Juan Mendez, Jr., etc. v. Hampton Court Nursing Center, LLC. , 203 So. 3d 146 ( 2016 )

Supreme Court of Florida
_____________
No. SC14-1349
_____________
JUAN MENDEZ, JR., etc.,
Petitioner,
vs.
HAMPTON COURT NURSING CENTER, LLC,
Respondent.
[September 22, 2016]
PERRY, J.
Juan Mendez, Jr. (the “son”), as personal representative of the estate of Juan
Mendez, Sr. (the “father”), seeks review of the decision of the Third District Court
of Appeal in Mendez v. Hampton Court Nursing Center, LLC, 140 So. 3d 671 (Fla.
3d DCA 2014), on the ground that it expressly and directly conflicts with decisions
of the district courts of appeal on whether a nursing home resident is bound by an
arbitration clause in a nursing home contract, when the resident neither signed nor
otherwise agreed to the contract. We have jurisdiction. See art. V, § 3(b)(3), Fla.
Const.
This case concerns whether the father is bound by an arbitration clause in a
nursing home contract signed by Hampton Court and the son, but not the father.
The Third District found “that the father is bound by the arbitration provision
contained in the agreement for care executed by his son, and to which the father
was the intended third-party beneficiary.” Mendez, 140 So. 3d at 676. We
disagree. Accordingly, we quash the Third District’s decision and remand for
further proceedings consistent with this opinion.
I. Facts and Procedure
Hampton Court Nursing Center (“Hampton Court”) admitted the father to its
nursing home facility in 2009. At that time, the son signed a nursing home
contract with Hampton Court, providing for the father’s residency and care at
Hampton Court. The contract included an arbitration clause. The father did not
sign the contract.
While under Hampton Court’s care in 2011, the father developed an eye
infection that eventually required the removal of his left eye. In 2012, the son filed
suit on the father’s behalf in the Circuit Court for the Eleventh Judicial Circuit,
Miami-Dade County, alleging negligence and statutory violations. Hampton Court
moved to compel arbitration and stay the judicial proceedings. The circuit court
heard argument and granted the motion. The father appealed, but passed away
while the appeal was pending. See id. at 673.
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On appeal from the trial court’s order, the Third District affirmed. Id. at
676. Citing Alterra Healthcare Corp. v. Estate of Linton ex rel. Graham, 953 So.
2d 574 (Fla. 1st DCA 2007), the Third District held that the father was the intended
third-party beneficiary of the nursing home contract, and accordingly, Hampton
Court could bind him to its contract even though he never signed it. Mendez, 140
So. 3d at 674.
II. The Conflict Cases
“Third persons who are not parties to an arbitration agreement generally are
not bound by the agreement.” 21 Williston on Contracts § 57:19, at 181 (4th ed.
2001). Notwithstanding that principle, the district courts disagree on whether a
nursing home resident is bound by an arbitration clause in a nursing home contract,
when the resident neither signed nor otherwise agreed to the contract.
The First and Third Districts held that the resident is bound by the contract,
because the resident is the intended third-party beneficiary of the contract. See
Mendez, 140 So. 3d at 674; Alterra Healthcare, 953 So. 2d at 579. Both courts
emphasized that the resident is bound irrespective of whether the resident signed
the contract, or whether the signing party had authority to act on the resident’s
behalf. See Mendez, 140 So. 3d at 674; Alterra Healthcare, 953 So. 2d at 579. As
discussed below, we reject this view.
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On similar facts, the Second, Fourth, and Fifth Districts held differently.
