EXCAVATING ENGINEERS, INC., APPELLANT,
v.
THE NATIONAL FIRE INSURANCE COMPANY OF HARTFORD AND PADULA CONSTRUCTION CO., INC., APPELLEES
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Excavating Engineers sued a contractor for breach of contract and sued the contractor's surety on a payment bond. The surety moved to stay the suit and compel arbitration based on an arbitration clause in the subcontract. The court reversed, holding that the surety was not a third-party beneficiary to the arbitration clause because the contract explicitly excluded third parties from benefiting.
The court held that the surety is not a third-party beneficiary to the arbitration clause and therefore cannot enforce it. A surety has no inherent right to arbitrate but may acquire such a right only if the parties intended to primarily and directly benefit the third party. The explicit exclusion in Article 25 demonstrates no such intent, so the surety cannot compel arbitration.
[1] A surety generally has no independent right to compel arbitration unless the underlying contract between the principal parties clearly and unambiguously demonstrates an i…
[2] When interpreting a contract to determine third-party beneficiary status, the entire contract must be considered, not just isolated clauses or phrases.
Previewing 2 of 4 headnotes on this case. FLexlaw’s editorially structured points of law — every proposition, pinpointed — are reserved for members.
Join FLexlaw to unlock all legal intelligence“a surety has no "existing right" to arbitrate, but may have such a right if the parties to the contract intended to primarily and directly benefit the third party”
Establishes the legal standard for when a surety can enforce an arbitration clause as a third-party beneficiary
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Join FLexlaw to unlock all legal intelligenceExcavating Engineers, a subcontractor, entered into a subcontract with Padula Construction Company (Contractor). The subcontract contained an arbitrat…
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GUNTHER, Judge.
Excavating Engineers, Inc. (Excavating) appeals the non-final order granting National Fire Insurance Company, Inc.’s (Surety) motion to stay and to compel arbitration. We reverse.
Excavating, a subcontractor, sued the contractor, Padula Construction Company, Inc. (Contractor), for breach of contract and sued Surety based on a payment bond. The issue is whether the contract between Excavating and the Contractor created an arbitration right which benefits Surety and permits Surety to stay Excavating’s suit against it and compel arbitration.
Surety’s motion to stay and to compel arbitration was based upon Article 21 of the contract executed between Excavating and the Contractor. Article 21 of the contract states in pertinent part:
Any controversy arising out of this subcontract or a breach of it may be settled by arbitration under the rules of the American Arbitration Association applicable to the construction industry at Contractor’s option.
However, the court in Aetna Casualty & Surety Co. v. Jelac Corp., 505 So. 2d 37 (Fla. 4th DCA 1987), makes it clear that a surety has no “existing right” to arbitrate, but may have such a right if the parties to the contract intended to primarily and directly benefit the third party. Third party beneficiary contracts, like all contracts, must be read as a whole, and isolated words and phrases are not determinative of the parties’ intentions. City National Bank of Miami v. Citibank, N.A., 373 So. 2d 703 (Fla. 3d DCA 1979).
In the instant case, the contract contains an additional provision, Article 25, which states as follows:
This Subcontract, or any part of it, shall not give third parties other than the owner any claim, demand or right of action against contractor or subcontractor beyond those that exist in the absence of this subcontract. [Emphasis added.]
When Article 21 on arbitration is read in conjunction with Article 25, it is clear that the instant contract does not express an intent that Surety benefit. Since Surety was not intended to primarily and directly benefit from the contract between Excavating and the Contractor, Surety is not a third party beneficiary to the arbitration clause of the contract. Thus, the trial court erred in granting the motion to stay and compel arbitration filed on behalf of Surety.
REVERSED AND REMANDED.
LETTS and GLICKSTEIN, JJ., concur.
Cases With Similar Vibessemantic neighbors from the corpus
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Henderson Inv. Corp. v. Int'l Fid. Ins. Co., 575 So. 2d 770 (Fla. 5th DCA 1991)…may participate, where their “presence is required if complete relief is to be accorded in the arbitration.” To the extent they may disagree with this opinion, we cite conflict with Excavating Engineers, Inc. v. National Fire Ins. Co. of Hartford, 524 So. 2d 1112 (Fla. 4th DCA 1988), Aetna Cas. & Sur. Co. v. Jelac Corp., 505 So. 2d 37 (Fla. 4th DCA 1987), and Maryland Cas. Co. v. State Dept. of General Services, 489 So. 2d 57 (Fla. 2d DCA), review dismissed, 494 So. 2d 1151 (Fla.1986), which all rest on an i…
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Nat'l Fire Ins. Co. of Hartford v. Aquamatic, Inc., 530 So. 2d 446 (Fla. 4th DCA 1988)…PER CURIAM. AFFIRMED on authority of Excavating Engineers v. National Fire Insurance [*447] Company of Hartford, (Fla. 4th DCA 1988). 524 So. 2d 1112 DOWNEY, LETTS and WALDEN, JJ., concur.…
Authorities Cited
- The AETNA Cas. & Sur. Co. v. Jelac Corp., 505 So. 2d 37 (Fla. 4th DCA 1987)
- City Nat'l Bank OF Miami v. Citibank, 373 So. 2d 703 (Fla. 3d DCA 1979)