Unvi. Emergency Med. Found. v. Rapier Inv.

• Citation: 197 F.3d 18
• Decision Date: 13 September 1999
• Docket Number: No. 99-1216,99-1216
• Parties: (1st Cir. 1999) UNIVERSITY EMERGENCY MEDICINE FOUNDATION, Plaintiff, Appellee, v. RAPIER INVESTMENTS, LTD AND MEDICAL BUSINESS SYSTEMS, INC, Defendants, Appellants. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 18

197 F.3d 18 (1st Cir. 1999)

UNIVERSITY EMERGENCY MEDICINE FOUNDATION, Plaintiff, Appellee, v. RAPIER INVESTMENTS, LTD AND MEDICAL BUSINESS SYSTEMS, INC, Defendants, Appellants.

No. 99-1216.

United States Court of Appeals, for the First Circuit.

Heard Sept. 13, 1999.

Decided November 30, 1999

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. Hon. Ernest C. Torres, U.S. District Judge.

William R. Grimm, with whom Mark Bianchi and Hinckley, Allen & Snyder were on brief for appellants.

Charles S. Beal, with whom Cameron & Mittleman LLP were on brief for appellee.

Before Boudin, Circuit Judge Bownes, Senior Circuit Judge, and Lipez, Circuit Judge.

LIPEZ, Circuit Judge.

Rapier Investments Ltd. ("Rapier") and Medical Business Systems, Inc., ("MBS") (collectively, the "appellants") appeal from the summary judgment entered in favor of plaintiff-appellee, University Emergency Medicine Foundation ("Emergency Medicine"), declaring effective Emergency Medicine's notice to terminate a service contract with appellants. This case calls upon us to decide whether notice of termination is effective pursuant to the law of Rhode Island¹ where: (1) the notice is mailed in advance of, but received after, the expiration of the contractual notice period; and (2) a separate contractual notice provision invites notice by mail to a certain address, but notice is sent to, and actually received by, the noticee at a different address. Because we agree with the trial court that such notice was effective, we affirm.

I.

As this is an appeal from an entry of summary judgment, we recount the pertinent facts in the light most favorable to the non-moving party, the appellants. See Reich v. John Alden Life Ins. Co., 126 F.3d 1, 6 (1st Cir. 1997). Emergency Medicine is a non-profit Rhode Island corporation that provides physicians' services to emergency departments at several Rhode Island hospitals. Pursuant to a series of contracts spanning more than ten years, MBS, a subsidiary of Rapier, performed coding, billing, collection and accounts receivable services for Emergency Medicine.

On October 1, 1995, Emergency Medicine and Rapier executed a contract (the "Agreement") calling for MBS to service Emergency Medicine for one year, and further providing that

this Agreement shall be automatically extended for additional one (1) year period [sic] ("additional terms") unless and until either party elects to terminate this Agreement as of the end of the initial term or any additional term by giving at least four (4) months written notice that it elects to have this Agreement terminated, without cause.

A separate paragraph entitled "Notices," (the "notice paragraph"), prescribes a method by which notice may be "effectively given":

Any notices given pursuant to this Agreement shall be deemed to have been effectively given if sent by registered or certified mail to the party to whom the notice is directed at the address set forth for such party herein above or at such other address as such party may hereafter specify in a notice given in accordance with this paragraph.

The only addresses "set forth" in the Agreement are Rapier's principal office, 7 Wells Avenue, Newton, Massachusetts, and Emergency Medicine's principal place of business, 593 Eddy Street, Providence, Rhode Island.

During the contract's first year, neither party terminated, and it automatically renewed for an additional year, ending September 30, 1997. On Friday, May 30, 1997, Annamarie Monks of Emergency Medicine mailed two letters intended to notify Rapier that Emergency Medicine planned to terminate the Agreement before it renewed for a third year. She sent one letter certified mail to Alan Carr-Locke of Rapier at 1238 Chestnut Street, Newton, Massachusetts. Because the letter was incorrectly addressed, it was returned undelivered on June 10, at which point Emergency Medicine mailed the notice to 7 Wells Avenue, Newton, Massachusetts. She sent the second letter certified mail to JoAnn Barato-Mills of MBS, the employee who had negotiated and signed the Agreement on behalf of Rapier, at her place of business, 20 Altieri Way, Warwick, Rhode Island. Ms. Barato-Mills received the letter the following Monday, June 2, 1997.²

In the months following Emergency Medicine's notice of non-renewal, MBS continued to perform services under the Agreement. Meanwhile, Emergency Medicine solicited bids for a new service contract and, although MBS submitted a bid, Emergency Medicine awarded the new contract to a different service provider. MBS then asserted that, because Emergency Medicine's termination notice had been invalid, the Agreement had already extended automatically for an additional year, ending September 30, 1998.

