Merchants Bank of Indiana v. Cypresswood TX Realty, LLC, et al.

CourtDistrict Court, S.D. Texas
DecidedDecember 1, 2025
Docket4:24-cv-03964
StatusUnknown

This text of Merchants Bank of Indiana v. Cypresswood TX Realty, LLC, et al. (Merchants Bank of Indiana v. Cypresswood TX Realty, LLC, et al.) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Merchants Bank of Indiana v. Cypresswood TX Realty, LLC, et al., (S.D. Tex. 2025).

Opinion

□ Southern District of Texas ENTERED UNITED STATES DISTRICT COURT vecemer □□ □□ SOUTHERN DISTRICT OF TEXAS OI HOUSTON DIVISION Merchants Bank of Indiana, § Plaintiff, §

Vv. § Civil Action H-24-3964 § Cypresswood TX Realty, LLC, § et al., § Defendants. § ORDER ON CYPRESSWOOD’S MOTION TO TRANSFER VENUE Pending before the court is Defendant Cypresswood TX Realty, LLC’s (Cypresswood) Motion to Transfer Venue of Case Pursuant to 28 U.S.C. Section 1412 or 1404(a), ECF No, 148. The court has considered the motion and supplemental authority, responses, reply, and applicable law. For the reasons stated below, Cypresswood’s Motion to Transfer Venue, ECE No. 148, is DENIED.1 I, Background This dispute involves eight parties—with citizenship, for diversity jurisdiction purposes, in six different states—that, amongst themselves, have executed more than twenty contracts and business agreements pertaining to the Fallbrook Rehabilitation and Care Center (the Facility), Most of the background facts, as presented here, are from Plaintiff Merchants Bank of Indiana’s (Merchants) Amended Complaint. ECF No. 68.

1 A magistrate judge may order or deny transfer of a case to another district as a non-dispositive matter under 28 U.S.C. § 686(b)(L(A). Mulvey v. Vertafore, Inc., No. 21-cv-213, 2021 WL 30893886, at *1 (N.D. Tex. Jul. 22, 2021),

A. The Facility, the Parties, and their Business Relationships The Facility is a 202-bed licensed skilled nursing facility, located at 10851 Crescent Moon Drive, Houston, Harris County, Texas 77064 (the Property). ECF No. 68 § 1. The Property is owned by Cypresswood. Id. J 25. On May 4, 2021, Cypresswood obtained a loan in the amount of $25,000,000 from Merchants with the Property serving as collateral. Id. 27. Cypresswood and Merchants executed a Promissory Note (ECF No. 68-4) and Loan Agreement (HCF No. 68-3). Jd. [§ 32-84. One of Cypresswood’s members, Samuel Goldner, agreed to serve as personal guarantor of the loan. Jd. { 2. Merchants perfected its security interest in the Property by recording a Deed of Trust (ECF No. 68-5) and various other loan documents (the Loan Documents) with Harris County and State of Texas officials. Jd. 32-35. On July 7, 2028, Cypresswood and Crescent Moon Dr. Healthcare, LLC (Crescent) executed an Operating Lease (Lease), which placed Crescent in charge of operating the Facility. ECF No. 68 36. One month after the Lease was executed, Merchants, Cypresswood, Crescent, and eCapital Healthcare Corp. (eCap) entered into a Lease Payment Agreement, which, in part, required Crescent to make certain payments directly to Merchants, instead of paying through Cypresswood as an intermediary. Jd. (38. On the same date, Crescent granted Merchants a security interest in certain collateral related to the Property and operations of the Facility. Id. 40. Cresent subleased the Facility to Frio Hospital District (Frio), a public entity of the State of Texas, on February 1, 2024. ECF No. 68 48. Under that agreement, Frio became the operator of the Facility. fd. Frio also executed a separate security agreement with Merchants, which granted Merchants a security

