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Friday, March 29, 2024

Pearland nonprofit cannot force Amegy Bank into arbitration despite arbitration clauses, appeals court rules

Appeals

HOUSTON (SE Texas Record) – Amegy Bank of Texas, owned by a Utah corporation, cannot be forced into arbitration with a Pearland nonprofit despite arbitration clauses in a promissory note, the Texas Fourteenth Court of Appeals ruled earlier this week.

In its 17-page opinion issued May 7, the appeals court affirmed most of a Harris County District Court's decision to grant summary judgment in favor of Amegy Bank, saying the nonprofit Contours Community Development Corporation and its executive director,  Stanwyn Jay Carter, could not compel arbitration in the dispute regarding a $544,000 promissory note.

The appeals court also deleted two paragraphs from the trial court's seven declarations but otherwise left that court's judgment intact.

Appeals court Chief Justice Kem Thompson Frost wrote the opinion in which Justices Kevin Jewell and Ken Wise concurred.

Carter, representing himself, appealed the Harris County 55th District Court decision to grant summary judgment in favor of Amegy Bank, court filings said. The Harris County court ruled that Carter could not force Amegy Bank into arbitration in the dispute Carter had commenced.

Amegy Bank of Texas, a division of Salt Lake City-based Zions Bancorporation, is headquartered in Houston.

The case stems from a September 2010 promissory note for $544,000 between Contours Community Development Corporation and Amegy Bank that Carter has signed as Contours executive director, according to the background portion of the appeals court's opinion. The promissory note includes arbitration clauses.

Contours Community Development is a 501(c)3 nonprofit organization based in Pearland that provides housing and shelter organization.

After Carter filed a demand for arbitration with an arbitration and mediation service company, Amegy filed suit in the Harris County court asking the court to stay the arbitration proceedings and to declare the bank could not be forced into arbitration, despite the clauses in its promissory note with Carter.

"Instead of filing an answer, Carter filed a motion to compel arbitration," the appeals court's opinion said.

After a temporary restraining order and a temporary injunction that enjoined Carter from continuing to prosecute the arbitration, Amegy Bank asked the Harris County court for a "traditional summary judgment," court filings said. In that motion, Amegy Bank asked for a declaration that Carter could not force the bank to arbitrate, claiming Carter improperly commenced the action and that the arbitration provision "does not authorize arbitration at this juncture," the appeals court's opinion said.

Carter countered the bank's motion, saying "he raised genuine issues of material fact," the opinion said.

The Harris County court sided with Amegy Bank, making seven declarations of law, including a finding that Amegy and Zions Bancorporation could not be forced into arbitration.

Carter appealed the Harris County court's decision, saying the lower court "reversibly erred" when it granted summary judgment.

The appeals court found that the arbitration clauses conditioned arbitration on either a jury-trial waiver not being permitted by law or a court ruling that a jury-trial waiver is not permitted.

"Amegy Bank's motion and summary-judgment evidence prove as a matter of law that neither condition has occurred, and therefore that there is no agreement to arbitrate the Carter dispute at this time," the appeals court said in its opinion.

The appeals court also found that two of the Harris County court's declarations that said arbitration cannot begin unless a court determines a jury trial waiver is not enforceable and until there is an arbitration order, conflicted "with the unambiguous language of the instruments."

The appeals court deleted those two declarations and affirmed the lower court's judgment as modified.

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