Alan Schrock v. Amegy Bank of Texas, N.A., and ZB, N.A. D/B/A Amegy Bank ( 2019 )

Opinion issued December 19, 2019.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-19-00096-CV
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ALAN SCHROCK, Appellant
V.
AMEGY BANK OF TEXAS, N.A., AND ZB, N.A. D/B/A AMEGY BANK,
Appellees
On Appeal from the 113th District Court
Harris County, Texas
Trial Court Case No. 2016-85775
MEMORANDUM OPINION
This is an appeal from the trial court’s summary judgment dismissing Alan
Schrock’s claims against Amegy Bank of Texas, N.A. and ZB, N.A. d/b/a Amegy
Bank (collectively, “Amegy”). After many years of serving as Schrock’s bank,
Amegy began to suspect that Schrock might be structuring his cash deposits to
avoid federal reporting requirements. Amegy notified Schrock of its concerns,
warned him that the continued appearance of structuring could result in the closure
of his accounts, and urged him to contact his account manager to discuss the matter
further. Schrock did not contact his account manager and continued to make the
concerning deposits. As a result, Amegy froze the accounts and sent Schrock
notice that the accounts would be permanently closed in 30 days.
The freeze to Schrock’s accounts disrupted his professional and personal
life, and he sued Amegy for breach of contract and negligence. Both claims were
predicated on Schrock’s contention that Amegy violated the parties’ Deposit
Agreement by freezing his accounts without giving him prior notice. But the
Deposit Agreement expressly permits Amegy to freeze an account before giving
notice when, as here, Amegy suspects fraudulent activity on the account. Because
Amegy had the right to freeze Schrock’s accounts before giving him notice,
Schrock’s claims fail as a matter of law. Therefore, we affirm.
Factual Background
This case arises from Amegy’s decision to freeze and then close the
accounts of one of its longtime depositors, Alan Schrock. Schrock is a landlord
who owns various properties in and around Baytown, Texas. For many years,
Schrock had two bank accounts with Amegy: a checking account and a savings
account. Both accounts were governed by a Deposit Agreement. As relevant here,
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Paragraph 2 granted Amegy the right to close the accounts upon reasonable notice
to Schrock:
We may also close this account at any time upon reasonable notice to
you and tender of the account balance personally, by mail, or by
electronic transfer. Items presented for payment after the account is
closed may be dishonored. Reasonable notice depends on the
circumstances, and in some cases it might be reasonable for us to give
you notice after the change or account closure becomes effective. For
instance, if we suspect fraudulent activity with respect to your
account, or upon any refusal to provide us additional information
requested about you, your account or your transactions, we may
immediately freeze or close your account and then give you notice.
In 2016, Amegy noticed that Schrock was making multiple cash deposits
and grew concerned that Schrock might be structuring his deposits to avoid federal
reporting requirements. To safeguard the financial industry from money laundering
and other financial crime, federal law requires financial institutions to report
currency transactions over $10,000 as well as multiple currency transactions that
aggregate to be over $10,000 in a single day. Federal law makes it a crime to
structure transactions for the purpose of evading these reporting requirements.
Amegy sent Schrock a letter, dated March 2, 2016, notifying him that his
cash deposits potentially violated federal reporting requirements. The letter began
by explaining Amegy’s currency transaction reporting obligations under federal
law and Amegy’s obligation to ensure that cash transactions with the bank are not
structured to avoid reporting requirements:
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As part of the Bank Secrecy Act (BSA) of 1970, Amegy Bank and
other U.S. financial institutions are required to assist government
agencies in detecting and preventing money laundering. Legally,
Amegy Bank must keep records of large customer cash transactions,
presently amounts in excess of $10,000,00, and must monitor all cash
transactions to ensure they are not purposely “structured” in amounts
less than $10,000.00 to avoid the reporting requirements.
The letter asked Schrock to conduct his “cash transactions in a manner that
will avoid future conflicts with BSA reporting requirements.” The letter warned
that future conflicts with reporting requirements could result in Amegy closing his
account. And the letter urged Schrock to contact his account relationship manager,
Crystal Stevenson, to discuss the requirements as they related to Schrock’s banking
activity.
After he received the letter, Schrock contacted his local branch customer
service representative, Augustine St. Romain, who told Schrock that he “had
nothing to worry about because the bank sends out these types of letters all the
time.” However, Schrock did not contact Stevenson, and he continued to make
multiple cash deposits.
Nearly five months later, Amegy sent Schrock a second letter, dated July 26,
2016, and titled “Second Notification,” notifying him once again that his cash
deposits potentially violated federal reporting requirements. The letter asked
Schrock to “consider conducting [his] cash transactions in a manner that will avoid
any future conflicts with [the] reporting requirements.” The letter warned that
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continued conflicts, including “the appearance of ‘structuring’,” could result in the
closure of Schrock’s accounts. And the letter urged Schrock to visit his local
branch or contact Stevenson to learn more about the various options available for
his cash transactions.
