Morelli v. Ehsan

Decision Date02 June 1988
Docket NumberNo. 54234-1,54234-1
Citation110 Wn.2d 555,756 P.2d 129
CourtWashington Supreme Court
PartiesTito MORELLI and Diana Morelli, husband and wife, Respondents, v. Mike EHSAN and M.S. Ehsan, husband and wife, Petitioners, John Milford Anholm and Anne Cherie Anholm, husband and wife, and the Sunrise Emergency and Family Care Clinic, a Washington Limited Partnership, Defendants.

Bogle & Gates, Don Paul Badgley, James R. Spady, Seattle, for petitioners.

Riddell, Williams, Bullitt & Walkinshaw, J. Jeffrey Dudley, Seattle, for respondents.

DOLLIVER, Justice.

Petitioners Mike and M.S. Ehsan (Ehsan) contend the Court of Appeals erred in holding the Morellis were entitled to a judicial dissolution and windup of an illegal partnership.

The Court of Appeals in its opinion has recounted the facts.

In November 1980, Tito Morelli, Dr. Mike Ehsan and a certified registered nurse, Anne Anholm, entered into a limited partnership agreement to establish and operate the Sunrise Emergency and Family Care Clinic in Everett, Washington. [Anholm subsequently sold her interest to Ehsan and is not a party to this action.] The clinic was to provide minor emergency treatment and health care to the general public on an out-patient basis. Morelli told Ehsan that he had consulted his lawyers and had been assured it was legal for a physician and a nonphysician to operate a medical clinic as partners.

Under the agreement, Morelli and Ehsan became co-general partners, sharing equally in profits and losses. The agreement provided that, in addition to their share of profits, Morelli and Ehsan could receive a salary for services rendered as employees of the partnership. The agreement also provided that, as general partners, Morelli and Ehsan would have equal rights in the management of the partnership business, and further defined Morelli's areas of responsibility as "Director of Operations" and those of Ehsan as the "Medical Director" of the clinic. The clinic also employed a medical staff, including licensed physicians, who were paid on an hourly basis.

For most of the next 3 years, the clinic operated at a loss, finally showing a small profit in 1984. The partners were obliged to advance additional funds to keep the business going during that time. Morelli's additional contributions to the clinic, totaling $75,000, were later characterized as loans and evidenced by a series of promissory notes, signed by Morelli and Ehsan as comakers.

During the latter part of 1983, the partners began to have a falling out, and in January 1985, Morelli petitioned the court for a dissolution of the partnership and an accounting. Ehsan moved to dismiss Morelli's complaint, arguing that the partnership agreement was illegal and void.

The trial court granted summary judgment for Ehsan, holding that Morelli's participation in the partnership constituted the unlicensed practice of medicine in violation of former RCW 18.71.020, and as a result, he had no legally cognizable interest in the assets, profits or management of the clinic. The court permanently enjoined Morelli from interfering in any way in the operation of the clinic. Ehsan was ordered to assume all the assets and liabilities of the business, but was held not to be liable for any of the funds contributed by Morelli to the partnership....

(Footnotes omitted.) Morelli v. Ehsan, 48 Wash.App. 14, 15-16, 737 P.2d 1030 (1987).

Tito and Diana Morelli (Morelli) appealed to the Court of Appeals, which held the partnership agreement was illegal, but remanded the case to the trial court for an accounting and distribution of the partnership assets on an equitable basis. We affirm in part and reverse in part.

I

Since Morelli's claims were dismissed on summary judgment, we engage in the same inquiry as the trial court. Hontz v. State, 105 Wash.2d 302, 311, 714 P.2d 1176 (1986). Summary judgment should be granted when

the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law....

CR 56(c); Hontz, at 311, 714 P.2d 1176.

Because the trial court granted summary judgment against Morelli, the nonmoving party, all evidence and reasonable inferences therefrom are to be considered in his favor. Hontz, at 311, 714 P.2d 1176; Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982).

In challenging Ehsan's motion for summary judgment, Morelli contends the partnership was legal because his responsibilities and duties were limited strictly to business aspects while Ehsan's authority was limited to the clinic's medical affairs. Morelli recites facts which he claims support this view. However, the legality of a partnership to practice medicine is not a matter of fact. It is a question of law, which is addressed by both the statutory and common law of Washington.

