Samson v. Hartsville Hospital

• Court: Court of Appeals of Tennessee
• Decided: March 12, 1997
• Docket: 01A01-9609-CH-00430
• Status: Published

Opinion

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

-2- 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

-3- 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:

-4- 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.

-5- 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

-6- 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

-7- 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

-8-