RIVERWALK APARTMENTS, L.P. AND AFFIRMATIVE EQUITIES COMPANY, L.P., APPELLANTS,
v.
RTM GENERAL CONTRACTORS, INC., APPELLEE
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Riverwalk Apartments challenged an order lifting a stay of arbitration in a construction dispute involving an allegedly unlicensed contractor. The court reversed, holding that when a party presents colorable evidence that a contract with an arbitration clause is illegal (here, executed with an unlicensed contractor in violation of Florida law), the court must hold an evidentiary hearing on enforceability before compelling arbitration.
The court reversed and held that RTM's fictitious name registration and subsequent qualification did not cure the alleged deficiency. A fictitious name cannot imbue an unlicensed contractor with a license. When a party alleges and offers colorable evidence that a contract containing an arbitration clause is illegal, the court must conduct an evidentiary hearing to determine the validity of the agreement before compelling arbitration.
[1] A party alleging and offering colorable evidence that a contract containing an arbitration clause is illegal cannot be compelled to arbitrate the threshold issue of the e…
[2] Contracts entered into and performed by an unlicensed contractor are void and unenforceable as a matter of public policy.
Previewing 2 of 6 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 party who alleges and offers colorable evidence that a contract containing an arbitration clause is illegal cannot be compelled to arbitrate the threshold issue of the existence of the agreement to arbitrate; only a court can make that determination.”
Establishes the fundamental principle that courts, not arbitrators, determine whether a contract containing an arbitration clause is illegal and unenforceable.
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Join FLexlaw to unlock all legal intelligenceRussell DeVore, purporting to be president of RTM General Contractors, Inc., signed contracts for apartment renovations. RTM was qualified through lic…
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NORTHCUTT, Acting Chief. Judge.
Riverwalk Apartments and Affirmative Equities Company (collectively referred to as Riverwalk) challenge the nonfinal order lifting a stay of arbitration in this lawsuit concerning construction work allegedly performed by an unlicensed contractor, Russell DeVore. We reverse and remand to the circuit court to conduct an evidentiary hearing concerning the existence of the agreements to arbitrate and Riverwalk’s claim that the agreements were unenforceable.
Purporting to be the president of RTM General Contractors, Inc., DeVore signed contracts to perform renovations to River-walk’s apartment complex. RTM was qualified to act as a construction company through a licensed general contractor named Thomas Ault. Riverwalk refused to pay for the work, contending that it was shoddy and incomplete. RTM sued and arbitration proceedings commenced pursuant to arbitration clauses in the contracts.
Thereafter, Riverwalk filed a motion to stay arbitration to allow the circuit court to consider its claim that the contracts were procured by fraud and were unenforceable under section 489.128, Florida Statutes (1997), which provides that contracts with unlicensed contractors are void and unenforceable. Riverwalk proffered evidence suggesting that DeVore was not, in fact, the president of RTM, that the work was performed by DeVore or DeVore d/b/a DeVore & Associates without a license, and that neither RTM nor Ault had anything to do with the project. In short, Riverwalk charged, it was fraudulently induced into believing it was contracting with RTM when, in fact, RTM merely permitted DeVore to use its name and its supposed involvement with the project was a sham. The court described Riverwalk’s proffered evidence as significant, and it granted the stay to permit further discovery and an evidentiary hearing on River-walk’s assertion that the contracts were unenforceable.
Shortly before the evidentiary hearing, RTM filed a motion to lift the stay of arbitration. It argued that the licensing problem had been “cured”, and that no further court proceedings were necessary, because RTM recently had filed a fictitious name registration to do business under the name “DeVore & Associates” and Ault had applied to act as qualifying agent for “RTM General Contractors, Inc. d/b/a De-Vore & Associates.” The circuit court agreed that these actions cured the licensing defect and lifted the stay of arbitration. This appeal followed.
A party who alleges and offers colorable evidence that a contract containing an arbitration clause is illegal cannot be compelled to arbitrate the threshold issue of the existence of the agreement to arbitrate; only a court can make that determination. See Party Yards, Inc. v. Templeton, 751 So. 2d 121 (Fla. 5th DCA 2000); Alphagraphics Franchising, Inc. v. Stebbins, 617 So. 2d 463 (Fla. 4th DCA 1993). The issue before us is whether the actions taken by RTM necessarily resolved River-walk’s challenge to the enforceability of the contracts. As it did in the circuit court, RTM argues that section 489.128 and our decision in Poole and Kent Co. v. Gusi Erickson Const. Co., 759 So. 2d 2 (Fla. 2d DCA 1999), allowed it to cure the licensing problem and render the contracts enforceable.
Section 489.128 provides that “as a matter of public policy, contracts entered into on or after October 1, 1990, and performed in full or in part by any contractor who fails to obtain or maintain a license in accordance with this part shall be unenforceable in law or equity.” Until recently, the last sentence of the statute stated that “[i]n the event the contractor obtains or reinstates his or her license, the provisions of this section shall no longer apply.” In the mentioned case, Poole and Kent, a general contractor, contended that its contracts with subcontractor Gusi Erickson Construction Co. were unenforceable because Gusi Erickson did not have a valid qualifying agent until several months after the subcontracts were signed. Poole and Kent argued that the last sentence of section 489.128 only allowed for the enforcement of contracts entered into after correction of the licensing problems. We did not expressly address that assertion, but noted that “nothing alleged by Poole convinces us that this public works contract should be treated as an unenforceable illegal contract because of the delay in registering Mr. Larsen with the state as the qualifying agent for Gusi....” We held that the trial court did not err in refusing to vacate an arbitration award to Gusi on the basis of the licensing issue.
