Hafer v. Mortgage

Decision Date24 June 2011
Docket NumberCivil Action No. C–11–128.
Citation793 F.Supp.2d 987
PartiesYvonne L. HAFER, et al., Plaintiffs,v.VANDERBILT MORTGAGE AND FINANCE, INC., et al., Defendants.
CourtU.S. District Court — Southern District of Texas


David L. Rumley, Wigington Rumley Dunn, LLP, Corpus Christi, TX, Baldemar Gutierrez, J. Javier Gutierrez, The Gutierrez Law Firm, Inc., Alice, TX, Richard E. Norman, R. Martin Weber, Jr., Crowley Norman LLP, Houston, TX. Michael B. Angelovich, Nix Patterson & Roach, LLP, Austin, TX, for Plaintiffs.Patton G. Lochridge, Carlos R. Soltero, April E. Lucas, McGinnis, Lochridge & Kilgore, LLP, Austin, TX, Lee E. Bains, Jr., Thomas W. Thagard, III, Edward S. Sledge, IV, Maynard, Cooper & Gale, P.C., Birmingham, AL, W. Scott Simpson, Simpson, McMahan, Glick & Burford, PLLC, Birmingham, AL, for Defendants.


JANIS GRAHAM JACK, District Judge.

Pending before the Court are Defendants' Motion to Compel Arbitration of Plaintiff Yvonne Hafer's Individual Claims and Vanderbilt's Counterclaims Against Plaintiff Yvonne Hafer (D.E. 11) and Defendants' Motion to Compel Arbitration of Plaintiffs Timothy Jones, Katherine Jones, and Christy Jones' Individual Claims (D.E. 12).

For the reasons stated herein, the motions to compel arbitration are GRANTED. The individual claims asserted by Plaintiff Yvonne Hafer, as well as the counter-claims asserted by Vanderbilt against Hafer, are to be decided by binding arbitration. 9 U.S.C. § 4. The individual claims asserted by Plaintiffs Timothy Jones, Katherine Jones and Christy Jones are also to be decided by binding arbitration. 9 U.S.C. § 4. As agreed, the Clayton parties shall bear the cost of arbitration, and the venue for arbitration shall be Corpus Christi, Texas. (D.E. 37 at 10, n. 14.)

In addition, because the Court is satisfied that this lawsuit is referable to arbitration under the parties' agreement, the Court ORDERS that this action be STAYED pending the arbitration proceedings. 9 U.S.C. § 3.

I. Jurisdiction

This is a putative class action filed under Rule 23 of the Federal Rules of Civil Procedure. The Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332(d)(2), providing that the district courts shall have original jurisdiction of any class action filed under Rule 23 in which the matter in controversy exceeds the sum or value of $500,000, exclusive of interests and costs, and in which any member of the putative class of plaintiffs is a citizen of a state different from any defendant. § 1332(d)(2)(A).

II. Background

On April 18, 2011, Plaintiffs Yvonne L. Hafer, Timothy Jones, Katherine Jones, and Christy Jones filed a putative class action against Defendants Vanderbilt Mortgage & Finance, Inc., Clayton Homes, Inc., and CMH Homes, Inc. for fraud and other violations of Texas law. (D.E. 1.)

The Plaintiffs allege that Defendants engaged in the “routine pattern and practice” of: creating mortgage liens and deeds of trust to secure repayment of debts incurred by Plaintiffs in order to purchase mobile homes from Defendants, “secretly releasing” the mortgage liens and deeds of trust with releases stating that the debts were “paid in full,” and then continuing to bill for, and accept payments on debts that had allegedly been released. ( Id. at 1.)

According to the complaint, each of the Plaintiffs purchased a manufactured home from Defendants CMH Homes and Clayton Homes, Inc., for which Vanderbilt provided the financing. Each signed a Retail Installment Contract (“RIC”) obligating them to make monthly payments to Vanderbilt until the maturity date. The purchases were secured by liens placed on real property, memorialized in two documents, a Builder's & Mechanic's Lien (“BML”) and a Deed of Trust (“DOT”), which were prepared and filed in the real property records as part of the transaction. ( Id. at 2.)

In October 2005, Vanderbilt, in conjunction with CMH and Clayton Homes, Inc. secretly filed hundreds (possibly over a thousand) releases of these liens across Texas. Plaintiffs allege that the BML and DOT releases released the liens on real property and the underlying debt on the RIC finance contracts as “paid in full.” ( Id. at 3.) Nonetheless, even after intentionally filing the releases, Defendants continued to bill Plaintiffs and accept payments on their manufactured homes. ( Id. at 7.)

