Mary Hamel-Schwulst v. Country Place Mortgage, Ltd., et al

Filing 920101230

Opinion

Case: 10-60143 Document: 00511336789 Page: 1 Date Filed: 12/30/2010

IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
December 30, 2010 N o . 10-60143 S u m m a r y Calendar Lyle W. Cayce Clerk

D R . MARY HAMEL-SCHWULST P la in t iff - Appellant v. C O U N T R Y PLACE MORTGAGE LIMITED, doing business as Country Place L im it e d Texas Partnership; CASPER KOBLE; JOHN WILLIAMS, JR.; PALM H A R B O R HOMES, INC., U.S. TITLE & REAL ESTATE CLOSING S E R V I C E S , INC.; JEFFREY NEGROTTO; PEIRSON/PATTERSON, L.L.P. Defendants - Appellees

A p p e a l from the United States District Court for the Southern District of Mississippi U S D C No. 1:08-cv-00195-WJG-JMR

B e fo r e JOLLY, GARZA, and STEWART, Circuit Judges. P E R CURIAM:* In 2007, Mary Hamel-Schwulst entered into several agreements with Palm H a r b o r Homes, Inc. (Palm Harbor) and CountryPlace Mortgage, LTD (C o u n try P la ce ) for the purchase, construction, and financing of a modular home. One of the agreements included an arbitration provision. After the modular

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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No. 10-60143 h o m e was completed, CountryPlace sent Hamel-Schwulst a modification a g r e e m e n t. Hamel-Schwulst refused to sign it and refused to make payments p u r s u a n t to her financing agreement. She subsequently filed a petition for a d e c la r a to r y judgment and a complaint seeking relief from multiple parties, in c lu d in g Palm Harbor and CountryPlace (collectively Defendants), as well as J e ffe r y Negrotto (Negrotto), the person who notarized Hamel-Schwulst's s ig n a t u r e on the closing documents. In response, the Defendants filed a motion t o compel arbitration pursuant to the arbitration provision, which the district c o u r t granted. The arbitrator issued a decision in favor of the Defendants, and t h e y filed a motion to confirm the arbitration award with the district court. The d is t r ic t court granted the motion. Hamel-Schwulst appealed. On appeal, Hamel-Schwulst challenges the district court's judgment c o m p e llin g arbitration and the district court's judgment confirming the a r b it r a t o r 's decision. We AFFIRM. I. FACTUAL AND PROCEDURAL BACKGROUND I n 2007, Hamel-Schwulst entered into an agreement to purchase a m o d u la r home (hereinafter the purchase agreement) from Palm Harbor, who w a s also responsible for manufacturing the home. At the closing, Hamel-

S c h w u ls t entered into several financing agreements with CountryPlace, relating t o her purchase, and Negrotto, the president of U.S. Title & Real Estate Closing S e r v ic e s , Inc., notarized Hamel-Schwulst's signature on these documents. After P a lm Harbor completed construction of the home, CountryPlace sent H a m e l-S c h w u ls t a modification agreement to convert her construction loan into a permanent loan, to adjust the first payment due date, to reduce the loan's p r in c ip a l balance, and to reduce the monthly payment. Hamel-Schwulst refused

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No. 10-60143 t o sign the modification agreement until CountryPlace annulled the entire t r a n s a c t io n ; she also refused to make payment. On April 29, 2008, an agent, a c t in g on Hamel-Schwulst's behalf, delivered a written request for arbitration, p u r s u a n t to the arbitration provision in the purchase agreement, to Palm H a r b o r 's office. After Palm Harbor and Hamel-Schwulst exchanged several le t t e r s , Hamel-Schwulst filed suit in the United States District Court for the S o u th e r n District of Mississippi (hereinafter the Mississippi district court or the d is t r ic t court). A. O r ig i n a l Complaint On May 14, 2008, Hamel-Schwulst filed a petition for declaratory ju d g m e n t , seeking clarification of her rights under the arbitration provision, and a complaint, alleging a multitude of claims against several parties, including the D e fe n d a n t s and Negrotto. Specifically, Hamel-Schwulst complaint asserted c la im s for breach of warranty, fraud, violations of the Real Estate Settlement P r o c e d u r e s Act, as well as violations of various Mississippi statutes and property l a w . On July 10, 2008, the Defendants filed a motion to stay the case and c o m p e l arbitration. The Defendants argued that Hamel-Schwulst's claims were s u b je c t to the terms of the arbitration provision, which states that the parties a r e required to arbitrate "with respect to any and all controversies or claims a r is in g out of or relating to the purchase, installation, manufacture and w a r r a n t i e s of the home." The agreement also states that it applies to "all c o n t r o v e r s ie s arising out of or in any way relating to financing whether arising fr o m statutory, property, or common law." The Defendants argued that the a r b it r a t io n provision was framed in the broadest possible terms and applied not o n ly to Palm Harbor, a signatory to the agreement, but also the non-signatory

