Mary Hamel-Schwulst v. Country Place Mortgage, Ltd ( 2010 )

Case: 10-60143 Document: 00511336789 Page: 1 Date Filed: 12/30/2010
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 30, 2010
No. 10-60143 Lyle W. Cayce
Summary Calendar Clerk
DR. MARY HAMEL-SCHWULST
Plaintiff - Appellant
v.
COUNTRY PLACE MORTGAGE LIMITED, doing business as Country Place
Limited Texas Partnership; CASPER KOBLE; JOHN WILLIAMS, JR.; PALM
HARBOR HOMES, INC., U.S. TITLE & REAL ESTATE CLOSING
SERVICES, INC.; JEFFREY NEGROTTO; PEIRSON/PATTERSON, L.L.P.
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 1:08-cv-00195-WJG-JMR
Before JOLLY, GARZA, and STEWART, Circuit Judges.
PER CURIAM:*
In 2007, Mary Hamel-Schwulst entered into several agreements with Palm
Harbor Homes, Inc. (Palm Harbor) and CountryPlace Mortgage, LTD
(CountryPlace) 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 R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .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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home was completed, CountryPlace sent Hamel-Schwulst a modification
agreement. Hamel-Schwulst refused to sign it and refused to make payments
pursuant to her financing agreement. She subsequently filed a petition for a
declaratory judgment and a complaint seeking relief from multiple parties,
including Palm Harbor and CountryPlace (collectively Defendants), as well as
Jeffery Negrotto (Negrotto), the person who notarized Hamel-Schwulst’s
signature on the closing documents. In response, the Defendants filed a motion
to compel arbitration pursuant to the arbitration provision, which the district
court granted. The arbitrator issued a decision in favor of the Defendants, and
they filed a motion to confirm the arbitration award with the district court. The
district court granted the motion. Hamel-Schwulst appealed.
On appeal, Hamel-Schwulst challenges the district court’s judgment
compelling arbitration and the district court’s judgment confirming the
arbitrator’s decision. We AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
In 2007, Hamel-Schwulst entered into an agreement to purchase a
modular home (hereinafter the purchase agreement) from Palm Harbor, who
was also responsible for manufacturing the home. At the closing, Hamel-
Schwulst entered into several financing agreements with CountryPlace, relating
to her purchase, and Negrotto, the president of U.S. Title & Real Estate Closing
Services, Inc., notarized Hamel-Schwulst’s signature on these documents. After
Palm Harbor completed construction of the home, CountryPlace sent
Hamel-Schwulst a modification agreement to convert her construction loan into
a permanent loan, to adjust the first payment due date, to reduce the loan’s
principal balance, and to reduce the monthly payment. Hamel-Schwulst refused
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to sign the modification agreement until CountryPlace annulled the entire
transaction; she also refused to make payment. On April 29, 2008, an agent,
acting on Hamel-Schwulst’s behalf, delivered a written request for arbitration,
pursuant to the arbitration provision in the purchase agreement, to Palm
Harbor’s office. After Palm Harbor and Hamel-Schwulst exchanged several
letters, Hamel-Schwulst filed suit in the United States District Court for the
Southern District of Mississippi (hereinafter the Mississippi district court or the
district court).
A. Original Complaint
On May 14, 2008, Hamel-Schwulst filed a petition for declaratory
judgment, seeking clarification of her rights under the arbitration provision, and
a complaint, alleging a multitude of claims against several parties, including the
Defendants and Negrotto. Specifically, Hamel-Schwulst complaint asserted
claims for breach of warranty, fraud, violations of the Real Estate Settlement
Procedures Act, as well as violations of various Mississippi statutes and property
law. On July 10, 2008, the Defendants filed a motion to stay the case and
compel arbitration. The Defendants argued that Hamel-Schwulst’s claims were
subject to the terms of the arbitration provision, which states that the parties
are required to arbitrate “with respect to any and all controversies or claims
arising out of or relating to the purchase, installation, manufacture and
warranties of the home.” The agreement also states that it applies to “all
controversies arising out of or in any way relating to financing whether arising
from statutory, property, or common law.” The Defendants argued that the
arbitration provision was framed in the broadest possible terms and applied not
only to Palm Harbor, a signatory to the agreement, but also the non-signatory
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parties named in Hamel-Schwulst’s complaint. On September 16, 2008, the
district court granted the Defendants’ motion and ordered the parties to submit
the dispute to arbitration (hereinafter the September 16th judgment or order
compelling arbitration).
