Universal Health v. Renaissance Women's

• Decision Date: 30 September 2003
• Docket Number: No. 02-0193.,02-0193.
• Citation: 121 S.W.3d 742
• Parties: UNIVERSAL HEALTH SERVICES, INC., RCW of Edmond, Inc., Renaissance Women's Center of Austin L.L.C., and Renaissance Women's Center of Austin, L.P., v. RENAISSANCE WOMEN'S GROUP, P.A.
• Court: Texas Supreme Court

121 S.W.3d 742

UNIVERSAL HEALTH SERVICES, INC., RCW of Edmond, Inc., Renaissance Women's Center of Austin L.L.C., and Renaissance Women's Center of Austin, L.P., v. RENAISSANCE WOMEN'S GROUP, P.A.

No. 02-0193.

Supreme Court of Texas.

Argued on April 16, 2003.

Decided September 30, 2003.

Marcy H. Greer, Mary S. Dietz, Fulbright & Jaworski, Paul Denton Trahan,

Douglas Alexander, J. Woodfin Jones, Alexander Dubose Jones & Townsend, LLP, Steve Selby, Scott Douglass & McConnico, L.L.P., Austin, for petitioner.

Roy Q. Minton, Minton Burton Foster & Collins, P.C., James Alan Hemphill, Patrick Lawrence Reznik, R. James George, Jr., George & Donaldson, L.L.P., W. Amon Burton, Austin, Charles G. Orr, Nina Cortell, Barry F. McNeil, Haynes & Boone, L.L.P., Dallas, for respondent.

Chief Justice PHILLIPS delivered the opinion of the Court.

This is a suit on a lease and accompanying letter agreements. A group of physicians contracted to lease office space for ten years in a building which also housed a hospital where they would practice. About two years into the lease term, the owners decided to close the hospital for financial reasons and notified the physicians of their intentions. The doctors sued, alleging that the owner was bound by the lease and letter agreements to operate the hospital for the entire term of the lease. The trial court granted a temporary injunction, enjoining the owners from closing the hospital until trial, which was affirmed by the court of appeals. Universal Health Services, Inc. v. Margaret Thompson, M.D., 24 S.W.3d 570 (Tex.App.-Austin 2000, no pet.). However, the trial court later determined that it could not require the hospital to stay open and granted the owners a partial summary judgment on the issue of specific performance. After a jury trial, the trial court rendered judgment for the physicians on a favorable verdict awarding future damages, and the court of appeals affirmed. Universal Health Services, Inc. v. Margaret Thompson, M.D., 63 S.W.3d 537 (Tex.App.-Austin 2001). We conclude that the agreements were not ambiguous; as a matter of law they did not obligate the owner to operate the hospital for the entire term of the lease. Accordingly, we reverse the court of appeals' judgment and render judgment that the physicians take nothing.

I

In 1994, Mike and Frank Schuster approached Universal Health Services, Inc., a health care management company, regarding a new approach to women's health care the Schusters had implemented in Oklahoma. The Oklahoma facility, called the Renaissance Center, combined a hospital and obstetrical/gynecological office space in one building, enhancing convenience to both doctors and patients. Universal, along with other shareholders, incorporated RCW of Edmond, Inc. to invest in developing women's health centers like the Oklahoma hospital.

In 1996, RCW of Edmond, Inc. purchased the assets of the Schusters' company, including a nascent project in Austin, Texas. The previous year, the Schusters contacted two physicians, Dr. Margaret Thompson and Dr. Linda Litzinger, to promote their multi-service women's health center concept. Dr. Thompson and Dr. Litzinger liked the idea, agreeing to create a Renaissance Center in Austin. The Schusters' company, Renaissance Centers for Women, Inc.,¹ entered into a letter agreement and lease with the physicians' professional association, Thompson & Litzinger, P.A., in October 1995. That agreement obligated Renaissance Centers for Women, Inc. to locate property upon which the center would be built, develop plans for and construct the center, and obtain all licenses and permits to operate the center. Furthermore, the company agreed to use reasonable efforts to obtain written agreements certifying the hospital as an approved hospital by insurance companies and managed care providers during the term of the lease. In 1996, after RCW of Edmond, Inc. acquired Renaissance Centers for Women, Inc.'s assets, the physicians entered into another letter agreement approving a site for the facility and substituting Renaissance Women's Center of Austin, L.P., a limited partnership formed by RCW of Edmond, Inc. for the purpose of developing the Austin project, as the landlord under the lease.

Renaissance Women's Center of Austin, L.P., purchased land and built a two-story hospital and office building which opened in September 1997. By the end of 1999, the hospital had sustained operating losses of over $2 million a year above and beyond the expected start-up losses. The doctors, on the other hand, had enjoyed great financial success in their new location. Universal had provided the initial capital expenses for constructing and opening the center and had thereafter funded the substantial operating losses since its opening. In late 1999, Universal advised the physicians of its decision to close the hospital.

The physicians brought suit for breach of contract and fraud, seeking damages and injunctive relief to prevent Universal from closing the hospital.² The trial court granted the physicians' application for a temporary injunction, effective only until trial, and the court of appeals affirmed. 24 S.W.3d 570 (Tex.App.-Austin 2000, no pet.). Universal then moved for partial summary judgment on the physicians' request for specific performance, and the trial court granted that motion, determining that it could not order Universal to keep the hospital open. In the trial court, both parties moved for summary judgment, arguing that none of the agreements were ambiguous. The physicians neither pleaded nor offered proof that a covenant to operate the hospital during the lease term should be implied into the lease or the letter agreements. The trial court concluded, contrary to the parties' contentions, that both the lease and letter agreements were ambiguous. The jury resolved these alleged ambiguities by finding, based on the lease and letter agreements, that Universal had agreed to operate the hospital for the entire 15-year lease term, awarding the physicians $5.6 million for the breach of contract and $1.3 million in attorney's fees. The jury failed to find fraud. The trial court rendered judgment on the verdict, and the court of appeals affirmed.

II

Universal challenges the legal sufficiency of the evidence supporting the jury's finding that the agreement and lease required it to operate the hospital for the entire 15-year term, arguing that the lease is reasonably susceptible only to the interpretation that the contract does not impose such an obligation and is therefore unambiguous. Universal argues that the physicians are really seeking an implied covenant, a legal theory they failed to assert below.

Conversely, the physicians assert that language in the three agreements unambiguously obligates Universal to operate the hospital for the lease term, or, in the alternative, creates an ambiguity that the jury correctly resolved in their favor. First, the 1995 Letter Agreement states Renaissance and Thompson & Litzinger contemplate participating in the project to be known as Renaissance Women's Center of Austin (the "Project") which will be composed of a women's hospital located on the first floor of the Project and medical offices and clinic leased to [the Physicians] located on the second floor of the project.

It also provides that

[b]y the signatures of Renaissance and Thompson & Litzinger below, Renaissance and Thompson & Litzinger agree that the validity and binding effect of the Lease are subject to the following terms and conditions:...

4. Upon substantial completion of the Project and the Premises, Renaissance shall use diligent efforts to obtain all licenses and permits required by the State of Texas and any other governmental authority having jurisdiction over the Project to operate the women's hospital to be located on the first floor of the Project. In the event that Renaissance cannot obtain all such licenses and permits required under this paragraph..., then either Renaissance or Thompson & Litzinger may terminate the Lease ......

5. Renaissance shall use reasonable efforts to obtain, and maintain in full force and effect throughout the Term of the Lease, written agreements ... certifying the Project as an approved hospital by all health insurance companies, health maintenance...