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No. 10-60143 p a r tie s named in Hamel-Schwulst's complaint. On September 16, 2008, the d is t r ic t court granted the Defendants' motion and ordered the parties to submit t h e dispute to arbitration (hereinafter the September 16th judgment or order c o m p e llin g arbitration). On November 19, 2008, Hamel-Schwulst filed a notice of appeal with this c o u r t, seeking to appeal the district court's September 16th judgment. This c o u r t determined that it did not have jurisdiction to hear the case because "the o r d e r compelling arbitration was not a final appealable order" and dismissed the c a s e . Hamel-Schwulst v. Country Mortgage Ltd., No. 08-61050 (5th Cir. Jan. 8, 2 0 0 9 ). B. F lo r i d a Suit Against Negrotto and Motion to Stay as to Negrotto. S h o r t ly after filing her notice of appeal with this court, on November 25, 2 0 0 8 , Hamel-Schwulst filed a separate action against Negrotto and other parties in the United States District Court for the Northern District of Florida (Florida d is t r ic t court). On April 8, 2009, Negrotto filed a suggestion of bankruptcy with t h e Florida district court. On May 27, 2009, in its report and recommendation, a Florida federal magistrate judge (hereinafter the Florida magistrate judge) s t a y e d Hamel-Schwulst's case as it applied to Negrotto, pursuant to 11 U.S.C. § 362, which, among other things, stays all claims against a bankruptcy debtor. The day before the Florida magistrate judge issued her decision and less t h a n a month before arbitration was set to begin, Hamel-Schwulst

s im u lt a n e o u s ly filed a motion to reopen the Mississippi action and a motion to s t a y the arbitration as it applied to all defendants based upon Negrotto's p e n d in g bankruptcy. In a June 9, 2009 text order, the district court denied H a m e l-S c h w u ls t 's motion to reopen the district court case. The district court

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No. 10-60143 a ls o granted the motion to stay pursuant to § 362 as it applied to Negrotto, but d e n ie d the motion as it applied to all other defendants. The district court fu r t h e r held that arbitration should proceed between Hamel-Schwulst and the D e fe n d a n t s because there was "insufficient evidence of an identity of interest b e tw e e n Negrotto and the non-debtor defendants to justify extending the stay t o those parties." C. A r b itr a tio n The arbitration proceeded between the Defendants and Hamel-Schwulst o n June 16, 2009, and the Defendants prevailed. The arbitrator held that, p u r s u a n t to the financing agreements, Hamel-Schwulst was indebted to C o u n tr y P la c e for $86,374.23 in principal and $7,322.54 in interest, with interest in the amount of $16.79 per day accruing after June 30, 2009. Attorney's fees w e r e also awarded to the Defendants. And the arbitrator authorized

C o u n tr y P la c e to proceed with foreclosure proceedings on the property so long as H a m e l-S c h w u ls t remained delinquent on her loan. D. P o s t-a r b i t r a t i o n Proceedings A t some point before the arbitration proceedings ended, Negrotto was g r a n t e d a discharge in the Florida bankruptcy case. And, on August 5, 2009 in a n amended report and recommendation, the Florida magistrate judge noted t h a t the automatic stay pursuant to § 362 was lifted. The Florida district court s u b s e q u e n t ly adopted the report and recommendation and held that the case w o u ld not be stayed as to any defendant in that case. Soon after, HamelS c h w u ls t filed another motion to stay the proceedings as to Negrotto in the F lo r id a district court pursuant to the Servicemembers Civil Relief Act, 50 App. U .S .C . § 501 (hereinafter the Act). Like a § 362 stay protects debtors who are

