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finding a plaintiff's interpretation of a contract to require minimum compensation to be "unreasonable," because the contract did not mention minimum compensation at all
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NUMBER 13-15-00207-CV
02-18-2016
DOROTHY S. NESMITH, M.D., P.A., Appellant, v. VALLEY BAPTIST MEDICAL CENTER N/K/A VB HARLINGEN HOLDINGS AND VHS HARLINGEN HOSPITAL COMPANY, LLC, Appellees.
On appeal from the County Court at Law No. 1 of Cameron County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Rodriguez and Benavides
Memorandum Opinion by Justice Rodriguez
Appellant Dorothy S. Nesmith, M.D., P.A. ("Nesmith") appeals from a summary judgment on her breach of contract claim. The trial court granted summary judgment against Nesmith and in favor of appellees VHS Harlingen Hospital Company, LLC and Valley Baptist Medical Center, now known as VB Harlingen Holdings ("Valley Baptist"). By one issue, Nesmith argues that the trial court erred in granting summary judgment. In response, Valley Baptist contends that the contract is unambiguous and that, as a matter of law, Valley Baptist did not breach the contract. Because we agree with Valley Baptist, we affirm.
The contract that is the subject of this lawsuit was entered into between appellant Dorothy S. Nesmith, M.D., P.A.—a professional association of which Dr. Dorothy Nesmith is the sole shareholder—and Valley Baptist Medical Center, now known as VB Harlingen Holdings. Pursuant to a merger, Valley Baptist Medical Center's interest in the contract was assumed by appellee VHS Harlingen Hospital Company, LLC d/b/a Valley Baptist Medical Center. For ease of reference, we refer to the appellees by the singular, collective term "Valley Baptist." We refer to appellant as "Nesmith," treat Dr. Nesmith and her professional association as though they were same legal entity, and use female pronouns with regard to Nesmith.
I. BACKGROUND
Valley Baptist is a hospital located in Harlingen, Texas. In May 2009, Valley Baptist contracted Nesmith to serve as director of the hospital's inpatient rehabilitation unit.
It is undisputed that Valley Baptist's decision to hire Nesmith was motivated, at least in part, by federal regulations issued by the Centers for Medicare and Medicaid Services. Specifically, the regulations require that, in order to receive federal payments for service in an inpatient rehabilitation unit, the unit must have a director who contributes at least twenty hours of service to the unit each week. 42 C.F.R. § 412.29(g) (West, Westlaw through Jan. 28, 2016). The director's twenty-hour requirement may be satisfied by a combination of clinical services (e.g., care to specific patients) and general administrative services. See id. The hospital hired Nesmith to serve as such a director and drafted a contract which set forth the terms of the arrangement.
According to its plain terms, the contract contemplates that Nesmith would perform, on an independent-contractor basis, at least twenty hours of administrative "services" each week—a minimum of eighty hours each month. The term "services" is defined by two passages in the contract: a paragraph titled "Duties of Physician" in the body of the contract and an enumerated list in Appendix B of the contract. The Duties of Physician paragraph states:
In particular, two sections contain language relating to a minimum number of hours. Appendix A, which is entitled "Physician Specific Information," reads as follows:
Hospital (page 1): | Valley Baptist Medical Center — Harlingen |
Location (page 1) | Harlingen, Texas |
Effective Date (page 1): | 5/1/2009 |
Physician (page 1): | Dorothy Smith, M.D., P.A. |
Program (page 1): | Rehabilitation and Physical Medicine |
Specialty (page 1): | Rehabilitation and Physical Medicine |
Physician's Title (page 1): | Medical Director of Rehabilitation andPhysical Medicine |
Minimum Number of Hours | 80 hours per month (20 per week/48weeks) |
|---|---|
Maximum Number of Hours (page 2): | 80 hours per month |
Board (page 3): | American Board of Rehabilitation andPhysical Medicine |
Hourly Compensation | $130.00 |
Annual Maximum Compensation | $128,400 |
Services. Physician agrees to perform the Services (defined below) pursuant to the terms and conditions of this Agreement, and to serve the Hospital faithfully and diligently, according to the best of his/her abilities. In the role of Medical Director, Physician will have the following major areas of responsibility: (a) assisting hospital and delivering the services provided
in the Program in an efficient manner in compliance with applicable legal and accreditation requirements; (b) assisting members of the medical staff of the Hospital (the "Medical Staff") with privileges in the Program in developing clinical protocols and care paths and disciplines practiced in the Program; (c) assisting Hospital in the development, implementation and carrying out a performance improvement and quality assessment efforts for the Program; and (d) monitoring the clinical and business operations of the Program; and in carrying out such responsibilities, Physician shall perform the services set forth on Appendix B attached hereto and incorporated herein by reference (collectively, the "Services"). The Services are administrative in nature and do not constitute the practice of medicine.
