Jackson v. Shakespeare Found., Inc.

• Citation: 108 So.3d 587
• Decision Date: 31 January 2013
• Docket Number: No. SC11–1196.,SC11–1196.
• Parties: George JACKSON, et al., Petitioners, v. The SHAKESPEARE FOUNDATION, INC., et al., Respondents.
• Court: Florida Supreme Court

108 So.3d 587

George JACKSON, et al., Petitioners,

v.The SHAKESPEARE FOUNDATION, INC., et al., Respondents.

No. SC11–1196.

Supreme Court of Florida.

Jan. 31, 2013.

Jean Marie Downing of Downing Law Offices, P.A., Panama City Beach, FL, for Petitioners.

Leonard E. Ireland, Jr. of Clayton–Johnston, P.A., Gainesville, FL, for Respondents.

LEWIS, J.

This case is before the Court for review of the decision of the First District Court of Appeal in Shakespeare Foundation, Inc. v. Jackson, 61 So.3d 1194 (Fla. 1st DCA 2011), and concerns whether an action for fraud is within the scope of an arbitration provision in a contract for the purchase and sale of real property. The First District certified that its decision is in conflict with the decision of the Fifth District Court of Appeal in Maguire v. King, 917 So.2d 263 (Fla. 5th DCA 2005). We have jurisdiction. Seeart. V, § 3(b)(4), Fla. Const.

FACTS

In 2006, George Jackson, Kerry Jackson, and the Jackson Realty Team, Inc. (“the Jacksons”) decided to sell the real property that is the subject of the contract which forms the basis of this dispute. They posted the following advertisement in the Bay County Multiple Listing Service:

This is a Great affordable housing project. Estimate from North Bay Engineering is $17,500 to get you to Dev order stage. Topography and boundary survey completed recently by Dragon Surveying to be included in price. Property is 165' on Everitt Avenue and 396' deep, totally cleared and filled except for 10' around fence line. Zoning per City of PC is MU2, Mixed Use 2, Multi Family duplex, triplex or quadraplex be built on the property. Recently tapped into Panama City Water and Sewer, with new commercial grade pump/lift station on site. Local Engineering company has platted 10 duplexes could fit 6 4 plexes. Zoned 20 units per acre or 30 units total. Wetlands study verifies No Wetlands. One of Sellers is Licensed Fl. Realtor.

(Emphasis added.) When the Jacksons posted this advertisement, they had in their possession a Property Report Land Use Planning Analysis, which established, contrary to the advertisement, that 25% of the subject property constituted wetlands.

The Jacksons and the Respondents—the Shakespeare Foundation, Inc., and the Herd Community Development Corp. (collectively the “Shakespeare Foundation” or the “Foundation”)—entered into negotiations for the purchase of the real property. During the negotiations, the Shakespeare Foundation advised the Jacksons that they intended to develop the property into a twenty-seven unit low-income housing development. The Shakespeare Foundation relied on the representations set forth in the advertisement and entered into a contract with the Jacksons for the purchase of the real property.

In July 2007, after the Shakespeare Foundation tendered full payment to the Jacksons for the property, the Foundation held an onsite meeting with a builder and engineer. The builder reported that the property might contain wetlands. The Shakespeare Foundation hired an engineering firm to perform a wetlands delineation ¹ on the property. The firm provided the Shakespeare Foundation with a report that established that 0.39 acres of the 1.5 acre property was wetlands rendering it unbuildable. The wetlands constituted 26% of the entire tract which was equal to nine of the twenty-seven units that the Shakespeare Foundation had intended to develop.

The Shakespeare Foundation thereafter filed an action against the Jacksons for fraudulent misrepresentation. In the complaint, it was alleged that in the advertisement for the sale of the property, the Jacksons knowingly and falsely misrepresented that the property had no wetlands and that the property was suitable for the construction of thirty units, and the Shakespeare Foundation relied on these misrepresentations when entering into the contract. The Shakespeare Foundation contended that if it had been known that 26% of the property constituted wetlands, the property would have never been purchased because that percentage of wetlands made use of the property “economically unfeasible.” The Shakespeare Foundation also asserted that the existence of the wetlands led to a delay in project development. It was alleged that this delay of time caused the Foundation to miss a favorable real estate market in which the subject property could have been sold, and placed them in one of the worst real estate markets in the modern era.