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No. 10-60143 p a r tie s to litigation, a stay pursuant to the Act protects servicemembers who are p a r tie s to litigation. The Florida District court did not issue an order on this m o t i o n because Hamel-Schwulst's case was transferred to the Mississippi d is t r ic t court, which ended all proceedings in the Florida district court. HamelS c h w u ls t raised the motion again in the Mississippi district court, but it denied t h e motion, explaining that it proceedings against Jeffrey Negrotto were already s t a y e d in its June 9, 2009 text order. I n addition to her repeat motion for a stay, Hamel-Schwulst filed nine oth er motions with the Mississippi district court following the arbitration One of the motions--motion for leave to file a reply--was

p r o c e e d i n g s .1

d is m is s e d in a text order, and the remaining eight motions were addressed with C o u n tr y P la c e 's motion for disbursement of funds and motion to confirm the a r b it r a t o r 's award. In the district court's February 17, 2010 "Final Judgment" (h e r e in a ft e r February 17 final judgment or final judgment), it granted HamelS c h w u ls t 's motion to reinstate the case to its active docket and a portion of a n o t h e r motion in which Hamel-Schwulst requested the same relief, but denied h e r remaining motions. The district court granted the Defendants' motions to d is b u r s e funds and to confirm the arbitrator's award. s u b s e q u e n t ly appealed the district court's judgment. Hamel-Schwulst

During the course of five months, Hamel-Schwulst filed the following, a motion: (1) to reinstate this case to the active docket; (2) to reopen this case to vacate the arbitration award; (3) for clarification of an order entered September 16, 2008; (4) for an extension of time to complete arbitration; (5) to quash or set aside a notice of default; (6) to strike an affidavit; (7) for leave to file a third party complaint; (8) for permission to file the arbitration record; (9) for relief pursuant to Federal Rules of Civil Procedure 60(b); and (10) to vacate the arbitration award on constitutional grounds.

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No. 10-60143 O n appeal, many of Hamel-Schwulst's arguments are indiscernible and u n s u p p o r t e d by case law or specific allegations. For example, the issues listed in the "Issues Presented" section of Hamel-Schwulst's brief do not align with the is s u e s addressed in the "Analysis" section of her brief. Many of the problems w i t h Hamel-Schwulst's brief stem from the fact that she is not represented by c o u n s e l. We have explained that we liberally construe a pro se litigant's brief a n d generally apply a less stringent standard to parties' proceeding pro se than t o parties represented by counsel. Grant v. Cuellar, 59 F.3d 523, 524 (5th Cir. 1 9 9 5 ) . However, "pro se parties [still must] brief the issues and reasonably c o m p ly with the standards of" Federal Rule of Appellate Procedure 28, which r e q u ir e s an appellant's brief to contain, among other things, a statement of the is s u e s and an argument. Id. at 524, 524 n.2. T h u s , we liberally construe Hamel-Schwulst's brief as a challenge to the d is t r ic t court's September 16th judgment compelling arbitration and the district c o u r t's February 17th final judgment confirming the arbitrator's decision. For t h e following reasons, we AFFIRM the district court's judgments. II. DISCUSSION A. T h e District Court's September 16th Judgment Compelling Arbitration. 1. W h e t h e r the district court's September 16th Judgment violated Negrotto's § 362 stay. H a m e l-S c h w u ls t argues that the district court did not have the authority t o issue an order compelling arbitration because the order was in violation of N e g r o t t o 's § 362 automatic stay. Section 362 provides that, in the event that an in d iv id u a l enters bankruptcy proceedings, any "action or proceeding against the