On November 19, 2008, Hamel-Schwulst filed a notice of appeal with this
court, seeking to appeal the district court’s September 16th judgment. This
court determined that it did not have jurisdiction to hear the case because “the
order compelling arbitration was not a final appealable order” and dismissed the
case. Hamel-Schwulst v. Country Mortgage Ltd., No. 08-61050 (5th Cir. Jan. 8,
2009).
B. Florida Suit Against Negrotto and Motion to Stay as to Negrotto.
Shortly after filing her notice of appeal with this court, on November 25,
2008, Hamel-Schwulst filed a separate action against Negrotto and other parties
in the United States District Court for the Northern District of Florida (Florida
district court). On April 8, 2009, Negrotto filed a suggestion of bankruptcy with
the Florida district court. On May 27, 2009, in its report and recommendation,
a Florida federal magistrate judge (hereinafter the Florida magistrate judge)
stayed 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
than a month before arbitration was set to begin, Hamel-Schwulst
simultaneously filed a motion to reopen the Mississippi action and a motion to
stay the arbitration as it applied to all defendants based upon Negrotto’s
pending bankruptcy. In a June 9, 2009 text order, the district court denied
Hamel-Schwulst’s motion to reopen the district court case. The district court
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also granted the motion to stay pursuant to § 362 as it applied to Negrotto, but
denied the motion as it applied to all other defendants. The district court
further held that arbitration should proceed between Hamel-Schwulst and the
Defendants because there was “insufficient evidence of an identity of interest
between Negrotto and the non-debtor defendants to justify extending the stay
to those parties.”
C. Arbitration
The arbitration proceeded between the Defendants and Hamel-Schwulst
on June 16, 2009, and the Defendants prevailed. The arbitrator held that,
pursuant to the financing agreements, Hamel-Schwulst was indebted to
CountryPlace 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
were also awarded to the Defendants. And the arbitrator authorized
CountryPlace to proceed with foreclosure proceedings on the property so long as
Hamel-Schwulst remained delinquent on her loan.
D. Post-arbitration Proceedings
At some point before the arbitration proceedings ended, Negrotto was
granted a discharge in the Florida bankruptcy case. And, on August 5, 2009 in
an amended report and recommendation, the Florida magistrate judge noted
that the automatic stay pursuant to § 362 was lifted. The Florida district court
subsequently adopted the report and recommendation and held that the case
would not be stayed as to any defendant in that case. Soon after, Hamel-
Schwulst filed another motion to stay the proceedings as to Negrotto in the
Florida 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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parties to litigation, a stay pursuant to the Act protects servicemembers who are
parties to litigation. The Florida District court did not issue an order on this
motion because Hamel-Schwulst’s case was transferred to the Mississippi
district court, which ended all proceedings in the Florida district court. Hamel-
Schwulst raised the motion again in the Mississippi district court, but it denied
the motion, explaining that it proceedings against Jeffrey Negrotto were already
stayed in its June 9, 2009 text order.