At the time of the partnership formation, former RCW 18.71.020 provided:

Any person who shall practice or attempt to practice or hold himself out as practicing medicine ... without ... a valid ... license ... shall be guilty of a gross misdemeanor.

The practice of medicine is defined in RCW 18.71.011(1) as anyone who

[o]ffers or undertakes to diagnose, cure, advise or prescribe for any human disease, ailment, injury, infirmity, deformity, pain or other condition, physical or mental ... by any means or instrumentality.

(Italics ours.)

Under The Professional Service Corporation Act, RCW 18.100, lawyers, doctors, dentists, optometrists, and other professional specialists are authorized to form a corporate entity within their respective practices. However, the corporation must be organized by "[a]n individual or group of individuals duly licensed ... to render the same professional services ..." RCW 18.100.050. Additionally, under RCW 18.100.080, "[n]o professional service corporation ... shall engage in any business other than the rendering of the professional services for which it was incorporated ..." The intent of the Legislature to bar other than similarly licensed health care professionals from involvement in professional services is amply delineated.

Under the common law, this court also has recognized the practice of law, medicine, dentistry, and optometry as learned professions which affect the public health and welfare. State v. Boren, 36 Wash.2d 522, 219 P.2d 566, appeal dismissed per curiam, 340 U.S. 881, 71 S.Ct. 198, 95 L.Ed. 640 (1950); State ex rel. Standard Optical Co. v. Superior Court, 17 Wash.2d 323, 135 P.2d 839 (1943); cf. Prichard v. Conway, 39 Wash.2d 117, 234 P.2d 872 (1951).

In Standard Optical, we found a corporation was practicing optometry, even though it was not exercising any "control over the professional judgment of the optometrist" in his practice. Standard, 17 Wash.2d at 326, 135 P.2d 839. The corporation's only involvement was limited to renting the space and advertising for the optometrist. We held that "neither a corporation nor any unlicensed person or entity may engage, through licensed employees, in the practice of the learned professions ..." Standard Optical, at 328, 135 P.2d 839.

In State v. Boren, supra, we relied on a statute which stated a person practices dentistry " 'who owns, maintains or operates an office for the practice of dentistry.' " Boren, 36 Wash.2d at 532, 219 P.2d 566. The same definition is found in the present successor statute, RCW 18.32.020(3). In Boren, two unlicensed partners, through a licensed dentist, owned and operated a dental office. The two unlicensed businessmen attempted to make their transaction look legitimate under the guise of a conditional sales contract. As in Standard Optical, the Boren court reiterated the general rule that "no unlicensed person or entity may engage in the practice of medicine surgery, or dentistry through licensed employees." Boren, at 531, 219 P.2d 566.

Morelli objects to the application of these statutes and cases to this partnership agreement and refers us to Prichard v. Conway, supra. In that case Mrs. Conway, a widow, sold her deceased husband's dental practice to Dr. Prichard, a licensed dentist. Because Dr. Prichard could not afford to make the necessary down payment, they entered into a conditional sales agreement. Examining the agreement in light of the Boren decision, the court found no violation of the public policy.

The fact that Mrs. Conway was to have a relatively large percentage of the net profits during the first five years does not establish that she owns, maintains, or operates an office for the practice of dentistry, but, rather, that she and Dr. Prichard had agreed upon a formula for arriving at a value of the "going business," which we conceive to be the good will of the established dental practice.

Prichard v. Conway, 39 Wash.2d at 121, 234 P.2d 872.

Morelli was not similarly situated. He was in a general partnership with a physician as an equal partner. While Morelli asserts his only duties were as business manager, the evidence is to the contrary. The partnership agreement clearly establishes Morelli as more than a business manager of the clinic. He was a general partner entitled to equal share of the profits, to equal rights in the management, to hire nurses, and to all the rights and duties of a general partner under the laws of the state of Washington. Furthermore, the record indicates Morelli exercised those rights.

Morelli argues that the Legislature in defining the practice of medicine (RCW 18.71.011(1)) did not expressly include the ownership, maintenance, or operation of an office as it did in defining the practice of dentistry (RCW 18.32.020). While this is so, we concur with the comment of the Court of Appeals: "[I]t would be incongruent to conclude that the Legislature intended to single out the dental profession within which to proscribe a particular form of 'unlicensed practice'." Morelli v. Ehsan, sup...

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