Nixon v. Cascade Health Services, Inc.

• Decision Date: 26 April 2006
• Docket Number: 04CV0149MA; A126853.
• Citation: 205 Or. App. 232,134 P.3d 1027
• Parties: Jeremy NIXON, Appellant, v. CASCADE HEALTH SERVICES, INC., dba St. Charles Medical Center, an Oregon corporation, Respondent.
• Court: Oregon Court of Appeals

134 P.3d 1027

205 Or. App. 232

Jeremy NIXON, Appellant, v. CASCADE HEALTH SERVICES, INC., dba St. Charles Medical Center, an Oregon corporation, Respondent.

04CV0149MA; A126853.

Court of Appeals of Oregon.

Argued and Submitted February 9, 2006.

Decided April 26, 2006.

Timothy J. Vanagas, Gresham, argued the cause for appellant. With him on the brief was Samuel T. Stanke.

Cecil Reniche-Smith, Portland, argued the cause for respondent. With her on the brief were Janet M. Schroer and Hoffman, Hart & Wagner, LLP.

Before HASELTON, Presiding Judge, and WOLLHEIM and ROSENBLUM,^* Judges.

HASELTON, P.J.

Plaintiff appeals in this declaratory judgment action, ORS 28.020, assigning error to the allowance of summary judgment for defendant. The substantive dispute concerns the proper interpretation of a "Release and Hold Harmless Agreement" (release agreement) that the parties executed in settling a medical malpractice action by plaintiff against defendant. In particular, does that agreement preclude plaintiff from asserting a defense, based on defendant's alleged negligence, to defendant's efforts to collect payment from plaintiff for unpaid medical services? We conclude that the trial court erred in determining, on this record, that defendant was entitled to judgment as a matter of law. ORCP 47 C. Accordingly, we reverse and remand.¹

Summary judgment is proper if the "pleadings, depositions, affidavits, declarations and admissions on file 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." ORCP 47 C. "No genuine issue as to a material fact exists if, based upon the record before the court viewed in a manner most favorable to the adverse party, no objectively reasonable juror could return a verdict for the adverse party on the matter that is the subject of the motion for summary judgment." Id. In reviewing the allowance of summary judgment, we draw all reasonable inferences in favor of plaintiff, who was the nonmoving party. West v. Allied Signal, Inc., 200 Or.App. 182, 187, 113 P.3d 983 (2005).

Viewed in accordance with the foregoing standard, the record discloses the following material facts: In 2002, plaintiff underwent surgery at St. Charles Medical Center, a hospital in Bend that defendant operates. Plaintiff allegedly suffered serious injuries while in defendant's care, including deep vein thrombosis and a pulmonary embolism. Thereafter, plaintiff filed an action in Deschutes County Circuit Court, alleging that he had been injured as a result of defendant's negligence. In his complaint, plaintiff sought $1,100,000 in noneconomic damages and $400,000 in economic damages. The claimed economic damages included $175,000 for medical expenses, including future expenses, resulting from plaintiff's injuries.

In 2003, the parties entered into a settlement whereby defendant, through its insurer, agreed to pay plaintiff $277,000. As part of that settlement, the parties executed the release agreement, which reads, in pertinent part, as follows:

"FOR THE SOLE CONSIDERATION of the sum of TWO HUNDRED SEVENTY SEVEN THOUSAND DOLLARS ($277,000.00) * * * [plaintiff] does hereby * * * fully and forever release and discharge [defendant and its insurer] * * * and all others directly or indirectly liable for any and all claims and demands, actions, and causes of actions, damages, claims for injuries, both known and unknown, including future developments thereof on account of, or in any way growing out of, any and all known and unknown personal injuries resulting therefrom or to result from that certain incident that occurred on or about February 25, 2002, while plaintiff was a patient at St. Charles Medical Center.

"[Plaintiff] agree[s] that this settlement is in full compromise of a doubtful and disputed claim both as to the question of liability and as to the nature, extent and permanency of such injuries and damages and that the payment is not to be construed as an admission of liability.

"[Plaintiff] further agree[s] that the nature, extent and results of [plaintiff's] injuries or damages * * * are not now all known or anticipated, but [plaintiff] nevertheless desire[s] to settle and compromise said claim in full. [Plaintiff] further agree[s] to indemnify and hold harmless [defendant and its insurer] from any and all claims, liens, actions or lawsuits for medical expenses, or any other expenses incurred as a result of or related to the above-referenced incident * * *.

"[Plaintiff] further agree[s] to execute a stipulation requesting a Judgment of Dismissal from the Circuit Court of Deschutes County dismissing [plaintiff's negligence complaint] with prejudice and without costs[.]"

(Emphasis added.)

