HOUSTON -- The Texas 14th Court of Appeals weighed in July 9 on an arbitration dispute in a loan agreement gone wrong.
Edwin Rodriguez and Tonya Rodriguez took issue with a lower court granting application to compel arbitration in their lawsuit against Texas Leaguer Brewing Company LLC and Nathan Rees. The lower court also dismissed the case altogether. The appeals court affirmed the ruling but did reverse the part that dismissed it and compelled arbitration for the allegations concerning breach of the alleged loan agreement. The appeals court remanded that portion of the case for litigation that aligns with the current opinion.
The court disagreed with the Rodriguezes that the agreements they signed included an agreement to arbitrate. The appeals court ruled that the language plainly says that the parties would go through arbitration for a dispute. “[It] reflects a clear intent that, if the parties are unable to settle their dispute through mediation, to submit to binding arbitration at the election of either party. [It] does not require consent of the other party when one party elects binding arbitration,” said the court. It added that the Rodriguezes forfeited the mediation possibility when they went straight to the lawsuit instead of mediation and that the Rodriguezes still say they are members and that the parties’ dispute concerning their status hasn’t been finalized yet, so both sides have the opportunity to take advantage of arbitration.
It also determined, “Regardless of whether the second agreement lacks consideration, the trial court’s arbitration judgment may be upheld based on the arbitration clause of the first agreement, the validity of which the Rodriguezes do not challenge.”
Finally, it also ruled the securities fraud allegation is a part of the agreement, but the breach of loan agreement claim isn’t.
Justice Meagan Hassan wrote the opinion and justices Tracy Christopher and Jerry Zimmerer concurred.
Edwin and Tonya Rodriguez previously signed an amended and restated company agreement that said they would own 7% of ownership of Texas Leaguer. They put out $150,000 for capital. The agreement also noted they would take the arbitration route if any legal disputes came up.
Matters began to fall apart after Rees informed the Rodriguezes that they were ending their relationship after the couple didn’t cosign a loan for as much as $556,000 as they said they would in the second agreement. The Rodriguezes then sued Texas Leaguer and Rees for securities fraud, breach of and specific performance of the first agreement, conversion and breach of a $20,000 loan agreement. Texas Leaguer and Rees filed an application to compel arbitration, and the lower court granted it, dismissing the case.
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