In Re North Cypress Medical Center Operating Company, Ltd
(Tex.App.- Houston [14th Dist.] Aug. 4, 2009)(Sullivan)(mandamus granted directing trial court to vacate
order requiring funds to be paid into the registry of the court, criteria for such order were not satisfied)
Because the undisputed evidence does not indicate that funds are actually in
danger of being lost or depleted, the trial court abused its discretion by
ordering the payment of such funds into its registry.
MOTION OR WRIT GRANTED: Opinion by Justice Kent Sullivan
Before Justices Seymore, Brown and Sullivan
14-09-00289-CV In Re North Cypress Medical Center Operating Company, Ltd. and North Cypress Medical
Center Operating Company GP, LLC
Appeal from 333rd District Court of Harris County
North Cypress Med. Ctr. Operation Co, Ltd. v. Laurent, MD (Tex.App.- Houston [14th
Dist.] Aug. 4, 2009)(Sullivan) (interlocutory appeal of temporary injunction, no irreparable damages shown,
temporary injunction dissolved by court of appeals)
REVERSED AND REMANDED: Opinion by Justice Sullivan
Before Justices Seymore, Brown and Sullivan)
14-09-00204-CV North Cypress Medical Center Operating Company, Ltd. and North Cypress Operating G.
P. LLC v. Matthew St. Laurent, M.D
Appeal from 333rd District Court of Harris County
Trial Court Judge: JOSEPH J. HALBACH
O P I N I O N
This consolidated appellate proceeding, consisting of an accelerated appeal and petition for writ of
mandamus, arises from a doctor's attempts to prevent the sale of his profits-only ownership interest in a
hospital's limited partnership. In the accelerated appeal, the partnership challenges a temporary injunction
preventing the sale or transfer of the doctor's shares. The trial court that issued the temporary injunction
also ordered the partnership to deposit the doctor's future distributions into the court's registry, prompting
the partnership to seek mandamus relief from this Court.
The doctor has not shown he has an inadequate remedy, at law, that is, that money damages would result
in inadequate compensation for the loss of his profits-only share in the partnership. Thus, the record does
not support a necessary finding that the doctor would suffer an irreparable injury but for the temporary
injunction. Accordingly, we reverse the trial court's order granting a temporary injunction. We further hold
that the record does not support a conclusion that disputed funds are likely to be lost or depleted, a
necessary finding before a trial court may order a party to deposit money into the court's registry.
Therefore, we conditionally grant the petition for writ of mandamus.
Background
In January 2004, Matthew St. Laurent, M.D., the appellee/real party in interest, purchased four limited
partnership shares, termed "units," in North Cypress Medical Center Operating Company, Ltd. (the
"partnership").[1] Under the terms of the limited partnership agreement (the "Agreement"), St. Laurent was
permitted to share in the partnership's net income and occasional distributions but had no right to manage
or control the partnership's operation, business, or activities. The Agreement also provided that the
partnership, "at its sole option," could sell St. Laurent's shares without his consent for a variety of reasons,
including his breach of the Agreement.
In November 2007, the partnership notified St. Laurent that he had breached the Agreement's non-
competition clause and that it intended to sell his shares. He responded by filing suit against North Cypress
for breach of contract, conversion, breach of fiduciary duty, and conspiracy to commit breach of fiduciary
duty. He sought money damages in excess of $250,000, and also asked for the equitable remedy of an
injunction preventing the sale of his shares.
In February 2009, the trial court granted St. Laurent's request for a temporary injunction, thereby
preventing the partnership from transferring or selling his shares. That ruling prompted North Cypress to
file this accelerated appeal. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4) (Vernon 2008). In
addition, the trial court ordered North Cypress to pay into the court's registry St. Laurent's portion of any
future partnership distributions. That order forms the basis for North Cypress's petition for writ of
mandamus.
II.
Temporary Injunction
In the accelerated appeal, which we address first, North Cypress contends St. Laurent was not entitled to a
temporary injunction because he failed to show that he would suffer an irreparable injury in the absence of
injunctive relief. We agree.