Appendix B is titled "Medical Director Responsibilities" and lists seven general areas of responsibility, each with specified duties: "Budget" (three duties), "Unit Policy Development and Implementation" (four duties), "Education" (five duties), "Meeting Attendance" (two duties), "Quality Care Assurance" (ten duties), "Utilization Review" (one duty), and "Other Duties" (one duty). Appendix B lists twenty-six duties in all.
The plain terms of the contract state that Nesmith would perform and be paid for no more than eighty hours of administrative service each month at a rate of $130 per hour, with a "maximum annual compensation" of $128,400. The contract provides that Valley Baptist would compensate Nesmith only for such administrative services and not for clinical care.
Multiple terms in the contract provide that Valley Baptist's obligation to pay was expressly conditioned upon Nesmith's submission of a monthly summary report. In the report, Nesmith was to document, on a specified form, the hours that she spent performing Services each month. The form of this report was prescribed by Appendix C, which corresponded to the twenty-six duties found in Appendix B, with a blank for Nesmith to write in the number of hours spent monthly performing each duty.
It is undisputed that over the next three years, Nesmith submitted reports which routinely documented fewer than eighty hours, ranging from thirty-six hours in a month to as many as seventy-nine. It is also undisputed that in September 2012, the form of the report changed, and Nesmith began to regularly submit reports documenting a full eighty hours of administrative services each month. With the increase in reported hours, Nesmith's aggregate compensation thus increased.
Following the change in the report format, Nesmith demanded back-pay for the months between May 2009 and September 2012—months in which she documented fewer than the full eighty hours a month. Nesmith asked Valley Baptist to pay her the difference between eighty hours and the amount of hours that she actually reported each month. Valley Baptist declined her request.
In 2013, Nesmith filed suit alleging that Valley Baptist had breached the contract. In 2014, Nesmith amended her petition to add various tort causes of action. Shortly thereafter, Valley Baptist filed a traditional and no-evidence motion for summary judgment. The trial court granted Valley Baptist's motion on all of Nesmith's claims without stating its basis. Nesmith appeals the summary judgment as to her original breach of contract claim. Thus, we solely address Nesmith's breach of contract claim. See TEX. R. APP. P. 47.1.
II. DISCUSSION
Valley Baptist's motion for summary judgment argued that the contract only obligated Valley Baptist to pay Nesmith for performing the twenty-six duties listed in Appendix B. Valley Baptist further argued that its obligation to pay was only triggered when Nesmith submitted a report documenting the hours that she spent performing those services. Valley Baptist submitted proof showing that it had paid Nesmith for all of the hours she had properly substantiated on her monthly summary reports. The motion asked the trial court to find the contract unambiguous, adopt Valley Baptist's interpretation, and hold as a matter of law that Valley Baptist did not breach the contract. The trial court agreed and granted Valley Baptist's motion. Valley Baptist reurges the same argument on appeal.
