Benefield v. State

• Decision Date: 14 August 2008
• Docket Number: No. 01-07-00970-CV.,01-07-00970-CV.
• Citation: 266 S.W.3d 25
• Parties: Nancy BENEFIELD, Nancy S. McNulty, Naomi Morales, Robert Seton, Ruthie Parker, Susan Berkley, Gloria Reeves, Shirley Buelow, and Angela Breedlove, Appellants, v. The STATE of Texas on Relation of the Alvin Community Health Endeavor, Inc. and Brazoria County, Texas, Appellees.
• Court: Texas Court of Appeals

266 S.W.3d 25

Nancy BENEFIELD, Nancy S. McNulty, Naomi Morales, Robert Seton, Ruthie Parker, Susan Berkley, Gloria Reeves, Shirley Buelow, and Angela Breedlove, Appellants, v. The STATE of Texas on Relation of the Alvin Community Health Endeavor, Inc. and Brazoria County, Texas, Appellees.

No. 01-07-00970-CV.

Court of Appeals of Texas, Houston (1st Dist.).

August 14, 2008.

Rehearing Overruled October 10, 2008.

Amanda L. Sanders Debra L. Bradberry, Bradley M. Bingham, Lisa Gaye Mann, Bingham, Mann, House & Gibson, Houston, TX, Cynthia Lea Jones, Alvin, TX, for Appellants.

Jeri Yenne, Criminal District Attorney, Jim D. Wiginton, Criminal District Attorney, Trey Picard, Assistant District Attorney, Angleton, TX, for Appellees.

Panel consists of Justices TAFT, JENNINGS, and BLAND.

OPINION

JANE BLAND, Justice.

After a conflict developed among the board members of a private, nonprofit community healthcare clinic, Brazoria County, on behalf of the State of Texas, brought a quo warranto proceeding, in which it sought a temporary restraining order and a temporary injunction against the chief executive and certain board members of the nonprofit, and the appointment of a receiver to run the clinic. The trial court granted the temporary restraining order and, in a subsequent hearing, ordered a temporary injunction against the board members from taking further action on behalf of the nonprofit. In addition, the court appointed a receiver to oversee all of its assets and business affairs, relying on Article 1396-7.05(A) of the Revised Civil Statutes. See TEX.REV.CIV. STAT. ANN. art. 1396-7.05(A) (Vernon 2003). The board members appeal the temporary injunction and the order appointing a receiver, contending that the trial court (1) erred in determining that Brazoria County was authorized to bring this quo warranto action against a nonprofit, (2) abused its discretion in ordering a temporary injunction and appointing a receiver, and (3) abused its discretion in admitting documents that were not properly authenticated. We conclude that Brazoria County has failed to show irreparable harm, or any grounds upon which it may impose a receiver to run the nonprofit. We therefore reverse the trial court's orders.

Background

The Alvin Community Health Endeavor ("ACHE"), a nonprofit corporation founded in 1970, provides primary and supplemental healthcare services to community residents who are medically indigent or have limited healthcare provider options. Since its inception, ACHE has operated through various sources of funding, including private donations and donations from charitable organizations. In September 2005, ACHE began to receive federal funding as a Federally Qualified Health Center ("FQHC") to cope with additional medical care needs in Brazoria County in the wake of hurricanes Katrina and Rita. Brazoria County owns the property upon which ACHE's facility is located and leases the land to ACHE pursuant to an agreement that ACHE provide free and low-cost healthcare benefits to Brazoria County residents. The lease agreement recognizes that ACHE had attained FQHC status.

In May 2007, the Health Resources and Services Administration ("HRSA") of the United States Department of Health and Human Services, the federal agency overseeing FQHC funding, conducted an on-site diagnostic review of ACHE after it received complaints about ACHE's then-current chief executive officer, Nancy Benefield. Benefield had served as the chief executive officer since 1994. Based on its review, HRSA concluded that ACHE had failed to comply with various requirements for federal funding, and expressed "significant concerns regarding ACHE's clinical, fiscal and administrative operations as well as its governance." HRSA expressed its findings in a July 19 letter to Nancy McNulty, an ACHE board member. In the letter, HRSA recommended follow-up actions, and stated that if ACHE did not correct the deficiencies HRSA found, as well as comply with various requirements, it would deny ACHE's grant application, resulting in the loss of its federal funding. The letter requested a "Board-approved Corrective Action Plan, with time-framed objectives responsive to the concerns noted," by September 1.