See Perry ex rel. Perry v. Sovereign Healthcare Metro W., LLC, 100 So. 3d 146,
147-48 (Fla. 5th DCA 2012); Fletcher v. Huntington Place Ltd. P’ship, 952 So. 2d
1225, 1227 (Fla. 5th DCA 2007); Lepisto v. Senior Lifestyle Newport Ltd. P’ship,
78 So. 3d 89, 92 (Fla. 4th DCA 2012); In re Estate of McKibben, 977 So. 2d 612,
613 (Fla. 2d DCA 2008). These decisions analyzed the facts using an agency law
framework and held that a resident was not bound by a contract that he or she did
not sign, where the signing party did not agree to the contract on the resident’s
behalf or lacked the authority to act for the resident. See Perry, 100 So. 3d at 147-
48; Fletcher, 952 So. 2d at 1227; Lepisto, 78 So. 3d at 92; McKibben, 977 So. 2d
at 613. The Fifth District explicitly considered and rejected the type of third-party
beneficiary argument upheld in Mendez and Alterra Healthcare. See Perry, 100
So. 3d at 147-48.
III. The Third-Party Beneficiary Doctrine
Hampton Court urges us to adopt the rule of Mendez and Alterra Healthcare:
that under the third-party beneficiary doctrine, a nursing home resident may be
bound by a contract to which the resident never agrees. We disagree.
The doctrine of third-party beneficiaries provides that under certain
circumstances, a person may sue to enforce a contract, even though the person is
not a party to the contract. See 11 Fla. Jur. 2d Contracts § 206, at 406-07 (2008).
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“To establish an action for breach of a third party beneficiary contract, [the third-
party beneficiary] must allege and prove the following four elements: ‘(1)
existence of a contract; (2) the clear or manifest intent of the contracting parties
that the contract primarily and directly benefit the third party; (3) breach of the
contract by a contracting party; and (4) damages to the third party resulting from
the breach.’ ” Found. Health v. Westside EKG Assocs., 944 So. 2d 188, 194-95
(Fla. 2006) (quoting Networkip, LLC v. Spread Enters., Inc., 922 So. 2d 355, 358
(Fla. 3d DCA 2006)); see also Patrick John McGinley, 21 Fla. Prac., Elements of
an Action § 603:1 (2015-2016 ed.).
Critically, the third-party beneficiary doctrine enables a non-contracting
party to enforce a contract against a contracting party—not the other way around.
See, e.g., Espinosa v. Sparber, Shevin, Shapo, Rosen & Heilbronner, 612 So. 2d
1378, 1380 (Fla. 1993); Shingleton v. Bussey, 223 So. 2d 713, 715 (Fla. 1969).
The third-party beneficiary doctrine does not permit two parties to bind a third—
without the third party’s agreement—merely by conferring a benefit on the third
party. Mendez and Alterra Healthcare are not in accord with this principle.
We have previously held that “[w]e see no reason to allow [the non-
contracting third-party beneficiary] to enjoy the benefits of the [contract] without
bearing its burdens as well.” Nat’l Gypsum Co. v. Travelers Indem. Co., 417 So.
2d 254, 256 (Fla. 1982) (holding that the non-contracting third-party beneficiary
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had to comply with the contract’s pre-litigation notice requirements if the third
party wanted to sue to enforce the contract). We distinguish National Gypsum,
however, because the third-party beneficiary in that case sued to enforce a contract
between other parties; here, the father’s estate sued for negligence and statutory
violations—not to enforce the son’s contract with Hampton Court.
This distinction is consistent with many of the authorities cited in Justice
Polston’s dissenting opinion. For instance, the dissent observes that “Florida
courts have required third-party beneficiaries to arbitrate,” Polston, J., dissenting
op. at 16 (quoting Kong v. Allied Prof’l Ins. Co., 750 F.3d 1295, 1302 (11th Cir.
