New South Federal Sav. Bank v. Anding, No. CIV.A. 3:02-CV-954 W.

• Decision Date: 14 October 2005
• Docket Number: No. CIV.A. 3:02-CV-954 W.
• Citation: 414 F.Supp.2d 636
• Parties: NEW SOUTH FEDERAL SAVINGS BANK Plaintiff v. Charles D. ANDING, et al. Defendants
• Court: U.S. District Court — Southern District of Mississippi

414 F.Supp.2d 636

NEW SOUTH FEDERAL SAVINGS BANK Plaintiff v. Charles D. ANDING, et al. Defendants

No. CIV.A. 3:02-CV-954 W.

United States District Court, S.D. Mississippi, Jackson Division.

October 14, 2005.

COPYRIGHT MATERIAL OMITTED

Michael D. Simmons, Cosmich & Simmons, PLLC, Richard A. Brown, Cosmich & Simmons, PLLC, Jackson, MS, for New South Federal Savings Bank, Plaintiff.

Robert Charles Robb, Robb Law Offices, PLLC, Vicksburg, MS, for Charles D. Anding, Martha C. Anding, Larry Carson, Faye Carson, Ora Jean Dobson, William Kimbrough, Eddie Lee Jackson, Ernestine Jackson, Willie James, Jr., Linda James, George R. Kelly, Sr., Sandra G. Kelly, Herbert M. Rayburn, Louise Rayburn, Michael W. Rockenbach, Melinda K. Rockenbach, Denise Murphree, Temple, Suzanne Temple, Sarah Maxcy, Angelo Harris, Anna M. Gines, Margie M. Washington, James W. Maxey, Jr., James W. Gilmer, Katherine Gilmer, Troy Bond, Fran Bond, Defendants.

MEMORANDUM OPINION AND ORDER

WINGATE, Chief Judge.

Before this court is the plaintiffs motion to compel arbitration. The plaintiff is New South Federal Savings Bank ("New South"), a federally chartered savings bank¹ with its principal place of business in Birmingham, Alabama. The defendants are all litigants in related state court proceedings before the Chancery Court for the First Judicial District of Hinds County, Mississippi. The complaint in the instant case asks this court to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), Title 9 U.S.C. § 4.² New South predicates this court's jurisdiction on Title 28 U.S.C. § 1332.³ Inasmuch as New South is a federally chartered savings bank with its principal place of business in Birmingham, Alabama, and the defendants here are all residents of the State of Mississippi; and inasmuch as the amount in controversy exceeds the sum of $75,000.00, exclusive of costs and interests, this court has jurisdiction over this dispute under Title 28 U.S.C. § 1332.⁴ Consequently, this court is obliged to apply the substantive law of the State of Mississippi to the instant case. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). For the reasons that follow, this court finds that the motion to compel arbitration is well taken and should be granted.

PERTINENT FACTS

New South accepted assignments of the defendants' mortgage loans with a third party lender Southern Mortgage which had refinanced defendants' original home loans. Among the documents executed at the closing of each defendant's loan was a Deed of Trust Rider. The Deed of Trust Rider provides for arbitration of claims relating to the Promissory Note, the Deed of Trust and any other matters relating to defendants' home loan transactions. New South and defendants are the only parties to these Deed of Trust Riders.

After defendants stopped making payments under their promissory notes and the occurrence of other events, such as the filing of state court claims against New South, New South filed a complaint in the United States District Court for the Southern District of Mississippi ("New South I"), seeking a declaratory judgment that (1) the defendants were required to submit their claims against New South to binding arbitration in accordance with the Deed of Trust Riders and pursuant to the Federal Arbitration Act, Title 9 U.S.C. §§ 1, et seq., or, in the alternative, (2) New South had no liability to the defendants under state or federal law. In its complaint, New South alleged that the district court had subject matter jurisdiction over the lawsuit solely on the basis of Title 28 U.S.C. § 1331, federal question jurisdiction. This lawsuit, ("New South I"), styled New South Federal Savings Bank v. Denise Murphree, et al., Civil Action No. 3:01-cv-882LN, was assigned to the Honorable Tom S. Lee.

In response to New South I, the defendants filed a motion to dismiss in which they argued that the district court lacked federal question jurisdiction under Title 28 U.S.C. § 1331. Convinced that defendants had a point, Judge Lee dismissed' that action with prejudice based on a lack of federal question jurisdiction.

