QHG of Lake City, Inc. v. McCutcheon

• Citation: 360 S.C. 196,600 S.E.2d 105
• Decision Date: 28 June 2004
• Docket Number: No. 3839.,3839.
• Parties: QHG OF LAKE CITY, INC., d/b/a, Carolinas Hospital System of Lake City, Respondent, v. Karen McCUTCHEON, M.D., Appellant.
• Court: South Carolina Court of Appeals

360 S.C. 196

600 S.E.2d 105

QHG OF LAKE CITY, INC., d/b/a, Carolinas Hospital System of Lake City, Respondent, v. Karen McCUTCHEON, M.D., Appellant.

No. 3839.

Court of Appeals of South Carolina.

Submitted March 8, 2004.

Decided June 28, 2004.

Rehearing Denied August 19, 2004.

Mark A. Brunty, J. Jackson Thomas, both of Myrtle Beach, for Appellant.

A.E. Justice, Jr., James D. Smith, Jr., both of Florence, for Respondent.

CURETON, A.J.

QHG of Lake City, Inc. d/b/a Carolinas Hospital System of Lake City commenced this action against Dr. Karen McCutcheon, alleging she breached an agreement that required her to either practice medicine in the Lake City area or repay loans from the hospital that financed McCutcheon's medical education. McCutcheon appeals the special referee's order awarding judgment and prejudgment interest to QHG based on its claim of quantum meruit. We affirm in part, reverse in part, and remand.

FACTS

On December 18, 1991, McCutcheon and Lower Florence County Hospital entered into a written agreement whereby the hospital agreed to provide loans to McCutcheon for payment of tuition and fees for her medical school education. Pursuant to this agreement, the hospital would forgive one year of the loans for each year McCutcheon practiced medicine in the Lake City area following her graduation from medical school. In addition to loan forgiveness, the hospital agreed to provide McCutcheon with financial assistance for setting up her medical practice.

From August 1991 to December 1994, County Hospital provided McCutcheon with $31,478.70 in loans for tuition, fees, and books. This amount was given to her over the course of eleven installments. While the first four installments were evidenced by promissory notes, no such instruments were executed for the remaining seven installments.¹ The four notes detail the repayment obligation and accrual of interest in identical language, varying only as to each installment's principal and applicable interest rate. For example, the note dated August 19, 1991, contains the following language:

FOR VALUE RECEIVED, the undersigned promise (s) to pay to Lower Florence County Hospital, or order, the principal sum of Three Thousand Seven Hundred Ninety Five Dollars, with interest from date at the rate of nine and one half (9 ½) per annum on the unpaid balance until paid.

The said principal and interest shall be payable at the office of Lower Florence County Hospital in Lake City, South Carolina... payable in sixty (60) days from the date of graduation of the undersigned or sixty (60) days that the undersigned ceases to be a full time student in good standing provided however, this indebtedness shall be deferred and forgiven upon compliance with the agreement between undersigned and Lower Florence County Hospital dated August 19, 1991.²

In 1995, McCutcheon graduated medical school and began her residency program in Florence with McLeod Family Practice. She left the residency program before completing it and contacted the former administrator of the hospital who had negotiated the agreement with her. McCutcheon indicated that she was ready to begin practicing medicine, but did not feel adequately prepared to practice alone in a hospital setting. Rather, she believed she needed more experience before beginning her own practice and wanted somebody to mentor her or oversee her practice until she gained the necessary experience. Although the hospital offered McCutcheon an opportunity to take over a practice in Timmonsville, South Carolina, McCutcheon declined the offer. Instead, in July 1997, McCutcheon began practicing medicine in Surfside Beach, South Carolina, and has never practiced medicine in the Lake City area.

On August 6, 1999, QHG brought suit against McCutcheon, asserting causes of action for breach of contract and quantum meruit. The parties agreed to refer the case to a special referee solely under the theory of quantum meruit. After a hearing, the special referee issued an order on February 16, 2002, awarding judgment to QHG in the amount of $31,478.70 for the outstanding principal, plus prejudgment interest in the amount of $23,314.43.³ McCutcheon appeals.

STANDARD OF REVIEW

In an action in equity tried by the judge alone, this Court can make findings of facts in accordance with our own view of the preponderance of the evidence. However, this does not require us to ignore the fact that the special referee was in a better position to assess the credibility of witnesses. Tiger, Inc. v. Fisher Agro, Inc., 301 S.C. 229, 237, 391 S.E.2d 538, 543 (1989); see Columbia Wholesale Co. v. Scudder May N.V., 312 S.C. 259, 262 n. 1, 440 S.E.2d 129, 131 n. 1 (1994)

(holding Supreme Court had jurisdiction to find facts in accordance with its own view of the preponderance of evidence in subcontractor's action against project owner seeking recovery under equitable doctrine of quantum meruit rather than recovery based on contract).