2014)); that “[o]rdinarily, a third party beneficiary is bound by an arbitration clause
in the contract under which the party claims third party beneficiary status,”
Polston, J., dissenting op. at 3 (quoting 8 Fla. Prac., Constr. Law Manual § 7:38
(2015-2016 ed.)); and that “traditional principles of state law allow a contract to be
enforced by or against nonparties to the contract through . . . third-party
beneficiary theories,’ ” Polston, J., dissenting op. at 16 (quoting Arthur Andersen
LLP v. Carlisle, 556 U.S. 624, 631 (2009) (emphasis removed)). We agree that
when a plaintiff sues under a contract to which the plaintiff is not a party—unlike
the father in this case—we will ordinarily enforce an arbitration clause contained
in that contract, absent some other valid defense. Cf. Nat’l Gypsum, 417 So. 2d at
256. However, the rule of National Gypsum, does not apply here because the
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father does not bring suit as a third-party beneficiary for the benefit of a contract
signed by others. The circumstances presented in National Gypsum are not
presented here. Neither Justice Polston’s dissenting opinion, Mendez, nor Alterra
Healthcare makes this distinction, and none finds support from National Gypsum.
Mendez and Alterra Healthcare also run contrary to the purpose behind the
third-party beneficiary doctrine, which is to do justice for the non-contracting
third-party beneficiary. From the early days of the third-party beneficiary
principle, its proponents recognized that the third-party beneficiary rule was
grounded in principles of justice and equity. See, e.g., Arthur L. Corbin, Law of
Third Party Beneficiaries in Pennsylvania, 77 U. Penn. L. Rev. 1, 6 (1928); Samuel
Williston, Contracts for the Benefit of a Third Person, 15 Harv. L. Rev. 767, 772-
73 (1902). The seminal case establishing the third-party beneficiary doctrine
argued that “manifest justice” required the establishment of the third-party
beneficiary doctrine, even if traditional contract principles demanded a different
result. Lawrence v. Fox, 20 N.Y. 268, 275 (1859) (plurality opinion).
Justice Polston’s dissent disapproves of these authorities, criticizing them as
old. See Polston, J., dissenting op. at 14, 17. Lawrence is now “universally
recognized as the landmark case in the evolution of the contract law of third party
beneficiaries in the United States.” 9 Corbin on Contracts § 42.3, at 16 (rev. ed.
2007). Professor Williston’s writings are instructive “because almost immediately
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after Lawrence v. Fox was decided, contract law became dominated by the
doctrinal reasoning of the classical contract school, as exemplified . . . in the
commentaries of figures like . . . Williston.” Melvin A. Eisenberg, Third-Party
Beneficiaries, 92 Colum. L. Rev. 1358, 1365 (1992). Professor Corbin’s thoughts
are especially noteworthy because he “had more influence on the sustained
development of [the third-party beneficiary] rule than anyone else before him or
since.” Anthony Jon Waters, The Property in the Promise: A Study of the Third
Party Beneficiary Rule, 98 Harv. L. Rev. 1109, 1172 (1985). If Lawrence and
Professors Corbin’s and Williston’s writings are invalid merely because of their
age, then so is Marbury v. Madison, 5 U.S. (1 Cranch) 137 (1803).
Neither Mendez nor Alterra Healthcare squares with the principles of justice
and equity underlying the third-party beneficiary doctrine: both decisions permit
contracting parties to bind the non-contracting party without the non-contracting
party’s consent. See Mendez, 140 So. 3d at 674-76; Alterra Healthcare, 953 So. 2d
at 579. We would never enforce an admission agreement if a nursing home
obtained a resident’s signature by threatening the violent destruction of the
resident’s property unless the resident signed the agreement. Cf. Casto v. Casto,
508 So. 2d 330, 335 (Fla. 1987) (invalidating a prenuptial agreement in part
because of the husband’s ultimatum that the wife “sign the agreement or he would
blow up the house and throw Clorox all over her clothes”). If we will not enforce a
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contract when a party agrees under threat or duress, then we should not enforce a
contract in the absence of the party’s agreement altogether.
IV. Agency Law and Medical Incapacity
Justice Polston’s dissent also attempts to distinguish this case on other
grounds, claiming that the son signed the admissions contract as a representative of
his father. Polston, J., dissenting op. at 18. The record in this case does not
support this analysis.
