Judge dismisses restraining order against bank
Garland County Circuit Court Judge Marcia Hearnsberger on Monday dismissed a temporary restraining order against Malvern National Bank that had enjoined it from freezing Quapaw House Inc.’s bank accounts.
The order, which was put into place by Judge John Homer Wright on Thursday, had unfrozen Quapaw’s bank accounts so it could pay its health insurance, payroll and payroll taxes, QHI CEO Casey Bright testified during Monday’s hearing.
Bright said during the hearing that QHI “closes its doors if there is no money to fund operations.”
MNB froze QHI’s account at the end of February after they were “legally entitled to enforce the right under the loan contract,” upon finding out QHI owes the IRS more than $1.7 million, MNB attorney Adrienne Baker said in her opening statement. The action resulted in insufficient payroll being issued to QHI employees last month.
QHI Attorney Karen Halbert said in her opening statement that QHI “disclosed its financial conditions to MNB” prior to MNB granting it the loan. As far as QHI issuing insufficient payroll to its employees, she said QHI asked MNB if they could issue payroll prior to the freeze, MNB granted the request, and then “swept the account and continued sweeping it.”
Halbert noted that QHI requested the TRO because it needed funds to continue its operation after MNB “improperly” took its loan back.
During the hearing, Bright said QHI’s audited financial statement from the IRS wasn’t complete prior to applying for the loan at MNB, therefore the information wasn’t provided. However, he added QHI provided “accurate information to MNB prior to obtaining the loans, that MNB requested.”
Bright said he was aware QHI owed money in taxes, but wasn’t banking with MNB at that time. When QHI began banking with MNB, he said he didn’t tell them about the predicament, although it “would have been appropriate” to do so.
With the $1.7 million QHI owed the IRS, Bright said QHI accepted the loan from MNB knowing it wouldn’t clear the incorporation’s debt to the IRS, but because MNB told QHI they were “ready and willing to work with them.”
In her closing statement, Halbert said MNB made the loan knowing the financial status of QHI, and breached its “good faith and fair dealing,” as stated in the loan contract, when freezing the funds.
“The bank came in and said we’re your partner, we’re going to work with you,” she said.
Baker said in her closing statement that the bank was entitled under the loan document to “do what they did.”
According to Thursday’s order granting a motion for the TRO, when determining whether to grant a TRO or preliminary injunction, the court considers whether irreparable harm will result in the absence of an injunction or restraining order.
At the conclusion of Monday’s hearing, which lasted more than three hours, Hearnsberger ruled that QHI’s testimony did not establish “irreparable harm” and dismissed the TRO.