Emergency Medicine filed a complaint seeking, inter alia, a declaration that its notice had effectively terminated the Agreement.³ The parties filed cross-motions for summary judgment on the validity of the termination notice, and the trial court granted judgment in favor of Emergency Medicine. This appeal ensued.⁴

II.

The Agreement entered into by Emergency Medicine and Rapier expressly reserved to either party the power to terminate the contract before it automatically renewed. Termination provisions are standard fare in modern contracts, see 1A Corbin on Contracts, § 265, at 531, and such provisions often require that the terminating party fulfill certain conditions before termination is effective, see 6 Corbin, § 1266 at 55-56. Where "the power to terminate is a conditional power," termination is not effective until the party seeking termination can show that the condition has been fulfilled. See id. at 56. According to Rapier, Emergency Medicine did not fulfill the condition required for termination under the Agreement because it failed to provide Rapier with at least four months written notice. We are asked therefore to evaluate the effectiveness of Emergency Medicine's termination notice pursuant to the contract.

A. The Mailbox Rule

The Agreement expressly conditions a party's right to terminate on that party "giving at least four (4) months written notice" to the other party. Where, as here, such "a condition is required by the agreement of the parties . . . a rule of strict compliance traditionally applies." Farnsworth, Contracts § 8.3, at 571 (1990) (emphasis added). "Strict compliance" means that "[t]he notice to terminate, to be effective, must be given at the stipulated time." Fred Mosher-Grain, Inc. v. Kansas Co-op. Wheat Mktg. Ass'n, 136 Kan.269, 15 P.2d 421, 425 (Kan. 1932); see also 6 Corbin § 1266, at 65-66 (where the contract expresses a time period for notice, it is presumed that "time is of the essence"). As one court cautioned more than seventy-five years ago, "[t]he difference of one day in the giving of notice is small, in one view, but it is the distance across a necessary boundary in relations under the contract, and must be taken as decisive, or there can be no boundary." Brown Method Co. v. Ginsberg, 138 A. 402, 403-04 (Md. 1927). Accordingly, we must strictly enforce the four-month notice period bargained for by Rapier and Emergency Medicine.

The Agreement, as extended by renewal for one additional year, was set to expire on September 30, 1997. Counting back exactly four months, the last day on which Emergency Medicine had the power to terminate was May 31, 1997.⁵ Although Emergency Medicine mailed notice letters on May 30, these letters were not received until after the notice period had expired. Thus, the timeliness of Emergency Medicine's notice turns on whether notice of termination is effective upon mailing, or upon receipt.

At common law, the default rule -- i.e., the rule that governs unless the parties contract for different terms -- makes notice effective only upon receipt, not mailing. See 1A Corbin § 265, at 532 ("If the agreement merely provides that one party may terminate by giving notice, the notice will be effective only when received, and not when it is started by mail or otherwise."); Kantrowitz v. Dairymen's League Co-Op. Ass'n, Inc., 71 N.Y.S.2d 821, 822 (N.Y. App. Div. 1947) ("[W]here a contract requires notice, but does not specify the manner in which the notice is to be given, the mere mailing of notice is not sufficient unless it is received within the time specified.").

However, the parties may override the default rule by contract. See 6 Corbin § 1266, at 65 ("The time and manner of exercising a power of termination may be specified in the contract . . . ."). In particular, the parties may contract to permit notice by mail. If they do, notice becomes effective upon mailing pursuant to the time-honored "mailbox rule."⁶ See 1 Merrill on Notice § 633 (1956); Kantrowitz, 71 N.Y.S.2d at 822; cf. Larocque v. Rhode Island Joint Reinsurance Ass'n, 536 A.2d 529, 531 (R.I. 1988) ("Where the [insurance] policy provides that cancellation may be effected by mailing notice, the general rule is that notification is fulfilled by proof of mailing.").

Here, the Agreement unquestionably authorizes notice by mail. The notice paragraph expressly invites notice "sent by registered or certified mail." This paragraph therefore triggers the "mailbox rule," making notice effective upon mailing. Accordingly, Emergency Medicine's notice letters, mailed on May 30, 1997, took effect on that date, and were timely under the Agreement's four-month notice period, which did not expire until May 31, unless the use of an address other than the one specified in the contract deprived Emergency Medicine of the benefit of the mailbox rule.

B. The Mailing Address

The notice paragraph states that notice "shall be deemed to have been effectively given if sent . . . to the party to whom the notice is directed at the address set forth for such party herein above or at such other address as such party may hereafter specify . . . ." The address "set forth" in the Agreement was Rapier's principal office located at...