First, we cannot conclude that the son was the father’s representative. When
“the totality of the evidence is susceptible to multiple inferences and
interpretations, the existence and scope of an agency relationship are generally
questions of fact.” Villazon v. Prudential Health Care Plan, Inc., 843 So. 2d 842,
853 (Fla. 2003); see also Goldschmidt v. Holman, 571 So. 2d 422, 424 (Fla. 1990)
(“[T]he existence of an agency relationship is normally one for the trier of fact to
determine, [except where] there [is] no evidentiary question . . . for the [factfinder]
to resolve.” (citation omitted)). In this case, the record contains conflicting
evidence on the question of agency. On one hand, the nursing home contract
contains the son’s signature on a line labeled “Resident’s Representative.” On the
other hand, the record also contains the son’s affidavit attesting to the fact that the
father had not granted the son any written authorization to act as the father’s agent,
nor had the father “otherwise directed, appointed, or instructed [the son] in any
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way on or prior to [the date of the father’s admission to Hampton Court] to carry
out [the father’s] affairs for him relating to any matter.” We need not remand to
the trial court to hold an evidentiary hearing and determine whether the son was
the father’s representative, however, because Hampton Court expressly disclaims
any reliance on agency principles. See Hampton Court’s Answer Br. 5 (stating that
“an argument . . . based on principles of Agency Law [sic] . . . has no relevance in
cases like this one”); id. at 14 (noting that Hampton Court has “made no argument
based on agency law principles”); Oral Arg. at 33:39 (Q: “So are you saying [that
the son was] the father’s agent?” A: “No, Your Honor. No.”).
Finally, we hold that the father’s mental capacity does not impact the
outcome of this case. Hampton Court explicitly concedes that a nursing home
resident’s “mental capacity or competence is irrelevant to the question of whether
an individual can be bound to the terms of a contract as a third party beneficiary.”
Hampton Court’s Answer Br. 13-14; id. at 18 (observing that a nursing home
resident’s “capacity to give informed consent or make medical decisions . . . is
irrelevant in a third party beneficiary analysis”); id. at 30 (“[The father’s] mental
status is irrelevant to a proper third party beneficiary analysis.”). If Hampton
Court were concerned that the father lacked the required mental capacity to execute
binding contracts, it could have availed itself of the Legislature’s comprehensive
statutory scheme governing incapacitated individuals. See Florida Guardianship
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Law, ch. 744, Fla. Stat. (2015). Any adult person—presumably including an
individual affiliated with Hampton Court—could have petitioned for a court to
adjudicate the father incapacitated and appoint a guardian. See §§ 744.3201,
744.334, Fla. Stat. An appointed guardian would have held the power to contract
on the father’s behalf for his residency at Hampton Court. See § 744.441(21), Fla.
Stat. Hampton Court elected not to seek appointment of a guardian, and we
decline to use common law contract principles to conduct an end-run around the
Legislature’s comprehensive guardianship scheme.
V. Conclusion
We hold that the third-party beneficiary doctrine does not bind the father to
the arbitration agreement in Hampton Court’s nursing home admission agreement,
to which he never agreed. Accordingly, we quash the Third District’s decision
below, and remand to that court for further proceedings not inconsistent with this
opinion. We approve the decisions in Perry, Lepisto, McKibbin, and Fletcher, to
the extent those decisions are consistent with this opinion.
It is so ordered.
LABARGA, C.J., and PARIENTE, LEWIS, and QUINCE, JJ., concur.
CANADY, J., dissents with an opinion.
POLSTON, J., dissents with an opinion.
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND
IF FILED, DETERMINED.
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CANADY, J., dissenting.
I am sympathetic to the view that the third-party beneficiary doctrine should
not be employed to impose the arbitration provisions of the nursing home contract
at issue in this case on the estate of Juan Mendez, Sr., who was not a party to the
contract. The application of that doctrine is highly problematic in this case where
there is no suggestion that Mendez exercised his will to obtain the benefit of any
provision of the contract or otherwise manifested his assent to the contract. But the
view adopted by the majority concerning the scope of the third-party beneficiary
doctrine as the ground for quashing the district court’s decision is not based on any
argument presented by the Petitioner. Because I conclude that the Petitioner has
made no argument that justifies quashing the decision on review, I dissent.
