Matheny v. Gila County

710 P.2d 469, 147 Ariz. 359, 1985 Ariz. App. LEXIS 724
CourtCourt of Appeals of Arizona
DecidedJuly 10, 1985
DocketNo. 2 CA-CIV 5323
StatusPublished
Cited by1 cases

This text of 710 P.2d 469 (Matheny v. Gila County) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Matheny v. Gila County, 710 P.2d 469, 147 Ariz. 359, 1985 Ariz. App. LEXIS 724 (Ark. Ct. App. 1985).

Opinion

OPINION

BIRDSALL, Presiding Judge.

This appeal is from judgment for defendant county releasing it from its obligation under an ambulance service contract due to what the trial court termed impossibility of performance. We affirm.

The appellants Mathenys operated GDM Ambulance Service and contracted with the county, beginning in 1978, to provide ambulance service for the county’s indigent sick. New legislation creating Arizona’s Health Care Cost Containment System (AHCCCS) became effective February 8, 1982. The program was to commence in November 1982. On October 5, 1982, the county Informed Mathenys that, effective November 5, 1982, it would no longer honor the contract, which had been extended through July 1983. Following refusal of the county to honor a claim under the contract in December 1982, appellants brought this suit in April 1983. Following a hearing in [360]*360May 1984, at which a Gila County medical certification officer testified that there were no persons in Gila County not qualifying for AHCCCS who would be eligible for county ambulance service, judgment for the county was entered.

We note at the outset that while the judgment appealed from cites impossibility of performance as the doctrine discharging the contract, both parties cite a similar doctrine, commercial frustration, as the basis for the decision. We believe the doctrine of commercial frustration supports the decision of the trial court.

This doctrine was accepted in Arizona in Garner v. Ellingson, 18 Ariz.App. 181, 501 P.2d 22 (1972). There a lease had been executed by the parties, but the lessees were advised that before they could make use of the premises for their intended use, they would have to install certain fire protection in adjoining premises also owned by the lessors. Because the lessors refused to make these improvements, the court of appeals held the agreement had been commercially- frustrated and the lessees were relieved of their obligations under the lease. The court adopted the following general definition of commercial frustration:

“ ‘It is well settled that when, due to circumstances beyond the control of the parties the performance of a contract is rendered impossible, the party failing to perform is exonerated.’ Whelan v. Griffith Consumers Company, 170 A.2d 229, 230 (D.C.1961).” 18 Ariz.App. at 182, 501 P.2d at 23.

The court then went on to say:

“It should be noted that the doctrine of commercial frustration is not necessarily limited to strict impossibility, but includes impracticality caused by extreme or unreasonable difficulty or expense. Whelan, supra.
A thorough discussion of the doctrine and its applicability is set forth in Lloyd v. Murphy, 25 Cal.2d 48, 153 P.2d 47 (1944).. Justice Traynor, in a well-reasoned opinion, states:
‘The question in cases involving frustration is whether the equities of the case, considered in the light of sound public policy, require placing the risk of a disruption or complete destruction of the contract equilibrium on defendant or plaintiff under the circumstances of a given case ... and the answer depends on whether an unanticipated circumstance, the risk of which should not be fairly thrown on the promisor, has made performance vitally different from what was reasonably to be expected (6 Williston, op. cit. supra, § 1963, p. 5511; Restatement, Contracts, § 454.’ 153 P.2d at 50.
As to the condition precedent which must exist before the doctrine can be applied, Justice Traynor continues as follows:
‘The purpose of a contract is to place the risks of performance upon the promisor, and the relation of the parties, terms of the contract, and circumstances surrounding its formation must be examined to determine whether it can be fairly inferred that the risk of the event that has supervened to cause the alleged frustration was not reasonably foreseeable. If it was foreseeable there should have been provision for it in the contract, and the absence of such a provision gives rise to the inference that the risk was assumed.’ 153 P.2d at 50.
The doctrine of frustration has been severely limited to cases of extreme hardship so as not to diminish the power of parties to contract, and, in addition, the courts in applying the doctrine have required proof from the party seeking to excuse himself that the supervening frustrating event was not reasonably foreseeable. Lloyd v. Murphy, supra.” 18 Ariz.App. at 182-83, 501 P.2d at 23-24.

Our supreme court, citing Garner v. Ellingson, said “The doctrine of commercial frustration is, in appropriate circumstances, a justification for nonperformance of a contract and is recognized in Arizona,” Mobile Home Estates, Inc. v. Levitt Mobile [361]*361Home Systems, Inc., 118 Ariz. 219, 222, 575 P.2d 1245, 1248 (1978). The high court refused to apply the doctrine in that case because the contract was fully performed.

In this appeal the Mathenys argue that:

1) AHCCCS did not destroy the value of the contract, and

2) The appellee county offered no evidence that AHCCCS was unforeseeable.

They also contend there was no evidence that the county sought to salvage the value of the contract and that the county was guilty of laches. These latter arguments were not made in the trial court and we cannot consider them on appeal.

Concerning the first issue, the appellants urge that there are still persons who are eligible for county assistance, but not for AHCCCS. In other words, they fall within a notch created by different standards of eligibility for the two systems, that is, county and AHCCCS. The only evidence shows there is no notch group in Gila County.

The appellants point out that the contract also required them to transport deceased indigent persons for autopsy. Therefore, they argue, the contract was still of value to Gila County. Although the contract did so provide, we believe any fair reading of its terms shows the principal undertaking and the reason for the contract was to provide ambulance service for the indigent sick residents of the county. Because there were no longer any indigent sick persons to be transported, we believe the purpose of the contract was substantially frustrated. The doctrine is not limited to strict impossibility, Garner v. Ellingson, supra. The transporting of. the deceased was a secondary, incidental service required to be performed under the agreement. Cf. Stratford, Inc. v. Seattle Brewing & Malting Co., 94 Wash. 125, 162 P. 31 (1916).

Turning to the second argument, the trial court found that the enactment of AHCCCS could not have reasonably been anticipated by the parties at the time they entered into the contract in July 1980. The appellants’ argument that there was no evidence that this was not foreseeable overlooks the fact that it was new legislation which completely changed the procedure and responsibility for care of the indigent sick in Arizona.

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Bluebook (online)
710 P.2d 469, 147 Ariz. 359, 1985 Ariz. App. LEXIS 724, Counsel Stack Legal Research, https://law.counselstack.com/opinion/matheny-v-gila-county-arizctapp-1985.