The purpose of a temporary injunction is to preserve the status quo of a lawsuit's subject matter pending a
full trial on the merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). However, a temporary
injunction is an extraordinary remedy that does not issue as a matter of right. Id. Instead, the applicant
bears the burden of pleading and proving that he has (1) a cause of action against the defendant, (2) a
probable right to the relief sought, and (3) a probable, imminent, and irreparable injury in the interim. Id.
The party seeking injunctive relief - here, St. Laurent - carries the burden to demonstrate an irreparable
injury. See Reach Group, L.L.C. v. Angelina Group, 173 S.W.3d 834, 838 (Tex. App.- Houston [14th Dist.]
2005, no pet.). An injury is considered irreparable if the party cannot be adequately compensated in
damages, or if those damages are incapable of calculation. Butnaru, 84 S.W.3d at 204; Reach Group, L.L.
C., 173 S.W.3d at 838. Generally, however, courts do not enforce contractual rights by injunction, because
an applicant who may recover breach-of-contract damages can rarely establish an irreparable injury and
accompanying inadequate legal remedy. Butnaru, 84 S.W.3d at 211; Reach Group, L.L.C., 173 S.W.3d at
838.
We review the grant or denial of a temporary injunction for an abuse of discretion. EMSL Analytical, Inc. v.
Younker, 154 S.W.3d 693, 696 (Tex. App.- Houston [14th Dist.] 2004, no pet.). A trial court does not abuse
its discretion if it bases its decision on conflicting evidence in the record. Law v. William Marsh Rice Univ.,
123 S.W.3d 786, 792 (Tex. App.- Houston [14th Dist.] 2003, pet. denied). With respect to the resolution of
factual issues, the appellant must establish the trial court reasonably could have reached only one
decision. Emeritus Corp. v. Ofczarzak, 198 S.W.3d 222, 225-26 (Tex. App.- San Antonio 2006, no pet.). To
the extent that we must consider the evidence to resolve this appeal, we review the evidence in the light
most favorable to the trial court's order, indulging reasonable inferences in its favor. See EMSL Analytical,
Inc., 154 S.W.3d at 696. Therefore, we will not disturb the trial court's ruling if some evidence in the record
reasonably supports the decision. Butnaru, 84 S.W.3d at 211. However, a trial court abuses its discretion if
it misapplies the law to the established facts of the case. Law, 123 S.W.3d at 792.
Here, St. Laurent contends that his partnership shares are "unique" such that money damages cannot fully
compensate him for their loss. In the alternative, he suggests that the amount of such damages cannot be
adequately measured. We will address each of these contentions, in turn.
A. “Uniqueness" of Profits-Only Limited Partnership Share
Generally, money damages may be inadequate to compensate an injured party for the loss of property
deemed to be legally "unique" or irreplaceable. See, e.g., Patrick v. Thomas, No. 2-07-339-CV, 2008 WL
1932104, at *3 (Tex. App.- Fort Worth May 1, 2008, no pet.) (mem. op.) (discussing owner's sentimental,
nonmonetary attachment to horses). The "uniqueness" rule is most commonly applied when the disputed
property involves real estate. See Lavigne v. Holder, 186 S.W.3d 625, 629 (Tex. App.- Fort Worth 2006, no
pet.); In re Stark, 126 S.W.3d 635, 640 (Tex. App.- Beaumont 2004, orig. proceeding [mand. denied]) ("We
agree . . . that every piece of real estate is unique and that its uniqueness may, in an injunction case,
constitute some evidence of an irreparable injury.").
Apparently hoping to invoke this common real-estate principle, St. Laurent claims that his partnership
shares should be treated as an interest in real estate because one of the purposes of the partnership is to
own and maintain a hospital, North Cypress Medical Center. We disagree. First, the limited partners,
including St. Laurent, do not own the hospital real estate; only the partnership does. Second, under the
Agreement, St. Laurent has no right to control the management or operation of the hospital. Instead, as a
limited partner, St. Laurent's only interest in the hospital real estate is confined to whatever net income may
be generated from the hospital's business. Therefore, we are not persuaded that St. Laurent's attenuated
connection to the physical plant of the hospital is sufficient to constitute a “unique" interest in real estate.