The Jacksons moved to dismiss the Shakespeare Foundation's action. They asserted that the fraud claim arose out of, and was related to, the contract and, therefore, fell within the arbitration provisionof the contract. The arbitration provision in the contract, titled “Default and Dispute Resolution,” states:

14. DISPUTE RESOLUTION: This Contract will be construed under Florida law. All controversies, claims, and other matters in question arising out of or relating to this transaction or this Contract or its breach will be settled as follows:

(a) Disputes concerning entitlement to deposits made and agreed to be made: Buyer and Seller will have 30 days from the date conflicting demands are made to attempt to resolve the dispute through mediation. If that fails, Escrow Agent will submit the dispute, if so required by Florida law, to Escrow Agent's choice of arbitration, a Florida court or the Florida Real Estate Commission. Buyer and Seller will be bound by any resulting award, judgment, or order.

(b) All other disputes: Buyer and Seller will have 30 days from the date a dispute arises between them to attempt to resolve the matter through mediation, failing which the parties will resolve the dispute through neutral binding arbitration in the county where the Property is located. The arbitrator may not alter the Contract terms or award any remedy not provided for in this Contract. ... This clause will survive closing.

(Emphasis added.) The Jacksons contended that the contractual provisions required the Shakespeare Foundation to submit the fraud claim to binding arbitration. It was asserted that this provision required binding arbitration of the fraud claim because the scope of the contractual provision included all claims “arising out of or relating to this transaction or this Contract.” (Emphasis added.)

The trial court subsequently granted the Jacksons' motion to dismiss, concluding that the arbitration provision in the contract required that the parties submit the fraud claim to arbitration. The Shakespeare Foundation appealed the judgment of dismissal to the First District Court of Appeal. See Shakespeare Found., 61 So.3d at 1196.

Decision of the First District

On appeal, the First District examined whether the trial court erred in dismissing the action. See id. at 1197–98. The crux of the appellate court's review was whether the fraud claim of the Shakespeare Foundation was within the scope of the arbitration provision of the contract. See id. at 1198.

The district court below concluded that the arbitration provision of the subject contract was broad in scope because its terms were to apply to all claims or controversies “arising out of or relating to” the contract. See id. (concluding that the “or relating to” language rendered the arbitration provision broad in scope). The district court then held that a claim falls within a broad arbitration provision if a “significant relationship”—i.e., a “contractual nexus”—exists between the contract and the claim. See id.

The district court, however, determined that the fraud claim here did not come within the broad scope of the arbitration provision because the fraud claim arose from a general duty established under the common law; not from an obligation arising under the contract. See id. at 1199. More specifically, the district court concluded that the fraud claim did not significantly relate to the contract because determination of this claim required neither reference to nor construction of the contract. See id. Rather, the district court held that the claim rested on the alleged false statements in the published advertisementand the general common law duty not to make fraudulent misrepresentations. See id. The court further determined that the fraud claim was not within the scope of the arbitration provision because the contract was only incidental to the dispute since the Shakespeare Foundation had the ability, as well as the right, to assert a fraud claim before the parties executed the contract. See id. The district court also concluded that the express language of the contract evinced an intent that a fraud claim would not be litigated under the contract and its arbitration provision. See id. Specifically, the district court held that the express language of the contract only contemplates remedies for a breach of contract action, and prohibits an arbitrator from providing a remedy not specifically provided for in the provisions of the contract, such as a remedy in the event of a tort or fraud action. See id.

The First District ultimately held that the action based on fraud was not a dispute subject to arbitration under the contract, reversed the trial court's order, and certified conflict with the decision of the Fifth District in Maguire. See id. at 1201.

Conflict Case

In Maguire, a buyer entered into a contract to purchase real property from the sellers. See917 So.2d at 264. The sellers represented that the real property would include two acres of drainage rights. See id. The parties articulated and reduced those rights into written form in an addendum to the purchase contract. See id. After the parties closed on the contract, the buyer discovered that the sellers had previously transferred one acre of the agreed upon two acres of drainage rights in a previous sale of a different parcel. See id. The buyer filed an action against the sellers for specific performance, breach of contract, fraud in the inducement, fraudulent misrepresentation, and negligent misrepresentation. See id. at...