Our law recognizes the “sanctity” of the right “to freely contract[.]” State
Farm Fire & Cas. Co. v. Marshall, 554 So. 2d 504, 505 (Fla. 1989). Accordingly,
contracts to which competent parties have given their assent are declared invalid
only if there is a compelling justification for doing so. See, e.g., Powertel, Inc. v.
Bexley, 743 So. 2d 570, 574 (Fla. 1st DCA 1999) (“Florida courts may properly
decline to enforce a contract on the ground that it is unconscionable. To support a
determination of unconscionability, however, the court must find that the contract
is both procedurally unconscionable and substantively unconscionable.” (citation
omitted)). The obverse of the right to freely contract is the right not to be bound
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by a contract without assent. Contract law—including the law governing contracts
to arbitrate—is about protecting and enforcing the expression of the will of the
contracting parties. Just as courts should not invalidate the expressed will of
contracting parties without compelling justification, courts should not impose
contractual obligations on a nonparty without compelling justification.
The Petitioner here presents no argument explaining why the third-party
beneficiary doctrine is by its own terms inapplicable in this case. Instead, the
Petitioner relies on the effect of section 400.151, Florida Statutes (2009), which
sets forth requirements for nursing home contracts. The Petitioner argues that
where a nursing home contract has not been executed in accordance with the
requirements of section 400.151 any remedy under the third-party beneficiary
doctrine is foreclosed. According to the Petitioner, the common law third-party
beneficiary doctrine is wholly displaced by the statute.
This argument would preclude a remedy in circumstances where the third-
party beneficiary doctrine could quite appropriately be applied—e.g., where the
nonparty intended beneficiary nursing home resident had affirmatively sought to
enforce a provision of the contract. Accepting the logic of the argument regarding
the displacement of the common law would also entail displacing remedies based
on contract implied in the law or contract implied in fact in circumstances where
affording such remedies would be appropriate under existing law. The Legislature
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could, of course, displace the third-party beneficiary doctrine and the law regarding
contracts implied in law and in fact, but nothing in the regulatory requirements of
section 400.151 suggests that the failure to observe the formalities required by the
statute should result in the wholesale displacement of common law remedies. The
statute does not expressly displace existing common law remedies, and to displace
those remedies by implication in this context is manifestly unreasonable.
The Petitioner’s reliance on section 400.151 is unpersuasive. And no ground
has been presented to justify quashing the decision on review.
POLSTON, J., dissenting.
Instead of applying well-settled contract law regarding third-party
beneficiaries, the majority creates a manifest injustice “standard” by turning
reasoning from old law review articles and a plurality opinion from an 1800s New
York case on its head. The majority’s decision will allow courts to arbitrarily
disavow arbitration clauses as occurs here by Hampton Court being denied
arbitration with Juan Mendez, Jr., the very person who signed the contract at issue.
I.
The Third District Court of Appeal explained the facts and procedural
history of the case as follows:
On March 13, 2009, the father was admitted to the facility. On
the day the father was admitted, a doctor employed by the facility
determined the father lacked the capacity to give informed consent or
make medical decisions. The admission forms included an agreement
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for care (“the agreement”). The agreement is the contract under
which the facility provided the father with the various residential,
nursing, and other services associated with residency at a nursing
home facility. The agreement contained a broad arbitration clause, as
follows:
Any controversy or claim arising out of or relating to the
Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the provisions of the
Florida Arbitration Code found at Chapter 682, Florida
Statutes, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having
jurisdiction thereof.
Although the son was not acting under a power of attorney at that
time, he signed the agreement on a signature line indicating “signature
of resident’s representative.” Below that signature block, the
agreement included the following language:
In the event that the resident has appointed a
representative to control his/her assets, and even if such
appointment has not been made through a legal
document, the resident’s representative shall be fully
bound to the extent of those assets to the terms of this
Agreement.
