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Opinion
issued August 14, 2008

In The

Court of
Appeals

For The

First District
of Texas

NO. 01-07-00970-CV

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

On Appeal from the 239th District
Court

Brazoria County, Texas

Trial Court Cause No. 44874

O P I N I
O N

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 injunction, and an appellate court should reverse only if it
finds a clear abuse of that discretion.  Tel. Equip. Network,
Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 607 (Tex.
App.—Houston [1st Dist.] 2002, no pet.).  We should not reverse a
trial court’s temporary injunction unless it is “so arbitrary as to exceed
the bounds of reasonable discretion.”  Id.  We review
the evidence in a light most favorable to the trial court’s order, but an
erroneous application of the law to undisputed facts constitutes an abuse
of discretion.  Id.

To obtain a temporary
injunction, an applicant must prove (1) a cause of action against a
defendant, (2) a probable right to the relief sought, and (3) a probable,
imminent, and irreparable injury in the interim.  Butnaru,
84 S.W.3d at 204.  An injury is irreparable if there is no adequate
remedy at law; if for example, a prevailing applicant could not be
compensated adequately in damages, or if damages cannot be measured by any
certain pecuniary standard.  Id.  While the board members
contend that none of these elements exists, the absence of any one renders
an award of temporary injunctive relief inappropriate.  See
id.  We find the third element dispositive.

Brazoria County asserts that ACHE is an
important part of its obligation to provide healthcare assistance to its
low-income residents.  It leases county-owned land to ACHE to carry
out that purpose.  In support of the trial court’s order, Brazoria
County relies on evidence that ACHE might not qualify for the federal
grant it had been receiving since 2005.  ACHE, on the other hand,
presented evidence that it was taking steps to comply with federal
regulations.  While the county’s evidence suggests the possibility
that this nonprofit corporation might lose its federal funding, it did not
suggest that the loss of federal funding would jeopardize ACHE or its
ability to serve low-income residents of Brazoria County.  To the
contrary, the testimony at the hearing was that ACHE operates through
various sources of funding, and it operated without federal funding for
thirty-five years before it first received federal funds.  Brazoria
County implies that ACHE has an obligation to it to seek and receive
federal funding, but no evidence suggests that ACHE, a private, nonprofit
corporation, either requires or depends on federal funding to be able to
provide healthcare services to Brazoria County residents.  Nor has
Brazoria County offered any evidence of such an obligation to it, either
in the lease agreements or otherwise.  Consequently, Brazoria County
fails to show that it would suffer an imminent, irreparable injury, even
if ACHE were to lose its federal funding.  At most, Brazoria County
has established a fear of the possibility of a future injury, and such a
contingency “is not sufficient to support issuance of a temporary
injunction.”  See Reach Group, L.L.C. v. Angelina
Group, 173 S.W.3d 834, 838 (Tex. App.—Houston [14th Dist.] 2005, no
pet.) (citing EMSL Analytical, Inc. v. Younker, 154 S.W.3d 693,
697 (Tex. App.—Houston [14th Dist.] 2004, no pet.)).  Because the
evidence does not support the trial court’s finding that irreparable harm
to Brazoria County is probable or imminent, Brazoria County has not
satisfied the third element necessary to obtain a temporary
injunction.

Appointment of
Receiver

The board members further contend that the trial court abused its
discretion in appointing a receiver over all of the assets and business
affairs of ACHE because the county did not plead and prove the elements
required for the appointment of a receiver.

Whether authorized by statute
or by equity, we should affirm the interlocutory appointment of a receiver
unless the trial court clearly abused its discretion.  Mueller v.
Beamalloy, Inc., 994 S.W.2d 855, 858 (Tex. App.—Houston [1st Dist.]
1999, no pet); Abella v. Knight Oil Tools, 945 S.W.2d 847, 849
(Tex. App.—Houston [1st Dist.] 1997, no writ).  A trial court abuses
its discretion when it acts without reference to guiding rules and
principles.  Downer v. Aquamarine Operators, Inc., 701
S.W.2d 238, 241–42 (Tex. 1985).  If the decision was within the trial
court’s discretionary authority, we may not reverse simply because we
might have reached a different decision.  Beaumont Bank, N.A. v.
Buller, 806 S.W.2d 223, 226 (Tex. 1991).  The appointment of a
receiver, nevertheless, is a harsh, drastic, and extraordinary remedy, to
be used cautiously.  Hunt v. Merch. Mart, Inc., 391 S.W.2d
141, 145 (Tex. Civ. App.—Dallas 1965, writ ref’d n.r.e.); see Balias v.
Balias, Inc., 748 S.W.2d 253, 257 (Tex. App.—Houston [14th Dist.]
1988, writ denied).  Even if a specific statutory provision
authorizes a receivership, as in this case, a trial court should not
appoint a receiver if another remedy exists, either legal or
equitable.  Rowe v. Rowe, 887 S.W.2d 191, 200 (Tex. App.—Fort
Worth 1994, writ denied) (observing that statute permitting appointment of
receiver over corporation authorizes appointment only if party seeking
relief convinces trial court that all other legal and equitable remedies
are inadequate).  Rather, receivership is warranted only if the
evidence shows a threat of serious injury to the applicant.
Parness v. Parness, 560 S.W.2d 181, 182 (Tex. Civ. App.—Dallas
1977, no writ); Hughes v. Marshall Nat’l Bank, 538 S.W.2d 820, 824
(Tex. Civ. App.—Tyler 1976, writ ref’d n.r.e.); Gunther v. Dorff,
296 S.W.2d 638, 640 (Tex. Civ. App.—Waco 1956, writ dism’d).  Our
review focuses on whether the pleadings and evidence are sufficient to
justify a receivership.  See Covington Knox, Inc. v.
State, 577 S.W.2d 323, 325 (Tex. Civ. App.—Houston [14th Dist.] 1979,
no pet.) (noting that when appeal from order overruling motion to vacate
receivership is perfected, question becomes simply one of sufficiency of
petition to support appointment of receiver).