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No. 10-60143 d e b to r that . . . arose before the commencement of the" bankruptcy is stayed. Hamel-Schwulst claims that, because a § 362 automatic stay was issued on b e h a lf of Negrotto, this should not only have stayed the arbitration as it relates t o Negrotto, but also the Defendants. However, it is well-established that the p r o t e c t io n s of § 362 neither apply to co-defendants nor preclude severance." Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir. 1983); see also A r n o ld v. Garlock, Inc., 278 F.3d 426, 436 (5th Cir. 2001). Thus, the district c o u r t did not err in compelling arbitration between Hamel-Schwulst and the D e fe n d a n t s . This analysis also disposes of Hamel-Schwulst's claim that the a r b it r a t o r 's ruling violated the § 362 stay.2 2. W h e t h e r the district court erred in compelling the parties to arbitrate. H a m e l-S c h w u ls t arguments effectively attempt to challenge, in the first in stan ce, the validity of the arbitration provision. However, Hamel-Schwulst did n o t specifically challenge the validity of the arbitration provision in her original c o m p la in t , but only asked the court to clarify which of her claims are subject to t h e arbitration provision. Moreover, she does not directly challenge the validity

As previously noted, after the Florida action was transferred to the Mississippi district court, Hamel-Schwulst renewed her motion to stay the proceedings as to Negrotto pursuant to the Servicemembers Civil Relief Act, 50 App. U.S.C. § 501. The district court denied the motion, and Hamel-Schwulst does not challenge this decision on appeal. Thus, we do not address the district court's judgment as to the motion to stay because it is wellestablished that "[w]e do not examine issues not raised on appeal absent the possibility of injustice so grave as to warrant disregard of usual procedural rules." Calderon-Ontiveros v. I.N.S., 809 F.2d 1050, 1052 (5th Cir.1986) (citation and internal quotation marks omitted). Here, Hamel-Schwulst has had ample opportunity to raise each of her claims and motions not only before the Mississippi district court, but also the Florida district court and the Florida magistrate judge. As such, this is not a situation that we believe warrants disregarding our procedure.

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No. 10-60143 o f the arbitration provision on appeal; she merely argues that the district court e r r e d in compelling arbitration because the contract containing the arbitration p r o v is io n is void. Thus, she reasons, the arbitration provision is also void. This court has made clear that "where parties have formed an agreement w h ic h contains an arbitration clause, any attempt to dissolve that agreement by h a v i n g the entire agreement declared voidable or void is for the arbitrator." Will-Drill Res., Inc. v. Samson Res. Co., 352 F.3d 211, 218 (5th Cir. 2003). "Only if the arbitration clause is attacked on an independent basis can the court decide t h e dispute; otherwise, general attacks on the agreement are for the arbitrator." Id. Here, Hamel-Schwulst did not challenge the validity of the arbitration p r o v is io n on an independent basis. And neither the arguments made in HamelS c h w u ls t 's original complaint nor her arguments on appeal are sufficient to c h a lle n g e the validity of the arbitration provision. See Will-Drill Res., 352 F.3d a t 218. Thus, Hamel-Schwulst's attempt to invalidate the arbitration provision is without merit. Even assuming arguendo that Hamel-Schwulst properly challenged the v a lid it y of the arbitration provision, the district court correctly held that the p a r tie s should be compelled to arbitrate. We review de novo the grant or denial o f a petition to compel arbitration pursuant to § 4 of the Federal Arbitration Act (F A A ). This court uses a two-step inquiry to determine whether parties should be compelled to arbitrate, and in diversity cases, like this case, our inquiry is g o v e r n e d by state law. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429 (5 t h Cir. 2004). "First, the court must determine whether the parties agreed to a r b it r a t e the dispute." Id. (citing R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d 5 3 4 , 538 (5th Cir. 1992)) (internal quotation marks omitted). The first step

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No. 10-60143 r e q u ir e s the court to determine: (1) "whether there is a valid agreement to a r b it r a t e between the parties" and (2) "whether the dispute in question falls w it h in the scope of that arbitration agreement." Id. "Once the court finds that t h e parties agreed to arbitrate, it must consider whether any federal statute or p o lic y renders the claims non-arbitrable." Id. First, the arbitration provision is valid pursuant to Mississippi law. As t h e district court correctly noted, it is well-established under Mississippi law t h a t a party's acceptance of the terms of a contract may be shown by the party's a c t io n s and a course of conduct, indicating that the party has acquiesced to the a g r e e m e n t. Dockins v. Allred, 755 So.2d 389, 394 (Miss. 1999) (quoting McInnis v . Southeastern Automatic Sprinkler Co., 233 So.2d 219 (Miss. 1970). Here, not on ly did Hamel-Schwulst's sign and initial the relevant documents, including the a r b it r a t io n provision, she also attempted to enforce the arbitration provision b e fo r e filing suit. Furthermore, Hamel-Schwulst acknowledged in her original c o m p la in t that she entered into a "Mandatory Arbitration Agreement," and the t h r u s t of her original complaint only sought clarification of what claims were a r b itr a b le . Therefore, we conclude that the parties entered into a valid

