Humana of Tennessee v. Tennessee Health Facilities Commission

• Decision Date: 25 April 1977
• Parties: HUMANA OF TENNESSEE, d/b/a McFarland Hospital, Appellant, v. TENNESSEE HEALTH FACILITIES COMMISSION et al., Appellees. 551 S.W.2d 664
• Court: Tennessee Supreme Court

Page 664

551 S.W.2d 664

HUMANA OF TENNESSEE, d/b/a McFarland Hospital, Appellant, v. TENNESSEE HEALTH FACILITIES COMMISSION et al., Appellees.

551 S.W.2d 664

Supreme Court of Tennessee.

April 25, 1977.

William M. Leech, Jr., Columbia, for appellant.

Michael E. Terry, Asst. Atty. Gen., Nashville, James H. Kinnard, Lebanon, Mark A. Schneider, Nashville, for appellees.

OPINION

HARBISON, Justice.

This case arises under the Tennessee Health Facilities Act of 1973, T.C.A. § 53-5401 et seq. After administrative procedures and hearings provided for in the statutes, the Health Facilities Commission granted a certificate of need to appellee University Medical Center, Inc., authorizing it to construct a sixty-five-bed specialty care hospital in Wilson County, Tennessee.

The application was opposed at all administrative stages by appellant, which owns and operates a 137-bed general care hospital in Wilson County. Appellant sought review of the final order of the Commission in the chancery court. After considering the records of the administrative hearings and additional evidence filed in court, the Chancellor affirmed the action of the Commission. Appellant seeks further review here.

Although the record reveals some procedural irregularities, no error sufficiently material or prejudicial to warrant reversal has been shown. Accordingly we affirm the judgment of the Chancellor.

Before discussing the specific assignments of error, we think it appropriate to summarize the procedural background.

I. History of the Litigation

In January 1975 University Medical Center, Inc., a nonprofit corporation, filed its application with the Tennessee Health Facilities Commission, seeking permission to build a sixty-five bed hospital in Wilson County. As provided by T.C.A. § 53-5412, the Commission referred the application to an area-wide health planning agency, the Mid-Cumberland Comprehensive Health Planning Council. After a public hearing held on February 27, 1975, that agency recommended that the certificate be granted. Its recommendation was forwarded to the State Health Planning Agency for review, pursuant to T.C.A. § 53-5413, and the latter recommended approval by the Commission.

On March 25, 1975 the Health Facilities Commission considered the application in a review-and-comment session. At that time the application failed to receive six affirmative votes as required by T.C.A. § 53-5407. Only eight members of the Commission were in attendance. Of these, four voted for the application, two against, and two members abstained.

Pursuant to T.C.A. § 53-5415, the applicant was granted a public hearing before the Commission. This was held on May 29, 1975, at which time a number of witnesses testified. Following that hearing, the Commission approved the application by a vote of nine to one.

Appellant sought review of the decision of the Commission by petition for certiorari filed in the chancery court at Nashville on July 23, 1975. This was after the effective date of the Uniform Administrative Procedures Act, T.C.A. § 4-507 et seq., but the administrative hearings had been held before July 1, 1975, when most of the provisions of the Administrative Procedures Act went into effect.

Therefore, in the chancery court, the matter was treated as a certiorari proceeding, the Chancellor at one point holding that review would be had as under a "common law" writ of certiorari, T.C.A. § 27-801 et seq. Nevertheless, after the case had reached the chancery court, appellant took fifteen depositions, comprising nearly four hundred pages of testimony, calling as witnesses all but one member of the Health Facilities Commission, together with personnel on the staff of the Commission and an official of the Mid-Cumberland Comprehensive Health Planning Council.

These depositions were very wide ranging in scope, involving not only the procedures used before the respective agencies, but also inquiries of the various Commission members as to the reasons for their votes and the evidence they considered.

The Chancellor apparently reviewed all of these depositions, together with the records made before the administrative agencies, and after considering the numerous assignments of error made before him by appellant, he affirmed the action of the Health Facilities Commission in granting the application.