The Texas Nonprofit Corporation
Act governs the appointment of a receiver to rehabilitate a nonprofit
corporation, and it states in relevant part:

(A) A receiver may be appointed for the assets and
business of a corporation by the district court for the county in which
the registered office of the corporation is located, whenever
circumstances exist deemed by the court to require the appointment of a
receiver to conserve the assets and affairs of the corporation and to
avoid damage to parties at interest, but only if all other requirements of
law are complied with and if all other remedies available either at law or
in equity, including the appointment of a receiver for specific assets of
the corporation, are determined by the court to be inadequate, and only in
the following instances:

(1)    In an action by a member when it
is established:

(a) That the corporation is insolvent or in
imminent danger of insolvency; or

(b)  That the directors are deadlocked in the
management of the corporate affairs and the members are unable to break
the deadlock, and that irreparable injury to the corporation is being
suffered or is threatened by reason thereof; or

(c)  That the acts of the directors or those
in control of the corporation are illegal, oppressive, or fraudulent;
or

(d)  That the corporate assets are being
misapplied or wasted.

Tex.
Rev. Civ. Stat. Ann. art. 1396-7.05(A).  A
court may appoint a receiver over an entire corporation only if all other
remedies are deemed inadequate.  See Aubin v. Territorial
Mortgage Co. of Am., Inc., 640 S.W.2d 737, 741–42 (Tex. App.—Houston
[14th Dist.] 1982, no writ).  The burden of proof to show the
existence of circumstances justifying the appointment of a receiver rests
on the party seeking the appointment.  See Furgerson v.
First Nat’l Bank, 218 S.W.2d 1019, 1020 (Tex. Civ. App.—Texarkana
1949, no writ).  To determine whether the appointment of the receiver
was authorized, therefore, we first consider whether Brazoria County has
met its burden to plead and prove that other remedies available either in
law or in equity are inadequate.  See Aubin, 640 S.W.2d
at 741–42.

Nothing in the record indicates
that Brazoria County met this burden or that the trial court considered
remedies less drastic than a receivership.  For example, if Brazoria
County has a contractual interest in ensuring that ACHE maintains its FQHC
status, as it contends, it has not shown that other remedies, such as
money damages, cannot adequately protect that contractual interest.
Because remedies at law were not even considered, they could not have been
deemed “inadequate” as required by the Texas Nonprofit Corporation
Act.

Furthermore, no evidence
suggests that ACHE is insolvent or in imminent danger of insolvency to
justify the appointment of a receiver to take control of the entire
corporation and all of its assets; the county has merely shown that ACHE
might lose one of its sources of funding.  Brazoria County maintains
that the public interest, as reflected in the Texas Health and Safety
Code, requires the county to provide healthcare services to its low income
residents, and that to meet this obligation, it leased county-owned land
to ACHE on which ACHE operates a clinic that provides such services.
See Tex. Health & Safety Code Ann.
§ 61.028(a) (Vernon 2001) (listing healthcare services county must
provide for its indigent residents).  In 2005, the county extended
its lease with ACHE and noted that ACHE had become a FQHC, but nothing in
the lease requires ACHE to maintain its status as a FQHC.  The county
also asserts that its own obligation to provide healthcare to its indigent
residents gives the county a legal and contractual interest in ensuring
that ACHE maintain its FQHC status.  The county’s effort to transfer
its own statutory obligation onto a private corporation, however, fails to
meet the statutory test for a receivership—namely that without one, a
danger of insolvency or injury to the county or its residents
exists.  Brazoria County’s obligation to provide healthcare services
to its residents does not require it to provide federally-funded
healthcare services, nor is ACHE—a private corporation—required to
maintain FQHC status to avoid a complete government takeover of its
operations.  Brazoria County fails to show how the county or its
residents would be irreparably injured were ACHE to lose FQHC status, or
that the loss of federal funding would place ACHE in danger of insolvency,
or even that the loss of federal funding is a foregone conclusion.
Accordingly, the county did not justify the appointment of a receiver on
this ground.

