Acute Care Holdings, LLC v. Houston County, Tennessee ( 2019 )

06/03/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
March 7, 2019 Session
ACUTE CARE HOLDINGS, LLC V. HOUSTON COUNTY, TENNESSEE
Appeal from the Chancery Court for Houston County
No. 2014-CV-434 David D. Wolfe, Chancellor
No. M2018-01534-COA-R3-CV
This appeal arises from an action filed by a healthcare management company against a
county for breach of contract and unjust enrichment. The dispute centered on a
financially distressed hospital, which the county wanted to purchase and lease to the
healthcare company to manage. Thus, the county, the hospital, and the healthcare
management company entered into a Letter of Intent to accomplish this goal. The Letter
of Intent provided that the healthcare management company would loan funds to the
owner of the hospital to keep the hospital operating while the county negotiated the asset
purchase agreement. If the purchase of the hospital closed by the agreed-upon deadline,
the county agreed to repay the healthcare management company for the amount loaned;
however, if the purchase of the hospital did not close by the deadline, the county was not
obligated to repay the loans to the hospital. After the asset purchase agreement did not
close by the deadline set in the Letter of Intent, the county purchased the hospital and
awarded the contract to manage the hospital to a company owned by the county’s
attorneys and refused to pay the healthcare management company the more than $1.2
million it loaned the hospital. Thereafter, the healthcare management company filed this
action against the county for breach of contract and unjust enrichment. In its answer, the
county denied breaching the contract because of the failure of the condition precedent,
that the purchase of the hospital close by the agreed-upon deadline. Thereafter, the
county filed a motion for summary judgment on the same ground and also moved to
summarily dismiss the unjust enrichment claim because the Letter of Intent, which was
an enforceable contract, precluded the claim. The healthcare management company
responded by presenting evidence indicating that the county failed to act in good faith to
close on the purchase of the hospital by the deadline in order to avoid its obligations to
the healthcare management company. It also contended that its claim of unjust
enrichment should not be dismissed unless the court determined that the Letter of Intent
was an enforceable contract. The trial court summarily dismissed both claims on the
finding the evidence was not sufficient to create a genuine dispute of material fact as to
either claim. Having determined that the evidence was sufficient, we reverse and remand
this case to the trial court for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Reversed and Remanded
FRANK G. CLEMENT JR., P.J., M.S., delivered the opinion of the Court, in which ANDY D.
BENNETT and RICHARD H. DINKINS, JJ., joined.
Robert E. Boston, Tera Rica Murdock, and Taylor J. Askew, Nashville, Tennessee, for
the appellant, Acute Care Holdings, LLC.
Samuel P. Funk and Michael R. O’Neill, Nashville, Tennessee, for the appellee, Houston
County, Tennessee.
OPINION
By the fall of 2001, the only hospital in Houston County, Patient’s Choice Medical
Center (“PCMC”), was in financial distress and in danger of closing its doors. Although
the hospital had just recently obtained certification as a “Critical Access Medical
Center,”1 which would likely provide for a better financial future, but not in the
immediate future, PCMC lacked the capital or revenue to continue operating long enough
to benefit from the new certification. Because PCMC was Houston County’s third largest
employer and a critical provider of medical services to the community, in order to
prevent the closure of the hospital, Houston County sought to purchase the hospital from
PCMC and then lease it to a hospital management company.
Around the same time, Acute Care Holdings, LLC (“Acute Care”), which operated
a nursing facility in Houston County, also considered buying PCMC but determined that
it was not feasible to do so. Nevertheless, its inquiry into the matter ultimately resulted in
the execution of a Letter of Intent among Houston County, Acute Care, and PCMC
pursuant to which Houston County would endeavor to negotiate an asset purchase
agreement with PCMC to purchase the hospital and its assets and then lease the hospital
to Acute Care, which would manage the hospital.
The Letter of Intent, which was executed on February 29, 2012, established the
conditions by which Acute Care agreed to loan funds to PCMC to sustain the hospital’s
operations while Houston County and PCMC negotiated an asset purchase agreement. In
pertinent part, the Letter of Intent provided:
1
The certification would allow the hospital to receive cost-based reimbursement from Medicare,
rather than being bound by fixed-reimbursement rates.
