Joseph v. Hospital Service District No. 2

Citation939 So.2d 1206
Decision Date15 October 2006
Docket NumberNo. 2005-C-2364.,2005-C-2364.
PartiesDr. Willie John JOSEPH, III, Dr. Michelle T. Brumfield, and St. Mary Anesthesia Associates, Inc. v. HOSPITAL SERVICE DISTRICT NO. 2 OF the PARISH OF ST. MARY, State of Louisiana, Our Lady of the Lake Hospital, Inc., Melvin Bourgeois, M.D., James Broussard, John Guarisco, Sharon Howell, Y. George Ramirez, Clifford M. Broussard, National Union Fire Insurance Company of Louisiana and Louisiana Hospital Association Malpractice and General Liability Trust.<SMALL><SUP>1</SUP></SMALL>
CourtSupreme Court of Louisiana

Leake & Andersson, Peirce A. Hammond, II, George D. Fagan, New Orleans, for applicant.

Breazeale, Sachse & Wilson, Scott N. Hensgens, Lauren M. Smith, Christine Lipsey, Baton Rouge, Biggs, Supple, Cremaldi & Curet, James B. Supple, Russel J. Cremaldi, Franklin, Nicholas F. LaRocca, Jr., Morgan City, Benjamin L. Guelfo, for respondent.

WEIMER, Justice.

We are called upon to determine whether a contract between a hospital and a medical corporation provides a stipulation for a third party (also referred to as a stipulation pour autrui) in the form of benefits for individual doctors affiliated with the medical corporation. This matter is before the court on defendants' exceptions of no right of action, which contend the doctors are not third party beneficiaries of the contract. The trial court granted defendants' exceptions and dismissed the plaintiff doctors' claims with prejudice. The court of appeal reversed and defendants filed an application for writ of certiorari. For reasons that follow, we reinstate the judgment of the trial court finding the contract at issue does not create a stipulation pour autrui in favor of the plaintiff doctors. Consequently, the doctors have no right of action.

FACTS AND PROCEDURAL BACKGROUND

On December 13, 1990, Hospital Service District No. 2 of the Parish of St. Mary (Hospital), operator of Lakewood Medical Center, entered into a contract with St. Mary Anesthesia Associates, Inc. (SMAA) for the purpose of obtaining general anesthesia services for the hospital's patients. The contract was signed by Raymond J. Rowell, chief operating officer of the Hospital, and Willie J. Joseph, III, M.D., president of SMAA. The contract provided for automatic annual renewal unless terminated by the Hospital for cause as defined in the contract or by SMAA giving no less than 60 days notice prior to the end of the original term or any renewal period.

In November 2000, then chief operating officer of the Hospital, Clifford M. Broussard, advised SMAA that the contact would terminate within 30 days from the date of the letter because the contract was not in the Hospital's best interest.

Dr. Willie John Joseph, III, Dr. Michelle T. Brumfield, and SMAA filed suit on August 19, 2003, naming as defendants the Hospital, Our Lady of the Lake Hospital, Inc., Melvin Bourgeois, M.D., James Broussard, John Guarisco, Sharon Howell, Y. George Ramirez, Clifford M. Broussard, National Union Fire Insurance Company of Louisiana, and Louisiana Hospital Association Malpractice and General Liability Trust.

Alleging breach of contract, the petitioners sought damages, including, but not limited to, past and future loss of earnings, costs of relocation and "moral damages," mental anguish, grief and anxiety on behalf of the doctors, and future loss of earnings on behalf of SMAA. Pursuant to a provision contained in the contract, plaintiffs also sought attorney fees in connection with this litigation.2

Defendants filed exceptions of no right of action regarding the claims asserted by the doctors contending that SMAA was the only party with a real and actual interest in the contract and the doctors had no individual right to sue for a corporate loss. The doctors argued the contract expressed an intent to stipulate a benefit in favor of the doctors and that this benefit was a material consideration for the contract.

At the hearing on the exceptions before the trial court, the contract in question was introduced into evidence following which counsel argued their respective contentions. Defendants argued the contract is clear and unambiguous, thus parol evidence is not admissible to determine the intent of the parties. Plaintiffs agreed the contract is unambiguous, but contended it clearly contemplated third party beneficiaries.

Following argument, the trial court ruled the contract did not contain a stipulation pour autrui on behalf of the doctors and the contract was between the Hospital and SMAA. The doctors were allowed to proffer evidence regarding the intent of the contracting parties. Judgment was signed granting the peremptory exceptions of no right of action filed on behalf of the defendants, dismissing the doctors' claims with prejudice and casting them with all costs of the proceedings. The doctors appealed.