As before, after he received the second letter, Schrock contacted St. Romain,
who told Schrock that he “must be doing something wrong with [his] cash
transactions” but “could not give [him] any specifics as to what [he] was doing
wrong or how [he] could avoid [his] account being closed.” Schrock did not
contact Stevenson. Nor did Schrock otherwise attempt to explain to Amegy that he
was a landlord and that his multiple cash deposits were rental income from his
various tenants.
Due to Schrock’s continued problematic cash deposits and his failure to
contact Stevenson, Amegy decided to close his accounts. On November 14, 2016,
Amegy froze Schrock’s checking and savings accounts. A letter notifying Schrock
of Amegy’s decision was mailed to Schrock’s home address that same day. The
letter stated that Amegy would wait 30 days until December 24, 2016, to close the
accounts and instructed Schrock to immediately stop writing checks against the
account and stop using his checking account debit card.
The same day this letter was sent, Schrock tried to conduct an ATM
transaction using his checking account debit card. But because Amegy had already
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deactivated the card, Schrock was unable to complete the transaction. Schrock
went to his local Amegy branch to inquire about the matter. There, he met with
Stevenson, who gave him a copy of the letter informing him of the account closure.
The next day, Schrock closed his savings account with Amegy. A day or two
later he opened an account at Woodforest Bank. Amegy closed Schrock’s checking
account on December 14, 2016, the same day Schrock filed this lawsuit and 10
days earlier than the date specified in the letter. All money remaining in the
account was returned to Schrock.
Procedural History
Schrock sued Amegy for breach of contract, alleging that Amegy breached
the parties’ Deposit Agreement “by failing to give reasonable notice before
preventing [Schrock] from using his accounts and by rejecting checks and
automatic payments when there were sufficient funds in the account to cover the
payments.” Schrock also sued Amegy for negligence, arguing that Amegy’s
breaches of the Deposit Agreement also gave rise to tort liability because Amegy
had a duty to exercise reasonable care in performing under the Deposit Agreement.
Amegy moved for summary judgment, arguing, among other things, that
Schrock’s claims fail as a matter of law because Paragraph 2 of the Deposit
Agreement granted Amegy the right to freeze Schrock’s accounts before providing
him notice that the freeze was in effect. Amegy supported its motion with various
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exhibits, including (1) the Deposit Agreement, (2) the three letters that Amegy sent
to Schrock, (3) an affidavit from Stevenson, and (4) excerpts from Schrock’s
deposition.
After a hearing, the trial court granted Amegy’s motion without stating the
grounds for its ruling and dismissed Schrock’s claims.
Schrock appeals.
Summary Judgment
Because it is dispositive, we begin with Schrock’s second issue, in which he
contends that the trial court erred to the extent it granted summary judgment based
on Amegy’s argument that its conduct complied with the Deposit Agreement.
A. Standard of review
We review a trial court’s grant of summary judgment de novo. Shawn
Ibrahim, Inc. v. Houston-Galveston Area Local Dev. Corp., 582 S.W.3d 753, 763
(Tex. App.—Houston [1st Dist.] 2019, no pet.). To prevail on a traditional
summary judgment motion, the movant must show that no genuine issue of
material fact exists and that it is entitled to judgment as a matter of law. TEX. R.
CIV. P. 166a(c); Shawn Ibrahim, Inc., 582 S.W.3d at 763. When a defendant moves
for traditional summary judgment, it must either (1) disprove at least one essential
element of the plaintiff’s cause of action or (2) plead and conclusively establish
each essential element of an affirmative defense, thereby defeating the plaintiff’s
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cause of action. Shawn Ibrahim, Inc., 582 S.W.3d at 763. If the movant carries this
burden, the burden shifts to the nonmovant to raise a genuine issue of material fact.
Id.
We review the evidence presented in the light most favorable to the
nonmovant, crediting favorable evidence if reasonable jurors could and
disregarding contrary evidence unless reasonable jurors could not. Id. We indulge
every reasonable inference and resolve any doubts in the nonmovant’s favor. Id.
When, as here, the trial court’s summary judgment does not state the basis for the
court’s decision, we must uphold the judgment if any of the theories advanced in
the motion are meritorious. Donaldson v. Texas Dep’t of Aging & Disability Servs.,
495 S.W.3d 421, 432 (Tex. App.—Houston [1st Dist.] 2016, pet. denied).
B. Analysis
In his petition, Schrock asserted claims for breach of contract and
negligence.1 Each claim was predicated on the same alleged misconduct: Amegy’s
failure to provide “reasonable notice” of its decision to close Schrock’s accounts as
required by Paragraph 2 of the Deposit Agreement. Thus, if Amegy proved that it
complied with Paragraph 2, then Amegy conclusively negated an essential element
of each of Schrock’s claims: breach of a duty. See Primoris Energy Servs. Corp. v.