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As of March 1, 2012, [Acute Care] . . . and [PCMC] shall enter into an
interim management agreement for the [PCMC] facility . . . wherein [Acute
Care] agrees to assume operational authority and control of the Facility
under [PCMC’s] provider number and license, to the extent permitted by
law, and to provide funding for certain improvements and operational
expenses, to be reimbursed at a later date by [Houston County] to [Acute
Care] if and when the Closing occurs. [PCMC] shall execute one or more
promissory notes . . . for all expenses paid by [Acute Care] for operation of
the Facility in excess of the Facility’s revenue during the interim
management period, evidencing [PCMC’s] obligation to repay such
expenses in the event the closing does not occur.
(Emphasis added).
The Letter of Intent further provided that once Houston County purchased the
hospital, Houston County would lease the assets to Acute Care to operate and manage,
stating:
Lease. As of the Closing, [Houston County] and [Acute Care] shall enter
into a lease of the Assets (“Lease”) containing the following terms:
a. Term: 5 years, with six, five year renewal options, with lessee right to
terminate early with notice in the event of a regulatory change
materially and adversely affecting the operations of the facility.
b. Rent: building rental shall be based on fair market value.
c. Purchase option: [Acute Care] shall have the option to purchase the
leased property at the end of the initial lease term and each renewal term
thereafter for fair market value.
d. Capital Expenditures: [Houston County] shall be responsible for
payment of the expenses set forth on Exhibit “C” attached hereto.
e. Charitable care: [Houston County] acknowledges and agrees that the
provision of charitable care to the Erin community is a desired and
valuable service, and therefore agrees to reimburse [Acute Care] on a
monthly basis for such charitable care and bad debt.
The Letter of Intent also provided a due diligence period whereby Acute Care
would inspect PCMC’s assets. The Letter of Intent also clarified the parties’ obligations
to one another when the Letter of Intent was canceled or expired:
[Acute Care] shall have 30 days from the date of this Letter of Intent (“Due
Diligence Period”) to fully inspect the Assets and, at its discretion, proceed
with, or cancel the transaction. If canceled, no party shall have any further
obligations to the others, except for the repayment of any promissory
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note(s) signed by [PCMC] in favor of [Acute Care] for funds expended by
[Acute Care] for payment of improvements and operating expenses during
the interim management period. Unless [Acute Care], in its sole discretion,
gives [PCMC] notice that it waives its rights to cancel the transaction, the
transaction shall be deemed canceled at the end of the Inspection Period.
Based on the agreement, if Houston County closed on the purchase of the hospital
within the agreed-upon deadline, Houston County would assume PCMC’s obligations to
Acute Care on the loans that kept the hospital in business. If, however, the purchase did
not close in accordance with the Letter of Intent, Houston County would have no
financial obligations to Acute Care.
Acting pursuant to the Letter of Intent, Acute Care periodically loaned PCMC the
funds it needed to operate the hospital while Houston County and PCMC negotiated the
asset purchase agreement. When Houston County and PCMC were unable to reach an
agreement by the initial deadline, Acute Care, Houston County, and PCMC executed
amendments to the Letter of Intent that extended the deadline to December 31, 2012, all
the while Acute Care continued to financially support PCMC. As each loan was made,
PCMC’s president, Ray Shoemaker, executed promissory notes to memorialize its debt to
Acute Care.
By November 25, 2012, Houston County still had not closed on the purchase of
the hospital. Thus, Acute Care sent Houston County a new proposed Letter of Intent
which provided that Acute Care would “continue to manage the Hospital pursuant to the
existing interim management agreement . . . until the County acquires the Hospital, but in
no event beyond January 10, 2013.” It further provided that Houston County would
execute a promissory note in Acute Care’s favor to cover the cost of PCMC’s November
payroll. Houston County rejected the proposal.
Houston County did not close on the purchase of the hospital by the December 31
deadline; however, Houston County and PCMC executed a purchase agreement in March
2013, by which Houston County would not assume any of PCMC’s liabilities.
Additionally, instead of awarding the management contract to Acute Care, Houston
County awarded the hospital management contract to an entity owned by the County’s
attorneys. Thereafter, Houston County refused to reimburse Acute Care for the money it
expended to keep the hospital in business during negotiations.
