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Cumberland Surgical Hospital of San Antonio, LLC v. CCA Financial, LLC

Court of Appeals of Texas, Fourth District, San Antonio

December 4, 2019

CUMBERLAND SURGICAL HOSPITAL OF SAN ANTONIO, LLC and PSN Affiliates, LLC - North Loop Series, Appellants
v.
CCA FINANCIAL, LLC, Appellee

          From the 45th Judicial District Court, Bexar County, Texas Trial Court No. 2019CI03676 Honorable Mary Lou Alvarez, Judge Presiding

          Sitting: Sandee Bryan Marion, Chief Justice Irene Rios, Justice Liza A. Rodriguez, Justice

          MEMORANDUM OPINION

          SANDEE BRYAN MARION, CHIEF JUSTICE

         Cumberland Surgical Hospital of San Antonio, LLC ("Cumberland") and PSN Affiliates, LLC - North Loop Series ("PSN") appeal the trial court's failure to rule on their motion to vacate a foreign judgment asserting the trial court abused its discretion in allowing the motion to be overruled by operation of law. We affirm the trial court's judgment.

         Background

         On September 15, 2015, Cumberland and CCA Financial, LLC ("CCA") entered into a Master Lease Agreement pursuant to which CCA agreed to lease Cumberland certain equipment. On September 29, 2015, Cumberland and CCA entered into a Security Agreement pursuant to which Cumberland granted CCA a security interest in the equipment listed on an exhibit to the Security Agreement to secure the rental payments Cumberland would owe to CCA under the Master Lease Agreement. In the Security Agreement, Cumberland represented and warranted that it owned the equipment listed on the exhibit free and clear of all liens, security interests, and claims.

         On November 2, 2018, CCA sent Cumberland a notice of default and demand asserting Cumberland had failed to make timely rental payments for January 2018 through October 2018. The notice referred to the equipment rented to Cumberland under the terms of the Master Lease Agreement as listed on two equipment schedules signed by the parties (the "Leased Equipment"). The notice also contained an exhibit listing the equipment in which CCA had a security interest under the terms of the Security Agreement (the "Collateral Equipment"). The notice demanded payment in full of the past-due rental payments and the return of the Leased Equipment. The notice also demanded that Cumberland "immediately assemble the Collateral Equipment and make it available to CCA."

         On November 26, 2018, CCA filed a complaint against Cumberland in a Virginia court. The complaint sought damages for Cumberland's breach of its obligations under the Master Lease Agreement. The complaint also sought a "judgment in detinue" granting CCA "the right to take possession of, and compelling Cumberland to surrender, the Leased Equipment and the Collateral [Equipment]."

         On February 6, 2019, the Virginia court entered a Consent Final Judgment and Detinue Order ("Consent Judgment") against Cumberland and PSN. The Consent Judgment recites that Cumberland and PSN consented to the requested relief, and the Consent Judgment is signed as "Seen and agreed" by a representative of Cumberland and PSN. The Consent Judgment awards CCA $569, 835.53 in damages and orders Cumberland and PSN to tender to CCA the equipment listed and identified on an exhibit to the Consent Judgment (the "Listed Equipment"). The Listed Equipment includes the Leased Equipment and the Collateral Equipment. The Consent Judgment further provides Cumberland and PSN would be entitled to a credit against the judgment for the net proceeds, if any, from the sale of the Listed Equipment.

         On February 25, 2019, CCA filed a notice of foreign judgment in the underlying cause in Bexar County, Texas pursuant to section 35.003 of the Uniform Enforcement of Foreign Judgments Act ("UEFJA"). See Tex. Civ. Prac. & Rem. Code Ann. § 35.003. On March 27, 2019, Cumberland and PSN filed a motion to vacate or stay enforcement of the Consent Judgment.

         In their motion to vacate, Cumberland and PSN alleged the Collateral Equipment is owned by Capital Partners Financial Group USA, Inc. ("Capital Partners") and was pledged by Capital Partners to secure a loan from UMB Bank, N.A. ("UMB"). The motion asserted the Consent Judgment is void because neither Capital Partners nor UMB were parties to the Virginia lawsuit; therefore, the Virginia court did not have jurisdiction to enter the judgment "giving Plaintiff ownership of Capital Partners' property." The motion further asserted the trial court could not enforce the Consent Judgment in the underlying cause because neither Capital Partners nor UMB are listed as parties in CCA's notice of foreign judgment.

         Cumberland and PSN attached to their motion a declaration pursuant to section 132.001 of the Texas Civil Practice and Remedies Code signed by Ryan King, PSN's chief financial officer since January 2019. In the declaration, King stated PSN purchased a controlling interest in Cumberland in October 2018, and PSN provides management and administrative services to Cumberland. King also stated Cumberland leased the Collateral Equipment from Capital Partners, and Capital Partners later assigned the lease to UMB. King finally stated PSN and Cumberland's current management did not discover the Collateral Equipment was owned by UMB until CCA threatened to take possession of the Collateral Equipment.

         Cumberland and PSN also attached to their motion two UCC financing statements filed by Capital Partners on September 15, 2015, listing the collateral as "[a]ll equipment and inventory of Debtor [Cumberland] financed by Secured Party [Capital Partners] wherever located, and now owned or hereafter acquired." One of the UCC financing statements had a 215-page list of equipment attached to it. The list stated it was "[a]ttach[ed] to and a part of the lease agreement between" Capital Partners as lessor and Cumberland as lessee.

         The final attachment to Cumberland and PSN's motion is a UCC financing statement filed by CCA on October 15, 2015, listing ...


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