Plains State Bank v. Svabic Properties, Ltd., Svabic Family Partnership, Ltd. Vojislav W. Svabic, Individually and as Trustee of the Elizabeth Svabic 2012 Trust SFP 711 Corpus Christi, LLC And Svabic Operating Co., LLC

Reversed and Remanded and Memorandum Opinion filed January 9, 2024.

In The

Fourteenth Court of Appeals

NO. 14-23-00028-CV

PLAINS STATE BANK, Appellant

V.
SVABIC PROPERTIES, LTD., SVABIC FAMILY PARTNERSHIP, LTD.;
VOJISLAV W. SVABIC, INDIVIDUALLY AND AS TRUSTEE OF THE
ELIZABETH SVABIC 2012 TRUST; SFP 711 CORPUS CHRISTI, LLC;
AND SVABIC OPERATING CO, LLC, Appellees

On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Cause No. 2022-39182

MEMORANDUM OPINION

Appellant Plains State Bank (“PSB”) appeals the trial court’s order denying
its motion to compel arbitration in the lawsuit filed by appellees Svabic Properties,
Ltd.; Svabic Family Partnership, Ltd.; Vojislav W. Svabic, individually and as
trustee of the Elizabeth Svabic 2012 Trust; SFP 711 Corpus Christi, LLC; and
Svabic Operating Company, LLC. See Tex. Civ. Prac. & Rem. Code Ann.
§§ 51.016l, 171.021. 171.098(a)(1). In two issues we treat as one, PSB argues the
trial court erred when it denied its motion to arbitrate claims relating to the deeds
of trust and security agreements signed on June 28, 2013, and July 29, 2019. We
reverse the trial court’s order and remand for further proceedings.

I. BACKGROUND

PSB provided multiple commercial loans to appellees since April 2012. On
April 26, 2012, the parties executed an arbitration agreement, which provided that
only PSB could invoke arbitration and that any disputes were to be resolved in
accordance with the Federal Arbitration Act (“FAA”).1 Subsequently, the parties
executed a “Deed of Trust and Security Agreement” on June 28, 2013, and another
on July 29, 2019, each of which contained a jury waiver provision.

On June 29, 2022, appellees filed suit against PSB, seeking an accounting
for loans issued by PSB and guaranteed by appellees which were sold by PSB to
another lender. Appellees also asserted that PSB’s actions were discriminatory and
constituted unfair practices.

On October 17, 2022, PSB filed a plea in abatement and motion to compel
arbitration, attaching a copy of the arbitration agreement the parties signed on
April 26, 2012. Appellees filed a response in opposition, arguing that the
arbitration agreement PSB submitted was unsigned by PSB. On November 9,
2022, the trial court granted PSB’s motion.

Appellees filed a motion to set aside the trial court’s order, arguing that the
jury waiver provisions in the deeds of trust and security agreements executed on
June 28, 2013, and July 29, 2019, replaced the previous arbitration agreement. On

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The arbitration agreement further provided that arbitration was to be carried out in
accordance with the laws of the State of Texas to the extent the FAA was inapplicable,
unenforceable, or invalid.

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December 27, 2022, the trial court issued an order, granting appellees’ motion in
part and setting aside the portions of its previous order compelling arbitration of
any causes of action relating to the deeds of trust and security agreements signed
on June 28, 2013, and July 29, 2019. The trial court also reinstated onto the court’s
docket the claims relating to the deeds of trust and security agreement signed on
June 28, 2013, and July 29, 2019.

This interlocutory appeal followed.

II. DISCUSSION

In one issue, PSB argues the trial court erred in denying its motion to compel
arbitration claims relating to the deeds of trust and security agreement signed on
June 28, 2013, and July 29, 2019. PSB argues the trial court erred because (1) a
valid arbitration agreement exists and the relevant claims are within the scope of
the arbitration agreement, and (2) it was without authority to modify its previous
order to abate.

A. STANDARD OF REVIEW

We review a trial court’s order denying a motion to compel arbitration for an
abuse of discretion. Henry v. Cash Biz, LP, 551 S.W.3d 111, 115 (Tex. 2018). A
trial court abuses its discretion if it acts unreasonably or without reference to
guiding rules or principles. Low v. Henry, 221 S.W.3d 609, 614 (Tex. 2007).

We review a trial court’s legal determinations de novo. Henry, 551 S.W.3d
at 115. The trial court’s determination of the arbitration agreement’s existence and
validity are legal questions subject to de novo review. Jody James Farms, JV v.
Altman Grp., Inc., 547 S.W.3d 624, 633 (Tex. 2018); J.M. Davidson, Inc. v.
Webster, 128 S.W.3d 233, 227 (Tex. 2003).