On November 10, 2014, Acute Care filed a complaint for breach of contract and
unjust enrichment in Houston County Chancery Court, alleging Houston County was
liable to Acute Care for the more than $1.2 million Acute Care expended during the
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interim management period.2 In its answer, Houston County denied the allegations and
asserted a number of affirmative defenses, including the failure of a condition precedent.
Houston County filed a motion for summary judgment on November 16, 2017,
wherein it contended that the County was not obligated to reimburse Acute Care because
it was undisputed the closing did not occur pursuant to the Letter of Intent; thus, Acute
Care’s only recourse was to seek reimbursement from PCMC or its president Ray
Shoemaker.3 Houston County also sought dismissal of the claim for unjust enrichment
because that claim only applied when the parties did not have an enforceable contract,
and it was undisputed that the parties had an enforceable contract.
In its response to the motion for summary judgment, Acute Care agreed that the
purchase of the hospital did not close pursuant to the Letter of Intent, which was a
condition precedent to Houston County’s obligation to perform. However, Acute Care
argued that the non-occurrence of a condition precedent is excused when the defendant
prevents the condition from occurring. Acute Care alleged that Houston County’s failure
to negotiate an asset purchase agreement pursuant to the Letter of Intent was calculated to
avoid the County’s obligations to Acute Care, and it asked the trial court for additional
time to conduct discovery so it could present evidence supporting that allegation. The
court granted the continuance, and after taking additional discovery, Acute Care filed a
supplemental response to Houston County’s motion for summary judgment.
First, Acute Care contended that PCMC and Houston County reached an
agreement for the purchase of the hospital as early as September 2012, well before the
December 31 deadline, but the Mayor of Houston County failed to sign the agreement.
As evidence, Acute Care submitted a resolution of the Houston County Board of
Commissioners dated September 17, 2012, which acknowledged that the Commissioners
reviewed Houston County’s asset purchase agreement with PCMC and its management
agreement with Acute Care and approved the agreements “in all particulars.” The
Commissioners then ordered the Mayor and County Clerk of Houston County “to
execute, acknowledge, and deliver” the agreements on behalf of the County.
As further support, Acute Care submitted an email exchange, dated October 16
and 18, 2012, between Cindy Barnett, an attorney for Houston County, and a loan
representative from the United States Department of Agriculture (“USDA”). The emails
showed that Houston County had obtained a USDA loan to purchase the hospital and to
reimburse Acute Care. In an email dated October 16, Ms. Barnett sent the USDA
representative the asset purchase agreement, the management agreement, and the
2
Plaintiff also asserted a claim for promissory estoppel but that claim is not the subject of this
appeal.
3
By this time, Ray Shoemaker was incarcerated in a federal prison for Medicare fraud.
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Commissioners’ resolution and indicated that the parties had agreed on all material terms,
and they were ready to close on the purchase of the hospital. Acute Care also submitted
the meeting notes from the December 6, 2012 meeting of the Houston County Board of
Commissioners wherein the Commissioners approved the management agreement with
Acute Care and directed the Mayor to execute the agreement.
For its part, Houston County presented evidence to refute the claim that it had
reached an agreement with PCMC before the December 31, 2012 deadline. Supporting its
contention, Houston County submitted the asset purchase agreement approved by the
Commissioners on September 17, 2012, and noted that the agreement was missing the
purchase price. Houston County argued that the Commissioners had approved a “form”
of an asset purchase agreement but not the agreement itself because Houston County and
PCMC had not settled on the material terms and did not come to an agreement on the
material terms until March 2013. Houston County also submitted emails between Ms.
Barnett and PCMC representatives sent in October 2012, showing that PCMC was not
satisfied with the Commissioner-approved asset purchase agreement.
After a hearing on June 11, 2018, the trial court summarily dismissed Acute
Care’s breach of contract claim, ruling in pertinent part:
While [Acute Care] argues that Houston County actually reached an
agreement on an [asset purchase agreement] with PCMC and a
management agreement with [Acute Care] but the county mayor refused to
execute them, the plaintiff has not submitted any evidence which actually
establishes that allegation. By contrast, Houston County submitted copies
of the form of an [asset purchase agreement] and form of a management
agreement adopted by the county commission, however those forms were
incomplete in material terms . . . . The terms of the [Letter of Intent] made
Houston County liable only if and when Houston County and PCMC
reached an asset purchase agreement. That requirement never took place
and therefore the breach of contract claim cannot be successful.
