Bancorpsouth Bank v. Shields
2011 Ark. 503
| Ark. | 2011Background
- Bancorp-South Bank sued Shields over a premium-fund account owned by State Farm opened in 1982 at First National Bank.
- The account was used to deposit insurance premiums and then swept to State Farm accounts out-of-state.
- Billie Oliver diverted funds from the premium-fund account starting in 2008, using deposited funds for personal use and falsifying deposits.
- Overdrafts occurred; Shields alleges Oliver intercepted overdraft notices and Shields suffered substantial losses.
- Shields alleged Bancorp negligence for failing to notify him of overdrafts; Bancorp claimed arbitration under a contract and asserted a counterclaim against Shields and a third-party claim against Oliver.
- The circuit court denied Bancorp’s motion to compel arbitration, ruling the 2005 arbitration clause was unenforceable because it modified the account terms without the owner’s (State Farm’s) consent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AUAA or FAA governs arbitration | Shields. | Bancorp. | AUAA governs; FAA not applicable. |
| Whether the 2005 arbitration clause is enforceable | 2005 clause valid and arbitration binding. | Owner State Farm did not consent to modification. | Modification unenforceable; 2005 clause not binding. |
| Whether the dispute is subject to arbitration given contractor/owner status | Claims subject to arbitration under 2005 agreement. | Arbitration clause invalid due to lack of consent by account owner. | Arbitration not compelled; claims not subject to 2005 arbitration clause. |
Key Cases Cited
- Asbury Auto. Used Car Ctr., L.L.C. v. Brosh, 364 Ark. 386 (Ark. 2005) (appeals court reviews arbitration orders de novo; contract interpretation governs arbitration)
- Tyson Foods, Inc. v. Archer, 356 Ark. 136 (Ark. 2004) (arbitration as a matter of contract; standard of review for arbitration agreements)
- City of Dardanelle v. City of Russellville, 372 Ark. 486 (Ark. 2008) (elements of contract modification; mutual assent required to modify contracts)
- Van Camp v. Van Camp, 333 Ark. 320 (Ark. 1998) (modification of contract requires mutual assent; ownership rights govern modification)
- City of Lamar v. City of Clarksville, 314 Ark. 413 (Ark. 1993) (contract modification requires mutual consent of parties)
- Reeve v. Carroll County, 373 Ark. 584 (Ark. 2008) (court will not raise arguments for a party or address sua sponte issues absent jurisdictional needs)