Arlington Surgicare Partners, Ltd. D/B/A Baylor Surgicare at Arlington v. CFLS Investments, LLC ( 2015 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-15-00090-CV
ARLINGTON SURGICARE APPELLANTS
PARTNERS, LTD. D/B/A BAYLOR
SURGICARE AT ARLINGTON;
JONATHAN BOND; CAROLYN
EXLEY; BRETT BRODNAX;
ARLINGTON ORTHOPEDIC AND
SPINE HOSPITAL, LLC D/B/A
BAYLOR ORTHOPEDIC AND
SPINE HOSPITAL AT ARLINGTON,
LTD.; BAYLOR HEALTH
SERVICES; USP TEXAS, L.P.; USP
NORTH TEXAS, INC.; UNITED
SURGICAL PARTNERS
INTERNATIONAL, INC.; TEXAS
HEALTH VENTURES GROUP, LLC;
THVG ARLINGTON GP, LLC; AND
TEXAS HEALTH VENTURE
ARLINGTON HOSPITAL, LLC
V.
CFLS INVESTMENTS, LLC; JOE T. APPELLEES
SOUTHERLAND, DPM; RICHARD
ALAN CARTER, DO; JANIS R.
CORNWELL, MD; LINNIE V.
RABJOHN, DPM; JOHN R.
LANDRY, DPM; FROESCHKE
INVESTMENTS, LTD.; ZOEZY 1
SUPERSTAR GP, LLC; THE
WALKER GROUP, LP; WONG
FAMILY HOLDINGS, LLC;
FALLOPIAN DISASTER
HOLDINGS, LP; MATLOCK OB-
GYN ASSOCIATES, PA; AND
DAVID B. GRAYBILL, DO
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FROM THE 352ND DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 352-264845-13
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MEMORANDUM OPINION1
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I. INTRODUCTION
This is a permissive appeal. See Tex. Civ. Prac. & Rem. Code Ann.
§ 51.014(d) (West 2015); Tex. R. App. P. 28.3. We granted Appellants’ petition
to appeal, limiting this permissive appeal to deciding “the issue of the General
Partner’s ability to consent to the Doctor Defendants’ investment in the [Baylor
Orthopedic and Spine Hospital at Arlington] BOSHA under the first sentence of
Section 12.1 of the Partnership Agreement [that] presents a controlling question
of law as to which there is a substantial ground for difference of opinion.”
Because we hold as a matter of law that the first sentence of Section 12.01 of the
Second Amended and Restated Agreement of Limited Partnership (Agreement)
dated July 1, 2007, authorized the General Partner to give written consent to the
1
See Tex. R. App. P. 47.4.
2
Doctor Defendants to invest in BOSHA, we will reverse the trial court’s March 17,
2015 amended order denying Appellants’ summary judgment to the limited extent
that paragraph number 3 of the judgment denies Appellants’ motion for summary
judgment on grounds that are based on Section 12.01 and will remand for further
proceedings consistent with this opinion.
II. PROCEDURAL BACKGROUND
Appellants are BOSHA, Arlington Surgical Center, and various doctors and
entities that are limited partners of Arlington Surgical Center and that
subsequently invested in BOSHA. Appellees are limited partners of Arlington
Surgical Center that did not invest in BOSHA. Appellees sued Appellants in part
for allegedly violating the Agreement by investing in BOSHA. Appellants filed
summary judgment motions asserting, in part, that their investment in BOSHA did
not violate the Agreement because they had obtained the General Partner’s
written consent to acquire an ownership interest in BOSHA per Section 12.1 of
the Agreement. The trial court ruled that “while the [Agreement] gives the
General Partner ‘sole and absolute discretion’ to withhold consent, the
[Agreement] is silent as to the standard which should apply to the giving of
consent,” and therefore the trial court denied “[Appellants’] summary judgment
grounds that are based on the first sentence of Section 12.1 for this reason.”