Thereafter, New South appealed New South I to the United States Court of Appeals for the Fifth Circuit on the basis that the dismissal should have been without prejudice. Following briefing at the Fifth Circuit, that Court entered a per curiam opinion on December 20, 2002, which vacated the district court's dismissal of New South I with prejudice and remanded with instructions that the judgment be amended to reflect that the dismissal was without prejudice.

While the appeal of New South I was pending before the Fifth Circuit, New South filed the present action. In this present action, New South alleges, and this court agrees, that subject matter jurisdiction over this dispute is predicated under Title 28 U.S.C. § 1332. Thus, New South seeks to compel arbitration of the claims against it pursuant to the FAA.

The defendants previously moved to dismiss this action, asserting as grounds for a dismissal (a) that this court lacks subject matter jurisdiction by virtue of New South's failure to join parties whose presence in the case would destroy diversity of citizenship jurisdiction pursuant to Title 28 U.S.C. § 1332, (b) that the district court's judgment in New South I bars this action based on collateral estoppel, res judicata, and the law of the case, or, in the alternative, and (c) Colorado River abstention applies and that this court should defer to a parallel state court action. This court already has addressed these assertions in a separate Order and has denied the motion to dismiss (Docket No. 9-1). Only the motion to compel arbitration remains for disposition.

ARBITRATION — THE STANDARD

Agreements to arbitrate are creatures of contract. Although there is a presumption in favor of arbitration, Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 24-25, 103 S.Ct. 927, 941, 74 L.Ed.2d 765, 785 (1983), parties will not be required to arbitrate when they have not agreed to do so. Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. University, 489 U.S. 468, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488, 499 (1989). The courts are not to twist the language of the contract to achieve a result which is favored by federal policy but contrary to the intent of the parties. The Federal Arbitration Act (FAA) "simply requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms." Id. 109 S.Ct. at 1255. This court is required to determine whether the parties agreed to arbitrate their disputes. Harvey v. Joyce, 199 F.3d 790, 793 (5th Cir.2000). In this regard, the intent of the parties is determined by employing the state law rules of contract construction. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). "Any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability." Moses H. Cone, 460 U.S. 1, 103 S.Ct. 927, 941, 74 L.Ed.2d 765. This presumption can be overcome with clear evidence that the parties did not intend the claim to be arbitrable. Harvey, 199 F.3d at 793.

A two-pronged inquiry is used when determining whether a motion to compel arbitration should be granted. The first prong has two components: (1) whether there is a valid arbitration agreement; and (2) whether the parties' dispute is within the scope of the arbitration agreement. East Ford v. Taylor, 826 So.2d 709, 713 (Miss.2002). The second prong asks "whether legal constraints external to the parties' agreement foreclose[s] arbitration of those claims." Id., quoting Mitsubishi Motors Corporation v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). This second prong includes the consideration of applicable contract defenses available under state contract law which may invalidate the arbitration agreement. Id, citing Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686, 116 S.Ct. 1652, 134 L.Ed.2d 902 (1996).

THE ARBITRATION AGREEMENT

The arbitration agreement entered into between the parties is contained in a Deed of Trust Rider, a one-page document. This Deed of Trust Rider, a document separate and distinct from all the other loan documents signed by the defendants, was both initialed and signed by each defendant separately from all the other closing documents. Particularly, each defendant has initialed paragraph (a) of the document which provides as follows:

(a) For the purposes of the Note or this Deed of Trust, Borrower and Lender, acknowledge and agrees (sic) they are engaged in, and this Deed of Trust secures transactions involving substantial interstate commerce. Except as otherwise specifically set forth below, and IN LIEU OF BORROWER'S AND LENDER'S RIGHT TO A JURY TRIAL AND THE RIGHT TO ASSERT A CLAIM FOR PUNITIVE DAMAGES, ATTORNEY FEES AND OTHER MATTERS MORE PARTICULARLY DESCRIBED HEREIN, any action, dispute, claim, counterclaim or controversy ("Dispute" or "Disputes"), between Borrower and Lender, including any claim based on or arising from an alleged tort, shall be resolved in Jackson, Mississippi by ARBITRATION as set forth below. The term "Disputes" shall include all actions, disputes, claims, counterclaims or controversies arising in connection with the Note or this Deed of Trust, any collection of indebtedness owed to Lender, any security or collateral given to Lender, any action taken (or any omission to take any action) in connection with any of the above, any past, present and future agreement between or among Borrower and Lender (including the Deed of Trust), and any past, present or future transactions between or among Borrower and Lender. Without limiting the generality of...