Samson v. Hartsville Hospital ( 1997 )

BIENVENIDO T. SAMSON, M.D., )
)
Plaintiff/Appellee, )
) Appeal No.
) 01-A-01-9609-CH-00430
VS. )
) Trousdale Chancery
) No. 6243
HARTSVILLE HOSPITAL, INC., )
)
Defendant/Appellant. )
FILED
COURT OF APPEALS OF TENNESSEE March 12, 1997
MIDDLE SECTION AT NASHVILLE
Cecil W. Crowson
Appellate Court Clerk
APPEALED FROM THE CHANCERY COURT OF TROUSDALE COUNTY
AT HARTSVILLE, TENNESSEE
THE HONORABLE C. K. SMITH, CHANCELLOR
EDDIE TAYLOR
DONOHO, TAYLOR & TAYLOR
204 Court Street
P. O. Box 179
Hartsville, Tennessee 37074
Attorney for Plaintiff/Appellee
LUIS C. BUSTAMANTE
J. FORD LITTLE
WOOLF, MCCLANE BRIGHT, ALLEN & CARPENTER
900 S. Gay Street, Suite 900
P. O. Box 900
Knoxville, Tennessee 37901-0900
Attorneys for Defendant/Appellant
REVERSED AND REMANDED
BEN H. CANTRELL, JUDGE
CONCUR:
TODD, P.J., M.S.
KOCH, J.
OPINION
The appellant hospital has asked this court to review the question of
whether Dr. Samson should be required to submit his dispute with the hospital to
binding arbitration after the termination of a contract between them. The hospital
insisted on arbitration, and the doctor chose to pursue his rights through the courts.
The Chancery Court of Trousdale County found that the arbitration clause in the
contract was no longer binding on the doctor, and it enjoined the hospital from
pursuing arbitration. We reverse.
I.
On October 8, 1993, Hartsville Hospital and Dr. Bienvenido Samson
entered into a one year Physician Agreement, whereby the doctor would establish a
practice in Hartsville, and the hospital would provide assistance to him in the form of
advancements of up to $15,000 per month. The purpose of the advancements was
to enable the doctor to meet his operating expenses, and to guarantee a floor under
his income. The agreement also required the doctor to provide the hospital with 60
hours per month of emergency room coverage at no charge.
The agreement contained a provision for repayment of the
advancements after the contract came to an end, and also for forgiveness of that
obligation on a prorated basis if the doctor continued to maintain a practice in
Hartsville. The contract was renewable for one additional year upon the written
approval of both parties.
The termination section gave the parties the right to terminate the
contract without cause upon 60 days written notice, or to terminate it for cause without
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notice, upon certain specified happenings, or upon the “failure of either party to
faithfully and diligently carry out the provisions of this agreement.” Termination of the
agreement by the doctor without cause, or termination by the hospital with cause
would result in all the money that had been advanced to the doctor becoming due and
payable within 30 days.
Another clause involving termination provided as follows:
In the event that either party notifies the other of intent to
terminate the agreement, either party to this agreement may
request binding arbitration to resolve any disagreements, with
the cost of such arbitration being equally shared.
The parties performed in accordance with the terms of the contract, and
continued to perform after October 8, 1994, but neither of them furnished the other
with a written notice of intent to renew.
On August 14, 1995 the hospital was sold. On October 2, 1995 the new
owners of the hospital sent Dr. Samson a notice of their intent to terminate the
agreement with him, and requested reimbursement of the advancements, amounting
to $154,614. The doctor rejected the request on the basis that the termination was
without cause, and that it thus extinguished his obligation to repay the advancements.
Since the parties were unable to resolve their differences, the hospital invoked the
arbitration provisions of the contract.
The doctor then filed a complaint in chancery court for a declaratory
judgment that he was not obligated to repay the advancements and that he was under
no legal obligation to arbitrate the dispute. He also asked the court to enjoin the
hospital from proceeding under the arbitration clause, and he demanded to be paid
$4,350 for emergency room services rendered under the contract. The hospital
responded by filing a motion to stay further court proceedings pending the outcome
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of arbitration. After a hearing on the hospital’s motion, the trial court dismissed it, and
enjoined the hospital from pursuing arbitration. This appeal followed.
II.
This case is before this court by virtue of Tennessee’s Uniform
Arbitration Act, Tenn. Code Ann. § 29-5-301 et seq. The provisions of the Act
encourage the use of agreements to arbitrate by making it easier to enforce such
agreements through the courts.
Tenn. Code Ann. § 29-5-302 reads in pertinent part:
Agreements to submit to arbitration -- Jurisdiction. -- (a)
A written agreement to submit any existing controversy to
arbitration or a provision in a written contract to submit to
arbitration any controversy thereafter arising between the
parties is valid, enforceable and irrevocable save upon such
grounds as exist as law or in equity for the revocation of any
contract . . . .
(b) The making of an agreement described in this section
providing for arbitration in this state confers jurisdiction on the
court to enforce the agreement under this part and to enter
judgment on an award thereunder [Acts 1983, ch. 462, §§
1,17.]
Tenn. Code Ann. § 29-5-303 enables courts to make a summary
determination as to whether a party is entitled to arbitration, upon the application of
a party who can show the kind of agreement described in Tenn. Code Ann. § 29-5-
302 and an opposing party’s refusal to arbitrate. The case before us was initially filed
by the party who refused to arbitrate, rather than by the one who sought arbitration,
but we do not believe that this minor deviation from the procedure described in the
statute impairs the hospital’s rights under the Uniform Arbitration Act.