3
III. SECTION 12.1 OF THE AGREEMENT
Section 12.1 of the Agreement provides, in pertinent part,
12.1 Offer of Participation. Each Limited Partner (other than
the General Partner as to any Limited Partner Units it may own)
agrees that . . . neither the Limited Partner nor any of its Affiliates
shall, directly or indirectly, without the prior written consent of the
General Partner, which consent may be withheld in its sole and
absolute discretion, acquire an ownership interest in or participate
in the management of any (i) ambulatory surgery center or other
licensed health care facility at which ambulatory surgery is
performed, or (ii) short stay hospital which is identified by patient
stays of three days or less located within fifteen (15) miles of the
Center for so long as the Limited Partner is a Limited Partner and for
a one (1) year period following the termination of such Limited
Partner’s status as Partner . . . . [Emphasis added.]
IV. STANDARD OF REVIEW
When construing contracts and other written instruments, our primary
concern is to ascertain the true intent of the parties as expressed in the
instrument. See NP Anderson Cotton Exch., L.P. v. Potter, 230 S.W.3d 457, 463
(Tex. App.—Fort Worth 2007, no pet.). Language used by parties in a contract
should be accorded its plain, grammatical meaning unless it definitely appears
that the parties’ intention would thereby be defeated. Reilly v. Rangers Mgmt.,
Inc., 727 S.W.2d 527, 529 (Tex. 1987); Coker v. Coker, 650 S.W.2d 391, 393
(Tex. 1983). A contract cannot be interpreted in a way that renders any words or
phrases meaningless or in a way that leads to an absurd result. Seagull Energy
E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006); Pavecon,
Inc. v. R-Com, Inc., 159 S.W.3d 219, 222 (Tex. App.—Fort Worth 2005, no pet.).
All of the contractual provisions must be considered with reference to the whole
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instrument. Coker, 650 S.W.2d at 393. If, after the pertinent rules of
construction are applied, the contract can be given a definite or certain legal
meaning, it is unambiguous, and we construe it as a matter of law. Frost Nat’l
Bank v. L & F Distrib., Ltd., 165 S.W.3d 310, 312 (Tex. 2005); Fort Worth Transp.
Auth. v. Thomas, 303 S.W.3d 850, 857–58 (Tex. App.—Fort Worth 2009, pet.
denied). The construction of an unambiguous contract is a question of law for
the court, which is considered under a de novo standard of review. See Tawes
v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011).
V. APPLICATION OF THE LAW TO THE FACTS
Appellants’ sole issue in its petition for permission to appeal is whether
Section 12.1 of the Agreement permitted the General Partner to consent to the
Doctor Defendants’ investment in BOSHA.2 On full briefing on appeal and during
oral argument, Appellees agreed that the General Partner has authority to grant
consent under Section 12.1.3 Appellants and Appellees agree that Section 12.1’s
which-consent-may-be-withheld-in-its-sole-and-absolute-discretion provision
would be meaningless if the General Partner possesses no authority to consent.
2
We denied Appellees’ petition for permissive appeal; to the extent
Appellees’ arguments relate to the issues we declined permission to appeal, we
do not consider them in this limited permissive appeal.
3
Appellees assert,
[W]e do not say that the GP can never grant consent to the opening
of a competing facility. Rather, we say that it does not have “sole
and absolute discretion” to grant such consent. Under some
circumstances, the GP might be able to consent to the opening of a
competing facility without violating the Partnership Agreement.
5
We likewise agree; the General Partner’s contractual right to withhold consent is
no right at all absent the authority to consent. Cf. Seagull Energy E & P, Inc.,
207 S.W.3d at 345 (recognizing that a contract cannot be interpreted in a way
that renders any words or phrases meaningless).
We next turn to the issue of Section 12.1’s “silen[ce] as to the standard
which should apply to the giving of consent.” The first sentence of Section 12.1
gives the General Partner the right to consent to the acquisition by limited
partners of ownership interests in ambulatory surgery centers, other licensed
health care facilities at which ambulatory surgery is performed, and short stay
hospitals––identified by patient stays of three days or less—that are located
within fifteen miles of Arlington Surgicenter. Section 12.1 prohibits a limited
partner’s acquisition of such an ownership interest only if it is made “without the
prior written consent of the General Partner.” The provision states that the
written consent “may be withheld [by the General Partner] in its sole and absolute
discretion.”