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B. APPLICABLE LAW

Arbitration is a creature of contract. In re Poly-Am., L.P., 262 S.W.3d 337,
348 (Tex. 2008) (orig. proceeding). Thus, parties cannot be compelled to arbitrate
any controversy unless they have contractually agreed to do so. TotalEnergies
E&P USA, Inc. v. MP Gulf of Mex., LLC, 667 S.W.3d 694, 701 (Tex. 2023);
Robinson v. Home Owners Mgmt. Enters., 590 S.W.3d 518, 521 (Tex. 2019). A
contractual agreement to arbitrate controversies is severable from a broader
contract that contains it. Baby Dolls Topless Saloons, Inc. v. Sotero, 642 S.W.3d
583, 586 (Tex. 2022).

A party seeking to compel arbitration must establish that (1) a valid
arbitration agreement exists, and (2) the claims at issue are within the scope of the
agreement. In re Rubiola, 334 S.W.3d 220, 223 (Tex. 2011) (orig. proceeding). If
the relevant parties did not sign the contract in which the arbitration agreement is
contained, then addressing the first prong includes analysis of whether a non-
signatory is bound by or can enforce the arbitration agreement. See id. at 223–24;
Osornia, 367 S.W.3d at 711. If the trial finds a valid arbitration agreement and that
the claims fall within the scope of the agreement, then the burden shifts to the party
opposing arbitration to raise a defense. J.M. Davidson, 128 S.W.3d at 227; see In
re Poly–Am., L.P., 262 S.W.3d at 348.

Arbitration is favored under public policy. In re Poly–Am., L.P., 262 S.W.3d
at 348. In deciding whether the parties have agreed to arbitrate, we do not resolve
doubts or indulge a presumption in favor of arbitration. See In re Kellogg Brown &
Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding). Once an
arbitration agreement is found to exist, doubts regarding an agreement's scope are
resolved in favor of arbitration because there is a strong presumption favoring
agreements to arbitrate. Id.

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C. ANALYSIS

The FAA applies to the arbitration agreement here because the parties
agreed to arbitrate under the FAA in the arbitration agreement. See Rubiola, 334
S.W.3d at 223.

1. Interlocutory Jurisdiction

First, we address appellees’ contention that we lack jurisdiction to consider
this interlocutory appeal because the trial court did not deny PSB’s motion to
compel arbitration claims relating to the deeds of trust and security agreement
signed on June 28, 2013, and July 29, 2019. Appellees argue that the trial court
granted PSB’s motion to compel arbitration in part but reinstated the remaining
claims without denying the motion to compel as to these claims.

Appellate courts may consider appeals from interlocutory orders when a
statute explicitly authorizes an appeal. Tex. A & M Univ. Sys. v. Koseoglu, 233
S.W.3d 835, 840 (Tex. 2007). Texas Civil Practice and Remedies Code § 51.016,
which authorizes appeals in matters subject to the FAA, provides that a party may
appeal an interlocutory order “under the same circumstances that an appeal from a
federal district court’s order or decision would be permitted by 9 U.S.C. Section
16.” Tex. Civ. Prac. & Rem. Code Ann. § 51.016. Under § 16 of the FAA, a party
may immediately appeal the denial of a motion to compel arbitration. See 9 U.S.C.
§ 16(a)(1)(B), (C); Tex. Civ. Prac. & Rem. Code Ann. §§ 51.016, 171.098(a)(1);
see also Taylor Morrison of Tex., Inc. v. Skufca, 650 S.W.3d 660, 672–73 (Tex.
App.—Houston [1st Dist.] 2021, no pet.); In re Helix Energy Sols. Grp., 303
S.W.3d 386, 395 n.7 (Tex. App.—Houston [14th Dist.] 2010, orig. proceeding).
When determining whether an order denies a motion to compel arbitration, our
interlocutory jurisdiction is controlled by the substance and function of the order
viewed in the context of the record. Natgasoline LLC v. Refractory Constr. Servs.,
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Co., 566 S.W.3d 871, 880 (Tex. App.—Houston [14th Dist.] 2007, pet. denied).

Here, the substance of the trial court’s order was to effectively deny PSB’s
motion to compel arbitration of any claims relating to the deeds of trust and
security agreements signed on June 28, 2013, and July 29, 2019. The trial court
acted on PSB’s motion to compel arbitration by granting it in part, and it implicitly
denied it as to the claims related to the deeds of trust and security agreements by
reinstating them on the court’s docket. Accordingly, we conclude that we have
jurisdiction over this interlocutory appeal of the trial court’s order signed
December 27, 2022. See 9 U.S.C. § 16(a)(1)(B); Tex. Civ. Prac. & Rem. Code
Ann. § 51.016.

