ST. CROIX — The creditors holding a $6.36 million judgment against Governor Juan F. Luis Hospital and Medical Center told a federal judge Friday that they own the hospital’s operating equipment and can seize the assets of its parent corporation, because the corporation pledged all of its assets as security for the deal.
VFI KR SPE I LLC and Varilease Finance Inc. filed the nine-page brief in the District Court of the Virgin Islands in response to an October 29 order from Chief Judge Robert Molloy. Molloy had ordered the creditors to explain what legal authority allows them to seize assets of the Virgin Islands Government Hospitals and Health Facilities Corporation, citing a territorial law that generally shields the corporation’s property from seizure.
READ MORE: Federal judge questions creditors’ authority to seize hospital corporation assets in $6.36M judgment
According to the brief, in mid-2024 VIGHHFC sold all of JFL’s operating equipment to the creditors for about $6 million in cash, then leased the equipment back so the hospital could keep using it for patient care while making monthly lease payments.
“Therefore, plaintiffs own Juan Luis Hospital’s operating equipment and can repossess the same as it belongs to them, not VIGHHFC,” the brief states.
Creditors say they don't want to take the equipment:
The creditors also wrote that they do not want to take the equipment from the hospital.
“Plaintiffs want to make it crystal clear they do not want to repossess Juan Luis Hospital’s operating equipment,” the brief states.
The creditors wrote that after VIGHHFC missed its November 2025 lease payment, they made multiple attempts over several months to contact the corporation and work out a plan, but “were met with silence.” They brought in outside counsel in February, sent a formal demand letter and, receiving no response, sued in March in Michigan, a forum the brief says VIGHHFC agreed to in the parties’ contract.
After the Michigan court entered default in May, the creditors sent VIGHHFC a proposed payment plan, according to the brief, but the corporation never responded.
Hospital corporation says judgment is void:
The creditors’ brief responds in part to a motion VIGHHFC filed November 5 asking Molloy to set aside the Michigan judgment as void and deny the request to seize its assets. The motion, filed by VIGHHFC Legal Counsel Julie Beberman, marks the hospital corporation’s first appearance in the case.
VIGHHFC argues the Michigan court never had jurisdiction, for two reasons.
First, it says it was never properly served. A process server delivered the summons and complaint on April 13 to Stephanie-Anne Oriol, a legal and administrative coordinator who, according to the motion, was neither VIGHHFC’s registered agent nor authorized by law to accept service. The chief executive officer was never served, the motion states.
The motion acknowledges that the creditors later sent their motion for default judgment and notice of the hearing to Governor Albert Bryan Jr., Attorney General Gordon Rhea, VIGHHFC, JFL, and JFL CEO Darlene Baptiste, but argues that did not cure the defective service of the original lawsuit.
Second, VIGHHFC argues it is an arm of the Virgin Islands government, and therefore not a citizen for purposes of diversity jurisdiction, the only basis the creditors cited for suing in federal court. The motion points to the government’s legal obligation to fund the corporation, including $66.5 million appropriated from the General Fund for its operations in fiscal year 2027. VIGHHFC argued that it would have to rely on taxpayer funds to pay the judgment.
VIGHHFC also reserved its right to argue that its property is exempt from seizure under territorial law.
The creditors called the motion “merely a transparent attempt to kick the can down the road,” noting VIGHHFC’s public admissions that it failed to make the payments. They wrote that they “can and will refile suit, if necessary, and obtain an even larger judgment,” as interest continues to accrue, and said they will respond to the motion’s arguments separately.
The legal argument:
The territorial law at issue, 19 V.I.C. § 245b, exempts all VIGHHFC property, including funds, from judicial processes such as attachment, levy, and execution. But it includes an exception that preserves creditors’ right to “foreclose or otherwise enforce any mortgage or other security of the corporation” and to enforce “any lien or pledge given by the corporation upon its revenues.”
The creditors argue that exception applies. As security for the lease payments, they wrote, VIGHHFC gave VFI KR SPE I LLC a lien on “any and all” of VIGHHFC’s and JFL’s “goods, chattels, fixtures, equipment, assets, accounts receivable, contract rights, general intangibles and property of every kind wherever located.” The lien was recorded in a Uniform Commercial Code financing statement filed with the Office of the Lieutenant Governor on May 7, 2024, a copy of which is attached to the brief.
The brief argues the statute’s language is “plain and unambiguous,” and compares it to the laws covering the Virgin Islands government, whose property is fully exempt from execution, and the Virgin Islands Water and Power Authority, whose exception covers only bondholders. The broader wording for VIGHHFC shows lawmakers intended to allow more expansive recovery, the creditors argue.
In a footnote, the creditors wrote that if lenders cannot recover against assets VIGHHFC specifically pledges, the corporation “will functionally lose its ability to independently borrow from banks and other financing sources.”
The creditors asked the court to issue a writ of execution against all of VIGHHFC’s assets as well as JFL’s operating equipment.
The brief was filed by Attorney Lisa Michelle Komives, of Dudley Newman Feuerzeig LLP.
Background on the judgment:
The judgment was entered September 22 by U.S. District Judge Brandy McMillion, of the Eastern District of Michigan, after VIGHHFC and JFL failed to answer the lawsuit or appear at a September 21 hearing. It awarded the creditors $6,357,600, with interest of 13% a year, plus $22,250 in attorney fees and $2,388.88 in costs.
The judgment ordered the defendants to return the equipment within 30 days, foreclosed the creditors’ all-asset lien, and stated that the creditors are entitled to immediate possession of the assets. The money judgment is to be reduced by the resale value of any equipment returned or seized. The creditors wrote Friday that VIGHHFC has not returned the equipment.
The equipment at issue includes sterilization systems, Intensive Care Unit and birthing beds, ventilators, patient monitors, laboratory analyzers, operating room equipment, neonatal incubators, and a 75-kilowatt generator, according to the Michigan complaint.
That complaint alleged the hospital did not pay the full rent of $149,400 for November 2025 and made no payments from December 2025 through February and failed to provide required financial statements for fiscal years 2021 through 2025.
In his October 29 order, Molloy also noted in a footnote that it is unsettled whether VIGHHFC is an alter ego of the Virgin Islands government, which could affect whether the Michigan court had jurisdiction based on diversity of citizenship. He said the issue would be better resolved in a court proceeding where both sides could present their arguments.