The trial court also granted Houston County’s motion to summarily dismiss Acute Care’s
unjust enrichment claim, ruling that “a plaintiff cannot recover [on] an unjust enrichment
claim where there is a valid contract, and it is undisputed that the [Letter of Intent]
constituted a valid contract . . . .” This appeal followed.
STANDARD OF REVIEW
This court reviews a trial court’s decision on a motion for summary judgment de
novo without a presumption of correctness. Rye v. Women’s Care Ctr. of Memphis,
MPLLC, 477 S.W.3d 235, 250 (Tenn. 2015). Accordingly, this court must make a fresh
determination of whether the requirements of Tenn. R. Civ. P. 56 have been satisfied. Id.;
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Hunter v. Brown, 955 S.W.2d 49, 50 (Tenn. 1997). In so doing, we consider the evidence
in the light most favorable to the nonmoving party and draw all reasonable inferences in
that party’s favor. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn. 2002).
Summary judgment should be granted when “the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Tenn. R. Civ. P. 56.04. When a defendant moves for
summary judgment based on an affirmative defense such as failure of a condition
precedent, the defendant must establish the elements of the affirmative defense before the
burden shifts to the nonmovant. See Carr v. Borchers, 815 S.W.2d 528, 532 (Tenn. Ct.
App. 1991).
When a motion for summary judgment is made and supported as provided in
Tenn. R. Civ. P. 56, the nonmoving party may not rest on the allegations or denials in its
pleadings. Tenn. R. Civ. P. 56.06. Instead, the nonmoving party must respond with
specific facts showing that there is a genuine issue for trial. Id. A fact is material “if it
must be decided in order to resolve the substantive claim or defense at which the motion
is directed.” Byrd v. Hall, 847 S.W.2d 208, 215 (Tenn. 1993). A “genuine issue” exists if
“a reasonable jury could legitimately resolve that fact in favor of one side or the other.”
Id.
ANALYSIS
We have determined that the dispositive issue concerning Acute Care’s breach of
contract claim is whether there is a genuine dispute of material fact that Houston County
acted in good faith in negotiating an asset purchase agreement with PCMC by the
deadline.
As for Acute Care’s unjust enrichment claim, the dispositive issue is whether the
Letter of Intent, as amended, constitutes an enforceable agreement between Houston
County and Acute Care. We will consider each claim in turn.
I. BREACH OF CONTRACT
A claim for breach of contract requires an enforceable contract, nonperformance
amounting to a breach of the contract, and damages caused by the breach. ARC LifeMed,
Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005). Parties “are
generally free to impose whatever conditions they may choose on . . . the performance of
their contractual undertakings, and the performance or occurrence of these conditions is
essential before they become obligated under the agreement.” 13 Richard A. Lord,
Williston on Contracts § 38:2 (4th ed.) (footnote omitted); see Covington v. Robinson,
723 S.W.2d 643, 645 (Tenn. Ct. App. 1986). Therefore, failure of a condition precedent
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is an affirmative defense that, if proven, will defeat the plaintiff’s claim for breach of
contract. See Harlan v. Hardaway, 796 S.W.2d 953, 957 (Tenn. Ct. App. 1990); see also
Branch Banking & Tr. Co. v. Hill, No. E2018-00232-COA-R3-CV, 2019 WL 993441, at
*9 (Tenn. Ct. App. Feb. 28, 2019). However, as explained by this court:
Where a duty of one party to a contract is subject to the occurrence of a
condition, the additional duty of good faith and fair dealing imposed on him
may require some cooperation on his part, either by refraining from conduct
that will prevent or hinder the occurrence of that condition or by taking
affirmative steps to cause its occurrence; non-performance of that duty
when performance is due is a breach, and that has the further effect of
excusing the non-occurrence of the condition itself, so that performance of
the duty that was originally subject to its occurrence can become due in
spite of its non-occurrence.
German v. Ford, 300 S.W.3d 692, 707 (Tenn. Ct. App. 2009) (quoting 13 Richard A.
