Riley v. Lucas Lofts Investors, LLC

• Decision Date: 09 July 2013
• Docket Number: No. ED99290,ED99290
• Parties: TIMOTHY RILEY, Respondent, v. LUCAS LOFTS INVESTORS, LLC, MARK COFMAN, REALTY EXCHANGE, INC., APARTMENT EXCHANGE, INC., and REALTEX INC., Appellants, and LUCAS LOFTS CONDOMINIUM ASSOCIATION, INC., REBECCA WRIGHT, KELLIE ROLAND, TIMOTHY FLEEGER, CHARLES PATRICK STANLEY, III, PARIC CORPORATION, SHAY ROOFING INC., and PATRICK SHELBY d/b/a SHELBY ROOFING, Defendants.
• Court: Missouri Court of Appeals

TIMOTHY RILEY, Respondent,
v.
LUCAS LOFTS INVESTORS, LLC, MARK COFMAN, REALTY EXCHANGE, INC.,
APARTMENT EXCHANGE, INC., and REALTEX INC., Appellants,
and
LUCAS LOFTS CONDOMINIUM ASSOCIATION, INC., REBECCA WRIGHT, KELLIE ROLAND,
TIMOTHY FLEEGER, CHARLES PATRICK STANLEY, III, PARIC CORPORATION,
SHAY ROOFING INC., and PATRICK SHELBY d/b/a SHELBY ROOFING, Defendants.

No. ED99290

Missouri Court of Appeals Eastern District DIVISION FOUR

Filed: July 9, 2013

Appeal from the Circuit Court of the City of St. Louis
Honorable Joan L. Moriarty
Introduction

Lucas Lofts Investors LLC (Seller), Mark Cofman, Realty Exchange, Inc., and Apartment Exchange, Inc. (collectively, Defendants), along with Realtex, Inc. d/b/a Coldwell Banker Premier Group (Third-Party Defendant),¹ appeal the judgment of the Circuit Court of the City of

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St. Louis denying Defendants' motion to compel arbitration² of claims Timothy Riley (Plaintiff) asserted against Defendants. Defendants and Third-Party Defendant argue that the trial court erred in denying the motion because a contract for the sale of two Lucas Lofts condominium units (Units) from Seller to Plaintiff contained an enforceable arbitration provision applicable to Plaintiff's claims. We affirm.

Factual and Procedural Background

In 2008, Plaintiff purchased the Units from Seller. The Units, along with approximately one hundred other residential condominium units, are located in a seven-story building at 1114 Lucas Avenue in the City of St. Louis. The Lucas Lofts condominium declaration defines "Unit" as "a physical portion of the Condominium designated for separate ownership or occupancy." The declaration provides that the upper horizontal boundary of a Unit is "the undecorated surfaces of the ceiling facing the interior of the Unit." The declaration defines "common elements" as "all portions of the Condominium other than the Units" and provides that the roof of the building is a common element.

The contract for Plaintiff's purchase of the Units provided:

In the event that after Closing, any disputes or disagreements between Seller and Purchaser arise with respect to the construction of Unit [sic] sold hereunder and/or this Contract (collectively, "Disputes"), then in any such event the Disputes shall be submitted to binding arbitration for resolution and determination. All such arbitration proceedings shall be conducted in accordance with the procedures

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contained in the Missouri Uniform Arbitration Act, Chapter 435 RSMo. 1994, as amended, and shall be determined in accordance with the substantive law of the State of Missouri.

Realty Exchange, Inc. was the selling agent in the transaction, and Apartment Exchange, Inc. was the condominium's management company at the time of purchase.