Plaintiff Hafer allegedly had her home repossessed after she could no longer pay bills sent to her. Plaintiffs Timothy Jones and Katherine Jones paid over $14,000 since the releases were filed because they were afraid of losing their home. ( Id.)

Based on these events, Plaintiffs assert the following claims against Vanderbilt, CMH Homes and Clayton Homes, Inc. (hereafter referred to collectively as Defendants or “the Clayton parties): (1) Declaratory judgment, (2) Texas Debt Collection Practices Act, (3) Money Had and Received, (4) Fraud, and (5) Civil Conspiracy.

The Clayton parties have answered, denying these allegations. Vanderbilt brings a counter-claim against Plaintiff Hafer for breach of contract and unjust enrichment, alleging that Hafer failed to perform her obligations under the RIC to make payments on her mobile home. (D.E. 8 at 20–23.)

The Clayton parties have now filed motions to compel arbitration of the named parties' claims and Vanderbilt's counter-claims against Hafer. (D.E. 11, D.E. 12.) The Plaintiffs have responded. (D.E. 26.) Defendants have filed a reply. (D.E. 39.)

III. DiscussionA. Motion to Compel Arbitration

The Federal Arbitration Act (“FAA”) permits an aggrieved party to file a motion to compel arbitration when an opposing party has failed, neglected, or refused to comply with an arbitration agreement.” American Bankers Ins. Co. of Florida v. Inman, 436 F.3d 490, 493 (5th Cir.2006) (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 24, 111 S.Ct. 1647, 114 L.Ed.2d 26 (1991)); see also 9 U.S.C. § 4.

FAA Section 4 provides that, when a party petitions the court to compel arbitration under a written arbitration agreement, [t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. The hearing and proceedings, under such agreement, shall be within the district in which the petition for an order directing such arbitration is filed.” 9 U.S.C. § 4.

The FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed. Thus, ... agreements to arbitrate must be enforced, absent a ground for revocation of the contractual agreement.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985).

When considering a motion to compel arbitration under the FAA, a court employs a two-step analysis. “First, a court must determine whether the parties agreed to arbitrate the dispute in question. Second, a court must determine whether legal constraints external to the parties' agreement foreclosed the arbitration of those claims.” Tittle v. Enron Corp., 463 F.3d 410, 418 (5th Cir.2006) (internal citations and quotation marks omitted).

“The first step of the analysis—whether the parties agreed to arbitrate the dispute in question—consists of two separate determinations: (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.

B. Analysis

1. Valid Agreement to Arbitrate Dispute in Question

The first step in the analysis requires the Court to determine whether there is a valid agreement to arbitrate between the parties. See id. Defendants argue that this dispute is subject to the arbitration agreement in the Retail Installment Contract (“RIC”). They submit documentary evidence showing that each of the named Plaintiffs executed a RIC with Defendant CMH Homes containing the same arbitration agreement. The arbitration agreement, located at the bottom of the third page of the RIC, provides, in part:

ARBITRATION: All disputes, claims or controversies arising from or relating to this contract, or the subject hereof, or the parties, including the enforceability or applicability of this arbitration agreement or provision and any acts, omissions, representations and discussions leading up to this agreement, hereto, including this agreement to arbitrate, shall be resolved by mandatory binding arbitration by one arbitrator selected by Seller with Buyer's consent. This agreement is made pursuant to a transaction in interstate commerce and shall be governed by the Federal Arbitration Act at 9 U.S.C. Section 1 ... The parties agree and understand that all disputes arising under case law, statutory law and all other laws including, but not limited to, all contract, tort and property disputes will be subject to binding arbitration in accord with this contract.

(D.E. 11, Ex. 1, ¶ 9, Ex. 1–A, p. 3; Ex. 2–A, p. 3; D.E. 12, Ex. 1, ¶ 9, Ex. 1–A, p. 3; Ex. 2–A, p. 3.) The agreement states that [t]he parties agree and understand that they choose arbitration instead of litigation to resolve disputes. The parties understand that they have a right to litigate disputes in court, but that they prefer to resolve their disputes through arbitration, except as provided herein.” ( Id.) The agreement further states in bold and capital letters: THE PARTIES VOLUNTARILY AND KNOWINGLY WAIVE ANY RIGHT THEY HAVE TO A JURY TRIAL. ( Id.)

Under the FAA, “a written arbitration agreement is prima facie valid and must be enforced unless the opposing party ... alleges and proves ... such grounds as exist at law or in equity for the revocation of the contract.” Freudensprung v. Offshore Technical Servs., Inc., 379 F.3d...

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