The court of appeal found the contract as a whole clearly manifested an express intent to benefit Dr. Joseph. Relying on the legal principles that stipulations pour autrui are favored and can be made for an undetermined person, the court found the contract also manifested an intent to benefit Dr. Brumfield. The court of appeal reversed the judgment of the trial court. Joseph v. Hospital Service District No. 2 of the Parish of St. Mary, 04-0781 (La. App. 1 Cir. 8/3/05), 923 So.2d 27.

The court of appeal agreed that the contractual obligations of the parties are clear and unambiguous. Thus, the question to be resolved is whether the contract clearly manifested an intent to stipulate a benefit for a third person. The court of appeal rejected the hospital's argument that the stipulation itself must be in writing to be valid and questioned the validity of the statement in Fontenot v. Marquette Casualty Co., 258 La. 671, 247 So.2d 572 (1971), requiring a stipulation pour autrui to be in writing. The focus of the court's concern involved the following statement in Fontenot: "In Louisiana contracts for the benefit of others, or the stipulation pour autrui, must be in writing and clearly express that intent." Fontenot, 247 So.2d at 579. The Fontenot court cited former Civil Code articles 1890 and 1902 as authority for the statement.3

Defendants, National Union Fire Insurance Company of Louisiana and Hospital

Service District No. 2 of the Parish of St. Mary, applied for writ of certiorari which this court granted. Joseph v. Hospital Service District No. 2 of the Parish of St. Mary, 05-2364, 05-2427 (La.4/24/06), 926 So.2d 527.

DISCUSSION

An exception of no right of action is a threshold procedural device used to terminate a suit brought by a person who has no legally recognized right to enforce the right asserted. Unless otherwise provided by law, an action can only be brought by a person having a real and actual interest in the matter asserted. LSA-C.C.P. art. 681. An exception of no right of action is a peremptory exception designed to test whether plaintiff has a real and actual interest in the action. LSA-C.C.P. art. 927(A)(5). The function of the exception is to determine whether plaintiff belongs to the class of persons to whom the law grants the cause of action asserted. Industrial Companies, Inc. v. Durbin, 02-0665, p. 11 (La.1/28/03), 837 So.2d 1207, 1216; Louisiana Paddlewheels v. Louisiana Riverboat Gaming Commission, 94-2015, p. 4 (La.11/30/94), 646 So.2d 885, 888. Evidence is admissible on the trial of the exception of no right of action to support or controvert any of the objections pleaded. LSA-C.C.P. art. 931.

Collectively, the defendants contend the claims set forth in this case belong to SMAA, not the doctors/employees, thus the exception of no right of action is proper. Defendants also argue the decision of the court of appeal conflicts with this court's decision in Fontenot, as well as decisions from other appellate courts and should be overturned. They claim the stipulation pour autrui must be in writing and, thus an oral stipulation pour autrui is unenforceable.

It is plaintiffs' position that the court of appeal was correct in its interpretation of the Fontenot decision. Fontenot involved a reinsuring agreement4 which is statutorily required to be in writing. Plaintiffs assert the statement in Fontenot requiring a stipulation pour autrui to be in writing is merely dicta. In this case, plaintiffs argue the benefits they were to receive were clearly contemplated by the parties to the contract and were not merely incidental. They assert the court of appeal decision is correct and should be affirmed.

At the hearing on the exceptions, defendants introduced a copy of the contract dated December 13, 1990. The contract, an anesthesia service agreement, was executed by and between the Hospital and SMAA. Dr. Joseph signed the contract on behalf of SMAA, but not in his individual capacity. Dr. Brumfield is not mentioned in the contract. In the contract, SMAA was referred to as the "Contractor." The Hospital agreed to retain the Contractor to exclusively provide anesthesia services. The Hospital agreed to provide facilities, equipment, and supplies necessary and proper for the administration of anesthesia to its patients. Additionally, the Hospital agreed to recognize Dr. Joseph as a "medical specialist" providing services on behalf of the Contractor. The Hospital also agreed to recognize any employee of the Contractor (any duly licensed and qualified physician trained in delivery of anesthesia services and licensed to practice in Louisiana) as a "medical specialist" on behalf of the Contractor, SMAA.

The contract further provided that the Contractor may from time to time retain the services of other physician specialists who were to comply with all of the terms and conditions of the agreement.

The contract specifically provided that the Contractor was an "independent contractor" and clearly stated there was no intent to create an employer/employee relationship, a joint venture relationship, or lease or landlord/tenant...

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