The right to appeal an adverse ruling on the question of arbitration is
found in Tenn. Code Ann. § 29-5-319:
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Appeal. -- (a) An appeal may be taken from:
(1) An order denying an application to compel
arbitration made under § 29-5-303;
(2) An order granting an application to stay
arbitration made under 29-5-303(b);
...
(b) An appeal shall be taken in the manner and to
the same extent as from orders or judgments in a civil action.
[Acts 1983, ch. 462, §19.]
The statute creates a rare exception to the general rule that a party is
not entitled to appeal a judgment or order to the Court of Appeals unless that order
or judgment is a final one. See Tenn. R. App. P. Rule 3(b).
III.
There is little doubt that had Hartsville Hospital terminated the contract
with Dr. Samson prior to October 8, 1994, then the hospital would have been entitled
to arbitration, despite any objection by Dr. Samson. However, the doctor argued at
trial, as he argues here, that the parties’ failure to execute a written renewal of the
contract eliminated all his obligations under that contract, including the obligation to
submit disputes to arbitration. In the alternative, he argues that his obligations under
the contract were terminated on the date that the hospital was sold, because the sale
rendered the signatories unable to perform in accordance with its provisions.
The appellant argues to the contrary that the contract was still in effect
after October 8, 1994, because both parties continued to perform under it. To uphold
this argument, we would perhaps have to find that the situation is akin to that of a
holdover tenant at the conclusion of a one-year lease. The agreement in such a case
continues on the same terms as before, except that it is converted to a periodic
tenancy or a tenancy at will, which can be terminated by either party upon proper
notice.
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Appellant also argues that Dr. Samson’s complaint contained a binding
judicial admission that the contract remained in effect after the first year. The relevant
portion of the complaint reads as follows:
11. In addition, Dr. Samson performed certain services
pursuant to his agreement with the Defendant for which he
was entitled to compensation which has never been paid.
Specifically, Dr. Samson performed Emergency Room
services at Hartsville Hospital in June, July and August, 1995,
for which he is entitled to agreed and reasonable
compensation in the amount of Four Thousand Three
Hundred Fifty and 00.100 Dollars ($4,350.00).
Appellant further contends that arbitration is appropriate in this case
because of clear legislative and public policy favoring that mode of dispute resolution.
See Buraczynski v. Eyring, 919 S.W.2d 314 (Tenn. 1996). Appellant points out that
at least one previous decision of this court has called for a liberal construction of
arbitration clauses, with all doubts to be resolved in favor of arbitration. See Dewitt
v. Al-Haddad, Appeal No. 89-394-II (Filed April 25, 1990).
IV.
The cardinal rule in interpreting any contract is to determine the intention
of the parties, and to give effect to that intention, consistent with legal principles. Bob
Pearsall Motors v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578 (Tenn. 1975);
Petty v. Sloan, 277 S.W.2d 355, 197 Tenn. 630 (1955). In determining the intent of
the parties, we must look to the contract as a whole, even though we are here called
upon to interpret only one of its clauses. See Cocke County Board of Highway
Commissioners v. Newport Utilities Board, 690 S.W.2d 231 (Tenn. 1985); Aetna
Casualty and Surety Co. v. Woods, 565 S.W.2d 861 (Tenn. 1978).
We hesitate to pretermit any argument that either of the parties may
advance on remand, by ruling that the contract ended on any particular date. It
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appears to us that the notice of termination is not only the triggering event that entitles
either party to request arbitration, but it also may affect the outcome of further
proceedings, as the obligations of the parties may depend on the reasons advanced
for termination.
We must note, however, that the refund the hospital demands is based
upon advancements that arose under the contract, and that the clause which provides
for binding arbitration to resolve “any disagreement” between the parties must of
necessity include disagreements about those advancements. In fact, it appears to us
that the parties contemplated that their respective obligations relative to the
advancements would be the most likely area for disagreements to arise.
We note also that the contract apparently anticipates that such
arbitration may occur after its one year term, and perhaps even several years
afterward, in view of the clause that compels the hospital to reduce the doctor’s
obligation of repayment by $30,000 “for every year that the physician remains in active
practice in the service area following the expiration of the term of this agreement.”
In view of the clear evidence that the parties intended that
disagreements about the repayment of advances be decided by arbitration, and the
uncertainties surrounding the legal effects of the hospital’s purported termination of
the contract on the rights of the parties, we are inclined to reverse the chancellor. Our
decision is reinforced by the public policy argument which we discussed in DeWitt v.
Al-Haddad, supra, as follows:
“. . . case law across the country indicates that it is a well
established principle that arbitration is favored by the state,
Federal and common law. This strong public policy favoring
the arbitration of disputes is reflected in the Uniform
Arbitration Act, which is designed to discourage litigation,
permit a resolution of disputes in a specialized forum
conversant with the issues involved and provide a speedy
resolution of the disputes. Therefore, courts generally
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construe arbitration clauses liberally and resolve any doubts
in favor of arbitration. . . [C]ourts usually give as broad an
interpretation to an arbitration provision as the words and
intentions of the parties, drawn from their expressions, will
warrant.” (citations omitted).
V.
The decision of the trial court is reversed. Remand this cause to the
Chancery Court of Trousdale County for further proceedings consistent with this
opinion. Tax the costs on appeal to the appellee.
________________________________
BEN H. CANTRELL, JUDGE
CONCUR:
_______________________________
HENRY F. TODD, PRESIDING JUDGE
MIDDLE SECTION
_______________________________
WILLIAM C. KOCH, JR., JUDGE
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