KP MEIRING CONST., INC. v. NORTHBAY I & E, INC.
| Decision Date | 30 June 2000 |
| Docket Number | No. 2D99-3037.,2D99-3037. |
| Citation | 761 So.2d 1221 |
| Parties | K.P. MEIRING CONSTRUCTION, INC. and Great American Insurance Company, Appellants, v. NORTHBAY I & E, INC., Appellee. |
| Court | Florida District Court of Appeals |
Joseph V. McNabb of Marlowe & McNabb, P.A., Tampa, for Appellants.
Debra J. Sutton, Bartow, for Appellee.
In this action by a subcontractor against the contractor and surety we review the denial of the contractor's motion to stay pending arbitration, which the trial court denied after a nonevidentiary hearing without stating any rationale. We have examined the relevant contracts and find that the trial court erred as a matter of law. Accordingly, we reverse.
The builder/owner in this case, La Quinta Inns, Inc., a corporation headquartered in San Antonio, Texas, contracted with K.P. Meiring Construction, Inc., a corporation headquartered in Indianapolis, Indiana, to build a hotel in Lakeland, Florida. Meiring subcontracted with Northbay I. & E., Inc., a Florida corporation, to provide certain labor, materials, and services. In this lawsuit filed in Polk County, Northbay sued Meiring for breach of contract and quantum meruit, contending that Meiring owed over $68,000 for work performed and materials and supplies provided. Northbay also sued Great American Insurance Company, Meiring's surety on a lien transfer bond, to foreclose a mechanics lien. Meiring and Great American have not answered the complaint and have appeared only to move for stay pending arbitration.
Although this motion was titled "motion to stay pending arbitration," the real thrust of the motion was to compel arbitration of the underlying dispute, as is apparent from the arguments presented to the trial court at the hearing. Thus, this court has jurisdiction over this matter pursuant to Florida Rule of Appellate Procedure 9.130(a)(3)(C)(v), which permits review by this court of a nonfinal order determining "the entitlement of a party to arbitration." See also § 682.20(1)(a), Fla. Stat. (1999) (). Furthermore, Great American, the surety, is a proper party to this appeal, even though it would not be a party to the arbitration. This is because Great American's liability is contingent upon the liability of its bond principal, so Great American will be bound by the results of the arbitration between Meiring and Northbay. Thus, Great American would be entitled to a stay of the action on the lien transfer bond until the underlying issues between Meiring and Northbay were determined by arbitration. See Kidder Elec. of Fla., Inc. v. United States Fidelity & Guar. Co., 530 So.2d 475 (Fla. 5th DCA 1988); Post Tensioned Eng'g Corp. v. Fairways Plaza Assoc., 429 So.2d 1212 (Fla. 3d DCA 1983).
The trial judge did not hold an evidentiary hearing in this matter and apparently disposed of the motion by reference to the contract documents only. "Where the determination of the issues of a lawsuit depends upon the construction of a written instrument and the legal effect to be drawn therefrom, the question at issue is one of law only ... [and] an appellate court is not restricted in its ability to reassess the meaning and effect of a written instrument to reach a conclusion contrary to that of the trial court." Angell v. Don Jones Ins. Agency, Inc., 620 So.2d 1012, 1014 (Fla. 2d DCA 1993). Our review of the relevant documents and the applicable law has led us to conclude that the trial court should have stayed this lawsuit until any claims arising out of this subcontract had been settled by mediation or arbitration.
As a general premise, "[a]rbitration is especially appropriate in situations involving issues that are unique to certain industries and which require specialized knowledge for their resolution." Lake Plumbing, Inc. v. Seabreeze Constr. Corp., 493 So.2d 1100, 1102 (Fla. 2d DCA 1986). As this court stated in Lake Plumbing, "the construction industry is such an industry." Id. Courts are required to indulge every reasonable presumption in favor of arbitration, a favored means of dispute resolution. See Roe v. Amica Mut. Ins. Co., 533 So.2d 279 (Fla. 1988); Florida Select Ins. Co. v. Keelean, 727 So.2d 1131 (Fla. 2d DCA 1999).
The Florida Arbitration Code, sections 682.01-682.22, Florida Statutes (1999), is designed "to encourage arbitration of disputes." Roe, 533 So.2d at 281.
Section 682.02 states that an "agreement or provision [for arbitration] shall be valid, enforceable, and irrevocable without regard to the justiciable character of the controversy; provided that this act shall not apply to any such agreement or provision to arbitrate in which it is stipulated that this law shall not apply...." Upon application by a party to compel compliance with an arbitration provision, the court shall grant the application if it "is satisfied that no substantial issue exists as to the making of the agreement or provision." § 682.03. Thus, the trial court must examine the contracts to determine whether it was the intent of the parties to submit their claims to compulsory arbitration. If so, the court should grant a stay of the litigation while the case proceeds to arbitration. The only means to obviate enforcement of a mandatory arbitration clause in the contract would be for the court to find that the parties had "stipulated that this law [the Florida Arbitration Code] should not apply." In this case Northbay has maintained that the contract documents demonstrate that the parties agreed not to apply the Florida Arbitration Code. We reject that view as unsupported by the contract documents themselves and the applicable law of contract interpretation.
We must first decide which documents constitute the actual agreement between the parties on the issue of arbitration. This involves determining whether the terms of the subcontract control over terms of the prime contract between the owner and the general contractor. As is the general rule, Northbay's subcontract incorporated by reference the prime contract as one of subcontract documents listed in article 1 of the memorandum of agreement between contractor and subcontractor. This is important because the prime contract contains both choice of law and forum selection clauses. Article 21 of the prime contract requires that The subcontract contains a choice of law provision in article 15.3.12.8, which states: "Subject to paragraph 6.6, the Subcontract shall be governed by Florida law."
The choice of law provisions are important because a Florida court is not empowered to compel parties to arbitrate in a foreign jurisdiction. See Damora v. Stresscon Int'l, Inc., 324 So.2d 80 (Fla. 1975). In this case, however, the prime contract does not contain an arbitration provision. We have reviewed the documents and have concluded that the parties intended that the subcontract terms should take precedence over any potentially conflicting prime contract provisions concerning arbitration, forum, or choice of law, because the subcontract defines the specific agreement between these two parties, Meiring and Northbay.
Also included within the subcontract, and appended to it, is the AIA Document A401 "Standard Form of Agreement Between Contractor and Subcontractor," which contains a mandatory arbitration clause in article 6.1:
6.1 Any controversy or claim between the Contractor and the Subcontractor arising out of or related to this Subcontract, or the breach thereof, shall be settled by arbitration, which shall be conducted in the same manner and under the same procedure as provided in the Prime Contract with respect to claims between the Owner and the Contractor.... If the Prime Contract does not provide for arbitration or fails to specify the manner and procedure for arbitration, it shall be conducted in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.
The standard arbitration provisions were contractually modified by the parties in article 15, "Miscellaneous Provisions," to include the following:
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