At the time that the parties were negotiating the settlement, plaintiff had an outstanding hospital bill from defendant in the amount of $24,018.39 for medical and surgical services, including services that had been the subject of his malpractice claim. The parties discussed that bill during negotiations. Defendant told plaintiff that "the bill was still owed," but the parties never reached any agreement regarding payment of the hospital bill.

Sometime after the parties executed the release agreement, defendant made a demand on plaintiff for payment of the disputed bill. Plaintiff refused to pay, informing defendant that, if defendant sued to collect the bill, he would raise defendant's negligence (i.e., the alleged malpractice) as a defense to payment. Defendant responded that the release agreement — and particularly the language emphasized above — precluded plaintiff from raising such a defense to a collection action.

Plaintiff then brought this action, seeking a declaration regarding the proper construction and application of the release agreement. ORS 28.020. Defendant answered and counterclaimed for payment of the outstanding hospital bill.

The parties subsequently filed cross-motions for summary judgment. Plaintiff contended that the release agreement did not preclude him from raising a defense, based on defendant's alleged malpractice, to a collection action because the critical language of the release does not refer to "defenses." Rather, that language refers to "claims and demands, actions, and causes of actions, damages, [and] claims for injury" — all of which, plaintiff contended, are procedurally and substantively distinct from defenses. See, e.g., ORCP 13 A; ORCP 16 B, C; ORCP 18; ORCP 19 A; ORCP 21 A.

Conversely, in its cross-motion,² defendant argued that, notwithstanding that the release agreement did not explicitly refer to "defenses,"

"the plain meaning of the agreement is that plaintiff released any right to receive any economic benefit from the incidents underlying his original complaint. In exchange, he was compensated for all economic and non-economic damages sought in his lawsuit, including all medical expenses related to his hospitalization. To now allow plaintiff to assert that he does not have to pay his hospital bills because of the hospital's alleged negligence defeats the purpose of the settlement in two ways: first, it allows plaintiff a double recovery — to, in essence, recover an additional $24,018.39 that should have been paid to the hospital — and second, it allows plaintiff to benefit economically from the assertion of a `negligence' claim against the hospital in the guise of an affirmative defense."³

(Emphasis in original.) The trial court denied plaintiff's motion but granted defendant's cross-motion, ultimately entering a judgment in favor of defendant on its collection counterclaim.

Plaintiff appeals, assigning error to the trial court's allowance of defendant's cross-motion for summary judgment. Plaintiff does not, however, assign error to the denial of his own motion for summary judgment.⁴

"A release agreement is a contract subject to the rules of contract construction and interpretation." Ristau v. Wescold, Inc., 318 Or. 383, 387, 868 P.2d 1331 (1994). Very recently, in Batzer Construction, Inc. v. Boyer, 204 Or.App. 309, 129 P.3d 773 (2006), we summarized the proper application of the three-step methodology for contract interpretation prescribed in Yogman v. Parrott, 325 Or. 358, 937 P.2d 1019 (1997).⁵ First, the court is to determine whether the contractual provision is ambiguous. Batzer Construction, Inc., 204 Or.App. at 315, 129 P.3d 773. A contractual provision is ambiguous if it is susceptible to more than one reasonable interpretation. Porter v. Oba, Inc., 180 Or. App. 207, 211, 42 P.3d 931, rev. den., 334 Or. 693, 56 P.3d 405 (2002). In making that determination, the court is to consider the text and context of the provision. Batzer Construction, Inc., 204 Or.App. at 315, 129 P.3d 773 (citing Yogman, 325 Or. at 361, 937 P.2d 1019). In addition, and consistently with the parol evidence rule, ORS 41.740,⁶ and Abercrombie v. Hayden Corp., 320 Or. 279, 883 P.2d 845 (1994), the court, in making that determination, is also to consider extrinsic evidence of "the circumstances underlying the formation of the contract." Batzer Construction, Inc., 204 Or.App. at 317, 129 P.3d 773.⁷

Second, if the text, context, and circumstances of the contract's formation show that the provision is ambiguous, the court, in attempting to resolve that ambiguity, is to consider "extrinsic evidence of the contracting parties' intent." Yogman, 325 Or. at 363, 937 P.2d 1019; see also Batzer Construction, Inc., 204 Or.App. at 316-17, 129 P.3d 773 (noting that, at Yogman's second level, courts can consider extrinsic evidence "to explain an ambiguity, intrinsic or extrinsic. ORS 41.740."). Third, and finally, if the "provision remains ambiguous after the first two steps have been followed, the court relies on appropriate maxims of construction" to determine the provision's meaning. Yogman, 325 Or. at 364, 937 P.2d 1019.

We begin, then, with the text of the release agreement, viewed in context and with reference to...