Scott v. Ashland Healthcare Ctr., 99-00346

• Court: Court of Appeals of Tennessee. Court of Criminal Appeals of Tennessee
• Citation: 49 S.W.3d 281
• Docket Number: 99-00346
• Parties: WANDA CARY SCOTT v. ASHLAND HEALTHCARE CENTER, INC., et al.IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE
• Decision Date: 09 July 2001

WANDA CARY SCOTT
v.
ASHLAND HEALTHCARE CENTER, INC., et al.

No. M1999-00346-SC-R11-CV

IN THE SUPREME COURT OF TENNESSEE AT NASHVILLE

February 7, 2001 Session

Filed July 9, 2001

Appeal by Permission from the Court of Appeals, Middle Section, Circuit Court for Cheatham County, No. 4737

Robert E. Burch, Judge

We granted review of this case to determine whether the holder of a certificate of need may be held liable for the healthcare facility operator's tortious acts. We hold that the Tennessee statutes and rules governing certificates of need impliedly impose a non-delegable duty upon the certificate of need holder to initiate operation of the healthcare facility. We therefore reverse the judgment of the Court of Appeals, reverse the trial court's judgment, and remand this case to the trial court for further proceedings.

Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Reversed;

Case Remanded to Trial Court.

Janice M. Holder, J., delivered the opinion of the court, in which E. Riley Anderson, C.J., and Frank F. Drowota, III, Adolpho A. Birch, Jr., and William M. Barker, JJ., joined.

Steve R. Darnell, Clarksville, Tennessee, for the appellant, Wanda Cary Scott.

Peter F. Klett and Robert Larry Estes, Nashville, Tennessee, for the appellees, Ashland Healthcare Center, Inc., Medical Holdings, Ltd., and Stephen W. Creekmore.

OPINION

BACKGROUND

This appeal arises from a wrongful death action filed by Wanda Cary Scott on behalf of the beneficiaries of Flois Cary Snoddy. Mr. Snoddy was a resident at Oakmont Care Center (Oakmont), operated by Monarch Nursing Homes, Inc. (Monarch), at the time of his death on July 6, 1994. Ms. Scott filed suit against Monarch, d/b/a Oakmont; Monarch's parent corporation, Red Bird Jet Corporation, d/b/a Paragon Healthcare and/or Paragon Companies; Ashland Healthcare, Inc. (Ashland); Medical Holdings, Ltd. (Medical Holdings), and Stephen W. Creekmore, Jr. Ms. Scott alleged that Mr. Snoddy's death was the result of negligent care by the defendants in the operation of Oakmont.

Medical Holdings builds nursing homes across the United States. Ownership of each nursing home is transferred to a separate corporate entity, wholly-owned by Medical Holdings. Ashland is a wholly-owned subsidiary of Medical Holdings. Medical Holdings incorporated Ashland to build and own the Oakmont facility in Ashland City, Tennessee. Mr. Creekmore is the president and sole stockholder of both Ashland and Medical Holdings.

On November 21, 1988, Medical Holdings applied for and was issued a certificate of need(FN1) by the Tennessee Health Facilities Commission authorizing construction of "Ashland Healthcare Center d/b/a Ashland City Healthcare Center." During construction, Ashland entered into an agreement with Monarch under which Monarch would lease the Oakmont facility from Ashland and Monarch would operate the nursing home.

An application listing Ashland as the owner of the Oakmont facility was sent to the Tennessee Department of Health's Board of Licensing Health Care Facilities (the Licensing Board) in July of 1993 to obtain a license to operate the nursing home. The application was denied because the Licensing Board required that the business owner on the license application match the holder of the certificate of need.

In the interim, the Health Facilities Commission reissued the certificate of need in Ashland's name at the request of E. Graham Baker, counsel for Medical Holdings. The reissue was granted based upon Mr. Baker's representation that Medical Holdings, instead of Ashland, was inadvertently listed as the facility owner on the initial certificate of need application. The new certificate of need was issued on September 22, 1993, to Ashland for construction of Oakmont Care Center.(FN2)

A subsequent license application was filed with the Licensing Board in the name of "Ashland Healthcare Center, Inc., d/b/a Oakmont Care Center." The application indicated that Medical Holdings was the holding company of Ashland and that Monarch was under contract to operate the facility. The Licensing Board issued a six-month conditional license in Ashland's name on October 1, 1993.

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