for a premium of either $30,000 or $32,000. They were also told that the golf course owner might build a wall that would partially block the view of the golf course, but that this was not likely. However, the sales representatives persuaded the Buyers to construct two story homes with second story balconies (in the cases of three Buyers), to insure that their golf course view would never be blocked. The Buyers further allege that at the time these representations were made, Beazer and its sales representatives knew that the golf course owner planned to construct an eight-foot wall in the near future, as well as plant trees which would totally block the Buyers' view of the golf course, even from the second stories of their homes.

Thereafter, when the golf course owner revealed to the public its plans to build the wall and to block off the golf course view with the tree landscaping, the Buyers sued the appellants, alleging fraud and violations of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). Each Buyer alleged Beazer and its sales representatives had misrepresented that their lots would have a permanent golf course view, at least from the second story of their homes. The Buyers alleged that they relied on those misrepresentations and failure to disclose, which was known to Beazer and its sales representatives. As a result, the Buyers averred that they suffered damages, in the form of the premium price paid for their lots, and the cost of the balcony options. For the fraud count, the Buyers sought only a damage remedy. The FDUTPA counts are based on the same set of facts, and the Buyers sought damages and an award of attorney fees.

The Buyers disclose in their complaint that the covenants and restrictions in the Public Records for their subdivision expressly do not guarantee a view of the golf course by the developer, an entity different than Beazer, or the homeowners association. Paragraph 2 of Article XII provides:

Neither the Developer nor the Association guarantees or represents that any view over and across the Golf Course from adjacent or approximate Lots will be preserved without impairment. Neither the Developer, the Association nor the owner of the Golf Course will have any obligation to prune or thin trees or other landscaping, and the owner of the Golf Course will have the right, in its sole and absolute discretion, to operate and maintain the Golf Course in accordance with any standards adopted from time to time by such owner and to add and remove trees, walls, fences and other landscaping to and from the Golf Course from time to time. In addition, the owner of the Golf Course, in its sole and absolute discretion, may change the location, configuration, size and elevation of the trees, bunkers, fairways and greens on the Golf Course from time to time. Any such additions or changes to the Golf Course may affect the view of the Golf Course from the Lots.

Appellants responded to the Buyers' complaint by moving to abate and to compel arbitration based on the sales contract signed by Beazer and the Buyers. Article X.C. of the contracts provides:

Should a controversy, claim or dispute arise out of this contract, Buyer(s) shall submit to binding arbitration. Seller and Buyer hereby agree to a waiver of a jury trial.

Appellants argued that claims for fraud in the inducement directed to the entire agreement or provisions other than the arbitration clause contained within the agreement, should be resolved by arbitration, and that counts brought under FDUTPA should also be properly submitted to arbitration. Chiriboga and Rosen argue that the counts filed against them, in their individual capacities, should be arbitrated as well, because they are agents of Beazer, and the causes of action against them are interdependent with claims against Beazer.

The Agreements of Sale also contain an integration provision in Article X. CONTRACT, A.

This contract supersedes all prior contracts between the parties here to. There are no collateral understandings, representations or agreements other than those contained herein or added by written instrument attached hereto, duly executed by Buyer and Seller. No salesman, employee, agent or seller has any authority to modify the terms hereof, or make agreements, representations, or promises which might postpone, limit, modify, or extinguish the terms hereof. No agreement or representation has been made by Seller, its agent or representatives to obtain any loan for Buyer or to guarantee the Buyer will secure any loan.

There is no mention in the contracts of any golf course view.

The trial court denied the motion to compel arbitration, without giving reasons. Our review of this issue is de novo. See Vacation Beach, Inc. v. Charles Boyd Construction, Inc. 906 So.2d 374 (Fla. 5th DCA 2005)(Florida law); Qubty v. Nagda, 817 So.2d 952 (Fla. 5th DCA 2002)(federal law); Hirshenson v. Spaccio, 800 So.2d 670 (Fla. 5th DCA 2001)(Florida law); Florida Title Loans, Inc. v. Christie, 770 So.2d 750 (Fla. 1st DCA 2000)(Florida law). The case sub judice involves the application of Florida law, rather than federal law.

The Buyers argued below, as well as on appeal, that the cause of action for fraudulent inducement is not within the scope of the arbitration provision. Seifert v. U.S. Home Corporation, 750 So.2d 633 (Fla. 1999), applying Florida law, describes the kind of arbitration clause involved in this case as "narrow" rather than "broad" because it refers only to disputes arising "out of" the contract, rather than "relating to" the contract. Thus, they maintain, the scope of such a narrow arbitration provision encompasses only claims having a direct relation to the terms and provisions of the contract, its interpretation and performance. They submit that fraud in the inducement claims should be excluded under state law, even though under federal law, they would be included.

The Buyers also argue that the essence of this controversy is a tort. Fraudulent inducement involves a contract only tangentially. The controversy does not concern the duties and obligations of the parties regarding the construction and sale of the homes. The allegations merely relate to a duty owed the general public not to lie and make false representations to induce a sale of real estate. They argue that Seifert has decreed that such tort causes of action are not even within the scope of a broad arbitration clause. They also argue that Chiriboga and Rosen cannot require arbitration because they are not parties to the contract.

I. Scope of the Arbitration Provision—Fraud in the Inducement Claims

As a matter of pure logic, if a contract is entered into because of the fraud or misrepresentations of one party, the whole contract should fail, including any agreement to arbitrate contained in the contract. However, that is not the course which case law has taken. Beginning with Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967), the majority ruled that if the alleged fraud related to the arbitration clause itself, then a court should resolve the issue. But if the fraud in inducement related to the whole contract which contained an agreement to arbitrate, that issue should be resolved by arbitration. The three dissenting judges described the majority holding as "fantastic."

If there has never been any valid contract, then there is not now and never has been anything to arbitrate. If Prima's allegations are true, the sum total of what the Court does here is to force Prima to arbitrate a contract which is void and unenforceable before arbitrators who are given the power to make final legal determinations of their own jurisdiction, not even subject to effective review by the highest court in the land.

388 U.S. at 425, 87 S.Ct. 1801.

Granted the arbitration provision in Prima Paint was broader than the one involved in this case, and the Court was interpreting federal law, nevertheless, the courts in this state have followed that ruling in fraud in the inducement cases, almost without exception, whether applying federal or state law.² In Florida Dept. of Ins. v. World Re, Inc., 615 So.2d 267 (Fla. 5th DCA 1993), applying federal law, this...