In addition to her repeat motion for a stay, Hamel-Schwulst filed nine
other motions with the Mississippi district court following the arbitration
proceedings.1 One of the motions—motion for leave to file a reply—was
dismissed in a text order, and the remaining eight motions were addressed with
CountryPlace’s motion for disbursement of funds and motion to confirm the
arbitrator’s award. In the district court’s February 17, 2010 “Final Judgment”
(hereinafter February 17 final judgment or final judgment), it granted Hamel-
Schwulst’s motion to reinstate the case to its active docket and a portion of
another motion in which Hamel-Schwulst requested the same relief, but denied
her remaining motions. The district court granted the Defendants’ motions to
disburse funds and to confirm the arbitrator’s award. Hamel-Schwulst
subsequently appealed the district court’s judgment.
1
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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On appeal, many of Hamel-Schwulst’s arguments are indiscernible and
unsupported 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
issues addressed in the “Analysis” section of her brief. Many of the problems
with Hamel-Schwulst’s brief stem from the fact that she is not represented by
counsel. We have explained that we liberally construe a pro se litigant’s brief
and generally apply a less stringent standard to parties’ proceeding pro se than
to parties represented by counsel. Grant v. Cuellar, 59 F.3d 523, 524 (5th Cir.
1995). However, “pro se parties [still must] brief the issues and reasonably
comply with the standards of” Federal Rule of Appellate Procedure 28, which
requires an appellant’s brief to contain, among other things, a statement of the
issues and an argument. Id. at 524, 524 n.2.
Thus, we liberally construe Hamel-Schwulst’s brief as a challenge to the
district court’s September 16th judgment compelling arbitration and the district
court’s February 17th final judgment confirming the arbitrator’s decision. For
the following reasons, we AFFIRM the district court’s judgments.
II. DISCUSSION
A. The District Court’s September 16th Judgment Compelling
Arbitration.
1. Whether the district court’s September 16th Judgment
violated Negrotto’s § 362 stay.
Hamel-Schwulst argues that the district court did not have the authority
to issue an order compelling arbitration because the order was in violation of
Negrotto’s § 362 automatic stay. Section 362 provides that, in the event that an
individual enters bankruptcy proceedings, any “action or proceeding against the
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debtor that . . . arose before the commencement of the” bankruptcy is stayed.
Hamel-Schwulst claims that, because a § 362 automatic stay was issued on
behalf of Negrotto, this should not only have stayed the arbitration as it relates
to Negrotto, but also the Defendants. However, it is well-established that the
protections of § 362 neither apply to co-defendants nor preclude severance.”
Wedgeworth v. Fibreboard Corp., 706 F.2d 541, 544 (5th Cir. 1983); see also
Arnold v. Garlock, Inc., 278 F.3d 426, 436 (5th Cir. 2001). Thus, the district
court did not err in compelling arbitration between Hamel-Schwulst and the
Defendants. This analysis also disposes of Hamel-Schwulst’s claim that the
arbitrator’s ruling violated the § 362 stay.2
2. Whether the district court erred in compelling the parties to
arbitrate.
Hamel-Schwulst arguments effectively attempt to challenge, in the first
instance, the validity of the arbitration provision. However, Hamel-Schwulst did
not specifically challenge the validity of the arbitration provision in her original
complaint, but only asked the court to clarify which of her claims are subject to
the arbitration provision. Moreover, she does not directly challenge the validity
2
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 well-
established 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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of the arbitration provision on appeal; she merely argues that the district court
erred in compelling arbitration because the contract containing the arbitration
provision is void. Thus, she reasons, the arbitration provision is also void.
This court has made clear that “where parties have formed an agreement
which contains an arbitration clause, any attempt to dissolve that agreement by
having 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
the dispute; otherwise, general attacks on the agreement are for the arbitrator.”
Id. Here, Hamel-Schwulst did not challenge the validity of the arbitration
provision on an independent basis. And neither the arguments made in Hamel-
Schwulst’s original complaint nor her arguments on appeal are sufficient to
challenge the validity of the arbitration provision. See Will-Drill Res., 352 F.3d
at 218. Thus, Hamel-Schwulst’s attempt to invalidate the arbitration provision
is without merit.