The father resided at the facility for approximately four years,
from early 2009 until his death in late 2013. His residency included
years before and after the incident giving rise to this lawsuit. In July
2011, while residing at the facility, the father’s eye became infected
and had to be removed. The father subsequently gave the son power
of attorney. In December 2012, the son brought suit against the
facility on behalf of the father. The facility moved to compel
arbitration on the basis of the arbitration clause in the agreement. The
son asserted that the arbitration clause was not binding on the father,
who was not a party to the agreement. The trial court compelled
arbitration and this appeal [affirms].
Mendez v. Hampton Court Nursing Ctr., LLC, 140 So. 3d 671, 673 (Fla. 3d DCA
2014).
II.
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The majority obliterates longstanding Florida contract law applicable to
third-party beneficiaries and denies Hampton Court’s right to arbitrate, even
though arbitration provisions are favored. Jackson v. Shakespeare Found., Inc.,
108 So. 3d 587, 593 (Fla. 2013) (“Courts generally favor [arbitration] provisions,
and will try to resolve an ambiguity in an arbitration provision in favor of
arbitration.”).
The law is well settled that the rights of third-party beneficiaries are limited
by the terms of the contract. See 2 Williston on Contracts § 364A, at 873-74 & n.5
(3d ed. 1959) (collecting cases holding that a third-party beneficiary’s right is
limited by the terms of the contract). Our district courts in Florida have long held
this includes contractual arbitration provisions. 8 Florida Construction Law
Manual § 7:38 (2015-2016 ed.) (“Ordinarily, a third party beneficiary is bound by
an arbitration clause in the contract under which the party claims third party
beneficiary status.”). “Florida courts have required third-party beneficiaries to
arbitrate.” Kong v. Allied Prof’l Ins. Co., 750 F.3d 1295, 1302 (11th Cir. 2014).
“ ‘[T]raditional principles’ of state law allow a contract to be enforced by or
against nonparties to the contract through ‘assumption, piercing the corporate veil,
alter ego, incorporation by reference, third-party beneficiary theories, waiver and
estoppel.’ ” Arthur Andersen LLP v. Carlisle, 556 U.S. 624, 631 (2009) (quoting
21 Williston on Contracts § 57.19, at 183 (4th ed. 2001)) (emphasis added).
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To hold that arbitration is not required, the majority arbitrarily applies a
manifest justice “standard,” relying on law review articles from 1902 and 1928,
and dicta from an 1859 New York plurality opinion. Majority op. at 8; Lawrence
v. Fox, 20 N.Y. 268, 275 (1859) (stating that manifest justice might result in a
different outcome from the case before it). Essentially, the majority asserts that,
because the third-party beneficiary doctrine was originally based upon principles
of equity, the doctrine should yield when a court believes that enforcing an
arbitration clause would be manifestly unjust. The majority attempts to persuade
the reader of the propriety of turning the “manifestly just” language from the 1800s
plurality on its head by quoting a 2007 edition of Corbin on Contracts and fairly
recent law review articles regarding Professors Williston and Corbin. However,
the majority ignores the fact that the two treatises that currently bear the names of
Professors Williston and Corbin do not support the majority’s position. See 21
Williston on Contracts § 57:19, at 183 (4th ed. 2001) (“[N]onsignatories may be
bound by arbitration agreements entered into by others where they have no greater
rights than those of the party through whom they claim, applying traditional
principles of agency and contract law, including assumption, piercing the corporate
veil, alter ego, incorporation by reference, third-party beneficiary theories, waiver,
and estoppel.”); 9-46 Corbin on Contracts § 46.9 (2015) (“Absent a contract term
to the contrary, the beneficiary will be subject to an arbitration clause in the
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contract for two reasons: (1) such holdings conform to the general principle that
the terms of the contract define and limit the rights of the third party beneficiary;
(2) there is a strong public policy in favor of arbitration.”). The majority’s position
is simply out of step with binding legal doctrine.
Using its manifest injustice “standard,” the majority reasons that Juan
Mendez, Jr., should not be required to arbitrate his father’s claims because his
father did not sign the nursing home contract that included the arbitration clause.
