Southpark Community Hospital, LLC v. Southpark Acquisition Co.

126 So. 3d 805, 13 La.App. 3 Cir. 59, 2013 WL 5813179, 2013 La. App. LEXIS 2222
CourtLouisiana Court of Appeal
DecidedOctober 30, 2013
DocketNo. 13-59
StatusPublished
Cited by5 cases

This text of 126 So. 3d 805 (Southpark Community Hospital, LLC v. Southpark Acquisition Co.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southpark Community Hospital, LLC v. Southpark Acquisition Co., 126 So. 3d 805, 13 La.App. 3 Cir. 59, 2013 WL 5813179, 2013 La. App. LEXIS 2222 (La. Ct. App. 2013).

Opinions

CONERY, J.

| iThe plaintiff, Broussard Hospital Holdings, L.L.C., appeals the trial court’s partial summary judgment denying its right to future rent relating to its lease of a hospital facility, and judgment on the merits dismissing its claims for past-due rent against certain defendants in this litigation. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

This litigation arises from a dispute over a September 20, 2007 contract of lease entered into between two Louisiana limited liability companies: Reorganized South-park Community Hospital L.L.C. (later to become Broussard Hospital Holdings, L.L.C., and referred to hereafter as “Broussard”),1 as Landlord or Lessor, and Southpark Acquisition Company, L.L.C. [808]*808(“Southpark Acquisition”), as Tenant or Lessee. In the agreement, Broussard leased the Southpark Community Hospital (“the hospital”),2 a twenty-bed facility located at 314 Youngsville Highway, Lafayette, Louisiana, to Southpark Acquisition for a term of 240 months beginning September 20, 2007. The lease agreement further provided that “[t]he Premises shall be used by the Tenant for the operation of a hospital, as allowed by the City of Lafayette, the United States Government and licenses by the State of | gLouisiana.” The original base rental was $102,000.00 per month, due each month in advance.3

Southpark Acquisition is owned by fifteen physicians and Southpark Investment Group, L.L.C. (“Southpark Investment”). As an additional inducement for the Lessor to execute the lease, the fifteen physicians and Southpark Investment signed guaranties in the Lessor’s favor, wherein they each guaranteed payment of South-park Acquisition’s lease obligation based on their ownership percentage in South-park Acquisition. The sixteen guarantors and their ownership interests are listed as follows:

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Although formed as a Louisiana limited liability company, Southpark Acquisition’s business office was physically located in Houston, Texas, where its Chief Executive Officer, Irvin Gregory, and its Chief Financial Officer, Michael |sMullin, resided and maintained offices. Both men also owned an interest in Southpark Investment. Although James Ramirez functioned as the administrator of the hospital and served as Southpark Acquisition’s on-site representative in Lafayette, Louisiana, [809]*809all operational and financial decisions concerning the hospital were made in Houston, Texas, with Mr. Gregory having the final decision-making authority.

Mr. Gregory and Mr. Mullin also jointly owned Hospital Investment Group (“HIG”), a legal entity which loaned South-park Acquisition and/or the hospital approximately $1,400,000.00 for operational expenses between September of 2007 and May of 2009. HIG secured its loans by a lien against all otherwise unencumbered assets of the hospital and/or Southpark Acquisition including, but not limited to, the equipment and accounts receivable. The existence of the loans and lien was divulged to Broussard only after this litigation began.

The hospital appears to have suffered financial difficulties from the start and by early 2009, was struggling to stay afloat. In fact, the situation was so dire vendors were refusing to provide supplies to the hospital unless they were paid in advance. Given the situation, Southpark Acquisition fell behind on its financial obligations under the lease as well.

By a letter dated March 26, 2009, Brous-sard notified Southpark Acquisition that it had failed to pay the March 20, 2009 rental payment and that if the amount was not paid within ten days of the receipt of the notice, the failure to pay would constitute an act of default pursuant to Section 17 of the lease, and that Broussard would pursue any remedies available to it pursuant to Section 18 of the lease.4 In |4the letter, Broussard also notified Southpark Acquisition that it was two months in arrears on the payments due under a September 15, 2008 promissory note it had executed in favor of Broussard in the original amount of $861,000.00, and Broussard was declaring the entire note immediately due and payable pursuant to its terms.

Mr. Gregory received this default notice and demand letter, but did not respond because Southpark Acquisition did not have the money to satisfy either demand. Instead, Southpark Acquisition ignored the problem until May 15, 2009, when it sent cash-call letters to each of the sixteen guarantors hoping to raise a total of $700,000.00 to address the lease deficiency only.5 Based on the percentage of ownership, the physician guarantors were called upon to produce a total of $315,000.00, with the remainder of the $385,000.00 to come from Southpark Investment.

In response to this cash-call request, seven of the physician guarantors6 caused a letter to be prepared and mailed to the other physician guarantors by their legal counsel on May 20, 2009. In that letter, the remaining guarantors were informed that the seven had agreed to contribute their pro rata share of the cash-call ($98,-000.00), and were “strongly encouraged” to do the same. However, the letter also informed the other guarantors that the seven had agreed to place their share in an escrow account with their attorney’s firm, and they suggested that the remaining guarantors make their contribution to that account and not to Southpark Acquisition. The attorney writing the letter further notified the remaining |sguarantors that [810]*810should they fail to answer the request, they each would receive “formal demand for the full amount [they] owe under [their] guaranty of lease.”

The ultimate result of the cash-call effort was that Southpark Acquisition did not raise the revenue necessary to meet its financial obligations to Broussard. Finding no solution in sight, toward the end of May 2009, both Southpark Acquisition and HIG made business decisions to cut their losses associated with the hospital. However, before Southpark Acquisition took any steps in that direction, Mr. Gregory and Mr. Mullin, through HIG and without notice to Broussard, removed equipment from the hospital that had served as security for the loans it had made to the hospital.7

After HIG protected its security interest, Mr. Gregory instructed Mr. Ramirez to take the steps necessary to begin closure of the hospital. The hospital discharged its last patient on May 29, 2009, and, on the morning of June 3, 2009, Mr. Ramirez called an unscheduled staff meeting and circulated a memorandum to all employees. The first sentence of the memorandum to the employees stated: “It is with great regret that I must tell you that Southpark Hospital is closing today.” At the staff meeting and through the memorandum, Mr. Ramirez informed all of the hospital employees that the hospital was being closed effective that date. In coordination with this activity, a sign was posted on the hospital’s door stating, “Southpark Hospital Closed Effective June 3, 2009[.] Any inquiries can be made to 832-717-3444.” Additionally, a press release was placed on the hospital’s door, which read:

This press release serves as official notice that Southpark Hospital will close as of 9 a.m. today, June 3, 2009. No services will be |firendered after 9 a.m. today. This includes all departments. An orderly process of closure is proceeding as the hospital is transitioned and closed.

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Bluebook (online)
126 So. 3d 805, 13 La.App. 3 Cir. 59, 2013 WL 5813179, 2013 La. App. LEXIS 2222, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southpark-community-hospital-llc-v-southpark-acquisition-co-lactapp-2013.