2. Existence of an Agreement to Arbitrate

Next, we address PSB’s argument that the trial court erred when it denied its
motion to compel arbitration regarding any claims relating to the deeds of trust and
security agreement signed on June 28, 2013, and July 29, 2019.

The trial court implicitly found that there is a valid agreement to arbitrate,
and the trial court denied PSB’s motion to compel arbitration in part based on
appellees’ argument that the arbitration agreement was replaced by the subsequent
non-jury trial provisions contained in the deed of trust and security agreements.

Here, the arbitration agreement provides:

Binding Arbitration. Notwithstanding any provision in any
Documents (defined below) to the contrary, upon the request of, and
at the sole election of, the above named lender, whether made before
or after the institution of any legal proceeding, any action, dispute,
claim or controversy of any kind (for example, whether in contract or
in tort, under statutory or common law, or legal or equitable) now
existing or hereafter arising between or among any of the undersigned
(“collectively called the “parties” and individually called a “party”) in
any way arising out of, pertaining to or in connection with (1) the

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referenced loan, any related agreements, documents, or instruments
(collectively, the “Documents”) or any transaction contemplated
thereby, before or after maturity, or (2) all past, present and future
loans, notes, instruments, guarantees, letters of credit, contracts or
agreements and all other aspects of any past, present, or future
relationships of the parties to the documents shall be resolved by
mandatory and binding arbitration in accordance with the terms of this
Arbitration Program. The occurrence of any of the foregoing matters
shall be referred to as a “Dispute”. At Lender’s sole option, the
Lender may bring by summary proceedings (for example, a plea in
abatement or motion to stay further proceedings) an action in court to
compel arbitration of any Dispute.
(emphasis added). We conclude that a binding agreement to arbitrate between the
parties exists and that the italicized portion above encompasses claims related to
the deeds of trust and security agreements executed on June 28, 2013, and July 29,
2019. See TotalEnergies E&P USA, Inc., 667 S.W.3d at 702.2

3. Novation Defense

Appellees argued at the trial court—and argue on appeal—that the April 26,
2012, agreement to arbitrate was revoked when the parties executed the subsequent
deeds of trust that included the jury waiver provisions.

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On appeal, appellees argue that the April 26, 2012, arbitration agreement was unsigned
by PSB, and thus, it was never binding on the parties. Appellees advanced this argument at the
trial court in response to PSB’s motion to compel arbitration, and the trial court rejected this
argument and implicitly found that the agreement had been executed despite lacking PSB’s
signature because the trial court granted the motion and ordered the parties to arbitrate.
Appellees did not seek review of the trial court’s ruling that a valid arbitration agreement exists
via a petition for writ of mandamus. See Chambers v. O’Quinn, 242 S.W.3d 30, 31–32 (Tex.
2007) (per curiam). (“Because the FAA does not provide for interlocutory appeals from orders
compelling arbitration, we concluded that . . . mandamus was the appropriate remedy.”). Our
interlocutory jurisdiction is limited to the order denying the motion to compel arbitration, which
in this case is the order granting appellees’ motion to set aside the trial court’s order. Thus,
appellees have waived any complaint as to the missing signature. In any event, we note that
“[u]nless parties explicitly require that a party on an arbitration agreement sign the agreement to
manifest the party’s assent thereto, a party may manifest its assent to the arbitration agreement
by its acts, conducts, or acquiescence in the terms of the agreement . . . .” GSC Wholesale, LLC
v. Young, 654 S.W.3d 558, 563 (Tex. App.—Houston [14th Dist.] 2022, pet. denied).

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Parties to an arbitration agreement can agree to modify or supersede their
arbitration agreement. Roehrs v. FSI Holdings, Inc., 246 S.W.3d 796, 808 (Tex.
App.—Dallas 2008, pet. denied); see Zaporozhets v. Ct. Appointed Receiver in
Cause No. 12-DCV-199496, No. 14-14-00143-CV, 2014 WL 5148151, at *2–7
(Tex. App.—Houston [14th Dist.] Oct. 14, 2014, no pet.) (mem. op.); see also
Adcock v. Five Star Rentals/Sales, Inc., No. 04-17-00531-CV, 2018 WL 1831646,
at *2 (Tex. App.—San Antonio Apr. 18, 2018, no pet.) (mem. op.). A novation, or
the substitution of a new agreement, occurs when a contract evinces an intention to
relinquish and extinguish pre-existing claims and rights of action; in lieu of the old
obligation, a party accepts the promise of performance of the new obligation
instead of the performance itself. See N.Y. Party Shuttle, LLC v. Bilello, 414
S.W.3d 206, 214 (Tex. App.—Houston [1st Dist.] 2013, pet. denied); Zaporozhets,
2014 WL 5148151, at *3; see also Fulcrum Cent. v. AutoTester, Inc., 102 S.W.3d
274, 277 (Tex. App.—Dallas 2003, no pet.). The novation contract discharges the
original obligation and only the new obligation may be enforced. N.Y. Party
Shuttle, LLC, 414 S.W.3d at 214; Zaporozhets, 2014 WL 5148151, at *3.

