Garrison v. Palmas Del Mar Homeowners Ass'n, Inc.

• Decision Date: 10 March 2008
• Docket Number: Civil No. 06-2062 (GAG/MEL).
• Citation: 538 F.Supp.2d 468
• Parties: Earl A. GARRISON, et al, Plaintiffs, v. PALMAS DEL MAR HOMEOWNERS ASSOCIATION, INC., et al, Defendants.
• Court: U.S. District Court — District of Puerto Rico

Page 468

538 F.Supp.2d 468

Earl A. GARRISON, et al, Plaintiffs, v. PALMAS DEL MAR HOMEOWNERS ASSOCIATION, INC., et al, Defendants.

Civil No. 06-2062 (GAG/MEL).

United States District Court, D. Puerto Rico.

March 10, 2008.

Roberto Ramos-Antonmattei, Cancio, Nadal, Rivera & Diaz, San Juan, PR, for Plaintiffs.

Jose E. Otero-Matos, Irizarry, Otero & Lopez, Victor J. Quinones-Martinez, Goldman Antonetti & Cordova, Raul Serrano-Diaz, Luis A. Rivera Cabrera, PSC, San Juan, PR, for Defendants.

OPINION AND ORDER

MARCOS E. LÓPEZ, United States Magistrate Judge.

I. PROCEDURAL BACKGROUND

On October 20 and 27, 2006, respectively, plaintiffs Earl A. Garrison, his wife Antonia J. Garrison and the conjugal legal partnership constituted by them filed a complaint and an amended complaint in this case against: (1) Palmas del Mar Homeowners Association, Inc., ("PDMHA"); (2) Palmas del Mar Architectural Review Board, Inc., ("PDMARB"); (3) Wilfredo López ("López"), PDMARB's Executive Director, his wife and the conjugal legal partnership constituted by them; and (4) David E. Melnyk, his wife Marlo Melnyk and the conjugal legal partnership constituted by them (collectively, "the Melnyks"), for declaratory judgment and injunction, breach of contract, negligence, bad faith and damages. Docket Nos. 1, 3.

Plaintiffs and the Melnyks are next door neighbors in the Palmas del Mar complex in Humacao, Puerto Rico. Their properties are separated by a party wall that is co-owned by plaintiffs and the Melnyks. As property owners in the Palmas del Mar complex, they are bound by the provisions contained in Deed No. 2 of August 27, 1997, authorized by Notary Public Rafael Cuevas Kuinlan, titled "Deed of Amended and Restated Declaration of Rights, Restrictions, conditions and Constitution of Restrictive Covenants and Establishment of Provisions for Palmas del Mar Homeowners Association Incorporated" ("Deed No. 2") and by Deed No. 130 of April 19, 1974, authorized by Notary Public Guillermo A. Nigaglioni, titled "Deed of Declaration of Rights, Restriction Covenants and Constitution of Restrictive Covenants for Single Family Residential Areas and Other Special Restrictions" ("Deed No. 130"). In general terms, the complaint claims that defendants have objected to or impeded construction work that plaintiffs want to perform within their property. Plaintiffs claim that said work is essential in order to rectify the safety hazards imposed by the deteriorated conditions of their property and that defendants' bad faith and negligent failure to allow them to make the improvements constitute a breach of the contractual duties imposed by Deed No. 2, and have resulted in damages to plaintiffs and their property. Docket No. 1, ¶¶ 43, 46, 49 and 53. On December 26, 2006, PDMHA answered the amended complaint. Docket No. 8. PDMARB and Lopez answered the amended complaint on January 4, 2007. Docket 9.

On May 11, 2007, PDMARB and López filed a Motion to Dismiss and/or Compel Arbitration. Docket No. 22. In said motion, PDMARB and. López moved the court to dismiss the amended complaint and compel the parties to arbitrate their claims under certain dispute resolution clauses contained in Deed No. 2 and Deed No. 130. The dispute resolution clause in Deed No. 2 provides that:

The Association, Developer, Owners, all Persons subject to the Declaration, and any person not otherwise subject to this Declaration who agrees to submit to this Article (collectively, "Bound Parties") agree to encourage the amicable resolution of disputes involving the Properties and to avoid the emotional and financial costs of litigation if at all possible. Accordingly, each Bound Party Covenants and agrees that it shall attempt to resolve all claims, grievances or disputes, between such Bound Party involving the Properties, including, without limitation, claims, grievances or disputes arising out of, or relating to, the interpretation, application or enforcement of this Declaration, Bylaws, the Association rules, or the Certificate of Incorporation (collectively, "Claim") through alternative dispute resolution methods, such as mediation and arbitration.