interest in certain collateral related to the Property and operations of the Facility. Id, 4, 44—46. B. Cypresswood’s Default on the Loan and the Receivership Action On January 26, 2024, Merchants initiated a lawsuit against Cypresswood in the Southern District of Indiana for breach of the Loan Agreement. ECF No. 153 § 1. According to Merchants, Cypresswood and Goldner defaulted on the Loan Agreement because they failed to pay amounts when due and failed to pay the entire sum of indebtedness on December 10, 2028—the maturity date of the Promissory Note. ECF No. 68 { 28. On September 4, 2024, Crescent gave Cypresswood and Merchants written notice of lease termination and expressed its desire to cease management of the Facility and vacate the Property. ECF No. 68 57-58. Crescent reported that it was not economically feasible to operate the Facility under the terms of the lease because the operational cost and expense shortfalls exceeded revenues, Id, 4] 59. Merchants alleges that it realized that “[albsent funding (protective advances),” which Merchants was willing to cover, “the Facility [was] in imminent danger of closing.” ECF No. 68 { 61. To cover the Facility’s financial shortfalls, Merchants filed this receivership action in the Southern District of Texas on October 16, 2024. Id. § 2. Merchants sought “to have a receiver appointed to operate the [Flacility and ensure the health and safety of its residents.” Jd. The court appointed a receiver, Michael Flanagan (the Receiver), on October 24, 2024. ECF No. 21. On December 19, 2024, Cypresswood moved to dismiss the instant case or, alternatively, to have it transferred to the Southern District of Indiana. ECF No. 33. Ten days later, Cypresswood filed a motion in the Southern District of Indiana seeking the opposite—to transfer the Indiana action to the

Southern District of Texas and consolidate the two actions. ECF No. 1538-2. Ultimately, Cypresswood and Merchants agreed to litigate the entire dispute in the Southern District of Texas. ECF No. 153 5. Merchants dismissed its case in Indiana, and Cypresswood withdrew its motion to dismiss or transfer the instant case. Id. | 6; see also ECF No. 66. On February 11, 2025, Merchants filed an Amended Complaint in the instant case. ECF No. 68. The Amended Complaint included a request for the receivership to remain in place. Id. Like Merchants’ Original Complaint, the Amended Complaint names Cypresswood, Crescent, eCap, and Frio as parties to the receivership action. Jd. Additionally, the Amended Complaint added new requests for monetary relief against Cypresswood, for breach of the Promissory Note, and Goldner, for breach of the loan guaranty, as well as declaratory judgment to allow Merchants to foreclose on the Deed of Trust and sell the Property. Jd. §1. Crescent also filed crossclaims against Cypresswood; Cypresswood TX Healthcare, LLC; and Samuel Goldner for declaratory judgment, breach of contract, and unjust enrichment. Id. On March 4, 2025, Cypresswood and Goldner filed their Answer and Amended Counterclaims, Crossclaims, and a Third- Party Complaint. ECF No. 76. Cypresswood and Goldner assert claims against Merchants, for breach of fiduciary duty and conspiracy, against Crescent and Vertical, for breach of contract, and against Crescent, Vertical, and William Miller (Cresent and Vertical’s owner and member), for tortious interference and civil conspiracy. Jd. In that filing, Cypresswood relies on the Lease’s forum-selection clause to establish that the Southern District of Texas is a “proper venue to litigate” its claims. fd. at 16 (citing ECF No. 68-9 at 58).

C. Cypresswood Declares Bankruptcy Cypresswood initiated Chapter 11 bankruptcy in the Bankruptcy Court for the Eastern District of New York (Bankruptcy Court) on July 28, 2025. ECF No. 148 1. Accordingly, on July 28, 2025, the court administratively closed the instant case, pending the outcome of Cypresswood’s bankruptcy. ECF No. 148. The parties petitioned the court to lift the stay to allow the Receiver and the receivership to continue the operations, financing, and management of the Facility pursuant to the Receivership Order. ECF No. 145. The court granted the parties’ motion and lifted the stay as to the receivership action. ECF No. 146. All other claims in the case remain stayed. Id. Cypresswood’s bankruptcy is in the initial stages. The Bankruptcy Court has not yet held an Initial Case Management Conference. See Docket, In re Cypresswood TX Realty, LLC, No, 8-25-72833-ast (Bankr, H.D.N.Y. 2025). Merchants filed a proof of claim in the bankruptcy proceeding. ECF No.

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Merchants Bank of Indiana v. Cypresswood TX Realty, LLC, et al., Counsel Stack Legal Research, https://law.counselstack.com/opinion/merchants-bank-of-indiana-v-cypresswood-tx-realty-llc-et-al-txsd-2025.