Even assuming arguendo that Hamel-Schwulst properly challenged the
validity of the arbitration provision, the district court correctly held that the
parties should be compelled to arbitrate. We review de novo the grant or denial
of a petition to compel arbitration pursuant to § 4 of the Federal Arbitration Act
(FAA). 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
governed by state law. Banc One Acceptance Corp. v. Hill, 367 F.3d 426, 429
(5th Cir. 2004). “First, the court must determine whether the parties agreed to
arbitrate the dispute.” Id. (citing R.M. Perez & Assocs., Inc. v. Welch, 960 F.2d
534, 538 (5th Cir. 1992)) (internal quotation marks omitted). The first step
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requires the court to determine: (1) “whether there is a valid agreement to
arbitrate between the parties” and (2) “whether the dispute in question falls
within the scope of that arbitration agreement.” Id. “Once the court finds that
the parties agreed to arbitrate, it must consider whether any federal statute or
policy renders the claims non-arbitrable.” Id.First, the arbitration provision is valid pursuant to Mississippi law. As
the district court correctly noted, it is well-established under Mississippi law
that a party’s acceptance of the terms of a contract may be shown by the party’s
actions and a course of conduct, indicating that the party has acquiesced to the
agreement. 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
only did Hamel-Schwulst’s sign and initial the relevant documents, including the
arbitration provision, she also attempted to enforce the arbitration provision
before filing suit. Furthermore, Hamel-Schwulst acknowledged in her original
complaint that she entered into a “Mandatory Arbitration Agreement,” and the
thrust of her original complaint only sought clarification of what claims were
arbitrable. Therefore, we conclude that the parties entered into a valid
arbitration provision.
Next, the court must determine “whether the dispute in question falls
within the scope of that arbitration agreement.” Banc One Acceptance Corp., 367
F.3d at 429. Again, the district court’s analysis is directly on point. The parties’
arbitration agreement provides:
The parties . . .agree that any and all controversies or
claims arising out of, or in any way relating to [the
installment contract or sales contract] or the
negotiation, purchase, financing, installm ent,
ownership, occupancy, habitation, manufacture,
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w arranties (express or im plied), repair or
sale/disposition of the home which is the subject of the
[the installment contract or sales contract] whether
those claims arise from or concern contract, warranty,
statutory, property or common law, will be settled
solely by means of binding arbitration before the
American Arbitration Association.
The district court correctly noted that under Mississippi law the terms of the
parties’ arbitration agreement are broad enough to include all of the claims
raised in Hamel-Schwulst’s complaint. Specifically, “broad terms defining the
scope of an arbitration agreement such as ‘any controversy’ are ‘broad sweeping’
and 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)
(citing Smith Barney, Inc. v. Henry, 775 So.2d 722, 725–26 (Miss. 2001).
Furthermore, arbitration provisions containing the language “related to” are
broad clauses that are “not limited to claims that literally ‘arise under the
contract,’ but rather embrace all disputes having a significant relationship to the
contract 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
Barney, Inc., 775 So.2d at 726 (citing Prima Paint Corp. v. Flood & Conklin Mfg.
Co., 388 U.S. 395, 406 (1967) and noting that “‘any controversy or claim arising
out of or related to this agreement,’” is a “‘broad arbitration clause’”).
Accordingly, we agree with the district court that “[t]he arbitration clause at
issue can easily be construed to cover the dispute between the parties concerning
rescission of the contract and other allegations regarding the sale of the Palm
Harbor home.” Because we can find no policy reason that would foreclose the
enforcement of the parties’ arbitration agreement, we conclude that the district
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court’s order compelling arbitration was not in error.
B. The District Court’s February 17 Final Judgment Confirming the
Arbitration Award.
1. Whether this court has jurisdiction to review the district
court’s February 17 final judgment.
As a threshold matter, we must determine whether we have jurisdiction
to review the district court’s final judgment confirming the arbitration award.