Appellant appealed to the Court of Appeals as under a certiorari proceeding, but after the cause reached that Court, appellant for the first time invoked the provisions of the Uniform Administrative Procedures Act and sought to have the cause transferred here pursuant to T.C.A. § 4-524. The Court of Appeals granted the motion, and we have concluded to allow the request of appellant to have the cause reviewed in this Court under the provisions of that Act.

The matter is not free from uncertainty, and it is possible that the case should be treated as a certiorari proceeding, as it began. This, however, might involve a remand to the Court of Appeals. More than two years have already been consumed in administrative and judicial proceedings since the filing of the original application for a certificate. Therefore, we believe it appropriate to dispose of the case here, despite its unusual procedural history.

II. Judicial Review Under the Administrative Procedures Act

In the recent case of Metropolitan Government of Nashville and Davidson County v. Shacklett, released for publication at Nashville on January 24, 1977, the Court had occasion to consider the provisions of the Administrative Procedures Act governing judicial review, both in the chancery court and on appeal, T.C.A. §§ 4-523, 524.

There, it was noted that the provisions of T.C.A. § 4-523(h) provide for a limited review in the chancery court, rather than a de novo review upon the record. New evidence may be received in that court only in cases "of alleged irregularities in procedure before the agency, not shown in the record . . . ." T.C.A. § 4-523(g). Otherwise, review is confined to the record made before the administrative agency.

There are provisions for remand to the agency for further proceedings. On the record before it, however, the court may reverse or modify the decision of the agency only if it finds that the agency findings, inferences, conclusions or decisions are:

"(1) in violation of constitutional or statutory provisions;

(2) in excess of the statutory authority of the agency;

(3) made upon unlawful procedure;

(4) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion; or

(5) unsupported by evidence which is both substantial and material in light of the entire record." T.C.A. 4-523(h).

The statute further provides that in determining the "substantiality" of evidence the chancellor shall "take into account whatever in the record fairly detracts from its weight, but the court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact."

In light of this language, it appears that the General Assembly intended that the trial court should review factual issues upon a standard of substantial and material evidence. The court is directed to consider the entire record, including any part detracting from the evidence supporting the findings of the administrative body. Nevertheless the trial court is not to review issues of fact de novo or to "substitute its judgment for that of the agency as to the weight of evidence . . . ."

The statute also contains a "harmless error" provision, stating that no agency decision in a contested case be reversed, remanded or modified "unless for errors which affect the merits of the decision complained of." T.C.A. § 4-523(i).

Appeals under the Act are taken directly to the Supreme Court "as in chancery cases". T.C.A. § 4-524. In the Shacklett case, supra, however, the Court construed that phrase as follows:

"We do not believe that the drafters of the Administrative Procedures Act intended that there be a broad, or de novo, review in this Court of the decision of a trial judge, when his action, initially, is confined to a narrow and statutorily prescribed review of the record made before the administrative agency. We consider that it would be impracticable for this Court to afford any broader or more comprehensive review to cases arising under the Act than is afforded to them by the trial court in the first instance, except, of course, this Court can review for the first time any new or additional evidence introduced in the chancery court with respect to 'alleged irregularities in procedure' before the agency as provided in T.C.A. § 4-523(g). Therefore we do not deem the words 'as in chancery cases' contained in T.C.A. § 4-524 to be definitive of the scope of review to be given such cases in this Court, but merely as descriptive of the general procedure to be followed in bringing cases from the chancery court to this Court, where procedures are not otherwise expressly set out in the Administrative Procedures Act itself."

Accordingly, insofar as appellant suggests a de novo review of the factual issues presented before the Commission, its assignments are not well taken. The record must be reviewed here, as in the trial court, under the statutory criteria.

III. Procedural Assignments of Appellant

In this Court appellant has asserted, for the first time, that the record transmitted to the chancery court from the Health Facilities Commission was incomplete, in that it did not contain a copy of the final order of the Commission granting the certificate of need. There is no contention that the Commission failed to enter an order or to furnish the parties with copies. The omission of the final order apparently was never called to the attention of the Chancellor while the case was pending before him. Indeed, counsel for appellant concedes that the omission was not discovered until appellate briefs were being prepared.

Ordinarily, of course, the...