Florida Court Enforces Loan Document Arbitration Provision

May 2012Articles In the Zone

On April 25, 2012, Florida’s Third District Court of Appeal filed an opinion reversing a trial court’s decision denying a defendant’s motion to compel arbitration. In MV Insurance Consultants, LLC et al. v. NAFH National Bank (Fla. 3d DCA 2012), MV Insurance Consultants, LLC, Dadeland Financial Associates, Inc., Maribel Viego Argomaniz, and Alberto Argomaniz (collectively, the “Borrower”) argued that the trial court erred in not enforcing an arbitration provision in one of its loan documents with NAFH National Bank, the successor in interest to Metrobank of Dade County (the “Lender”).

On October 22, 2007, the Borrower executed a series of loan documents relative to issuance of a commercial loan from the Lender. These documents included a promissory note, a security agreement, a guaranty, and an instrument entitled “Collateral Assignment of Termination Payments and Economic Interests Agreement” (the “Collateral Assignment”). The latter instrument contained the following provision:

ARBITRATION: Any controversy or dispute arising out of or relating to this Agreement or to any portion thereof shall be settled by arbitration in accordance with the Rules of the American Arbitration Association . . . and judgment upon the award of the Arbitration shall be binding upon parties hereto and may be entered into any court having jurisdiction thereof, all rights to appear and review being hereby waived by all parties.

When the Borrower defaulted on the promissory note, the Lender sought to foreclosure under the security agreement. The Borrower sought to enforce the arbitration provision in the collateral assignment and entered a motion to compel arbitration, which was denied by the trial court. The
Borrower subsequently appealed to the Third District Court, which reviewed the matter de novo.

Citing Boston Bank of Commerce v. Morejon, 786 So.2d 1245 (Fla. 3d DCA 2001), the court noted that, “[i]t is well-established that Florida law and public policy strongly favors arbitration, and courts are encouraged to resolve all doubts in favor of arbitration.” The court further noted that the parties’ intent is the paramount consideration in determining whether or not a particular dispute is subject to arbitration (citing Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla. 1999); Pacemaker Corp. v. Aaron T. Euster, 357 So.2d 208, 211 (Fla. 3d DCA 1978)).

The Lender argued that: (i) excepting the collateral assignment, none of the other loan documents contained arbitration provisions; and (ii) the collateral assignment was (as its name implies, a “collateral agreement” which should not be construed as partof the presumably more significant loan documents. The Lender cited an array of Florida case law (LBC Design & Constr. v. Serruya, 57 So.3d 994 (Fla. 3d DCA 2011); Gen. Impact Glass & Windows Corp. v. Rollac Shutter of Tex., Inc., 8 So.3d 1165 (Fla. 3d DCA 2009); Temple Emanu-El of Greater Fort Lauderdale v. Tremarco Indus., Inc. 705 So.2d 983 (Fla. 4th DCA 1988) to support that it is possible.

The court discredited the Lender’s assertion, countering that the aforementioned cases were distinguished by the fact that the “collateral” nature of the subject instrument in each case was premised not upon the significance of the document, but rather the fact that it was not executed by both parties or attached to a [more substantive] agreement. The court also observed that:

Documents executed by the same parties, on or near the same time, and concerning the same transaction or subject matter are generally construed together as a single contract. Where a writing expressly refers to and sufficiently describes another document, the other document, or so much of it as is referred to, is to be interpreted as part of the writing (citing Quix Snaxx, Inc. v. Sorensen, 710 So.2d 152, 153 (Fla. 3d DCA 1998).

In finding in favor of the Appellant, the court opined that references toother loan documents in the collateral assignment, coupled with the contemporaneous execution thereof, was sufficient to conclude that the parties evidenced an intent to apply mandatory arbitration to disputes arising under any of the loan documents.

Interestingly, since the U.S. Supreme Court upheld a mandatory arbitration clause in AT&T Mobility v. Concepcion, 2011 WL 159156 (U.S. 2011), there is a growing trend amongst lenders to restructure their loan documents to include arbitration provisions. Notwithstanding the ruling in AT&T Mobility, should lenders seek to impose mandatory arbitration, the take-away from MV Insurance Consultants is that lenders and their counsel need to ensure that arbitration provisions are applied universally and uniformly in all loan instruments.