Comphealth, Inc. v. Highland View Outpatient Surgical Center , 240 Mont. 366 ( 1989 )

No. 89-150
IN THE SUPREME COURT OF THE STATE OF MONTANA
1989
COMPHEALTH, INC.,
Plaintiff and Appellant,
-VS-
HIGHLAND VIEW OUTPATIENT SURGICAL
CENTER, a Montana corporation,
Defendant and Respondent.
APPEAL FROM: ~ i s t r i c tCourt of the Second Judicial ~istrict,
In and for the County of Silver Bow,
The Honorable Arnold Olsen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Larry Jent, Bozeman, Montana
For Respondent:
Leonard J. Haxby, Butte, Montana
Submitted on ~ r i e f s : Aug. 10, 1989
Decided: December 22, 1989
r-
Filed: m
Justice William E. Hunt, Sr., delivered the Opinion of the
Court.
plaintiff and appellant, Comphealth, Inc., brought this
breach of contract action against defendant, Highland vie67
Outpatient Surgical Center. Following a bench trial, the
District Court of the Second Judicial District, Silver Bow
County, found in favor of the defendant. From this judgment,
plaintiff appeals. We affirm.
The following issue is dispositive of the appeal:
Did defendant breach the contract between the parties by
giving oral notice of its intent to cancel when the agreement
required 30 days written notice of termination?
Defendant, a Montana corporation, is a freestanding
outpatient surgical center located in Butte. In late June,
1984, it entered into a contract with plaintiff, a Utah
corporation, in which plaintiff agreed to provide a locum
tenens (substitute) physician acceptable to defendant at a
rate of $2,950 per week for a period from July 30, 1984 to
August 27, 1984. The contract included a cancellation
clause, which granted defendant the right to terminate the
agreement by giving 30 days written notice. The clause
provided that failure to give the required notice would
result in liquidated damages.
At the time the parties entered into the contract,
defendant was in the process of constructing the surgical
center building. Defendant anticipated that the center would
open on July 30, 1984. Thus, the parties agreed that the
contract would commence on that date. However, on July 10,
1984, defendant notified plaintiff that the center's opening
would be delayed due to a plumbers' strike in the Butte area.
plaintiff consented to postpone the commencement of the
contract. A new contractual period was never agreed upon by
the parties.
On the day after it learned of the plumbers' strike,
plaintiff mailed to defendant the curricula vitae of two
anesthesiologists. One, Dr. Tilby, was available for the
anticipated term of the contract. The other, Dr. Plon, was
unavailable for the initial contractual period. Plaintiff
submitted Dr. Plon's statistics, however, in the event the
assignment extended longer than anticipated or in case Dr.
Plon would fit defendant's needs better than Dr. Tilby.
The parties dispute whether defendant ever accepted Dr.
Tilby. plaintiff's agent, Sharon Thompson, testified that
Dr. St. John, the president of defendant corporation, had
indicated that Dr. ~ i l b y would be acceptable and that
plaintiff should plan to send him to work when the center was
completed. Dr. Tilby also testified that plaintiff had
informed him that he was to fill the temporary position.
Dr. St. John, on the other hand, testified that he had
never accepted Dr. ~ i l b y because ~ i l b y ' s file did not
satisfactorily explain why his hospital privileges had been
temporarily suspended in 1981. The ~istrictCourt found that
defendant had never accepted the physician.
In late July or early August, 1984, Dr. St. John
notified plaintiff by telephone that the defendant would no
longer need plaintiff 's services because it had hired a
permanent anesthesiologist. Defendant did not follow up this
phone conversation with written notice of cancellation.
On November 28, 1984, plaintiff filed this action,
alleging that defendant had breached the contract by failing
to give adequate notice of cancellation and failing to pay
liquidated damages as provided in the contract. On December
1, 1988, trial was held before the ~istrict Court, sitting
without a jury. The court heard the testimony of Dr. St.
John and accepted the depositions of Ms. Thompson and Dr.
Tilby. On December 29, 1988, the ~istrict Court issued
findings fact and conclusions law. The court found
that defendant had not breached the contract but had
terminated the agreement in an appropriate and timely
fashion. The court further found that plaintiff had not
suffered any damages. Plaintiff appealed to this Court.
On appeal, plaintiff raises several issues, including
whether the ~istrict Court applied the correct law in
determining the enforceability of liquidated damages, whether
the District Court correctly determined the nature of the
contract, and whether defendant had actually accepted the
physician offered by plaintiff. We need not answer these
questions, however, because our conclusion that the defendant
adequately complied with the cancellation provisions in the
contract effectively disposes of the appeal.
Plaintiff argues that defendant's method of cancelling
the contract was both untimely and procedurally improper and,
therefore, triggered the agreement's liquidated damages
clause. We do not agree.
Substantial credible evidence supports the District
Court ' s finding that defendant gave adeq.uate, timely notice
of cancellation. The District Court found:
6. [Tlhere was a thirty-day cancellation of the
contract and based upon the testimony of Dr. Tilby
and Dr. St. John, the Plaintiff was advised in late
July or the first week in August, that Defendant
was no longer in need of the services of the
Plaintiff, that since they had not found a suitable
physician, that the Defendant had found a physician
of its own and had no further need for the services
of the Plaintiff. Since the surgery center did not
open until September 14, 1984, the notice was given
more than thirty days in advance of any need for a
physician. Although this notice was not in
writing, the overwhelming testimony reveals that no
further search was made by the plaintiff after that
date. The contract was in fact cancelled in late
July or the first week of August, 1984, in
substantial compliance with the agreement.
In addition, we note that, due to the uncertainty
created by the plumbers' strike, the intitial contractual
period had been postponed and a new commencement date for the
performance of the contract had not been agreed upon by the
parties. Under the particular facts of this case, where at
the time of cancellation a specific performance period had
not been agreed upon by the parties and where notice was
actually given more than 30 days prior to any possible
performance date, defendant gave timely notice of termination
of the contract.
Furthermore, even though defendant gave oral rather than
written notice of cancellation, the notice was procedurally
adequate. plaintiff does not now contest, nor has it ever
contested, that it did not receive oral notice of
cancellation. Plaintiff accepted the notice and took no
further action in reliance upon the contract. In fact,
shortly after defendant's telephone call, plaintiff notified
Dr. Tilby that he would not be filling the anesthesiologist
position.
The present case can be distinguished from our earlier
decision, Tomsheck v. Doran (1953), 126 Mont. 598, 256 P.2d
538, where we stated that exact compliance with contractual
terms regarding notice of cancellation is an essential
prerequisite to cancellation. Unlike the present case, the
plaintiff in Tomsheck did not substantially comply with the
terms of the cancellation provision. Although the Tomsheck
contract required a one-year notice of cancellation, the
plaintiff instituted a suit for rescission of the contract.
only one day after he delivered the termination notice to
defendant. Moreover, in Tomsheck substantial prejudice to
the non-cancelling defendant in the form of forfeiture of
land would have resulted had we failed to hold plaintiff
strictly to the terms of the contract.
In the present case, defendant substantially complied
with the terms governing notice o f cancellation. Therefore,
the District Court did not err in finding that defendant did
not breach the contract and in refusing to award liquidated
damages.
~f firmed.
b7e concur:
4,/4. 4 7
c -
Chlef Justice