Bound Parties may pursue any lawful means, including alternative dispute resolution methods, to resolve (a) any suit by the Association against any Bound Party to enforce the provisions of Article V; or (b) any suit by the Association to obtain a temporary restraining order (or equivalent emergency equitable relief) and such other ancillary relief as the court may deem necessary in order to maintain the status quo and preserve the Association's ability to enforce the provisions of Article VII and Article IX; or (c) any suit between Owners (other than the Developer) seeking redress on the basis of a Claim which would constitute a cause of action under the laws of the Commonwealth of Puerto Rico in the absence of a claim based on the Declaration, Bylaws, Articles or rules of the Association, if the amount in controversy exceeds $5,000. Any Bound Party may submit such Claims to alternative dispute resolution methods, but there shall be no obligation to do so.

To foster the amicable resolution of disputes, the Board may adopt alternative dispute resolution procedures applicable to all Bound Parties.

Docket No. 22, Exhibit 1 (Deed No. 2, Part XIII (General Provisions), § K); see also Docket No. 32, Exhibit 1.¹

The dispute resolution clause in Deed No. 130 provides that: "In the event of any disputes concerning a party wall, or under the provisions of this Part, each party shall choose one arbitrator, and such arbitrators shall choose one additional arbitrator, and the decision of the majority of all the arbitrators shall be final and conclusive of the question involved." Docket No. 42, Exhibit 1.

Plaintiffs opposed the Motion to Dismiss and/or Compel Arbitration on June 25, 2007, alleging that even though they are encouraged by said clauses to seek an amicable resolution of disputes through mediation or arbitration, they are by no means obligated to mediate or arbitrate and "may pursue any lawful means to resolve their claim against [d]efendants." Docket No. 32, at 4.

On July 13, 2007, the Melnyks filed a "Motion to Dismiss Pursuant to Rule 12(b)(6) for Failure to State a Claim on Which Relief can be Granted", and a Memorandum of Law in support thereof. Docket Nos. 35 and 36, respectively.² In said motion and memorandum of law, the Melnyks contend that plaintiffs do not state a valid claim under Article 1802 of the Puerto Rico Civil Code, P.R. Laws Ann., tit. 31, § 5141, are foreclosed from asserting any claim against defendants "due to the fact that the [p]laintiffs have a contractual obligation to bear a dispute resolution mechanism prior to initiate any proceeding before [the court]", and are not entitled to any compensatory damages, attorneys fees or any other relief. Docket No. 35, at 2. On July 19, 2007, PDMARB and López replied to plaintiffs' opposition to the request for dismissal and/or to compel arbitration filed by PDMARB and López. Docket No. 37.

On July 23, 2007, the court entered an order denying the requests for dismissal filed by PDMARB, López and the Melnyks. The court, however, referred the requests to compel arbitration to the undersigned for disposition pursuant to González v. GE Group Administrators, Inc., 321 F.Supp.2d 165, 166-67 (D.Mass.2004) and Herko v. Metropolitan Life Ins. Co., 978 F.Supp. 141 n. 1 (W.D.N.Y.1997). Docket Nos. 38 and 39.

On August 6, 2007, plaintiffs opposed the request to compel arbitration contained in the Melnyks'"Motion to Dismiss Pursuant to Rule 12(b)(6) for Failure to State a Claim on Which Relief can be Granted." Docket No. 41. The Melnyks replied on August 13, 2007. Docket No. 45.

II. LEGAL ANALYSIS

A. The Federal Arbitration Act, 9 U.S.C. §§ 1-16 ("FAA").

PDMARB and López seek to compel arbitration relying only on state law, namely, the Puerto Rico Commercial Arbitration Act, P.R. Laws Ann., tit. 32, §§ 3201-3229 ("PRCAA"). See Docket No. 22, at 6-7. The Melnyks support their request to compel arbitration by briefly citing two cases decided by the U.S. Supreme Court which interpret the FAA, namely, Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) and Moses H. Cone Memorial Hosp. v. Mercury Const. Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983). See Docket No. 36, at 12-13. Plaintiffs, on the other hand, rely solely on the language of the dispute resolution clause contained in Deed No. 2 in opposing the requests to compel arbitration.

Congress enacted the FAA in order "[t]o overcome judicial resistance to arbitration." Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 443, 126 S.Ct. 1204, 163 L.Ed.2d 1038 (2006); see also Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 474, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ("The [FAA] was designed `to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate' (citation omitted), and to place such agreements `upon the same footing as other contracts'", quoting Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 219-220, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985) and Scherk v. Alberto-Culver Co., 417 U.S. 506, 511, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974)). Thus, "[t]he FAA is intended to encourage speedy resolution of disputes and to bind parties to their voluntary agreements." Ideal Unlimited Services Corp. v. Swift-Eckrich, Inc., 727 F.Supp. 75, 76 (D.P.R.1989). Therefore, the FAA allows "parties to an arbitrable dispute to move out of court and into arbitration as quickly and easily as possible." Southland Corp. v. Keating, 465 U.S. 1, 7, 104 S.Ct. 852, 79 L.Ed.2d 1 (1984); quoting Moses H. Cone Memorial Hospital, 460 U.S. at 22, 103 S.Ct. 927.³

Section 2 of the FAA provides that:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out...