Lord, Williston on Contracts § 38:11 (4th ed. Supp. 2008)).
In its motion for summary judgment, Houston County contended that its
contractual obligation to reimburse Acute Care was conditioned on Houston County’s
ability to negotiate an asset purchase agreement with PCMC and close by December 31,
2012. It further contended that the closing did not occur pursuant to the contract, and
therefore, it had no obligation to perform. Houston County’s contentions were not
disputed; therefore, Houston County met its burden to show, at the summary judgment
stage, that the facts establishing its affirmative defense were not in dispute.
In its supplemental response to Houston County’s motion, Acute Care claimed
that it was disputed whether Houston County actually reached an agreement before the
deadline but prevented the closing from occurring to avoid its obligations to Acute Care.
Under Tennessee law, if Houston County prevented the condition from occurring, then
Houston County was liable for breach. See id. Therefore, we examine the evidence
presented by both parties in a light most favorable to Acute Care to determine if a
reasonable trier of fact could find in favor of Acute Care on this issue.
In support of its statement of disputed facts, Acute Care presented the September
17, 2012 resolution passed by the Houston County Board of Commissioners approving
the asset purchase agreement and Houston County’s management agreement with Acute
Care, which stated in pertinent part:
WHEREAS, the County hereby finds and determines that it is necessary
and desirable for the County to enter into that certain Asset Purchase
Agreement by and among the County, Patients’ Choice Medical Center of
Erin Tennessee LLC and Ray Shoemaker;
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WHEREAS, the County hereby finds and determines that it is necessary
and desirable for the County to enter into that certain Management
Agreement by and between the County and Acute Care Holdings LLC;
SECTION 1. Approval of the Asset Purchase Agreement. The form,
content, and provisions of the Asset Purchase Agreement, as presented to
this meeting of the Board of Commissioners of the County, are in all
particulars approved, and the Mayor and the County Clerk are hereby
authorized, empowered, and directed to execute, acknowledge, and deliver
said Asset Purchase Agreement in the name, and on behalf, of the County.
SECTION 2. Approval of the Management Agreement. The form, content,
and provisions of the Management Agreement, as presented to this meeting
of the Board of Commissioners of the County, are in all particulars
approved, and the Mayor and County Clerk are hereby authorized,
empowered, and directed to execute, acknowledge, and deliver said
Management Agreement in the name, and on behalf, of the County.
(Emphasis added).
Although this resolution shows that the Commissioners reviewed Houston
County’s agreements with PCMC and Acute Care and approved the agreements “in all
particulars,” Houston County insists the resolution merely approved “draft documents”
that were missing a material term, the purchase price. However, the County’s position is
undermined by the clear directive, which authorized the Mayor and County Clerk of
Houston County “to execute, acknowledge, and deliver” the agreements on behalf of the
County.
Furthermore, Acute Care relies on an email from October 16, 2012, in which Ms.
Barnett, attorney for Houston County, sent the asset purchase agreement, the
management agreement, and the Commissioners’ resolution to a USDA loan
representative, writing:
Attached is a copy of the signed Resolution adopted by the Houston County
Commission last night authorizing the execution of the Asset Purchase
Agreement and the Management Agreement in connection with the
Hospital purchase . . . Please let Markley or me know what else you need to
process this for closing.
Then, on October 18, 2012, when the USDA representative noted that the asset purchase
agreement did not have a purchase price, Ms. Barnett responded:
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Yes, it is the parties’ intentions that the USDA Loan be applied to retire all
existing lien indebtedness (appearing on the title commitment), as well as to
reimbursement of the management company, to the extent of payments
advanced for accounts payable (with supporting documentation).
. . .
None of these numbers can be finalized until we set a firm closing/funding
date. Then we can request a formal payoff letter.
In other words, the Seller is expecting the purchase price to be equal to
the amount necessary to pay the liabilities on the Seller’s balance sheet.
So yes, the purchase price will be that number. Funds available for
renovations to the hospital, and other reserved funds are not going to the
Seller. The Seller is not receiving any cash.
(Emphasis added).