In this respect, Valley Baptist argued that its proof conclusively showed no breach according to traditional summary judgment rules or, in the alternative, that Nesmith had failed to introduce more than a scintilla of evidence of breach according to no-evidence summary judgment rules. --------
By one issue, Nesmith argues on appeal that the trial court erred in granting summary judgment because the contract is ambiguous, which thus creates a fact issue that prevents this Court from construing the contract in Valley Baptist's favor as a matter of law. Nesmith points to language which, she contends, required Valley Baptist to pay her for a minimum of eighty hours per month. As we understand her argument, Nesmith contends that this language is inconsistent with other terms that support Valley Baptist's interpretation—that she only be paid for hours performed and substantiated—and that by virtue of this inconsistency, the agreement is ambiguous.
A. Standard of Review
We review a grant of summary judgment de novo. Henkel v. Norman, 441 S.W.3d 249, 250 (Tex. 2014) (per curiam). When a party files a hybrid summary-judgment motion on both no-evidence and traditional grounds, we first review the trial court's judgment under the no-evidence standard of review. Salazar v. Ramos, 361 S.W.3d 739, 745 (Tex. App.—El Paso 2012, pet. denied) (citing Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004)). To survive a no-evidence motion, the nonmovant must produce more than a mere scintilla of summary judgment evidence establishing the existence of the challenged element. Morgan v. Anthony, 27 S.W.3d 928, 929 (Tex. 2000); see TEX. R. CIV. P. 166a(i). When a trial court's order granting summary judgment does not specify the grounds relied upon, the reviewing court must affirm summary judgment if any of the summary judgment grounds are meritorious." FM Prop. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). If the nonmovant fails to produce more than a scintilla of evidence under the no-evidence burden, then there is no need to analyze whether the movant's proof satisfied the Rule 166a(c) burden. Ridgway, 135 S.W.3d at 600.
B. Applicable Law
In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. El Paso Field Sers., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 805 (Tex. 2012); R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex. 1980). To achieve this objective, we must examine the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).
The interpretation of an unambiguous contract is a question of law, which is reviewed de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999). Whether a contract is ambiguous is likewise a question of law. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). "An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating an ambiguity or to give the contract a meaning different from that which its language imports." David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per curiam). If the contract is subject to more than one reasonable interpretation, the contract is ambiguous. J.M. Davidson, Inc., 128 S.W.3d at 229; Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996); Coker, 650 S.W.2d at 393. If we can give a clear and definite legal meaning to a contract, it is not ambiguous as a matter of law. FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P., 426 S.W.3d 59, 63 (Tex. 2014); Gilbert Tex. Constr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 133 (Tex. 2010).
When the evidence is undisputed regarding a person's conduct under an unambiguous contract, the court as a matter of law determines whether the conduct shows performance or breach of a contract obligation. Valero Mktg. & Supply Co. v. Kalama Intern., 51 S.W.3d 345, 351 (Tex. App.—Houston [1st Dist.] 2001, no pet.); Lafarge Corp. v. Wolff, Inc., 977 S.W.2d 181, 186 (Tex. App.—Austin 1998, pet. denied).
C. Analysis
We find the contract at hand to be unambiguous. In the present case, we conclude that the plain terms of the contract show that Valley Baptist's obligation to pay was conditioned upon Nesmith's performance of twenty-six administrative services and timely "substantiation" of that performance—i.e., reporting it to Valley Baptist.
To argue for ambiguity, Nesmith's contends that the contract can be read as prescribing a minimum level of compensation, regardless of the number of hours worked. However, this is not a reasonable interpretation of the contract. Cf. J.M. Davidson, Inc., 128 S.W.3d at 229. Nesmith's interpretation relies heavily on two terms, which read as follows: "the Minimum Number of Hours: 80 hours per month" and "Medical Directors shall be on-site at the Program providing administrative services for a minimum of twenty hours per week as required by Medicare regulations." Contrary to Nesmith's interpretation, the plain language of these terms relates to minimum "hours" to be performed and substantiated by Nesmith, not minimum compensation regardless of hours performed. Compensation is addressed in a separate set of terms, which provide that Nesmith was to be paid $130 for each "hour," and several provisions in the body of the contract make clear that an "hour" of compensation requires an hour both performed and substantiated. Nesmith's pay was limited to a "maximum annual compensation" of $128,400. The contract says nothing of minimum compensation. Nesmith's interpretation is thus unreasonable: it is contrary to the terms' plain meaning, and it would "render meaningless" both the hourly—not lump-sum—rate of pay and the clear requirement to substantiate hours. See J.M. Davidson, Inc., 128 S.W.3d at 229; Heritage Res., Inc., 939 S.W.2d at 121.