Plaintiff filed a petition against Defendants, whom Plaintiff described in another pleading as "Mark Cofman and his enterprises," and eight other defendants that are not parties to this appeal. Plaintiff stated that "before, during, and after" his purchase of the Units, Defendants made various false representations to him concerning water leaking into the Units from the roof of the building. Plaintiff claimed that Defendants misrepresented to him that certain Defendants would repair the leaking roof of the building at their expense and pay the damages Plaintiff incurred as a result of the leaks. Plaintiff alleged that he reasonably relied on the representations when deciding to purchase the Units. Plaintiff asserted the following counts: (1) fraud against Seller, Mr. Cofman, Apartment Exchange, Inc., and Realty Exchange, Inc.; (2) negligent misrepresentation against Seller, Mr. Cofman, Apartment Exchange, Inc., and Realty Exchange, Inc.; (3) fraudulent inducement of the contract against Seller and Mr. Cofman; and (4) breach of the Missouri Merchandising Practices Act against Seller, Mr. Cofman, and Realty Exchange, Inc. Plaintiff sought actual damages for, among other things, damage resulting from the leaks to improvements and personal property in the Units, cleaning and restoration costs, mortgage and interest payments, and legal fees. Plaintiff also sought punitive damages for three of the counts. Plaintiff attached copies of his contract with Seller and the Lucas Lofts condominium declaration as exhibits to the petition.

Defendants moved the trial court to compel arbitration of Plaintiff's claims and stay the proceedings pending arbitration, citing the arbitration provision in the contract between Seller

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and Plaintiff. Defendants asserted that all of Plaintiff's claims against Defendants "rely on" the contract because: (1) Plaintiff attached the contract as an exhibit to his petition; and (2) Plaintiff asserted that he relied on Defendants' representations when deciding to purchase the Units. Defendants also contended that because they made the alleged representations while acting as authorized agents of Seller, all Defendants were "sellers" under the contract and entitled to enforce the arbitration provision. In response, Plaintiff argued that his claims were not subject to the arbitration provision because they did not arise out of the contract and that Defendants other than Seller could not enforce the arbitration provision.

After conducting a hearing on Defendants' motion, the trial court found that "an agreement to arbitrate certain types of claims exists" but that Plaintiff's tort claims did not fall within the substantive scope of the arbitration agreement. The trial court also found that Plaintiff could not be compelled to arbitrate his claims against Defendants other than Seller because Plaintiff sued them in their individual capacities, not as agents of Seller. The trial court entered an order and judgment denying Defendants' motion to compel arbitration. Defendants and Third-Party Defendant appeal.³

Standard of Review

"When faced with a motion to compel arbitration, the motion court must determine whether a valid arbitration agreement exists and, if so, whether the specific dispute falls within the scope of the arbitration agreement." Nitro Distrib., Inc. v. Dunn, 194 S.W.3d 339, 345 (Mo. banc 2006). "In making these determinations, the court should apply the usual rules of state contract law and canons of contract interpretation." Id. "Whether the trial court should have

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granted a motion to compel arbitration is a question of law that this Court reviews de novo." Robinson v. Title Lenders, Inc., 364 S.W.3d 505, 510 (Mo. banc 2012).

Discussion

In their sole point on appeal, Defendants and Third-Party Defendant assert that the trial court erred in denying Defendants' motion to compel arbitration because the contract between Seller and Plaintiff contained an enforceable arbitration provision applicable to Plaintiff's claims. In response, Plaintiff contends that: (1) his claims are independent torts that fall outside the scope of the arbitration clause; (2) he never agreed to arbitrate any claims against Mr. Cofman, Apartment Exchange, Inc., Realty Exchange, Inc., or Realtex, Inc.; and (3) the arbitration clause is unenforceable because the contract was procured by fraud.

The Missouri Uniform Arbitration Act⁴ provides that an agreement to arbitrate is "valid, enforceable and irrevocable, save upon such grounds as exist at law or in equity for the revocation of any contract." Mo. Rev. Stat. § 435.350.⁵ "Under Missouri law, a party who is fraudulently induced to enter a contract may either affirm the contract and sue for damages or may disaffirm the contract and sue in equity for its rescission." Fiordelisi v. Mt. Pleasant, LLC, 254 S.W.3d 120, 128 (Mo. App. E.D. 2008). "[W]here a contract is induced by fraud, the defrauded party may escape arbitration under the...