Cf. Lavigne, 186 S.W.3d at 629 (upholding land purchaser's right to injunctive relief to prevent foreclosure
on real estate).
Alternatively, St. Laurent suggests that his shares are unique because they are irreplaceable. As he notes,
the partnership's shares are not publicly traded and, under the terms of the Agreement, additional limited
partners may not be admitted without the general partner's consent. Thus, St. Laurent is correct that, once
he loses his shares, he cannot simply replace them with other partnership shares. However, he has not
shown that money damages cannot take their place. That is, a subjective desire to keep one's shares does
not, by itself, render money damages an inadequate substitute. See Pesch v. First City Bank of Dallas, 637
F. Supp. 1539, 1547 (N.D. Tex. 1986). This is particularly true here where, unlike the shares discussed in
Pesch, St. Laurent's ownership interest gives him no voice in the control or management of the partnership.
See Pesch, 637 F. Supp. at 1546. Instead, the Agreement provides:
The General Partner shall conduct, direct and exercise full control over all activities of the Partnership.
Except as otherwise expressly provided herein, all management powers over the business and affairs of the
Partnership shall be exclusively vested in the General Partner, and the Limited Partners shall not have any
right of control or management power over the business and affairs of the Partnership. . . . [T]he General
Partner shall have full power and authority to do all things deemed necessary or desirable by it to conduct
the business of the Partnership without the consent or approval of the Limited Partners[.][2]
The undisputed evidence in the record indicates that St. Laurent is at risk for loss of only his proportionate
share in the partnership's net income and any future distributions. Both of these items represent an interest
in money. Therefore, St. Laurent has not shown that breach-of-contract damages would be inadequate to
compensate him for any such monetary losses.
B. Calculation of Damages
Alternatively, St. Laurent acknowledges that damages may compensate for the loss of partnership shares
but argues that, in this case, his damages are incapable of mathematical calculation. See Reach Group, L.
L.C., 173 S.W.3d at 838. He reasons that, because no ready market exists for the sale and purchase of
these privately held shares, the value of his ownership interest cannot be readily ascertained. However, the
record does not support that argument.
The Agreement contains numerous provisions relative to the value of each limited partner's ownership
interest in the partnership. Under its terms, the partnership must establish and maintain a "Capital Account"
as to each partner, reflecting the current value of his ownership interest. That amount incorporates, among
other things, (1) the cash amount or fair market value of all shares owned by the partner, (2) his
proportionate share of the partnership's net income or loss, (3) the amount of partnership liabilities
attributable to him, and (4) the cash amount or fair market value of all distributions of cash or property made
to him. In addition, the Agreement contains several other provisions affecting the value of each partner's
Capital Account, including interest, value following transfer of a partnership interest, and the effect of loans
to the partnership. In the event a partner's shares are to be sold, the Agreement specifies, through
mathematical formulas, the exact consideration to be paid.
St. Laurent acknowledges that he can determine the value of his current ownership interest. In fact, during
the temporary-injunction hearing, he testified about the value of his Capital Account as of a specific date
shortly before the hearing. However, he claims that his future damages cannot be measured once he is
divested of his shares, at which point he will no longer be eligible to receive distributions or a proportionate
share of net income. He notes that, under the Agreement, the general partner may declare distributions in
its sole discretion, "from time to time." Drawing from that fact, St. Laurent argues in his brief that "[t]here is
nothing in the record that establishes any reliable method of affirmatively establishing the value of future
distributions."
St. Laurent's argument misstates the burden of proof. In a temporary-injunction hearing, the burden is on
the applicant to prove that his damages cannot be calculated, not on the non-movant to disprove that
notion. See Reach Group, L.L.C., 173 S.W.3d at 838. After reviewing the record, we conclude that St.
Laurent failed to carry that burden because he produced no evidence, either express or implicit, that his
future damages are simply too speculative to be calculated.[3]
To the contrary, expert witnesses frequently offer opinions about the value of a partnership interest,[4] even
when, as here, some unspecified future revenue source remains pending. See, e.g., Von Hohn v. Von
Hohn, 260 S.W.3d 631, 637B38 (Tex. App.- Tyler 2008, no pet.) (approving expert testimony as to value of
partnership interest in a law firm, even though some of the firm's lawsuits had not yet settled or even been
filed). That task calls upon expert witnesses, out of necessity, to make reasonable assumptions about a
litigant's future damages resulting from some intervening event, such as the defendant's alleged
wrongdoing. See, e.g., Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 254B55 (Tex.
