Tenet Health Sys. Hosps. Dall., Inc. v. N. Tex. Hosp. Physicians Grp., P.A.

• Decision Date: 30 July 2014
• Docket Number: No. 05–12–01719–CV.,05–12–01719–CV.
• Parties: TENET HEALTH SYSTEMS HOSPITALS DALLAS, INC., Appellant v. NORTH TEXAS HOSPITAL PHYSICIANS GROUP, P.A., Appellee.
• Court: Texas Court of Appeals

438 S.W.3d 190

TENET HEALTH SYSTEMS HOSPITALS DALLAS, INC., Appellant

v.NORTH TEXAS HOSPITAL PHYSICIANS GROUP, P.A., Appellee.

No. 05–12–01719–CV.

Court of Appeals of Texas,

Dallas.

July 30, 2014.

Blair Grant Francis, Joe Don Ridgell, Bobby Amick, Dallas, for Appellant.

Jay Madrid, Kristen Lee Sherwin, Dallas, for Appellee.

Before Justices MOSELEY, O'NEILL, and FITZGERALD.

OPINION

Opinion by Justice FITZGERALD.

This appeal follows cross-motions for summary judgment in a post-judgment garnishment action. Tenet Health Systems Hospitals Dallas, Inc. (the “Hospital”) named North Texas Physicians Group, P.A. (“New Co.”) as garnishee in an application for writ of garnishment seeking to recover on a judgment owed by North Texas Medical Group, P.A. (“MG”). The trial court granted summary judgment in favor of New Co. and entered a final judgment that the Hospital take nothing. In three issues on appeal, the Hospital asserts the trial court erred in denying its motion for summary judgment and granting New Co.'s motion. For the reason that follow, we conclude the trial court's judgment was in error. We reverse the trial court's judgment and render judgment that Tenet Health Systems Hospitals Dallas, Inc. recover $164,024.82 from North Texas Hospital Physicians Group, P.A.

BACKGROUND

Scott Yates, M.D., is the sole member, officer, and director of MG, the judgment debtor. Effective January 27, 2004, MG owned a leasehold estate as a tenant under a lease (the “Lease”). Initially, Cambridge–Plano Partners MOB IV, L.P. (“Cambridge”) was the landlord under the Lease, but effective January 31, 2012, Cambridge sold and assigned its interest under the Lease to HCRI Plano Medical Facility, LLC. (“HCRI”) (HCRI or Cambridge, “Landlord”). The leased premises consist of approximately 7,000 square feet of office space located in Plano, Texas (the “Premises”). Yates guaranteed MG's performance under the Lease.

On June 20, 2006, the Hospital obtained a final judgment against MG in the amount of $616,969.89, with costs and post-judgment interest (the “Judgment”). Effective June 1, 2006, twenty days before the Judgment was entered, MG subleased the Premises to New Co. (“the Sublease”). Yates is also the sole member, officer, and director of New Co. The term of the Sublease was the remaining term of the Lease. The amount of rent payable by New Co. as sublessee is equal to the amount of rent payable by MG under the Lease. Yates signed the Sublease as president on behalf of both MG and New Co.

On September 12, 2008, the Hospital filed its application for a writ of garnishment in the 193rd District Court of Dallas County, the same court that issued the Judgment. The application referred to the Hospital's Judgment against MG for $616,969.89, and stated that the Judgment remained unsatisfied. The application further asserted that New Co., the garnishee, was indebted to MG, the judgment debtor, because New Co. owed rent to MG under the Sublease. The writ of garnishment was issued on September 15, 2008, and served on New Co. on September 19, 2008.

New Co. filed an answer on October 13, 2008. The answer included both a general denial and a specific denial which stated, “[New Co.] specifically denies that it owes rents to [MG] or that it has property and effects of [MG], except to the limited extent previously testified to by [Yates].” The Hospital specially excepted and filed a traversal of New Co.'s answer.¹ On February 23, 2009, the trial judge signed an agreed order of transfer, and the case was transferred to Collin County.²

Following the transfer to Collin County, the Hospital filed a supplement to the application for writ of garnishment and added a request for turnover relief from New Co. The Hospital also filed an amended application for turnover and request for the appointment of a receiver in the 193rd District Court in Dallas County (the “Receivership Action”). The Dallas County court denied the requested relief (the “Dallas County Order”).

New Co. moved for a traditional summary judgment and asserted that New Co. was not indebted to MG. New Co.'s argument was premised on the assertion that the Sublease is unenforceable because it was not approved by the Landlord, and it therefore creates no indebtedness from New Co. to MG. New Co. further asserted that the Landlord had a superior right to rent.

