Fewox v. McMerit Const. Co.

• Decision Date: 06 December 1989
• Docket Number: No. 88-03101,88-03101
• Citation: 556 So.2d 419,14 Fla. L. Weekly 2827
• Parties: 14 Fla. L. Weekly 2827 Robert D. FEWOX and Adalia Bayfront Condominium, Ltd., d/b/a Adalia Condominium Partnership of Florida, Appellants, v. McMERIT CONSTRUCTION COMPANY, McCarthy Construction Company, and Federal Insurance Company, Appellees.
• Court: Florida District Court of Appeals

Page 419

556 So.2d 419

14 Fla. L. Weekly 2827

Robert D. FEWOX and Adalia Bayfront Condominium, Ltd., d/b/a Adalia Condominium Partnership of Florida, Appellants, v. McMERIT CONSTRUCTION COMPANY, McCarthy Construction Company, and Federal Insurance Company, Appellees.

No. 88-03101.

District Court of Appeal of Florida,

Second District.

Dec. 6, 1989.

Rehearing Denied Feb. 5, 1990.

Ted R. Manry, III and Charles W. Pittman of MacFarlane, Ferguson, Allison & Kelly, Tampa, for appellants.

Dale W. Vash of Fowler, White, Gillen, Boggs, Villareal & Banker, P.A., Tampa, for appellees.

EN BANC.

RYDER, Judge.

Appellants, who were the plaintiffs below, challenge the trial court's order denying their motion for attorney's fees against appellee Federal Insurance Company (FIC). The court denied the motion for attorney's fees relying on this court's decision in Glen Johnson, Inc. v. L.M. Howdeshell, Inc., 520 So.2d 297 (Fla. 2d DCA 1988). We reverse, and find it necessary to recede from Glen Johnson, as well as our opinion in St. Paul Fire & Marine Insurance Co. v. Sample, 533 So.2d 1196 (Fla. 2d DCA 1988), for reasons which will be explained in this opinion. We also certify two questions as involving inter-district conflict and being of great public importance.

Appellants are the owners of a condominium project that was constructed by appellee McMerit Construction Company (McMerit), the predecessor of appellee McCarthy Construction Company (McCarthy). FIC issued a performance bond to assure performance of the construction contract. After a controversy arose between the parties, appellants sued McMerit, McCarthy and FIC for breach of contract and on the bond and requested arbitration. The trial court granted a stay of the proceedings pending arbitration. Appellants initiated an arbitration proceeding against McCarthy with the American Arbitration Association which resulted in an arbitrator's award against McCarthy in the amount of $185,888.35. Appellants then filed a motion in the trial court to confirm the award against McCarthy and at the same time they moved for an award of attorney's fees against FIC on the performance bond pursuant to sections 627.428 and 627.756, Florida Statutes (1987).

Although the trial court did not dispose of appellants' motion to confirm the award, McCarthy issued a check in the amount awarded by the arbitrator payable to both appellants and the Federal Savings & Loan Insurance Corporation (FSLIC), which had claimed an interest in the proceeds of the award. McCarthy and FIC then filed a motion to interplead the funds into the registry of the court. The trial court, pursuant to a written stipulation between appellants and FSLIC, ordered that the funds be deposited into an interest-bearing account pending a determination of the claims of appellants and FSLIC thereto. After hearing appellants' motion for attorney's fees against FIC, the court entered the order denying the motion, citing Glen Johnson. This appeal followed.

Appellants' claim for attorney's fees is based on their interpretation of two statutes, sections 627.428 and 627.756, Florida Statutes (1987), which they contend allow the recovery of attorney's fees from a surety under a performance bond. Section 627.428(1) provides:

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured's or beneficiary's attorney prosecuting the suit in which the recovery is had.

Section 627.756 provides:

Section 627.428 applies to suits brought by owners, subcontractors, laborers, and materialmen against a surety insurer under payment of performance bonds written by the insurer under the laws of this state to indemnify against pecuniary loss by breach of a building or construction contract. Owners, subcontractors, laborers, and materialmen shall be deemed to be insureds or beneficiaries for the purposes of this section.

Reading these two sections together, they indeed appear to provide for attorney's fees in this case in favor of appellants, the owners, and against FIC, the surety insurer, under the performance bond. Appellees, however, argue from their reading of Glen Johnson that Florida's Arbitration Code, chapter 682, Florida Statutes, prohibits an award of attorney's fees for services rendered by the attorney during arbitration. Unless otherwise provided in the agreement or provision for arbitration, the arbitrator's and umpire's expenses and fees, together with other expenses, not including counsel fees, incurred in the conduct of the arbitration, shall be paid as provided in the award. (Emphasis supplied.)