Hamel-Schwulst argues that we do not have jurisdiction because the judgment
is unappealable as it does not meet the requirements of Federal Rule of Civil
Procedure 54(b). Specifically, Hamel-Schwulst contends that the district court
issued a final judgment that did not address “all claims of plaintiff/appellant
Hamel-Schwulst against CountryPlace Mortgage Ltd.”
We agree with Hamel-Schwulst that where a case involves multiple claims
an 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)
“expressly 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
essential prerequisite to an appeal,’” and “[a]ny appeal from a decision
adjudicating a portion of a case that is not accompanied by a Rule 54(b)
certificate must be dismissed for want of jurisdiction.” Boudeloche v. Tnemec
Co., 693 F.2d 546, 547 (5th Cir. 1982). Here, however, the district court
expressly stated that Hamel-Schwulst’s “[c]omplaint and any amendments,
counter-claims, and third party claims, if any, be finally dismissed on the docket
of this Court.” Thus, the district court’s order more than adequately addressed
Hamel-Schwulst’s claims against CountryPlace, and the final judgment was not
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in violation of Rule 54.
2. Whether the district court erred in confirming the
Arbitration Award.
Because Hamel-Schwulst’s claims are subject to a valid arbitration
provision, judicial review of the arbitration award is significantly limited by the
FAA. Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d
278, 280 (5th Cir. 2007). Although this court reviews the confirmation of an
arbitration award de novo, the court reviews the award using the same standard
as the district court to determine whether the award should have been
confirmed. See Am. Laser Vision, P.A. v. Laser Vision Inst., L.L.C., 487 F.3d 255,
258 (5th Cir. 2007), overruled on other grounds, 552 U.S. 576 (2008). Thus, this
court’s review is “exceedingly deferential,” and we will only vacate the award for
limited reasons. See id.; 9 U.S.C. § 10. Specifically, there are four grounds
pursuant 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)
“where there was evident partiality or corruption in the arbitrators;” (3) “where
the arbitrators were guilty of misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior by which the rights of
any party have been prejudiced;” or (4) “where the arbitrators exceeded their
powers, or so imperfectly executed them that a mutual, final, and definite award
upon the subject matter submitted was not made.”
It has been the rule for some time that courts do not vacate an arbitration
award based on the merits of a party’s claim. See United Paperworkers Int’l
Union v. Misco, Inc., 484 U.S. 29, 38–39 (1987) (“Courts . . . do not sit to hear
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claims of factual or legal error by an arbitrator as an appellate court does in
reviewing decisions of lower courts.”). Accordingly, because several of Hamel-
Schwulst’s claims discuss the merits of her claims, this court does not have
authority to review them. Id. To this end, Hamel-Schwulst’s arguments
concerning the merits are irrelevant to the determination of whether there are
statutory grounds within § 10(a) under which the arbitration award should be
vacated.
Hamel-Schwulst presents only one argument that could plausibly
challenge the arbitrator’s decision on § 10 grounds. She claims that the
arbitrator exceeded his authority by requiring her to present her case before the
Defendants at the arbitration hearing, even though she suffers from “a bipolar
mental disability.” These actions, she contends, constitute misconduct that
warrants vacating the arbitration award because the arbitrator refused “to
postpone 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
party must establish, at base, the she suffered from serious prejudice as a result
of the arbitrator’s alleged misconduct. See Laws v. Morgan Stanley Dean Witter,
452 F.3d 398, 400 (5th Cir. 2006). Here, Hamel-Schwulst does not explain how
she suffered from “serious prejudice” by being required to present her case first
at arbitration. She merely concludes that she has. Accordingly, we conclude
that Hamel-Schwulst has not established that the arbitration award should be
vacated 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
DENY Hamel-Schwulst’s motion to strike the Defendants’ brief and motion to
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strike the Defendants’ record excerpts.
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