After the circuit court rendered its decision in this case, the legislature amended section 489.128 to delete the “cure” language. See G.S./S.B. 220, Reg. Sess. (Fla. 2000). The Journal of the Senate published a statement of intent concerning Senate Bill 220:
Statement of Intent
A couple of the provisions in this bill are designed to clarify the unlicensed contract invalidation provisions in section[] 489.128....
Recent court decisions appear to have misapplied those sections and are allowing contracts with unlicensed contractors to be enforced because the unlicensed contractor may obtain a license sometime in the future. That was not intended.
By deleting the last sentence in those sections, this bill makes clear that contracts with unlicensed contractors are unenforceable ... period.
Journal of the Senate, p. 1437 (May 5, 2000). Although the amendment took effect after the instant dispute arose, River-walk contends that we may consider it when deciding this case. See Palma Del Mar Condominium Ass’n No. 5 of St. Petersburg, Inc. v. Commercial Laundries of West Florida, Inc., 586 So. 2d 315 (Fla.1991) (holding that courts may consider subsequent legislation to determine the intended result of a previously enacted statute).
Thus, on the one hand RTM urges us to apply Poole and Kent for a proposition that is not expressly set forth in it, while on the other hand Riverwalk urges us to apply the amendment to section 489.128 retroactively. Although both arguments have merit, we need not do either of those things to resolve this case. This is because RTM’s fictitious name registration and Ault’s filing as qualifying agent for RTM doing business under the fictitious name did nothing to resolve River-walk’s challenge to the enforceability of the contracts under either version of the statute, or under any interpretation of Poole and Kent. Riverwalk asserts that RTM’s supposed involvement in the project was a sham, and that the work was actually performed by an unlicensed contractor. RTM could not cure the alleged deficiency merely by assuming the unlicensed contractor’s name. A fictitious name is just that — a fiction involving the name of the real party in interest, and nothing more. RTM’s subsequent adoption of the same fictitious name as that employed by the contractor simply did not imbue him with a license.
We reverse the order lifting the stay of arbitration and remand for further evidentiary proceedings as to the validity of the agreements.
GREEN and CASANUEVA, JJ., Concur.
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R.A.M. OF S. Fla., Inc. v. WCI Cmtys., Inc., 869 So. 2d 1210 (Fla. 2d DCA 2004)…nforceability of the construction contract-which contained an arbitration provision-was an issue to be decided by the trial court rather than by the arbitrator. See § 682.03(1), Fla. Stat. (2000); Riverwalk Apts., L.P. v. RTM Gen. Contractors, Inc., 779 So. 2d 537, 538 (Fla. 2d DCA 2000) (“A party who alleges and offers colorable evidence that a contract containing an arbitration clause is illegal cannot be compelled to arbitrate the threshold issue of the existence of the agreement to arbitrate; only a court…
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Michnal v. Palm Coast Dev., Inc., 842 So. 2d 927 (Fla. 4th DCA 2003)…hasis supplied.) It is undisputed Palm Coast reinstated its license before it filed the instant lien. As such, the enforceability of Palm Coast’s contract with Michnal was salvaged. See also Riverwalk Apartments, L.P. v. RTM Gen. Contractors, Inc., 779 So. 2d 537 (Fla. 2d DCA 2000)(finding contractor’s attempt to cure past licensing defect by filing of fictitious name registration after termination of contract, but before filing of lien, was ineffectual under section 489.128, since the contractor failed to o…
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Beazer Homes Corp. v. Bailey, 940 So. 2d 453 (Fla. 5th DCA 2006)…d DCA 2002). . See Vacation Beach, Inc. v. Charles Boyd Construction, Inc., 906 So. 2d 374 (Fla. 5th DCA 2005); Micronair, Inc. v. City of Winter Haven, 800 So. 2d 622 (Fla. 2d DCA 2001); Riverwalk Apartments, L.P. v. RTM General Contractors, Inc., 779 So. 2d 537 (Fla. 2d DCA 2000); Florida Title Loans, Inc. v. Christie, 770 So. 2d 750 (Fla. 1st DCA 2000) (arbitration clause unenforceable when one party unilaterally rescinds the contract and the other seeks to reinstate it); Party Yards, Inc. v. Templeton, 7…
Previewing 3 of 11 citing cases — full citator treatment, depth of discussion, and citing context are member features.
Join FLexlaw to unlock all legal intelligenceAuthorities Cited
- Party Yards, Inc. v. Templeton, 751 So. 2d 121 (Fla. 5th DCA 2000)
- Palma DEL MAR Condo. Ass'n #5 OF ST. Petersburg, Inc. v. Commercial Laundries OF W. Fla., Inc., 586 So. 2d 315 (Fla. 1991)
- Fla. Power & Light Co. v. Gardner, 617 So. 2d 463 (Fla. 4th DCA 1993)
- The Poole & Kent Co. v. Gusi Erickson Constr. Co., 759 So. 2d 2 (Fla. 2d DCA 1999)
- Alphagraphics Franchising, Inc. v. Stebbins, 617 So. 2d 463 (Fla. 4th DCA 1993)