Wilczewski v. Charter W. Nat'l Bank
| Decision Date | 09 December 2016 |
| Docket Number | No. S-15-1051.,S-15-1051. |
| Parties | Michael J. WILCZEWSKI and Michelle A. Wilczewski, appellants, v. CHARTER WEST NATIONAL BANK, a National Banking Association, appellee. |
| Court | Nebraska Supreme Court |
John D. Stalnaker, Robert J. Becker, and Ashley A. Buhrman, of Stalnaker, Becker, & Buresh, P.C., Omaha, for appellants.
Jeffrey A. Silver, Omaha, for appellee.
Heavican, C.J., Wright, Miller–Lerman, Cassel, Stacy, Kelch, and Funke, JJ.
A bank foreclosed its loan on residential real estate and resold the property under a written contract containing an arbitration clause. The buyers appeal from an order compelling arbitration of their lawsuit against the bank. Because the Federal Arbitration Act (FAA)1 extends to the full reach of Congress' Commerce Clause power and the bank's activity fell within its reach, the buyers' claims arising from the purchase of residential real estate were subject to the arbitration clause. And because we find no merit to the buyers' other arguments, we affirm the order compelling arbitration.
Michael J. Wilczewski and Michelle A. Wilczewski bought residential real estate from Charter West National Bank (Charter). The property is located in Douglas County, Nebraska. The purchase agreement for this transaction contained an arbitration clause.
After the Wilczewskis learned that another bank had a superior lien against the real estate, they sued Charter for money damages. They asserted theories of fraudulent misrepresentation, negligent misrepresentation, common-law fraud, and quantum meruit or unjust enrichment. Their complaint alleged that despite Charter's knowledge of the other bank's lien, Charter represented the property would be conveyed free and clear of all liens. And the complaint alleged that without their knowledge, Charter "manipulated" the language of the deed to make it subject to liens of record.
But the Wilczewskis' complaint also alleged facts showing the full extent of Charter's activity leading to acquisition of its title and its later sale of the property to them. The following list summarizes the Wilczewskis' alleged facts:
• The prior owners' 2004 purchase of the real estate;
• the prior owners' 2004 purchase money loan from the other bank, secured by a deed of trust;
• the prior owners' 2006 loan from Charter, secured by another deed of trust;
• the prior owners' 2008 bankruptcy and the bankruptcy court's authorization of Charter's foreclosure in 2009;
• completion of a trustee's sale by Charter in 2009;
• Charter's issuance of a trustee's deed in foreclosure of the deed of trust, thereby conveying title to the real estate to itself as the purchaser;
• the October 2010 purchase agreement between Charter and the Wilczewskis; and
• the November 30, 2010, deed from Charter to the Wilczewskis.
Charter filed a motion to compel arbitration pursuant to the purchase agreement. The arbitration clause provided: "Any controversy or claim between the parties to this Nebraska Purchase Agreement, its interpretation, enforcement or breach, including but not limited to claims arising from tort, shall be settled by binding arbitration...."
The Wilczewskis objected to Charter's motion to compel arbitration on five grounds, which were later narrowed to two: (1) that the Wilczewskis' claims did not fall within the scope of the arbitration clause and (2) that the arbitration clause was void because it failed to comply with the notice provision under Nebraska's Uniform Arbitration Act (UAA).2 In connection with the second ground, the Wilczewskis contended that the transaction did not involve interstate commerce and that thus, the FAA did not apply to their claims.
The district court initially denied Charter's motion without prejudice. Charter appealed this order, but we concluded that it was not a final, appealable order and dismissed the appeal.3 Upon remand, the district court conducted an evidentiary hearing on the motion to compel arbitration.
After the evidentiary hearing, the district court sustained Charter's motion to compel arbitration. The court noted the strong public policy in favor of arbitration and construed the arbitration clause broadly. The court found that the clause was broad enough to encompass all of the Wilczewskis' claims. And, relying upon one of our decisions,4 the court concluded that the agreement was a transaction " ‘involving commerce’ " as defined by the FAA and, therefore, that the FAA rather than Nebraska's UAA, applied. After finding that the FAA controlled, the court determined that the clause was not void for failure to comply with Nebraska's UAA notice requirement. Having sustained Charter's motion to compel arbitration, the court dismissed the case.
The Wilczewskis timely appealed, and we granted their petition to bypass the Nebraska Court of Appeals.
The Wilczewskis assign, reordered, that the district court erred in (1) finding that the FAA preempted the UAA, (2) finding that the arbitration clause applied to their claims, (3) dismissing the instant litigation instead of staying the matter pending arbitration, and (4) not allowing a "full opportunity for discovery on the issue of arbitrability."
Arbitrability presents a question of law.5 Likewise, a jurisdictional issue that does not involve a factual dispute presents a question of law.6 And when reviewing questions of law, an appellate court resolves the questions independently of the lower court's conclusions.7
At oral argument, Charter conceded that the purchase agreement did not conform to Nebraska's UAA. But it contended that the FAA applies and preempts the UAA. Thus, Charter's motion to compel cannot succeed unless the FAA applies to Charter's activity. Because this is the main issue before us, we address it first.
