CHESTER E. BORCK, JESSIE L. BORCK, JAMES BORCK, AND JUDITH L. BORCK, INDIVIDUALLY AND D/B/A BORCK ASSOCIATES, APPELLANTS,
v.
DANIEL J. HOLEWINSKI, ET AL., APPELLEES
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The court affirmed a trial court order staying arbitration of a construction contract dispute where the contractor sought rescission of the entire contract based on mutual mistake. The court held that when a party seeks true rescission of a contract, the arbitration clause is abated pending resolution of the rescission claim, since rescission would render the underlying contract void.
When a party makes a prima facie case for true rescission of a contract, arbitration must be abated pending trial of the rescission issue. If rescission is granted, the contract is void and the arbitration clause falls away. If rescission is denied, the trial court must then determine whether to retain jurisdiction or compel arbitration.
[1] A claim for rescission of a contract, if prima facie established, abates arbitration pending a trial on the rescission issue.
[2] If a contract is rescinded, the arbitration clause within that contract is rendered of no force or effect.
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Join FLexlaw to unlock all legal intelligence“The effect of rescission is to render the contract abrogated and of no force and effect from the beginning.”
Establishes the foundational principle that rescission eliminates the contract retroactively, which would eliminate any arbitration clause within it.
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Join FLexlaw to unlock all legal intelligenceHomeowners contracted with a contractor/architect for extensive residential remodeling. The construction contract contained an arbitration clause. Dur…
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HERSEY, Judge.
The trial court entered an order staying arbitration of a dispute arising out of a construction contract, which order is appealed here.
Appellants, owning a residence, entered into a contract with appellee as architect and general contractor, for extensive remodeling of the property. The construction contract contained an arbitration clause which provided:
All claims, disputes and other matters in question between the Contractor and the Owner arising out of, or relating to, the Contract Documents of [sic] the breach thereof, ... shall be decided by Arbitration ....
Because of allegedly unforeseeable difficulties encountered in construction, there was first a verbal modification of the contract followed by commencement of this action by the contractor for rescission of the contract on the ground of mutual mistake. Appellants moved to dismiss the complaint and to compel arbitration. Ap-pellee moved to enjoin arbitration, the granting of which motion occasioned the present appeal.
The complaint clearly seeks rescission of the contract in its entirety. The effect of rescission is to render the contract abrogated and of no force and effect from the beginning. Restatement (First) of Contracts § 349 comment a (1932). If there is no contract, there can be no arbitration clause “of the contract.” This simplistic approach, a byproduct of the continuing search for consistency of result and simplicity of application of the law, is not without its philosophical detractors." Thus we have the school of thought that under appropriate circumstances an arbitration clause may be treated as severable from the remainder of the contract or, indeed, as a separate and distinct agreement ab initio. The authorities are collected in a scholarly opinion by Circuit Judge Aldrich in Lummus Co. v. Commonwealth Oil Refining Co., 280 F. 2d 915 (1st Cir.), cert. denied, 364 U.S. 911, 5 L.Ed.2d 225, 81 S.Ct. 274 (1960).
For our part we choose the path of simplicity and endorse the holding and rationale adopted by our sister court in R.B.F. Management Co. v. Sunshine Towers Apartment Residences Ass’n, 352 So. 2d 561 (Fla. 2d DCA 1977). The effect of that opinion is to require the trial court to make an initial finding as to whether a prima facie case is made to support a claim for “true” rescission (as opposed to partial rescission in conjunction with a claim for damages and other relief: a misnomer). If a prima facie case is made, then arbitration is abated pending trial of the rescission issue. If rescission is granted, then
this would necessarily leave the parties with no contract at all. Thereupon, the court would, in the exercise of its complete jurisdiction, continue with such further proceedings as might be required to return the parties to their original positions as nearly as possible. If rescission is denied the court will be faced with the problem of whether it may retain jurisdiction upon demand of either of the parties for arbitration.
Id. at 564.
Cf. Vic Potamkin Chevrolet, Inc. v. Bloom, 386 So. 2d 286 (Fla. 3d DCA. 1980) (enforcement of arbitration clause proper where plaintiffs did not seek rescission or cancellation of the contract).
We therefore affirm the order enjoining arbitration and remand for further proceedings.
AFFIRMED and REMANDED.
DOWNEY and LETTS, JJ., concur.
Cases With Similar Vibessemantic neighbors from the corpus
Citator
Cited By (12 total)
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United Auto. Ins. Co. v. Salgado, 22 So. 3d 594 (Fla. 3d DCA 2009)…contract”). The term “rescission,” however, has been defined to mean “[annulling or abrogation or unmaking of [a] contract and the placing of the parties to it in status quo.” Black’s Law Dictionary 1472 (4th ed. 1968); see also Borck v. Holewinski, 459 So. 2d 405, 405 (Fla. 4th DCA 1984) (“The effect of rescission is to render the contract abrogated and of no force and effect from the beginning.”); Webster’s Third New International Dictionary 1930 (1986) (term “rescind” defined to mean “to abrogate (a contra…
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Beazer Homes Corp. v. Bailey, 940 So. 2d 453 (Fla. 5th DCA 2006)…rima Paint minority quoted above: If there is no contract, there can be no arbitration clause “of the contract.” See Sanchez v. Criden, 899 So. 2d 326 (Fla. 3d DCA 2005); Diez-Sierra v. Aguera, 762 So. 2d 557 (Fla. 3d DCA 2000); Borck v. Holewinski, 459 So. 2d 405 (Fla. 4th DCA 1984). A trial court, as well as the appellate court, must determine whether “true rescission” is sought, as opposed to partial rescission in conjunction with a claim for damages and other relief. Borck. However, this exception to the…
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Shearson/Lehman Bros., Inc. v. Ordonez, 497 So. 2d 703 (Fla. 4th DCA 1986)…f any contract. In basing its ruling upon the last clause in section 2, the trial court erroneously broadened the meaning of the words “contract” and “agreement.” Furthermore, the trial court erred in relying on our decision in Borck v. Holewinski, 459 So. 2d 405 (Fla. 4th DCA 1984), in that Borck did not involve interstate commerce and was therefore controlled exclusively by the Florida Arbitration Act and Florida law. Here, we are dealing with interstate commerce and federal law which restrict the interpre…
Previewing 3 of 12 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- VIC Potamkin Chevrolet, Inc. v. Bloom, 386 So. 2d 286 (Fla. 3d DCA 1980)
- Lummus Co. v. Commonwealth OIL Ref. Co., Inc., 280 F.2d 915 (1st Cir. 1960)
- Conner Air Lines, Inc. v. Aviation Credit Corp., 364 U.S. 911 (U.S. 1960)
- Bindley v. Metro. Life Ins. Co., 364 U.S. 911 (U.S. 1960)
- R. B. F. Mgmt. Co. v. Sunshine Towers Apt. Residences Ass'n, Inc., 352 So. 2d 561 (Fla. 2d DCA 1977)