First Health, Inc. v. Blanton

• Decision Date: 16 August 1991
• Citation: 585 So.2d 1331
• Court: Alabama Supreme Court
• Parties: FIRST HEALTH, INC. v. Harold L. BLANTON. 89-1579.

Page 1331

585 So.2d 1331

FIRST HEALTH, INC. v. Harold L. BLANTON.

89-1579.

Supreme Court of Alabama.

Aug. 16, 1991.

William L. Middleton of Eyster, Key, Tubb, Weaver & Roth, Decatur, for appellant.

W.H. Rogers, Moulton, for appellee.

KENNEDY, Justice.

The Courtland Regional Medical Center, Inc., d/b/a Community Hospital of Courtland in Courtland, Alabama, came into existence in 1975. In 1982, Dr. Harold L. Blanton entered into an agreement to provide medical services to the Community Hospital of Courtland. The hospital was later purchased by Nu-Med Hospital Corporation. In 1986, First Health Courtland, Inc., purchased all of the stock in the hospital from Nu-Med. Thereafter, First Health Courtland, Inc., became delinquent in paying wages to the staff physicians of Community Hospital of Courtland. This condition persisted until Dr. Blanton and the Community Hospital of Courtland entered into an agreement by which the hospital would pay Dr. Blanton the debt it owed him. First Health Courtland, Inc., made one scheduled payment to Dr. Blanton before filing for bankruptcy. It made no further payments to Dr. Blanton.

First Health, Inc., a Delaware corporation, owns 100% of the stock in First Health Courtland, Inc., which is incorporated in Alabama. One half of the stock in First Health, Inc., is owned by David Vance, and one half of its stock is owned by Robert H. Gladney.

Dr. Blanton filed an action against First Health Courtland, Inc., First Health, Inc., and David Vance to recover the unpaid balance of the debt owed to him by First Health Courtland. The case was tried to the court sitting without a jury. The trial court entered a judgment for Dr. Blanton and against First Health Courtland, Inc., and First Health, Inc., in the amount of $18,080 plus interest from April 1, 1988. First Health, Inc., appeals.

First Health, Inc., argues that the trial court erroneously disregarded the corporate entity of First Health Courtland and held First Health, Inc., liable for First Health Courtland's debt.

Where testimony is presented ore tenus, the trial court's findings are presumed correct and will not be disturbed unless palpably erroneous, without supporting evidence, or manifestly unjust. Howell v. Bradford, 570 So.2d 643 (Ala.1990). The evidence, viewed in the light most favorable to the plaintiff, is as follows:

First Health owns stock in health facilities in Alabama, Mississippi, and Tennessee. The board of directors for both First Health and First Health Courtland consisted of David Vance, Robert Gladney, and Harry Baker. When First Health Courtland purchased the Community Hospital of Courtland, David Vance met with the hospital physicians, including Dr. Blanton, and he told them that the hospital would be run as it had been run before First Health Courtland purchased it.

All parties abided by the terms of the 1982 agreement until 1986. At that time, economic conditions worsened for the Community Hospital of Courtland, and First Health Courtland failed to pay Dr. Blanton and the other staff physicians for their services. Dr. Blanton testified that he discussed this deficiency with Carl Velte, the administrator of the Community Hospital of Courtland, and that he wrote to the directors of First Health in Batesville, Mississippi, concerning the overdue wages. The letter was addressed to the directors of First Health in their capacities as directors of the corporation.

Dr. Blanton testified that in the spring of 1987 the staff physicians agreed with Velte to reduce their emergency room hourly rate from $30 to $20. Dr. Blanton stated that Velte said that he had discussed the rate reduction plan with Vance in the "home office." Dr. Blanton said he was paid in accordance with that agreement until September 1987. Dr. Blanton stated that September 1987 began a four-month period during which he was not paid for his services. He testified that he spoke with Velte about this condition and that he wrote several letters to David Vance and the other directors of First Health concerning the delinquent payments.

Dr. Blanton next wrote to the directors of First Health concerning the payment of overdue wages in March and April 1987; he addressed the letter to the offices of First Health in Mississippi. He testified that the overdue wages were paid shortly thereafter.

Dr. Blanton again wrote Vance in December 1987. In that letter, he stated that, due to the hospital's inability to timely compensate its physicians, he intended to cease his employment at the Community Hospital of Courtland. Dr. Blanton wrote another letter to Vance in January 1988 that concerned the payment of past-due wages. On the same day, Dr. Blanton sent a letter to Lawson Woods, Velte's successor as administrator of the Community Hospital of Courtland. In the letter, Dr. Blanton asked Woods, "as a representative of the First Health Corporation," to arrange payment for past-due wages. In March 1988, Dr. Blanton again wrote Vance concerning payment of the same overdue wages.

Subsequently, Dr. Blanton entered into an agreement with the Community Hospital of Courtland whereby the hospital would pay him $1,000 per month until it had satisfied its debt, which was then $19,080. The agreement was typed on "Community Hospital of Courtland" stationery. It was signed by Dr. Blanton and by Lawson Woods in his capacity as the administrator of the hospital. On April 6, 1988, First Health Courtland drew a check for $1,000 made payable to Dr. Blanton, on its account at the Citizens Bank of Courtland, Alabama. First Health Courtland made no more payments to Dr. Blanton. It is not disputed that First Health Courtland owes Dr. Blanton $18,080.

Dr. Blanton testified that he did not know of, and did not attend, any First Health Courtland directors' meetings. He said that any discussions he had concerning the payment of past-due wages were with David Vance. He testified that decisions to pay him and decisions to buy hospital equipment were made by the hospital administrator through David Vance. Dr. Blanton testified that, other than Vance, he reported to Velte, in his capacity as administrator of the Community Hospital of Courtland, and to Lawson Woods, Velte's successor. Dr. Blanton testified that the hospital billed patients for medical services and that it collected payments for medical services. Dr. Blanton stated that any payments he received for services were paid by the Community Hospital of Courtland.

Next, Bonnie Blanton, Dr. Blanton's wife and a registered nurse at the hospital, testified. Ms. Blanton stated that, even though she was paid by First Health Courtland, on the days the hospital payroll checks were to be issued, the employees would sometimes have to wait because the payroll money would have to come from Mississippi. Ms. Blanton also said that the procedure for ordering hospital supplies was to fill out a request form and turn it in to the purchasing office at the hospital, and that it then went to the hospital administrator. She stated, however, that she was told that approval for nondisposable supplies had to come from the offices of First Health.

David Vance testified that First Health, First Health Courtland, and the other health care corporations whose stock was owned by First Health, were separately incorporated, some in different states, and that they maintained separate bank accounts, separate state tax returns, separate board meetings, and separate corporate minutes. He stated that the directors for First Health and First Health Courtland were the same. Vance said that, pursuant to Internal Revenue Service regulations, the two corporations filed a consolidated federal tax return form.

Vance stated that, as to the procedure for ordering hospital supplies, the day-to-day operation of the hospital was charged to the administrator, who submitted an administrator's report to the board of directors of First Health Courtland. He said that it was the responsibility of the administrator to order and purchase disposable supplies. At the beginning of each year, Vance said, the administrator had to submit a capital expenditure budget projection...