But Juan Mendez, Jr., signed the admissions contract on the line labeled
“Resident’s Representative.” Now, the son seeks to disavow the terms of the
contract that he signed as a representative of his father, while currently acting as a
representative of his father’s estate. It is not manifestly unjust to enforce the terms
of a contract against the same person who signed it.1
Additionally, the majority attempts to distinguish the claim at issue in this
case from a claim raised by a third-party beneficiary. The majority agrees that
“when a plaintiff sues under a contract to which the plaintiff is not a party . . . we
will ordinarily enforce an arbitration clause contained in that contract.” Majority
op. at 7. But the majority claims that here “the father does not bring suit as a third-
1. The majority once again misses the point in its discussion of agency law
and medical incapacity. See majority op. at 10-12. Third-party beneficiary
contract law, not agency law, controls this case.
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party beneficiary for the benefit of a contract signed by others.” Id. This is
nonsensical. Perhaps the majority’s claim is related to its assertion that “the
father’s estate sued for negligence and statutory violations—not to enforce the
son’s contract with Hampton Court.” Id. at 6. However, Hampton Court’s duty to
provide care to the father only arose based upon the contract signed by the son for
the benefit of the father. Therefore, perhaps the majority is intending to hold that
the enforcement of the contract would be manifestly unjust because the claim is
outside the scope of the arbitration clause? This apparent mixture of different legal
theories is incomprehensible and certainly not the law.
Further, the majority incorrectly states that the district courts disagree on
whether a nursing home resident is bound by an arbitration clause in a nursing
home contract when the resident did not sign or otherwise agree to the contract.
Majority op. at 3. To the contrary, the district courts have all applied well-settled
third-party beneficiary law and held that those residents are bound by the
arbitration clauses.
The majority acknowledges that the First and Third Districts have held that
those residents are bound as a third-party beneficiary. Majority op. at 3. Indeed,
the Third District has explained that “[a]rbitration clauses in contracts are binding
on third party beneficiaries.” Orion Ins. Co. v. Magnetic Imaging Sys. I, 696 So.
2d 475, 478 (Fla. 3d DCA 1997) (citing Terminix Int’l Co., LP v. Ponzio, 693 So.
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2d 104, 109 (Fla. 5th DCA 1997) (“As third party beneficiaries, these additional
plaintiffs are bound by the arbitration provision.”); see also Zac Smith & Co., Inc.
v. Moonspinner Condo. Ass’n, Inc., 472 So. 2d 1324, 1324 (Fla. 1st DCA 1985)
(holding that “an arbitration clause in a contract is binding on a third-party
beneficiary”). This is true even if the third-party beneficiary did not sign the
contract containing the arbitration agreement: “[A] nonsignatory to an arbitration
agreement may be bound to arbitrate if the nonsignatory has received something
more than an incidental or consequential benefit of the contract, or if the
nonsignatory is specifically the intended third-party beneficiary of the contract.”
Germann v. Age Inst. of Fla., Inc., 912 So. 2d 590, 592 (Fla. 2d DCA 2005).
But the majority incorrectly states that the Second, Fourth, and Fifth
Districts hold otherwise. Majority op. at 3-4 (stating that “[t]he First and Third
Districts held that the resident is bound by the contract, because the resident is the
intended third-party beneficiary of the contract” but that “[t]he Second, Fourth, and
Fifth Districts held differently”).
The Second, Fourth, and Fifth Districts all acknowledge that third-party
beneficiaries can be bound by arbitration provisions. See Terminix, 693 So. 2d at
109 (citing Raffa Assocs. v. Boca Raton Resort & Club, 616 So. 2d 1096 (Fla. 4th
DCA 1993); Zac Smith, 472 So. 2d 1324). For example, the Fifth District has
explained that “Florida courts have generally held that arbitration clauses in
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contracts may be enforced by and are binding on third party beneficiaries.”