The Hospital also moved for a traditional summary judgment. The motion asserted that the summary judgment evidence conclusively established New Co.'s indebtedness to MG on September 19, 2008, the date the writ was served, and the amount of such indebtedness, $164,024.82. In response to New Co.'s motion, the Hospital argued that the Sublease is enforceable as between New Co. and MG and, as a matter of law, created indebtedness owing by New Co. to MG. The Hospital also argued that the Landlord had no right, much less a right superior to the Hospital's, to impound the debt New Co. owes MG.

In response to the Hospital's motion, New Co. re-urged its previous arguments concerning the Sublease, the Lease, and the Landlord's superior right to rent. The response further asserted that the Hospital was collaterally estopped from asserting its garnishment claim.

The Hospital objected to New Co.'s summary judgment evidence. The objections included, inter alia, an objection that New Co.'s summary judgment evidence attempted to prove payment, an affirmative defense that had not been pled. The trial court denied the objections in their entirety.

The trial court granted New Co.'s motion for summary judgment and denied the Hospital's motion. The Hospital subsequently non suited its turnover claim. Following the Hospital's motion for new trial and reconsideration of the summary judgment issues, the trial court ultimately entered a final judgment that the Hospital take nothing on its garnishment claim. The Hospital timely perfected this appeal.

STANDARD OF REVIEW

Both parties moved for a traditional motion for summary judgment. In a traditional motion for summary judgment, the movant carries the burden of showing that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. SeeTex.R. Civ. P. 166a(c); Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex.2002). An appellate court reviews de novo the grant or denial of a motion for summary judgment. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex.2009). When, as here, the parties file cross-motions for summary judgment on overlapping issues, and the trial court grants one motion and denies the other, we review the summary judgment evidence supporting both motions and “render the judgment that the trial court should have rendered.” FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.2000).

ANALYSIS

The Hospital challenges the trial court's judgment that it take nothing on its garnishment claim. “Garnishment is a statutory proceeding whereby the property, money, or credits of a debtor in the possession of another are applied to the payment of the debt.” Bank One, Tex., N.A. v. Sunbelt Sav., F.S.B., 824 S.W.2d 557, 558 (Tex.1992) (per curiam). The garnishee is a third party who owes a debt to or holds property of the debtor. The plaintiff or garnishor is a creditor of the debtor and requests the court to issue the writ of garnishment to the garnishee. Tex. Civ. Prac. & Rem.Code Ann. §§ 63.001–.008 (West 2008); Tex.R. Civ. P. 657–79; Thompson v. Harco Nat'l Ins. Co., 997 S.W.2d 607, 611 (Tex.App.-Dallas 1998, pet. denied), overruled in part on other grounds by John v. Marshall Health Servs., Inc., 58 S.W.3d 738, 741 (Tex.2001) (per curiam).

“The only real issue in a garnishment action is whether the garnishee is indebted to the judgment debtor, or has in its possession effects belonging to the debtor, at the time of service of the writ on the garnishee, and at the time the garnishee files its answer.” Baytown State Bank v. Nimmons, 904 S.W.2d 902, 905 (Tex.App.-Houston [1st Dist.] 1995, writ denied). The burden is on the garnishor to establish the amount of the debt owed to the debtor or the value of the property held by the garnishee. Nat'l City Bank v. Tex. Cap. Bank, 353 S.W.3d 581, 585 (Tex.App.-Dallas 2011, no pet.). “If the garnishor's proof fails, he can of course recover nothing.” Putman & Putman, Inc. v. Capitol Warehouse, Inc., 775 S.W.2d 460, 463 (Tex.App.-Austin 1989, writ denied).

The timing of both service of a writ of garnishment and the garnishee's answer date govern the identity of funds trapped. See First Nat'l Bank in Dallas v. Banco Longoria, S.A., 356 S.W.2d 192, 195–96 (Tex.Civ.App.-San Antonio 1962, writ ref'd n.r.e.). Specifically, a writ of garnishment impounds funds in the hands of the garnishee at the time the writ is served through the date garnishee is required to answer. Id.

The crux of the issue before us is whether New Co., the garnishee, was indebted to MG, the judgment debtor, at the time the writ was served. SeeTex.R. Civ. P. 668. The Hospital argues the summary judgment in favor of New Co. cannot be upheld on any of the four grounds New Co. presented in the court below. New Co. responds that there was no indebtedness because there was a novation, the Landlord had a superior right to rentals due under the Sublease, and the indebtedness was discharged. New Co. further argues that even if there was an indebtedness, the Hospital is collaterally estopped to pursue the instant case, there is a fact question as to the amount of the debt New Co. was entitled to offset, and the amount of the offset exceeds the amount the Hospital seeks to recover. We begin our inquiry by considering whether the Sublease created an indebtedness from New Co. to MG.

Did the Sublease Create New Co. Indebtedness to MG?

Underlying the question of whether the Sublease created an indebtedness is the question of the enforceability of the Sublease. ³ In the court below, New Co. argued the Sublease was...