Cumberland Surgical Hospital of San Antonio, LLC PSN Affiliates, LLC- North Loop Series v. CCA Financial, LLC ( 2019 )

Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
No. 04-19-00354-CV
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
Opinion by: Sandee Bryan Marion, Chief Justice
Sitting: Sandee Bryan Marion, Chief Justice
Irene Rios, Justice
Liza A. Rodriguez, Justice
Delivered and Filed: December 4, 2019
AFFIRMED
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.
04-19-00354-CV
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
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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.
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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 the Collateral Equipment as the collateral.
On April 25, 2019, the attorney representing Cumberland and PSN sent a letter to the trial
court’s staff attorney enclosing a proposed order on the motion to vacate. By letter dated May 3,
2019, the staff attorney responded to the attorney’s letter advising that the proposed order had not
been signed “because Bexar County District Judges do not rule on submission on such matters.”
The attorney was also advised he would “need to schedule a hearing with the Presiding Court and
make a personal appearance” and was further advised about the procedure he would need to follow
to schedule a hearing. Because the attorney never scheduled a hearing, the motion to vacate was
overruled by operation of law, and this appeal ensued.
UEFJA AND STANDARD OF REVIEW
“[A] judgment creditor may enforce a foreign judgment under the UEFJA as provided in
Chapter 35 of the Texas Civil Practice and Remedies Code.” Counsel Fin. Servs., L.L.C. v. David
McQuade Leibowitz, P.C., 311 S.W.3d 45, 50 (Tex. App.—San Antonio 2010, pet. denied) (citing
TEX. CIV. PRAC. & REM. CODE ANN. §§ 35.001–35.008). Under the UEFJA, “the filing of a foreign
judgment is in the ‘nature of both a plaintiff’s original petition and a final judgment: the filing
initiates the enforcement proceeding, but it also instantly creates a Texas judgment that is
enforceable.’” Counsel Fin. Servs., L.L.C., 311 S.W.3d at 50 (quoting Moncrief v. Harvey, 805
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S.W.2d 20, 22 (Tex. App.—Dallas 1991, no writ)). A foreign judgment filed under the UEFJA
“has the same effect and is subject to the same procedures, defenses, and proceedings for
reopening, vacating, staying, enforcing, or satisfying a judgment as a judgment of the court in
which it is filed.” TEX. CIV. PRAC. & REM. CODE ANN. § 35.003(c).
“Under the UEFJA, the party seeking to enforce a foreign judgment has the initial burden
to present a judgment that appears on its face to be a final, valid, and subsisting judgment.”
Counsel Fin. Servs., L.L.C., 311 S.W.3d at 51. “When a judgment creditor files an authenticated
copy of a foreign judgment, he satisfies his burden of presenting a prima facie case for enforcement
under the UEFJA, and the burden of establishing why the judgment should not be given full faith
and credit shifts to the judgment debtor.” Clamon v. DeLong, 477 S.W.3d 823, 825–26 (Tex.
App.—Fort Worth 2015, no pet.). To meet its burden, the judgment debtor must “prove by clear
and convincing evidence that the foreign judgment should not be given full faith and credit.”
Counsel Fin. Servs., L.L.C., 311 S.W.3d at 51. “There are five well-established exceptions to full
faith and credit requirements: (1) the foreign judgment is interlocutory; (2) the foreign judgment
is subject to modification under the law of the rendering state; (3) the rendering state court lacked
jurisdiction; (4) the foreign judgment was procured by extrinsic fraud; and (5) pursuant to section
35.003(c) of the Texas Civil Practice and Remedies Code, the period of time to file the foreign
judgment had expired.” Id. In their motion to vacate, Cumberland and PSN relied on the third
exception, arguing the Virginia court lacked jurisdiction because Capital Partners and UMB were
not parties to the Virginia lawsuit. 1
1
Although Cumberland and PSN consented to the entry of the Consent Judgment, jurisdiction “may not be conferred
upon a court by the consent of the parties.” Rogers v. Damron, 479 S.E.2d 540, 541 (Va. Ct. App. 1997); see also
Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71, 76 (Tex. 2000) (noting jurisdiction “cannot be conferred upon any court
by consent or waiver”) (internal quotation marks omitted).
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“We review a trial court’s order on a motion contesting a foreign judgment’s enforcement
for an abuse of discretion.” Jahan Tigh v. De Lage Landen Fin. Servs., 545 S.W.3d 714, 723 (Tex.
App.—Fort Worth 2018, no pet.). Because CCA met its burden of presenting a prima facie case
for enforcement under the UEFJA by filing an authenticated copy of the Consent Judgment, “[w]e
apply the abuse-of-discretion standard recognizing that the law required the trial court to give full
faith and credit to the [Consent Judgment] unless [Cumberland and PSN] established an exception
by clear and convincing evidence.” Id. “Determining whether a judgment debtor established an
exception generally involves a factual inquiry, not resolution of a question of law.” Id. “But the
trial court has no discretion in applying the law to the established facts.” Id.
FAILURE TO SET HEARING
Before we can address whether Cumberland and PSN met their burden to establish by clear
and convincing evidence that the Virginia court lacked jurisdiction to enter the Consent Judgment,
we first must address the effect of their failure to set the motion to vacate for a hearing.
Because Cumberland and PSN had the burden to establish the exception to the full faith
and credit requirement by clear and convincing evidence, requiring evidence to be heard by the
trial court, they were required to obtain a hearing on their motion to vacate to preserve their
complaint for appellate review. See Tyhan, Inc. v. Cintas Corp. No. 2, No. 01-18-00027-CV, 2018
WL 5539419, at *1–2 (Tex. App.—Houston [1st Dist.] Oct. 30, 2018, no pet.) (mem. op.). Despite
being advised that the motion was required to be set for a hearing and being advised regarding the
procedure to follow, Cumberland and PSN never set the motion for a hearing. “[W]hen ‘a movant
for new trial from a default judgment makes no effort to have [its] motion set for a hearing or
otherwise to draw the trial court’s attention to [its] motion, and the movant allows the motion to
be overruled by operation of law, the trial court does not abuse its discretion in permitting [its]
motion to be overruled by operation of law.” R & G Transp., Inc. v. Fleetmatics, No. 01-14-00891-
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CV, 2016 WL 268553, at *2 (Tex. App.—Houston [1st Dist.] Jan. 21, 2016, no pet.) (mem. op.)
(alterations in the original) (quoting James v. Comm’n for Lawyer Discipline, 310 S.W.3d 586,
593–94 (Tex. App.—Dallas 2010, no pet.)). “This is because when a motion for new trial requires
the exercise of discretion, a trial court must be afforded the opportunity to exercise that discretion
before a court of appeals may hold that it was abused.” Id.; see also Shamrock Roofing Supply,
Inc. v. Mercantile Nat’l Bank at Dall., 703 S.W.2d 356, 358 (Tex. App.—Dallas 1985, no writ)
(explaining “[t]rial judges have a heavy load of trials and contested motions,” “cannot be expected
to examine sua sponte all papers filed in their courts,” and “must rely on counsel to see that motions
are set for hearing”). Accordingly, because Cumberland and PSN failed to set their motion to
vacate for a hearing, the trial court did not abuse its discretion in allowing the motion to be
overruled by operation of law.
CONCLUSION
The judgment of the trial court is affirmed.
Sandee Bryan Marion, Chief Justice
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