Hirshenson v. Spaccio, 800 So. 2d 670, 673 (Fla. 5th DCA 2001) (citing cases);
see also Lion Gables Realty Ltd. v. Randall Mech., Inc., 65 So. 3d 1098, 1099 (Fla.
5th DCA 2011). The Fourth District also recognizes that “ordinarily a third-party
beneficiary of a contract is bound by an arbitration clause in that contract.” Raffa
Assocs., 616 So. 2d at 1097; see also Martha A. Gottfried, Inc. v. Paulette Koch
Real Estate, Inc., 778 So. 2d 1089, 1090 (Fla. 4th DCA 2001) (“[A] third party
beneficiary to a contract can be compelled to arbitrate.”). Further, the Second
District recently held, in Pulte Home Corp. v. Bay at Cypress Creek Homeowners’
Ass’n, Inc., 118 So. 3d 957, 958 (Fla. 2d DCA 2013), that third-party beneficiaries
can be compelled to arbitrate. In a parenthetical, the Second District explained
that, “[a]s a basic derivative of the principle that a third-party beneficiary steps into
the shoes of a contracting party and is subject to all provisions of [the] contract, a
third-party beneficiary of a contract containing an arbitration provision can be
compelled to arbitrate.” Id. (quoting J. Douglas Uloth & J. Hamilton Rial, III,
Equitable Estoppel as a Basis for Compelling Nonsignatories to Arbitrate—A
Bridge Too Far?, 21 Rev. Litig. 593, 602 (Summer 2002)).
The majority cites the Fifth District’s decision in Perry ex rel. Perry v.
Sovereign Healthcare of Metro West, LLC, 100 So. 3d 146 (Fla. 5th DCA 2012),
as the basis for its claim that the Fifth District has disavowed general third-party
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beneficiary doctrine in regard to nursing home contracts, but the holding in Perry,
100 So. 3d at 147-48, was based upon the fact that the person who signed the
contract in that case only signed as a guarantor for payment on behalf of the
resident, not as the resident’s representative or the resident’s power of attorney.
This difference is legally significant. See Fed. Deposit Ins. Corp. v. Univ. Anclote,
Inc., 764 F.2d 804, 806 (11th Cir. 1985) (“A guaranty is a collateral promise to
answer for the debt or obligation of another.” (citing Nicolaysen v. Flato, 204 So.
2d 547, 549 (Fla. 4th DCA 1967))).
Lepisto v. Senior Lifestyle Newport Limited Partnership, 78 So. 3d 89, 92
(Fla. 4th DCA 2012), and Fletcher v. Huntington Place Limited Partnership, 952
So. 2d 1225, 1227 (Fla. 5th DCA 2007), cited by the majority, are likewise
distinguished on the basis that the contract indicated that the signor was a financial
guarantor, not a representative for the resident. Finally, the majority cites In re
Estate of McKibbin v. Alterra Health Care Corp., 977 So. 2d 612 (Fla. 2d DCA
2008), but that decision does not mention third-party beneficiaries at all. The
Second District does explain that “there was no evidence that [the resident] was
mentally or physically incapacitated to make decisions for herself,” which is
factually different from the case before us. Id. at 613.
III.
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In conclusion, I would follow well-settled contract law regarding third-party
beneficiaries and not create a manifest injustice standard that allows the court to
disavow arbitration proceedings on an ad hoc basis. I would not deny Hampton
Court the right to arbitrate with Juan Mendez, Jr., the same person who signed the
contract as the representative for his father.
I dissent.
Application for Review of the Decision of the District Court of Appeal - Direct
Conflict of Decisions
Third District - Case No. 3D13-1855
(Miami-Dade County)
Charles M. P. George of The Law Offices of Charles M-P George, Coral Gables,
Florida; Christopher Wayne Wadsworth and Raymond Renato Dieppa of
Wadsworth Huott, LLP, Miami, Florida,
for Petitioner
Thomas Anthony Valdez of Quintairos, Prieto, Wood & Boyer, P.A., Tampa,
Florida,
for Respondent
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