Given its ordinary meaning, the noun “consent” means acceptance or
approval of what is planned or done by another, acquiescence;4 in construing
Section 12.1 of the Agreement according to its plain meaning, we refrain from
superimposing standards for, or degrees of, consent that would modify the
word’s plain meaning. See Limestone Grp., Inc. v. Sai Thong, L.L.C., 107
4
See, e.g., Consent, American Heritage College Dictionary (5th ed. 2015).
6
S.W.3d 793, 797 (Tex. App.—Amarillo 2003, no pet.) (declining to construe the
word “default” as including quantifications or measurements such as “substantial”
or “material” when the parties’ agreement merely used the word “default”); Cross
Timbers Oil Co. v. Exxon Corp., 22 S.W.3d 24, 26 (Tex. App.—Amarillo 2000, no
pet.) (explaining that appellate court “cannot change the contract merely because
we or one of the parties comes to dislike its provisions or thinks that something
else is needed in it”).
We have reviewed the entire Agreement. Considering Section 12.1 in
connection with the entire Agreement and harmonizing it with the other
provisions of the Agreement, the construction of Section 12.1 according to its
plain meaning as set forth above is consistent with the Agreement. 5 See, e.g.,
Coker, 650 S.W.2d at 393.
Thus, applying a de novo standard, giving Section 12.1 its plain meaning,
interpreting it so as to not render any words meaningless, and considering it with
reference to the whole Agreement, we hold that as a matter of law the General
5
Appellees cite Sections 10.5 and 18.2 of the Agreement as limiting the
General Partner’s right to consent under Section 12.1. No conflict or disharmony
is generated between these two Sections and Section 12.1 by giving the term
consent its plain meaning in Section 12.1. Moreover, because Section 12.1 is
more narrow than Sections 10.5 and 18.2, even if a conflict existed between
these sections, we would simply harmonize the provisions by treating Section
12.1 as a specific exception to the more general provisions set forth in Sections
10.5 and 18.2. See, e.g., Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133–34
(Tex. 1994) (applying rule of construction to contract); see also Jackson v. State
Office of Admin. Hearings, 351 S.W.3d 290, 297 (Tex. 2011) (applying rule of
construction to statute).
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Partner possessed authority to give written consent to the Doctor Defendants’
investments in BOSHA. See, e.g., Tawes, 340 S.W.3d at 425; Seagull Energy E
& P, Inc., 207 S.W.3d at 345; Frost Nat’l Bank, 165 S.W.3d at 312; Reilly, 727
S.W.2d at 529; Coker, 650 S.W.2d at 393. We hold that the trial court erred to
the extent it construed Section 12.1’s “silen[ce] as to the standard which should
apply to the giving of consent” as limiting the General Partner’s ability to grant
written consent. See Limestone Grp., Inc., 107 S.W.3d at 797 (“In short, the
parties omitted words from the contract modifying the degree of default needed.
Because they did, we may not now incorporate them into the agreement and
thereby change it.”). We sustain Appellants’ sole issue.
VI. CONCLUSION
Having sustained Appellants’ sole issue and determined as a matter of law
that the first sentence of Section 12.01 of the Second Amended and Restated
Agreement of Limited Partnership dated July 1, 2007, authorized the General
Partner to give written consent to the Doctor Defendants to invest in BOSHA, we
reverse the trial court’s March 17, 2015 order denying Appellants’ summary
judgment grounds that are based on this provision and remand for further
proceedings consistent with this opinion.
/s/ Sue Walker
SUE WALKER
JUSTICE
PANEL: DAUPHINOT, WALKER, and GABRIEL, JJ.
DAUPHINOT, J., dissents without opinion.
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DELIVERED: October 1, 2015
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