Nor has Brazoria County
demonstrated that the acts of the directors or those in control of the
corporation are illegal, oppressive, or fraudulent.  The county has
shown only that, while one of ACHE’s board members was on a brief sick
leave, the board of directors had eight rather than the required nine
members.  This showing does not support Brazoria County’s contention
that the board was therefore illegally constituted in general.
Brazoria County relies heavily on Greater Fort Worth & Tarrant
County Community Action Agency v. Mims to justify the appointment of
the receiver, but Mims is distinguishable.  See 574
S.W.2d 870, 871 (Tex. Civ. App.—Fort Worth 1978, writ dism’d
w.o.j.).  The trial court in Mims appointed a receiver for the
specific and limited purpose of ensuring that the dysfunctional board was
properly constituted to allow a proper vote on a director’s employment
status.  Id. at 871–72.  The Mims court did not
appoint a receiver to take full control over the entire corporation as the
trial court did in this case.  See id.
Mims upheld the appointment of a receiver for the sole purpose of
making a dysfunctional board functional and properly constituted; it did
not authorize a receivership over all of a corporation’s assets and
business affairs.

Furthermore, Mims
authorized such a limited receivership to reconstitute a dysfunctional
board only when the board was “so impaired that it was no longer organized
or functioning as it was established or constituted,” and only when the
court determines that a board is “illegally constituted.” See
Swain v. Wiley College, 74 S.W.3d 143, 148 (Tex. App.—Texarkana
2002, no pet.).  No evidence suggests that ACHE’s board was so
impaired and dysfunctional that it was illegally constituted.  On the
contrary, the record indicates that ACHE’s board was functional and that
it was taking steps to correct the deficiencies found by the
HRSA.

Because the appointment of a
receiver over the assets and business affairs of a corporation is a
“radical remedy,” it should never be applied “unless some serious injury
to the complainant will result, or is threatened.”  See
Tex. Consol. Oils v. Hartwell, 240 S.W.2d 324, 327 (Tex. Civ.
App.—Dallas 1951, orig. proceeding).  Brazoria County has failed to
demonstrate that a serious injury is threatened or will result to the
county or its residents, and thus we hold that the court abused its
discretion in appointing a receiver over all of ACHE’s assets and business
affairs.

Admission
of Evidence

Last, the board members contend
that the trial court abused its discretion in admitting certain exhibits
reflecting correspondence from HRSA to ACHE, because the documents are not
properly authenticated, constitute hearsay, and are irrelevant.  The
admission and exclusion of evidence is committed to the trial court’s
sound discretion, but a trial court abuses that discretion when it acts
without regard for any guiding rules or principles.  City of
Brownsville v. Alvarado, 897 S.W.2d 750, 753–54 (Tex. 1995).

Texas Rule of Evidence 803(8)
excludes records from public offices and agencies from the hearsay
rule.  Tex. R. Evid. 803(8).  However,
such records must be properly authenticated to be admissible.  Tex. R. Evid. 901(a).
Generally, the requirement of authentication or identification as a
condition precedent to admissibility is satisfied by evidence sufficient
to support a finding that the matter in question is what the proponent
claims, and specifically, public records or reports may be authenticated
by evidence that the purported public record or report is from the public
office where items of this nature are kept.  Tex. R. Evid. 901(a);
901(b)(7).  While Brazoria County contends that Rule 803(8) creates a
presumption of admissibility, with the burden being placed on the party
opposing the admission of the report to show its untrustworthiness, that
presumption does not exempt the offered document from satisfying other
requirements of the rules.  See 1001 McKinney, Ltd. v.
Credit Suisse First Boston Mortgage Capital, 192 S.W.3d 20, 27–28
(Tex. App.—Houston [14th Dist.] 2005, pet. denied).  The rules of
evidence do not require extrinsic evidence of authenticity as a condition
precedent to admissibility for certified copies of public records because
they are self-authenticating.  Tex. R. Evid. 902(4).  The
contested exhibits here, however, were not authenticated by either
certification or any extrinsic evidence.  The trial court therefore
erred in admitting these documents over objections to their
authenticity.

Conclusion

We conclude that we do not have jurisdiction to consider the status of the
pending quo warranto proceeding in this interlocutory appeal, but because
Brazoria County does not show the necessary irreparable harm to support a
temporary injunction or the appointment of a receiver, we reverse the
trial court’s orders granting a temporary injunction and a receivership,
and remand the cause to the trial court for further proceedings.  We
dismiss all pending motions as moot.

Jane Bland

Justice

Panel consists of Justices
Taft, Jennings, and
Bland.