a r b it r a t io n provision. Next, the court must determine "whether the dispute in question falls w it h in the scope of that arbitration agreement." Banc One Acceptance Corp., 367 F .3 d at 429. Again, the district court's analysis is directly on point. The parties' a r b it r a t io n agreement provides: The parties . . .agree that any and all controversies or c la im s arising out of, or in any way relating to [the in s t a llm e n t contract or sales contract] or the n e g o t i a t i o n , purchase, financing, installm e n t , o w n e r s h ip , occupancy, habitation, manufacture, 10

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No. 10-60143 w a r r a n t i e s (express or im p l i e d ) , repair or s a le /d is p o s it io n of the home which is the subject of the [t h e installment contract or sales contract] whether t h o s e claims arise from or concern contract, warranty, s t a t u t o r y , property or common law, will be settled s o le ly by means of binding arbitration before the A m e r ic a n Arbitration Association. The district court correctly noted that under Mississippi law the terms of the p a r tie s ' arbitration agreement are broad enough to include all of the claims r a is e d in Hamel-Schwulst's complaint. Specifically, "broad terms defining the s c o p e of an arbitration agreement such as `any controversy' are `broad sweeping' a n d expansive enough to include most claims related to the contract in question." New S. Fed. Savings Bank v. Anding, 414 F. Supp.2d 636, 651 (S.D. Miss. 2005) ( c i t i n g Smith Barney, Inc. v. Henry, 775 So.2d 722, 725­26 (Miss. 2001). Furthermore, arbitration provisions containing the language "related to" are b r o a d clauses that are "not limited to claims that literally `arise under the c o n t r a c t,' but rather embrace all disputes having a significant relationship to the c o n t r a c t regardless of the label attached to the dispute." Pennzoil Exploration & Prod. Co. v. Ramco Energy, 139 F.3d 1061, 1067 (5th Cir. 1998); see also Smith B a r n e y , Inc., 775 So.2d at 726 (citing Prima Paint Corp. v. Flood & Conklin Mfg. C o ., 388 U.S. 395, 406 (1967) and noting that "`any controversy or claim arising o u t of or related to this agreement,'" is a "`broad arbitration clause'"). Accordingly, we agree with the district court that "[t]he arbitration clause at is s u e can easily be construed to cover the dispute between the parties concerning r e s c i s s i o n of the contract and other allegations regarding the sale of the Palm H a r b o r home." Because we can find no policy reason that would foreclose the e n fo r c e m e n t of the parties' arbitration agreement, we conclude that the district 11

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No. 10-60143 c o u r t's order compelling arbitration was not in error. B. T h e District Court's February 17 Final Judgment Confirming the Arbitration Award. 1. W h e t h e r this court has jurisdiction to review the district court's February 17 final judgment. A s a threshold matter, we must determine whether we have jurisdiction t o review the district court's final judgment confirming the arbitration award. Hamel-Schwulst argues that we do not have jurisdiction because the judgment i s unappealable as it does not meet the requirements of Federal Rule of Civil P r o c e d u r e 54(b). Specifically, Hamel-Schwulst contends that the district court is s u e d a final judgment that did not address "all claims of plaintiff/appellant H a m e l-S c h w u ls t against CountryPlace Mortgage Ltd." We agree with Hamel-Schwulst that where a case involves multiple claims a n order disposing of fewer than all the claims must state that the district court (1 ) "expressly determines that there is no just reason for delay" and (2) " e x p r e s s ly directs an entry of judgment." Fed. R. Civ. App. 54(b)(1). Moreover, " [a ] certification by the district court that meets these two requirements is `an e s s e n t ia l prerequisite to an appeal,'" and "[a]ny appeal from a decision a d ju d ic a t in g a portion of a case that is not accompanied by a Rule 54(b) c e r t ific a t e must be dismissed for want of jurisdiction." Boudeloche v. Tnemec C o . , 693 F.2d 546, 547 (5th Cir. 1982). Here, however, the district court

e x p r e s s ly stated that Hamel-Schwulst's "[c]omplaint and any amendments, c o u n t e r -c la im s , and third party claims, if any, be finally dismissed on the docket o f this Court." Thus, the district court's order more than adequately addressed H a m e l-S c h w u ls t 's claims against CountryPlace, and the final judgment was not