DISCUSSION

I. Quantum Meruit

McCutcheon argues the special referee erred in finding that QHG was entitled to relief based on its quantum meruit claim.

"In a law action, the measure of damages is determined by the parties' agreement, while in equity, `the measure of the recovery is the extent of the duty or obligation imposed by law, and is expressed by the amount which the court considers the defendant has been unjustly enriched at the expense of the plaintiff.'" Myrtle Beach Hosp., Inc. v. City of Myrtle Beach, 341 S.C. 1, 8, 532 S.E.2d 868, 872 (2000) (quoting United States Rubber Prods., Inc. v. Town of Batesburg, 183 S.C. 49, 55, 190 S.E. 120, 126 (1937)). "[Q]uantum meruit, quasi-contract, and implied by law contract are equivalent terms for an equitable remedy." Id. at 8, 532 S.E.2d at 872.

The equitable doctrine of quantum meruit allows an aggrieved party to recover for unjust enrichment. Columbia Wholesale Co.,312 S.C. at 261,440 S.E.2d at 130. To prevail on this theory, a plaintiff must establish the following three elements: (1) a benefit conferred by plaintiff upon the defendant; (2) realization of that benefit by the defendant; and (3) retention of the benefit by the defendant under circumstances that make it inequitable for her to retain it without paying its value. Myrtle Beach Hosp., Inc.,341 S.C. at 8-9,532 S.E.2d at 872.

A.

McCutcheon contends that QHG has not satisfied the first element of quantum meruit because she never entered into an agreement with that entity. Rather, McCutcheon asserts her agreement was with Lower Florence County Hospital, and it was that entity and not QHG that provided her with the medical school loans.⁴

Because McCutcheon makes this argument for the first time on appeal, it has not been properly preserved for our review. See Wilder Corp. v. Wilke, 330 S.C. 71, 76, 497 S.E.2d 731, 733 (1998)

("It is axiomatic that an issue cannot be raised for the first time on appeal, but must have been raised to and ruled upon by the trial judge to be preserved for appellate review."); Hubbard v. Rowe, 192 S.C. 12, 17, 5 S.E.2d 187, 189 (1939) ("In matters of appeal, so far as it appears, all that this Court has ever required is that the questions presented for its decision must first have been fairly and properly raised in the lower Court and passed upon by that Court.").

B.

McCutcheon next asserts that the third element of quantum meruit has not been satisfied "[b]ecause QHG changed the agreement between Lower Florence County Hospital and Dr. McCutcheon and prevented her from fulfilling the agreement as it was contemplated in 1991." Specifically, McCutcheon argues that "[n]ot only did Lower Florence County Hospital have the obligation to set up a practice for Dr. McCutcheon or place her in an established practice, it also had a duty to ensure her an income." This argument is without merit.

Nothing in the agreement obligated the hospital to provide McCutcheon with employment within the hospital or to secure the same for her elsewhere. The following provision from the agreement details the full extent of the hospital's obligation to McCutcheon insofar as the establishment of her medical practice is concerned:

Upon completion of Internship or Residency, HOSPITAL agrees to provide Physician certain financial aids to establish her medical practice. The scope of such aid will be determined by the usual custom at the time of practice opening.

By its very terms, the agreement only promises to provide McCutcheon with financial assistance for setting up her practice. Nowhere does the agreement state or even imply that the hospital promised to establish McCutcheon's medical practice for her, nor does it guarantee her a certain income. Quite the opposite, in detailing the available avenues by which McCutcheon could "fulfill medical practice obligations," the agreement makes clear that the practice of medicine in the Lake City area was how McCutcheon was to fulfill her end of the deal rather than a guarantee made by the hospital. Thus, the hospital neither prevented her from fulfilling her half of the agreement nor engaged in any other inequitable conduct.

Accordingly, we find no error in the special referee's determination that it would be inequitable to allow McCutcheon to retain the benefit of the hospital's funding of her medical education where she did not fulfill her part of the agreement.

II. Interest

McCutcheon argues the special referee erred in awarding prejudgment interest in this case because prejudgment interest is not available in a cause of action for quantum meruit.

A.

Although our research does not reveal any South Carolina cases that are directly on point, we believe our Supreme Court and this Court have implicitly found that an award of prejudgment interest is permissible in an action to recover under the theory of quantum meruit.

In Anderson v. Purvis, our Supreme Court discussed the rule in equity with respect to the allowance of interest. Anderson v. Purvis, 220 S.C. 259, 262, 67...