The Wilczewskis argue that Charter's activity here does not affect interstate commerce. The heart of their argument is that "[t]he subject Real Estate is located in Nebraska, the Wilczewskis are residents of Nebraska, and the claims made by the Wilczewskis against Charter ... involve statements made in Nebraska by representatives of Charter ... located in Nebraska."8
But that argument focuses on only part of Charter's activity. Charter was not a single-family occupant of residential real estate. Clearly, it would not have been engaged in selling the real estate but for its lending activity. Lending money secured by residential real estate plainly includes a risk of nonpayment and, in that event, the necessity of enforcing a lender's deed of trust. And where a nonjudicial foreclosure results in a lender's taking title to residential real estate, the subsequent sale of that real estate is sure to follow. In general, collection of a lender's loan is the only reason it would acquire title to residential real estate and the only reason it would sell the real estate to someone else, such as the Wilczewskis.
Thus, whether the FAA reaches Charter's activity depends upon how the activity is viewed. And to determine the answer to that question, we turn to the case law driven by decisions of the U.S. Supreme Court.
The FAA provides at 9 U.S.C. § 2 :
A written provision in any ... contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
Therefore, when determining whether an arbitration clause is governed by Nebraska's UAA or the FAA, the initial question is whether the parties' contract evidences a transaction " ‘involving commerce’ " as defined by the FAA.9
The U.S. Supreme Court has "interpreted the term ‘involving commerce’ in the FAA as the functional equivalent of the more familiar term ‘affecting commerce’—words of art that ordinarily signal the broadest permissible exercise of Congress' Commerce Clause power."10 For this reason, the Court has consistently found that the FAA "embodies Congress' intent to provide for the enforcement of arbitration agreements within the full reach of the Commerce Clause."11
A succession of U.S. Supreme Court cases leads to this inescapable conclusion. First, the Court held that the FAA is "based upon and confined to the incontestable federal foundations of ‘control over interstate commerce and over admiralty.’ "12 Second, the Court determined that Congress had withdrawn the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration.13 Third, the Court's later decisions reiterated the FAA's applicability to matters of state law.14 Finally, the Court expressly rejected the argument that the FAA's commerce language "carv[ed] out an important statutory niche in which a State remains free to apply its antiarbitration law or policy."15 The Court emphasized that "the word ‘involving’ is broad and is indeed the functional equivalent of ‘affecting.’ "16 Thus, the Court settled the question of the reach of the FAA—it extends to the full reach of the Commerce Clause.17 And in doing so, the Court read the FAA as insisting that the transaction in fact involved interstate commerce, even if the parties did not contemplate an interstate commerce connection.18 Thus, to summarize, in the words of a case note criticizing the U.S. Supreme Court's decision, the Court "[took] the final step in the federalization of the FAA."19
This progression of cases demonstrates that the scope of the FAA is well settled at the federal level as having the same reach as Congress' Commerce Clause power. And, as the district court noted, this court previously recognized the U.S. Supreme Court's interpretation of the FAA's "expansive scope" and concluded that the "FAA's reach is as...
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Wilczewski v. Charter W. Nat'l Bank, S-15-1051.
...295 Neb. 254MICHAEL J. WILCZEWSKI AND MICHELLE A. WILCZEWSKI, APPELLANTS, v. CHARTER WEST NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, APPELLEE.No. S-15-1051.SUPREME COURT OF NEBRASKADecember 9, 2016 1. Arbitration and Award. Arbitrability presents a question of law.2. Judgments: Jurisdic......
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Hermitage Inn Real Estate Holding Co. v. Extreme Contracting, LLC, 16-090.
...all of the issues raised in the [trial] court must be submitted to arbitration.") (collecting cases); Wilczewski v. Charter W. Nat'l Bank, 295 Neb. 254, 889 N.W.2d 63, 71 (2016) ("[T]here is a slight majority of the courts that allow dismissal, despite the mandatory language of [ 9 U.S.C. §......
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Fcci Ins. Co. v. Nicholas Cnty. Library, Case No. 5:18-cv-038-JMH
...on whether the FAA mandates a stay of litigation as opposed to a dismissal in certain situations. See Wilczewski v. Charter West Nat'l Bank, 889 N.W.2d 63, 71 n.34 (Neb. 2016) (acknowledging the split among the federal circuits and citing cases). Thus, it follows that, if a court can stay l......
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Hermitage Inn Real Estate Holding Co. v. Extreme Contracting, LLC, 2016-090
...of the issues raised in the [trial] court must be submitted to arbitration.") (collecting cases); Wilczewski v. Charter W. Nat'l Bank, 889 N.W.2d 63, 71 (Neb. 2016) ("[T]here is a slight majority of the courts that allow dismissal, despite the mandatory language of [9 U.S.C. § 3], where all......