1
We note that Schrock also asserted a claim for gross negligence, which is not
separable from a claim for negligence. See First Assembly of God, Inc. v. Tex.
Utils. Elec. Co., 52 S.W.3d 482, 494 (Tex. App.—Dallas 2001, no pet.) (“[O]ne’s
conduct cannot be grossly negligent without being negligent.”).
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Myers, 569 S.W.3d 745, 755 (Tex. App.—Houston [1st Dist.] 2018, no pet.)
(elements of negligence claim include breach of legal duty); Garcia v. Sasson, 516
S.W.3d 585, 592 (Tex. App.—Houston [1st Dist.] 2017, no pet.) (elements of
breach-of-contract claim include breach of contractual duty).
We begin with Paragraph 2’s text. BankDirect Capital Fin., LLC v. Plasma
Fab, LLC, 519 S.W.3d 76, 86 (Tex. 2017) (“The text is the alpha and the omega of
the interpretive process.”). Paragraph 2 provides, in relevant part:
We may also close this account at any time upon reasonable notice to
you and tender of the account balance personally, by mail, or by
electronic transfer. Items presented for payment after the account is
closed may be dishonored. Reasonable notice depends on the
circumstances, and in some cases it might be reasonable for us to give
you notice after the change or account closure becomes effective. For
instance, if we suspect fraudulent activity with respect to your
account, or upon any refusal to provide us additional information
requested about you, your account or your transactions, we may
immediately freeze or close your account and then give you notice.
For present purposes, Paragraph 2 contains three key provisions. The first
states: “We may also close this account at any time upon reasonable notice to you .
. . .” This provision grants Amegy a right—the right to close Schrock’s accounts
“at any time.” But it also imposes a duty—the duty to provide Schrock “reasonable
notice” in the event it decides to do so. And the use of the preposition “upon”
suggests that Amegy must fulfill the duty before exercising the right—that is, that
Amegy must provide notice before (and not after) it closes the accounts. The
second provision, however, clarifies that post-cancellation notice is reasonable in
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at least some circumstances: “Reasonable notice depends on the circumstances,
and in some cases it might be reasonable for us to give you notice after the change
or account closure becomes effective.” The third provision, most critically,
provides an example of when post-cancellation notice is reasonable: “For instance,
if we suspect fraudulent activity with respect to your account . . . we may
immediately freeze or close your account and then give you notice.”
Thus, under Paragraph 2 of the Deposit Agreement, if Amegy suspected
fraudulent activity on Schrock’s accounts, Amegy could immediately freeze or
close the accounts before giving Schrock notice—which is exactly what Amegy
did here. Schrock nevertheless argues that whether Amegy provided “reasonable
notice” is a material fact issue precluding summary judgment because Amegy
presented no evidence that it ever suspected fraudulent activity on Schrock’s
account. We disagree.
First, there were the multiple cash deposits made to Schrock’s checking
account, which were indicative of structuring and could therefore give rise to a
reasonable suspicion of fraudulent activity. Second, there were Amegy’s letters,
dated March 2 and July 26, 2016, respectively, which warned Schrock that his cash
transactions were potentially in conflict with federal reporting requirements and
that continued potential conflicts, including “the appearance of ‘structuring’,”
could result in the closure of his accounts. Third, there was Schrock’s deposition,
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in which he admitted that he knew from the letters that Amegy believed there was
an “issue” with his accounts; that he knew Amegy might close his accounts if the
issue was not resolved; that he nevertheless continued to make multiple cash
deposits after receiving the letters; and that never tried to explain to Amegy that
“all these daily cash deposits were rental income” because he did not think that
was “any of [Amegy’s] business.” Considered together, these three pieces of
evidence reflect that Amegy suspected fraudulent activity on Schrock’s accounts—
and that Schrock was aware of Amegy’s concerns yet did nothing to assuage them.
We hold that the evidence shows that Amegy “suspect[ed] fraudulent
activity with respect to [Schrock’s] account[s]” and that Amegy therefore had the
right under Paragraph 2 of the Deposit Agreement to “immediately freeze or close
[the] account[s] and then give [him] notice.” Because Amegy had the right to
freeze or close the accounts before giving Schrock notice, Amegy did not breach
the Deposit Agreement as a matter of law. Because Schrock’s claims were
predicated on Amegy’s alleged breach, both claims fail as a matter of law.
Accordingly, we overrule Schrock’s second issue.2
2
Because our resolution of Schrock’s second issue is dispositive, we do not reach
his first or third issues, in which he contends that the trial court erred to the extent
it granted summary judgment on the other grounds advanced in Amegy’s motion.
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Conclusion
We affirm the trial court’s judgment.
Gordon Goodman
Justice
Panel consists of Justices Keyes, Goodman, and Countiss.
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