Nesmith further argues that the circumstances under which the agreement was entered—the need to satisfy federal regulations—militate towards a finding that her interpretation is correct. See Balandran v. Safeco Ins. Co. of Am., 972 S.W.2d 738, 741 (Tex. 1998) ("[T]he contract may be read in light of the surrounding circumstances to determine whether an ambiguity exists"). However, this circumstance only shows that Valley Baptist needed to retain a unit director to perform and document eighty hours of service each month. Valley Baptist contracted with Nesmith to do just that. We agree with Valley Baptist that Nesmith's attempt to reason backward from this eighty-hour requirement—i.e., that because the contract required her to perform eighty hours, she must therefore be compensated for eighty hours regardless of actual performance—is logically inconsistent.
Nesmith also supports her argument that the contract is ambiguous by submitting testimony as to her subjective understanding of the contract and inconsistencies between the contract and her performance. However, parol evidence may not be received to contradict the singular, objectively certain meaning of the contract according to its plain terms. See David J. Sacks, 266 S.W.3d at 450; Friendswood Dev. Co. v. McDade & Co., 926 S.W.2d 280, 283 (Tex. 1996).
Because Valley Baptist's interpretation creates internal consistency and harmonizes with the plain meaning of the contract's provisions—whereas Nesmith's interpretation does not—we find there to be only one reasonable and definite interpretation of this contract: Valley Baptist's interpretation. See FPL Energy, 426 S.W.3d at 63. The contract is thus unambiguous. See id.
We next ask whether Nesmith has introduced more than a mere scintilla of evidence that Valley Baptist breached the unambiguous terms of the contract. See Ridgway, 135 S.W.3d at 600; Morgan, 27 S.W.3d at 929. Under the contract, Valley Baptist was only obligated to compensate Nesmith for twenty-six types of administrative services upon proper substantiation. Neither party disagrees that in each of the forty months in question—from May 2009 through September 2012—Nesmith substantiated fewer than eighty hours. Nesmith also admits that Valley Baptist paid Nesmith in full for each hour properly substantiated. This was the totality of Valley Baptist's obligation under the contract.
The undisputed record evidence shows that Valley Baptist fully satisfied its obligations under the contract. See Valero Mktg. & Supply Co., 51 S.W.3d at 351; Lafarge Corp., 977 S.W.2d at 186. Nesmith has failed to introduce more than a mere scintilla of evidence showing otherwise. See Ridgway, 135 S.W.3d at 600; Morgan, 27 S.W.3d at 929. Applying the unambiguous terms of the contract to the undisputed facts in the record, we find that, as a matter of law, Valley Baptist did not breach the contract. See Valero Mktg. & Supply Co., 51 S.W.3d at 351; Lafarge Corp., 977 S.W.2d at 186.
Because Nesmith failed to offer more than a scintilla of evidence that Valley Baptist breached the unambiguous terms of the contract, we hold that the trial court did not err in granting summary judgment in favor of Valley Baptist. We overrule Nesmith's issue.
III. CONCLUSION
We affirm.
NELDA V. RODRIGUEZ
Justice Delivered and filed the 18th day of February, 2016.
(Emphasis added). Likewise, Appendix B, which is entitled "Medical Director Responsibilities Program," states in part that "Hospital Program includes operation of an Inpatient Rehabilitation Unit . . . . Medical Directors shall be on-site at the Program providing administrative services for a minimum of twenty hours per week as required by Medicare regulations." (Emphasis added).