They cite section 682.11, Florida Statutes (1987), which states:

Appellees also contend that, even if section 682.11 does not prohibit an award of attorney's fees in this case, there was not a judicial "rendition of judgment or decree," or its equivalent, which is a prerequisite under section 627.428(1) to an award of fees. Although there is authority for the proposition that a voluntary payment by the insurer is the equivalent of the required "judgment or decree," appellees argue that in this case McCarthy, and not FIC, voluntarily paid the arbitrator's award and that FIC's motion to interplead the funds does not amount to a voluntary payment by FIC.

Thus, three issues are presented for our review:

(1) Does section 682.11 prohibit an award of attorney's fees for services rendered by the attorney during arbitration proceedings?

(2) Do sections 627.428 and 627.756 authorize an award of attorney's fees against the surety insurer for services rendered by the attorney during arbitration proceedings (or, stated differently, are arbitration proceedings encompassed within the term "suit" under section 627.428(1))?

(3) Was McCarthy's payment of the arbitrator's award, and FIC's motion to interplead the funds, tantamount to a voluntary payment by FIC, which would be the equivalent of "the rendition of a judgment or decree," entitling appellants to an award of attorney's fees under section 627.428?

1. Does Section 682.11 Prohibit Arbitration Attorney's Fees?

In Glen Johnson, a subcontractor on a construction job (Howdeshell) sued the general contractor (Glen Johnson) and the surety on the subcontract and the contractor's bond. Howdeshell also sought attorney's fees pursuant to the surety agreement. The case went before an arbitrator, who dismissed Howdeshell's claims without prejudice on the grounds that all conditions precedent to payment had not been met. The trial court, however, vacated the arbitrator's decision, finding that all conditions precedent had, in fact, been met, and entered final judgment in favor of Howdeshell. The court awarded attorney's fees to Howdeshell, including fees incurred during the arbitration proceedings. On appeal, this court affirmed the judgment but reversed the award of attorney's fees for services rendered by the attorney during arbitration. We stated, "[a]ttorney's fees for arbitration proceedings are expressly excluded by section 682.11, Florida Statutes (1985)."

Subsequent to Glen Johnson, we held in Sample, a case involving uninsured motorist coverage, that the insureds could not recover their attorney's fees for hours the attorney spent in arbitration because of the prohibition against such fees in section 682.11, citing Glen Johnson and Beach Resorts International v. Clarmac Marine Construction, 339 So.2d 689 (Fla. 2d DCA 1976).

Upon a close examination of section 682.11 and the relevant case law, we conclude that Glen Johnson and Sample were wrongly decided insofar as they hold that the statute prohibits an award of attorney's fees for services rendered by the attorney during arbitration proceedings. The "not including counsel fees" clause in section 682.11 merely indicates that an arbitrator may not include attorney's fees in his award of expenses and fees incurred during arbitration proceedings. Zac Smith & Co., Inc. v. Moonspinner Condominium Association, Inc., 534 So.2d 739, 742 (Fla. 1st DCA 1988); Loxahatchee River Environmental Control District v. Guy Villa & Sons, Inc., 371 So.2d 111 (Fla. 4th DCA 1978), cert. denied, 378 So.2d 346 (Fla.1979); Tassinari v. Loyer, 189 So.2d 651 (Fla. 2d DCA 1966). The legislature apparently eliminated attorney's fees from the subject matter jurisdiction of arbitration Upon examining Glen Johnson and Sample, we are of the opinion that our erroneous conclusion in those cases regarding the effect of section 682.11 may very well have stemmed from our misinterpretation of our previous decision in Beach Resorts International, although Glen Johnson did not cite Beach Resorts International. Other courts have also misconstrued Beach Resorts International to hold that section 682.11 prohibits an award of attorney's fees for services rendered during arbitration. See Cuevas v. Potamkin Dodge, Inc., 455 So.2d 398 (Fla. 3d DCA 1984); Heyman v. Vonelli, 413 So.2d 1254 (Fla. 3d DCA 1982); McDaniel v. Berhalter, 405 So.2d 1027 (Fla. 4th DCA 1981); Oakdale Park Ltd. v. Byrd, 346 So.2d 648 (Fla. 1st DCA 1977). But see Zac Smith & Co. (in which the First District Court of Appeal reaches a contrary conclusion to that reached in its previous opinion in Oakdale Park Ltd.); Consolidated Labor Union Trust v. Clark, 498 So.2d 547 (Fla. 3d DCA 1986) (in which the Third District Court of Appeal reaches a contrary conclusion to that reached in its previous opinions in Cuevas and Heyman ). Beach Resorts International, however, merely holds that section 682.11 prohibits an arbitrator from awarding attorney's fees associated with arbitration and that such fees are awardable by...