2008) (requiring expert's future-damage calculations to adhere to reasonable assumptions not inconsistent
with undisputed facts); Checker Bag Co. v. Washington, 27 S.W.3d 625, 638B39 (Tex. App.- Waco 2000,
pet. denied) (upholding future-damages testimony, based on reasonable assumptions, by expert
economist). In that regard, this case is not unlike any other case involving the calculation of future
damages. See Hughes v. Houston Nw. Med. Ctr., Inc., 680 S.W.2d 838, 842 (Tex. App.- Houston [1st Dist.]
1984, writ ref'd n.r.e.) ("Damages must be established with reasonable certainty, but the amount of
damages need not be certain, or future damages would never be recoverable.") (citations omitted).
Here, although the Agreement introduces some degree of uncertainty about the precise timing of future
distributions, it expressly requires the partnership to "use reasonable efforts to distribute annually at least
an amount of Available Cash to the Partners sufficient to cover the federal, state and local income tax owing
by the Partners as a result of Partnership allocations of income, gain, loss, deduction and credit to the
Partners[.]"[5] Thus, the Agreement contemplates, at a minimum, annual distributions tied into the amount of
the partnership's net income, if any. In addition, appropriate discovery should reveal the timing and amount
of past distributions, facts that may offer insight into the predictability of future distributions. Moreover, St.
Laurent's inability to predict the precise timing of the partnership's distributions of its assets does not mean
that the net present value of his interest in those income-generating assets is incalculable. See, e.g., State
v. Whataburger, Inc., 60 S.W.3d 256, 262 (Tex. App.- Houston [14th Dist.] 2001, pet. denied) (discussing
valuation of income-generating property).
Thus, on the record presented, St. Laurent did not prove that money damages could not compensate him or
that such damages are incapable of calculation. Absent proof of an irreparable harm, St. Laurent was not
entitled to injunctive relief. See SRS Prods. Co. v. LG Eng'g Co., 994 S.W.2d 380, 386 (Tex. App.- Houston
[14th Dist.] 1999, no pet.). Accordingly, we reverse the trial court's order, dissolve the temporary injunction,
and remand.[6]
III.
Deposits into Court's Registry
After granting the temporary injunction, the trial court, citing its inherent authority, also ordered North
Cypress to deposit into the court's registry any future distributions attributable to St. Laurent. In response,
North Cypress asked us to issue a writ of mandamus vacating the trial court's order because the record
does not indicate that disputed funds are likely to be "lost or depleted," a requisite for the court's order. We
agree, and conditionally grant mandamus relief.
A. Mandamus Standard of Review
Mandamus relief may be available if the relator establishes a clear abuse of discretion for which there is no
adequate appellate remedy. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004)
(orig. proceeding). Although we will not disturb the trial court's resolution of disputed fact matters, a trial
court has no discretion in determining what the law is or in applying the law to the facts. See Walker v.
Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding).
B. Evidence of “Loss or Depleting" Funds
If there is evidence that disputed funds are in danger of being "lost or depleted," a trial court, through its
inherent authority, may order a party to pay those funds into the court's registry. See Castilleja v. Camero,
414 S.W.2d 431, 433 (Tex. 1967). Here, however, the record contains no such evidence. Instead, the
undisputed evidence suggests only that the partnership may use the same bank account to fund several
activities, including the reinvestment of funds into the hospital's physical plant. By itself, that evidence is
insufficient to warrant the trial court's order in this case.
During the temporary-injunction hearing, St. Laurent testified that the hospital has recently undergone
capital improvements, including an expansion of the existing structure and the construction of a separate
professional building and parking garage. It appears that these capital improvements might be funded, at
least in part, from the partnership's "Available Cash," the same source used to pay partner distributions.
After reviewing these facts alone, the trial court concluded that the hospital's capital improvements are likely
to deplete the funds available to pay future distributions. However, that legal conclusion is not supported by
the evidence, for two reasons.