A novation requires (1) a previous, valid obligation; (2) a mutual agreement
of the parties to the acceptance of a new contract; (3) the extinguishment of the old
contract; and (4) the validity of the new contract. Vickery v. Vickery, 999 S.W.2d
342, 356 (Tex. 1999). A court can infer that a new contract is a novation of a
previous contract if the two contracts are so inconsistent with one another that they
cannot subsist together. Zaporozhets, 2014 WL 5148151, at *3; Farkooshi v.
Afisco Int., LLC, No. 14-13-00201-CV, 2014 WL 4161708, at *4 (Tex. App.—
Houston [14th Dist.] Aug. 21, 2014, no pet.) (mem. op.). A novation is never
presumed; the parties’ intent to novate must be clear. Zaporozhets, 2014 WL
5148151, at *3; SecurityComm Grp. v. Brocail, No. 14-09-00295-CV, 2010 WL

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5514333, at *16 (Tex. App.—Houston [14th Dist.] Dec. 28, 2010, pet. denied)
(mem. op.). Whether a new contract operates as a novation of an earlier contract is
usually a question of fact and becomes a question of law only when the state of the
evidence is such that reasonable minds cannot differ as to its effect. Chastain v.
Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 424 (1953); see Allstate Ins. v.
Clarke, 471 S.W.2d 901, 907 (Tex. App.—Houston [1st Dist.] 1971, writ ref’d
n.r.e.); see also In re B.N.L.-B., 523 S.W.3d at 264; In re Bath Junkie Franchise,
Inc., 246 S.W.3d 356, 365 (Tex. App.—Beaumont 2008, orig. proceeding);
Fulcrum, 102 S.W.3d at 278.

Here, the arbitration agreement provided:

Other Matters and Miscellaneous . . . . The provisions of this
Arbitration Program shall survive any termination, amendment, or
expiration of the Documents or the Relationship, unless the parties
otherwise expressly agree in writing. . . . This Arbitration Program
may be amended, changed, or modified only by the express provisions
of a writing which specifically refers to this Arbitration Program and
which is signed by all the parties hereto.
The non-jury trial provisions appellees rely on do not specifically refer to this
arbitration agreement as is required to amend it or modify it. Further, the non-jury
trial provision appellees rely on states:

JURY WAIVER: Every party to this Deed of Trust hereby expressly
waives any right to trial by jury of any claim, demand, action, or cause
of action (a) arising under this Deed of Trust or any other instrument,
document, or agreement executed or delivered in connection herewith;
or (b) in any way connected with or related or incidental to the
dealings of the parties hereto or any of them with respect to this Deed
of Trust or any other instrument, document, or agreement executed or
delivered in connection herewith, or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising and
whether sounding in contract or tort or otherwise; and each party
hereby agrees and consents that any such claim, demand, action, or
cause or action shall be decided by court trial without a jury, and that
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any party to this Deed of Trust may file an original counterpart or a
copy of this section with any court as written evidence of the consent
of the parties hereto to the waiver of their right to trial by jury.
This jury waiver provision is not so inconsistent with the agreement to arbitrate
that the two cannot subsist together. This is because PSB is the only party that can
invoke arbitration, and if PSB does not invoke arbitration, then the waiver of jury
trial applies. Furthermore, there is no evidence of any intent by the parties to
replace the arbitration agreement with the jury waiver provision in the relevant
deeds of trust and security agreements. We conclude that the jury waiver provision
did not replace the parties’ previous arbitration agreement. As noted above, the
arbitration agreement here is broad in scope, and appellees’ only argument at the
trial court and on appeal concerning the scope of the arbitration agreement was that
the jury waiver provisions replaced the arbitration agreement.

We conclude that the trial court erred when it denied PSB’s motion to
arbitrate any claims relating to the deeds of trust and security agreement signed on
June 28, 2013, and July 29, 2019. We sustain PSB’s sole issue.

III. CONCLUSION

We reverse the trial court’s December 27, 2022, order and remand for
further proceedings.

/s/ Margaret “Meg” Poissant
Justice

Panel consists of Chief Justice Christopher and Justices Zimmerer and Poissant.

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