Acute Care insists this email proves that Houston County and PCMC had agreed
upon the purchase price because they had agreed upon the method for calculating the
purchase price and, thus, the county had an enforceable contract to purchase the hospital
before the deadline expired. As we explained in previous cases, “where price is the
unspecified material term, courts have enforced contracts that call for the price to be set
by vague but ascertainable standards . . . .” Abbott v. Abbott, No. E2015-01233-COA-R3-
CV, 2016 WL 3976760, at *5 (Tenn. Ct. App. Jul. 20, 2016) (quoting Huber v. Calloway,
No. M2005-00897-COA-R3-CV, 2007 WL 2089753, at *5 (Tenn. Ct. App. Jul. 12,
2007)).
Considering the foregoing facts in a light most favorable to Acute Care, a
reasonable finder of fact could infer that all material terms of the asset purchase
agreement had been agreed upon as early as October 18, 2012. Therefore, the Mayor and
County Clerk of Houston County could have proceeded “to execute, acknowledge, and
deliver” the asset purchase agreement as previously authorized by the Board of
Commissioners.
Acute Care also contends it was disputed as to why Houston County failed to sign
the asset purchase agreement by December 31. Acute Care contended that Houston
County acted in bad faith because its failure to sign the agreements was calculated to
avoid its obligation to both reimburse Acute Care and award the management contract to
Acute Care. Pursuant to the plain terms of the Letter of Intent, if the purchase of PCMC
closed pursuant to the Letter of Intent, Houston County was required to lease the assets of
PCMC to Acute Care—“As of the Closing, [Houston County] and [Acute Care] shall
enter into a lease of the Assets . . . .” (Emphasis added). Ultimately, because the purchase
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of the hospital did not close in accordance with the Letter of Intent, Houston County was
free to award the management contract to a company owned by Houston County’s
attorneys, Tim Gary and John Griffin.
As evidence of the County’s bad faith, Acute Care submitted an October 2012
email, redacted by Houston County, from Mr. Griffin to Mr. Gary stating: “Attached are
both documents with updates. Let me know if you need to add anything else. If this looks
like it is moving forward, I would like to get together and discuss the overall management
company concept.” When deposed, the Mayor of Houston County could not confirm or
deny that Houston County had begun discussions with Mr. Griffin and Mr. Gary as early
as October 2012 about forming a separate entity to manage PCMC:
Q. Did you have discussions with Mr. Griffin or Mr. Gary in or around
October of 2012 about getting together with them to discuss the overall
management-company concept?
A. I don’t remember.
Q. Who is Mr. Gary?
A. Tim Gary was an attorney.
Q. He was your attorney?
A. He was an attorney for the county up at the hospital.
Q. After [Acute Care] is no longer involved in the particular transaction,
did Mr. Griffin and Mr. Gary end up in—an entity they have ownership
interest or control, operating the hospital?
A. The—I think that’s what Franklin Management ended up being.
Considering the foregoing facts in a light most favorable to Acute Care, a
reasonable finder of fact could infer that the October email represented the start of
negotiations to award Franklin Healthcare Management, instead of Acute Care, the
hospital management contract.
Based on the foregoing and other evidence in the record, there is a genuine dispute
of material fact concerning whether Houston County acted in good faith in negotiating an
asset purchase agreement with PCMC and in closing on the purchase of the hospital by
the deadline, either by refraining from conduct that would prevent or hinder the
occurrence of the condition precedent or by taking affirmative steps to cause its
occurrence. Accordingly, Houston County was not entitled to summary judgment on the
claim of breach of contract.4
4
As an alternative theory, Houston County contends that as of December 18, 2012, Acute Care
withdrew from the Letter of Intent and terminated all obligations therein, including Houston County’s
obligations to reimburse Acute Care. As evidence, Houston County submitted a letter written by Acute
Care’s CEO to Houston County’s Mayor and Commissioners on December 18, 2012, in which, counsel
(continued…)
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II. UNJUST ENRICHMENT
The trial court summarily dismissed Acute Care’s unjust enrichment claim on the
basis that “a plaintiff cannot recover [on] an unjust enrichment claim where there is a
valid contract, and it is undisputed that the [Letter of Intent] constituted a valid contract .
. . .” Acute Care contends this was in error because whether the April 17, 2012 and July
6, 2012 amendments to the Letter of Intent are enforceable is disputed.