First, the funds in question have not been shown to be in danger of being "lost or depleted." Instead, the
evidence suggests that those funds are being reinvested in the hospital's physical plant, a partnership
asset. Thus, in the event St. Laurent prevails in the dispute over his partnership distributions, his efforts to
collect on that judgment would not be limited solely to the hospital's "Available Cash" account. See
generally Tex. Civ. Prac. & Rem. Code Ann. §§ 31.001-.010 (Vernon 2008). As St. Laurent conceded
during oral argument, the record contains no suggestion that North Cypress is insolvent or otherwise unable
to pay a potential judgment in this case.
Second, even were we to hold that reinvested funds qualify as "lost or depleted" within the meaning of
Castilleja, the record is still insufficient to show that Available Cash is dwindling or being depleted. For
example, the record is devoid of evidence about (1) the balance of Available Cash, (2) the amount or
source of the hospital's revenue and net income used to fund that account, (3) the monthly or annual cash
flow in the Available Cash account (4) the cost of the ongoing capital improvements, or (5) the extent, if any,
to which Available Cash may be dwindling because of the capital improvements.
Instead, the record, particularly the Agreement, hints only that North Cypress uses the Available Cash
account for several purposes:
"Available Cash" shall mean, at the time of determination, all Partnership cash receipts derived from the
conduct of the Partnership's business reduced by (i) such amount as is necessary to pay the current
operating expenses and debt service of the Partnership, and (ii) such reserves for the reasonable needs of
the Partnership's business as the General Partner shall determine, in its sole discretion, including reserves
for replacements, capital improvements and additions.
Because the undisputed evidence does not indicate that funds are actually in danger of being lost or
depleted, the trial court abused its discretion by ordering the payment of such funds into its registry. See
Castilleja, 414 S.W.2d at 433; In re Deponte Invs., Inc., No. 05-04-01781-CV, 2005 WL 248664, at *2 (Tex.
App.- Dallas Feb. 3, 2005, orig. proceeding) (mem. op.).
Further, we determine that, in this case, the benefits to mandamus review outweigh the detriments. See
Prudential Ins. Co., 148 S.W.3d at 136. Here, North Cypress has been deprived of the use of its money
without a showing either of liability or an intent to hide assets from a possible judgment, as in Castilleja.[7]
Therefore, we hold that North Cypress does not have an adequate remedy by appeal. See Deponte Invs.,
2005 WL 248664, at *2. Accordingly, we conditionally grant mandamus relief.
IV.
Conclusion
St. Laurent has not shown that, in the absence of a temporary injunction, he would suffer irreparable injury.
Therefore, we reverse the trial court's ruling, dissolve the temporary injunction, and remand for further
proceedings not inconsistent with this opinion.
In addition, we conditionally grant the petition for a writ of mandamus, and direct the trial court to vacate its
order compelling North Cypress to deposit funds into the court's registry. We are confident the trial court
will comply; therefore, the writ will issue only in the unlikely event that it fails to do so.
/s/ Kent C. Sullivan
Justice
Panel consists of Justices Seymore, Brown, and Sullivan.
[1] This accelerated appeal and mandamus proceeding were filed by North Cypress Medical Center
Operating Company, Ltd., the limited partnership, and North Cypress Medical Center Operating Company G.
P., L.L.C., the general partner. Where necessary, we will collectively refer to these entities as "North
Cypress."
[2] Emphasis added.
[3] We note that, in his pleadings, St. Laurent seeks to recover money damages for North Cypress's
alleged breach of contract. That fact, considered alone, suggests that the prospect of calculating such
damages is not insurmountable.
[4] See Coleman v. Coleman, 170 S.W.3d 231, 241 (Tex. App.- Dallas 2005, pet. denied).
[5] Emphasis added.
[6] Because of our resolution of the accelerated appeal, we need not reach North Cypress's alternative
argument that the bond set by the trial court, as a condition of the temporary injunction, was too low.
[7] Cf. Castilleja, 414 S.W.2d at 433 (“Petitioner testified in the hearing on the writ of mandamus that he
did not inten[d] to satisfy the judgment . . . if the case was finally decided against him.").