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No. 10-60143 in violation of Rule 54. 2. W h e t h e r the district court erred in confirming the Arbitration Award. Because Hamel-Schwulst's claims are subject to a valid arbitration p r o v is io n , judicial review of the arbitration award is significantly limited by the F A A . Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 2 7 8 , 280 (5th Cir. 2007). Although this court reviews the confirmation of an a r b it r a t io n award de novo, the court reviews the award using the same standard a s the district court to determine whether the award should have been c o n fir m e d . See Am. Laser Vision, P.A. v. Laser Vision Inst., L.L.C., 487 F.3d 255, 2 5 8 (5th Cir. 2007), overruled on other grounds, 552 U.S. 576 (2008). Thus, this c o u r t's review is "exceedingly deferential," and we will only vacate the award for lim it e d reasons. See id.; 9 U.S.C. § 10. Specifically, there are four grounds p u r s u a n t to which a court can vacate an arbitration award pursuant to § 10(a): (1 ) "where the award was procured by corruption, fraud, or undue means;" (2) " w h e r e there was evident partiality or corruption in the arbitrators;" (3) "where t h e arbitrators were guilty of misconduct in refusing to postpone the hearing, u p o n sufficient cause shown, or in refusing to hear evidence pertinent and m a t e r ia l to the controversy; or of any other misbehavior by which the rights of a n y party have been prejudiced;" or (4) "where the arbitrators exceeded their p o w e r s , or so imperfectly executed them that a mutual, final, and definite award u p o n the subject matter submitted was not made." I t has been the rule for some time that courts do not vacate an arbitration a w a r d based on the merits of a party's claim. See United Paperworkers Int'l U n io n v. Misco, Inc., 484 U.S. 29, 38­39 (1987) ("Courts . . . do not sit to hear

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No. 10-60143 c la im s of factual or legal error by an arbitrator as an appellate court does in r e v ie w in g decisions of lower courts."). Accordingly, because several of HamelS c h w u ls t 's claims discuss the merits of her claims, this court does not have a u t h o r it y to review them. Id. To this end, Hamel-Schwulst's arguments

c o n c e r n in g the merits are irrelevant to the determination of whether there are s t a t u t o r y grounds within § 10(a) under which the arbitration award should be v a ca ted . H a m e l-S c h w u ls t presents only one argument that could plausibly c h a lle n g e the arbitrator's decision on § 10 grounds. She claims that the

a r b it r a t o r exceeded his authority by requiring her to present her case before the D e fe n d a n t s at the arbitration hearing, even though she suffers from "a bipolar m e n ta l disability." These actions, she contends, constitute misconduct that w a r r a n t s vacating the arbitration award because the arbitrator refused "to p o s t p o n e the hearing, upon sufficient cause shown." 9 U.S.C. § 10(a)(3). When a party requests that an arbitration award be vacated pursuant to § 10(a)(3), the p a r ty must establish, at base, the she suffered from serious prejudice as a result o f the arbitrator's alleged misconduct. See Laws v. Morgan Stanley Dean Witter, 4 5 2 F.3d 398, 400 (5th Cir. 2006). Here, Hamel-Schwulst does not explain how s h e suffered from "serious prejudice" by being required to present her case first a t arbitration. She merely concludes that she has. Accordingly, we conclude t h a t Hamel-Schwulst has not established that the arbitration award should be v a c a t e d on these grounds, and thus, we affirm the district court's judgment. III. CONCLUSION For the foregoing reasons, we AFFIRM the district court's judgments and D E N Y Hamel-Schwulst's motion to strike the Defendants' brief and motion to

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No. 10-60143 s t r ik e the Defendants' record excerpts.

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