Our courts recognize two types of implied contracts—contracts implied in fact and
contracts implied in law. Freeman Indus., LLC v. Eastman Chem. Co., 172 S.W.3d 512,
524 (Tenn. 2005). “Contracts implied in fact arise under circumstances establishing the
parties’ mutual intention to contract.” Id. However, when there is no mutual intent to
contract, a contract implied in law may arise under various quasi-contractual theories,
including unjust enrichment. Id. at 524–25. Thus, a plaintiff “may assert a claim for
unjust enrichment when the plaintiff does not have a contract with the defendant, or the
contract that the plaintiff has with the defendant is not enforceable or invalid.” Advanced
Sec. Servs. Evaluation & Training, LLC v. OHR Partners Ltd., No. M2017-00249-COA-
R3-CV, 2018 WL 1391626, at *11 (Tenn. Ct. App. Mar. 20, 2018) (citing Freeman, 172
S.W.3d at 524–25).5
Houston County conceded that the Letter of Intent was a valid contract and
admitted that the amendments executed on April 17, 2012, and July 6, 2012, were
“signed” by PCMC, Acute Care, and Houston County.6 However, Houston County never
for Houston County insisted at oral argument that Acute Care formally withdrew from the agreement and
released Houston County of its obligations to reimburse Acute Care. We disagree. We also find it
significant that Acute Care assured Houston County in the December 18 correspondence that it wanted to
participate in “a long-term solution” to ensure the viability of PCMC. Moreover, the following day,
Sandra Adams, Vice President and General Counsel for Acute Care, sent an email to Houston County
attorney Tim Gary stating: “Tim, I have still not heard from you on the management agreement. Could
you please let me know the status?” Thus, we find no merit to the contention that, as of December 18,
2012, Acute Care withdrew from the Letter of Intent and terminated all obligations therein, including
Houston County’s obligations to reimburse Acute Care.
5
To proceed under an unjust enrichment theory, the plaintiff must show: “1) ‘[a] benefit
conferred upon the defendant by the plaintiff’; 2) ‘appreciation by the defendant of such benefit’; and 3)
‘acceptance of such benefit under such circumstances that it would be inequitable for him to retain the
benefit without payment of the value thereof.’” Freeman, 172 S.W.3d at 525 (quoting Paschall’s, Inc. v.
Dozier, 407 S.W.2d 150, 155 (Tenn. 1966)).
6
Houston County’s statement of undisputed facts, reads:
12. PCMC, [Acute Care], and Houston County signed an amendment to the [Letter of
Intent] dated April 17, 2012.
(continued…)
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admitted or conceded that the amendments were valid and enforceable. Stated another
way, the fact that it is undisputed the parties “signed” the amendments was not
tantamount to admitting that the amendments were enforceable. Moreover, Houston
County signed the April amendment “[a]s an acknowledgment only.”
Whether the initial date or the date of December 31, 2012, constitutes the agreed-
upon deadline for closing on the purchase of the hospital is dependent on whether both of
the amendments are valid and enforceable. Therefore, there is a genuine dispute of a
material fact which precludes a finding that an enforceable agreement exists. Because the
trial court based its decision to summarily dismiss Acute Care’s unjust enrichment claim
on the determination that it was “undisputed that the [Letter of Intent] constituted a valid
contract,” we must reverse the dismissal of Acute Care’s unjust enrichment claim.7
IN CONCLUSION
The judgment of the trial court is reversed and remanded for further proceedings
consistent with this opinion. Costs of appeal are assessed against Houston County.
________________________________
FRANK G. CLEMENT JR., P.J., M.S.
14. PCMC, [Acute Care], and Houston County signed an amendment to the [Letter of
Intent] dated July 6, 2012.
7
Houston County also argues that Acute Care’s unjust enrichment claim fails as a matter of law
because it is undisputed that Acute Care conferred a direct benefit on PCMC, and not on Houston County.
However, the Tennessee Supreme Court has held that “a plaintiff need not establish that the defendant
received a direct benefit from the plaintiff. Rather, a plaintiff may recover for unjust enrichment against a
defendant who receives any benefit from the plaintiff if the defendant’s retention of the benefit would be
unjust.” Freeman, 172 S.W.3d at 525 (emphasis in original). Therefore, the County’s argument is without
merit.
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