Following the letter, in a series of events that spanned three days in late July, some members of ACHE's board of directors met and voted to terminate Benefield as CEO of ACHE. Then, board member Jerry Smith and others changed the locks at ACHE's clinic facility, issued a criminal trespass citation against Benefield, cancelled ACHE's insurance contracts, pulled the internet cabling out of the walls of ACHE's office, cancelled ACHE's housekeeping contract, and terminated employees of ACHE, all without any formal approval of the board of directors. Finally, certain other members of the board met again in an emergency meeting and voted to restore Benefield as CEO of ACHE.

In response to HRSA's warnings, ACHE hired a healthcare management company, which proposed a Clinic Management and Medical Staffing Agreement to ACHE to resolve the issues that concerned HRSA. Before the September deadline, Benefield sent a corrective action plan to HRSA, describing ACHE's accomplishments and continuing efforts to comply with the federal funding requirements. The healthcare management company also sent a letter to ACHE's board of directors that outlined the progress made and planned future actions that would resolve the problems that HRSA identified in its summary of findings.

Fearful that ACHE stood to lose its federal funding, Brazoria County sued. In October 2007, the trial court granted Brazoria County leave to file "an information in the nature of a quo warranto." The county also applied for a temporary restraining order, a temporary injunction, and the appointment of a receiver over ACHE. In the quo warranto action against Benefield and eight other directors, the county alleges illegal corporate conduct, human resource code violations, and breach of ACHE's lease.

The trial court granted the county's request for a temporary restraining order. Thereafter, the trial court heard the applications for the temporary injunction and appointment of a receiver. The parties presented testimony from ex-board member Gary Goff, board members Nancy McNulty and Nancy Benefield, and Lynda Bible, who manages similar healthcare facilities in neighboring counties. At Brazoria County's request, the trial court also admitted several pieces of correspondence from HRSA. At the conclusion of the hearing, the trial court enjoined ACHE's directors from taking any action whatsoever on behalf of ACHE, except as directed by the receiver, and barred access to all funds, accounts, and real, personal, or mixed property. In addition, it appointed Bible as a receiver for ACHE, and authorized her to conduct all of ACHE's affairs. Benefield and the other board members bring an interlocutory appeal, seeking reversal of the temporary injunction and the appointment of the receiver. See TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(1), (4) (Vernon 2008). Recently, the trial court extended the receivership until November 30, 2008. We granted the board members' motion to consider that order as part of this appeal. See Tex.R.App. P. 29.6 ("While an appeal from an interlocutory order is pending, on a party's motion or on the appellate court's own initiative, the appellate court may review ... a further appealable interlocutory order concerning the same subject matter.").

Appellate Jurisdiction

As an initial matter, Brazoria County contests our jurisdiction over the board members' appeal of Brazoria County's authority to bring a quo warranto proceeding, contending that we lack jurisdiction to consider this argument in an interlocutory appeal. The board members argue that quo warranto proceedings are extraordinary in nature, and are not available to challenge the legality or propriety of board member conduct. See Newsom v. State, 922 S.W.2d 274, 279 (Tex.App.-Austin 1996, writ denied).

Appellate courts have jurisdiction to consider immediate appeals of interlocutory orders only if a statute expressly provides appellate jurisdiction. Stary v. DeBord, 967 S.W.2d 352, 352-53 (Tex. 1998). The Texas Civil Practice and Remedies Code allows for an appeal from an interlocutory order that appoints a receiver or grants a temporary injunction. TEX. CIV. PRAC. & REM.CODE ANN. § 51.014(a)(1), (4) (Vernon 2008) (listing appealable interlocutory orders). An order granting leave to file "an information in the nature of a quo warranto" is not included in the statute affording interlocutory appeals. See id. § 51.014; Eichelberger v. Hayton, 814 S.W.2d 179, 182 (Tex. App.-Houston [1st Dist.] 1991, writ denied). In addition, the record on appeal contains no trial court proceeding or order that could be framed as a plea to the jurisdiction. Texas courts strictly construe statutes authorizing interlocutory appeals. Walker Sand, Inc. v. Baytown Asphalt Materials, Ltd., 95 S.W.3d 511, 514 (Tex.App.-Houston [1st Dist.] 2002, no pet.). An order "granting leave to file an information in the nature of a quo warranto" is neither a final judgment, nor is it an interlocutory order made appealable by statute. Consequently, we lack jurisdiction to review Brazoria County's authority to bring the underlying proceeding, except insofar as it implicates the appeal of the temporary injunction and the appointment of a receiver.

Temporary Injunction

The board members contend that the trial court abused its discretion in ordering a temporary injunction because Brazoria County did not plead and prove the elements required for a temporary injunction.

The purpose of a temporary injunction is to preserve the status quo pending trial, but it is an extraordinary remedy and does not issue as a matter of right. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex.2002). Trial courts have broad discretion in deciding whether to grant or deny a temporary...