Petty v. Sloan

• Decision Date: 11 March 1955
• Citation: 197 Tenn. 630,277 S.W.2d 355,1 McCanless 630
• Parties: , 197 Tenn. 630 Dr. David Gordon PETTY et al. v. Dr. Lillard SLOAN et al.
• Court: Tennessee Supreme Court

Page 355

277 S.W.2d 355

1 McCanless 630, 197 Tenn. 630

Dr. David Gordon PETTY et al. v. Dr. Lillard SLOAN et al.

Supreme Court of Tennessee.

March 11, 1955.

Hugh Hailey, Carthage, Charles L. Cornelius, Nashville, for appellants.

H. B. McGinness, Carthage, Albert Williams, Nashville, for appellees.

BURNETT, Justice.

This suit involves the proper construction of a paragraph in a lease contract. The suit was filed by the appellants under the Declaratory Judgment Act, Williams' Code, Section 8835 et seq. The Chancellor in an able opinion construed the Act against the appellants. They have seasonably perfected their appeal. The suit below was heard on bill and answer. The briefs and arguments in this case, from the standpoint of a judge or a lawyer, could be considered as beautiful, as they present an ideal work of able craftsmen on both sides. We have spent several days in reading these briefs, the authorities cited and in considering the matter and have now, in our minds, reached a determination which will hereinafter be set forth.

The contract sought to be construed was by Smith County, Tennessee, acting through its 'hospital committee' and the appellees.

The contract between these parties is attached to the original bill and made an exhibit thereto. This contract shows that Smith County constructed this hospital building at Carthage, Tennessee, from the proceeds of a $290,000 bond issue which was issued by the Quarterly County Court pursuant to legislative authority.

The controversy between the parties arises over the construction of Paragraph XI of the lease contract, which is as follows:

'Lessees agree to cooperate with all reputable doctors and especially the doctors of Smith County in the operation of said hospital and to make available the facilities of said hospital for the treatment of their patients.' (Emphasis ours.)

The answer of the appellees contends that the meaning of this clause was:

"Lessees agree * * * to make available the facilities of said hospital for the treatment of their patients' (i. e., patients of other doctors), was by the contracting parties intended as excluding, not including, surgical operations, and was by them employed to effectuate such intent, and that it does fairly import and manifest and express such meaning, intent and purpose.'

Thus we have the issue. Obviously it is that the appellees take the position in their answer and so allege that in the use of the word 'treatment' it was their intent that this word was to be used in a restricted sense and that it was not to include surgical operations. The Chancellor apparently, in his excellent memorandum, accepted their theory and position. He thought that since the appellees in answering the bill had set out certain facts as to what their intention was in the use of the language in the contract and that since the suit was set down by the plaintiff on bill and answer that then this was an admittance of these facts of intention of the meaning of the word 'treatment' and that he was thereby bound by such facts. The Chancellor said:

'The facts are established by the order setting the case for hearing on bill and answer. These averments taken as true admit or stipulate in effect that the contracting parties (not the defendants only) employed the language 'treatment of their patients' as meaning treatment other than surgery, 'treatment' being used in a restricted sense. Their mutual understanding or construction of the words used is in effect established by the record, and binding on the Court, granting that the word 'treatment' in its general sense would include surgery. It is my opinion that this is determinative of the controversy.'

The original bill filed in this cause sets forth the fact that the Quarterly County Court issued bonds and built this hospital; appointed a hospital committee with power to negotiate a lease and that this committee on June 25, 1952 had entered into the contract with the appellee doctors which is made an exhibit to the bill. The bill then quotes the Paragraph XI above quoted and in effect says that even though this contract is that these lessees would let any reputable doctors and especially the doctors of Smith County bring their patients to this hospital for treatment that the appellees had refused to allow the appellants to bring patients there for any surgery necessary for the treatment of their patients unless the doctors so desiring surgery for their patients would either employ the services of the appellees or those that the appellees suggested and allowed to practice surgery in this hospital.

The bill averred that this action on the part of the appellees was a direct violation of the clause of the lease contract above quoted (XI) and that it also amounted to a violation of the ethics of the medical profession, since it deprived the patient of the right of freedom of choice of his physician and surgeon.

Other things were averred that will be hereinafter referred to as necessity demands and an injunction was prayed. As heretofore said this was denied and the clause in the contract under consideration was construed as the appellees--lessees under the lease contract--had construed it in their answer.

The joint answer of the appellees (defendants below) in effect admitted all of the averments of the bill except as to what they claimed was their intention in the use of the words in Paragraph XI above quoted which as we quoted above was to the effect that it was their intention and this word 'treatment' be used in a restricted sense and did not include surgery.

The appellants (complainants below) are third party beneficiaries for whose use and benefit Section XI above quoted of the lease contract was made and entered into. The rights of these third party beneficiaries are affected with all the infirmities of the contract as would have been between parties to the contract. Fulmer v. Goldfarb, 171 Tenn. 218, 101 S.W.2d 1108; 12 Am.Jur., p. 842, Sec. 289. Their rights, too, depend upon 'and are measured by', the terms of the contract. Am.Jur., supra.

The first thing that we must do is to determine just what was the effect of setting this case for trial on bill and answer. It has been recognized in this State from the very earliest practice that when 'The parties went to trial on bill and answer, and according to a well settled rule of the chancery pleading and practice, 'the answer is to be considered true in all points, and when the defendant states that he believes and hopes to be able to prove such and such matters they are considered as proved:' Brinkerhoff v. Brown, 7 Johns' Ch. 222. It is not meant by this rule that the legal deductions insisted on in the answer are to be considered as true, but only such matters of fact as are stated in the answer by way of defense, or evidence of the equity set forth in the bill.' Rodgers v. Rodgers, 1871, 53 Tenn. 489, 495. It is otherwise expressed by Judge Gibson in his Suits in Chancery, Section 439: 'The rule that the answer is to be construed as true in all its parts does not mean that the legal deductions insisted on in the answer are to be considered as true.'

Thus it is readily seen what the contentions of the respective parties herein have been. The appellants of course insist that the contract is plain and unambiguous within itself and is not subject to have outside testimony introduced to vary or change it or set forth what the intention of the parties was under it. It is their contention that the contract does not contain any ambiguity either latent or patent. To the contrary the appellees take the position (and it is this position that was adopted by the Chancellor) that by their stating in their answer what their intention was in using the word 'treatment' that this is a statement of fact and since it is a statement of fact it is admitted to be true and therefore must be accepted as true. Of course if their contention is correct the lawsuit must be affirmed.

Able counsel brought the determinative matters to an issue herein via their pleadings so that it was not necessary to take long depositions. If the contract wass subject to proof outside of the contract then this could have been done by the introduction of witnesses but by stating in their answer what the contention of these witnesses was, they have stated the facts and thus it is not necessary to introduce any facts. We think that the parties are exactly in the same position as they would have been if the cause had not been set for hearing on bill and answer. Nobody has lost any rights by reason of the way the suit was tried below.

It is likewise the contention of the appellants that if a contract is plain and unambiguous it is a question of law and it is the function of the court to interpret the contract as written--according to its plain terms. It was their contention also that the intention of...