Hospital Corp. of America v. Springhill Hospitals, Inc.

• Decision Date: 13 March 1985
• Parties: HOSPITAL CORPORATION OF AMERICA and Knollwood Park Hospital, an Operating Division of Doctors Hospital of Mobile, Inc., a corporation v. SPRINGHILL HOSPITALS, INC., d/b/a Springhill Memorial Hospital, a corporation; Mobile Infirmary Association, a corporation; Alan G. Koch; Tigner Zorn; and State Health Planning and Development Agency. Civ. 4633.
• Court: Alabama Court of Civil Appeals

Page 1059

472 So.2d 1059

HOSPITAL CORPORATION OF AMERICA and Knollwood Park Hospital, an Operating Division of Doctors Hospital of Mobile, Inc., a corporation v. SPRINGHILL HOSPITALS, INC., d/b/a Springhill Memorial Hospital, a corporation; Mobile Infirmary Association, a corporation; Alan G. Koch; Tigner Zorn; and State Health Planning and Development Agency.

Civ. 4633.

Court of Civil Appeals of Alabama.

March 13, 1985.

Rehearing Denied April 10, 1985.

Certiorari Denied June 21, 1985

Alabama Supreme Court 84-735.

Donald F. Pierce, William C. Tidwell III, and Rayford L. Etherton, Jr. of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for appellants.

Wade B. Perry, Jr. and K.W. Michael Chambers of Johnstone, Adams, Howard, Bailey & Gordon, Mobile, for appellee Mobile Infirmary.

James D. Brooks of Reams, Vollmer, Philips, Killion, Brooks & Schell, Mobile, for appellee Springhill Memorial Hospital.

Peggy Schmitz, Asst. Atty. Gen., for appellee State Agency (SHPDA).

BRADLEY, Judge.

This appeal is from an injunction which enjoined the owners of a hospital to limit its operation to the care of patients who have an average length of stay of thirty days or more. Springhill Memorial Hospital (Springhill) initially filed the suit; the Alabama State Health Planning and Development Agency (SHPDA) and the Mobile Infirmary Association intervened as plaintiffs. The principal defendant is the Hospital Corporation of America (HCA), a large corporation which owns hospitals throughout the country, including one hundred percent of the stock of defendant Doctors Hospital of Mobile, Inc. (Doctors). Defendant Knollwood Park Hospital (Knollwood) is an operating division of Doctors. Knollwood's two hundred and fifteen bed heart and cancer hospital, known as the West Tower, is the branch of HCA at issue.

Plaintiffs aver that the West Tower is certified to care only for patients with an average length of stay (ALOS) in the hospital of at least thirty days. HCA says that the thirty-day ALOS does not apply to the West Tower since its plan was approved prior to the creation of SHPDA and has met all of the requirements of SHPDA's predecessor agency.

Before reviewing the merits of this controversy, we must decide whether the ore tenus rule will be observed during our review of the trial court's judgment.

After hearing part of the testimony of the plaintiffs' first witness, the court, as a time-saving measure, asked all parties to glean the voluminous exhibits already in evidence and submit the case on briefs and depositions. The testimony of the sole live witness was contained in fourteen pages of the reporter's transcript. The plaintiffs did not finish their examination and there was no opportunity for cross examination of the witness before the trial court. His lengthy deposition was admitted into evidence.

The case was tried then exclusively on exhibits. Springhill introduced sixty-two exhibits and HCA introduced two hundred and eighty-six exhibits. No witness was fully examined in the presence of the trial court.

We are aware of the cases holding that when the evidence is taken ore tenus before the trial court, or partly so, on review we grant the trial court a presumption of correctness. See, e.g., Jones v. Moore, 322 So.2d 682 (Ala.1975); Air Movers of America, Inc. v. State National Bank, 293 Ala. 312, 302 So.2d 517 (Ala.1974); State v. Frazier, 222 Ala. 180, 131 So. 442 (Ala.1930); Penn v. Penn, 437 So.2d 1053 (Ala.Civ.App.1983); Nero v. Moore-Handley, Inc., 370 So.2d 1043 (Ala.Civ.App.1979). However, in each of these cases at least one witness was examined and cross examined orally before the trial court.

The rationale behind the ore tenus rule has historically been that the trial court deserves a presumption of correctness when it is in a position to actually see and hear the testimony, observing firsthand the demeanor of the witnesses. Christian v. Reed, 265 Ala. 533, 92 So.2d 881 (1957); Steed v. Bailey, 247 Ala. 407, 24 So.2d 765 (1946); Barran v. Barran, 431 So.2d 1278 (Ala.Civ.App.1983). Considering that the trial court heard only part of the testimony of one witness, including only a partial direct examination and no cross examination, and that the case was otherwise tried exclusively on the basis of numerous depositions and exhibits, we hold that the ore tenus rule does not apply. Consequently, no presumption of correctness will be accorded the trial court's findings on the evidence, and this court will sit in judgment on the evidence as if it had been presented de novo. Smith v. Dalrymple, 275 Ala. 529, 156 So.2d 622 (1963); Lepeska Leasing Corp. v. State Department of Revenue, 395 So.2d 82 (Ala.Civ.App., writ denied, 395 So.2d 85 (Ala.1981).

Now we come to the question of whether the injunction was properly granted. The Circuit Court of Montgomery County is empowered to enjoin "violations of this article or any reasonable rules and regulations of the SHPDA." § 22-21-276(a), Code 1975. Viewing the evidence de novo, we find the pertinent facts to be as follows:

On January 17, 1978 Southwest Heart and Cancer Center, Inc. (Southwest) applied for an assurance of need (AON) to construct a two hundred and fifteen bed long-term-care hospital, the West Tower now at issue. The application was in response to an identified need. The 1977 State Medical Facilities Plan, instituted as a part of federal regulation of health services under the Social Security Act to allow the federal government to reimburse health care facilities if their facilities were actually needed in the area, had identified a need for two hundred and fifteen long-term-care beds in the Mobile area. There was no need identified for new short-term-care beds in Mobile, and none were made available. The approval to operate the two hundred and fifteen beds was governed by the state designated planning agency (DPA), which was empowered to issue the required AON. The AON was not required under state law. Southwest's application for this AON was originally denied but was subsequently granted on appeal to a fair hearing officer (FHO). No further appeal was taken.

The AON application filed by Southwest stated, in pertinent part, that:

"[T]he proposed facility is to be a 215 bed long term care hospital to meet the expanding needs of the residents of Mobile County, and surrounding area; and to relieve the General Hospitals in the area of needed hospital beds for short term medical, and surgical patients.

It will offer medical, surgical, intensive-care, cardiac, ambulatory, and emergency services for heart, cancer, recuperation, and similar long-term patients." (emphasis added)

Under new state law, after July 30, 1979 no one was allowed to "acquire, construct or operate a new institutional health service" in Alabama without a certificate of need (CON) from SHPDA. Section 22-21-265(a), Code 1975. The CON replaced the AON. Any entity, such as Southwest, that held a valid AON prior to July 30, 1979 was entitled to a CON "for the facility or service described on the application" for the AON. § 22-21-265(b), Code 1975. Southwest applied for and received the required CON in mid-1980 to construct a long-term-care hospital.

HCA became interested in Southwest's proposed project when Southwest applied initially for an AON. HCA eventually became manager of Southwest with an option to purchase all of its stock. In mid-1981 HCA exercised its option. HCA completed...