Weitzel v. Sioux Valley Heart Partners

• Decision Date: 10 May 2006
• Docket Number: No. 23728.,No. 23729.,23728.,23729.
• Citation: 714 N.W.2d 884,2006 SD 45
• Parties: Marc A. WEITZEL, M.D., Plaintiff and Appellee, v. SIOUX VALLEY HEART PARTNERS, a/k/a Heart Partners of Sioux Valley, a South Dakota Corporation, and Sioux Valley Physician Partners, a South Dakota Corporation, Defendants and Appellants.
• Court: South Dakota Supreme Court

714 N.W.2d 884

2006 SD 45

Marc A. WEITZEL, M.D., Plaintiff and Appellee, v. SIOUX VALLEY HEART PARTNERS, a/k/a Heart Partners of Sioux Valley, a South Dakota Corporation, and Sioux Valley Physician Partners, a South Dakota Corporation, Defendants and Appellants.

No. 23728.

No. 23729.

Supreme Court of South Dakota.

Argued March 21, 2006.

Decided May 10, 2006.

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James E. Moore of Woods, Fuller, Shultz & Smith, PC, Sioux Falls, South Dakota, Attorneys for plaintiff and appellee.

Roberto A. Lange, Eric C. Schulte of Davenport, Evans, Hurwitz and Smith, LLP, Sioux Falls, South Dakota, Attorneys for defendants and appellants.

GILBERTSON, Chief Justice.

[¶ 1.] Sioux Valley Hospital and Sioux Valley Heart Partners (hereinafter "SVH"), appeal from an order granting the plaintiff's, Marc Weitzel, M.D. (hereinafter Weitzel), motion for summary judgment on a breach of contract claim. SVH also appeals the circuit court's declaratory judgment that loans it made to Weitzel were not enforceable under the prevention doctrine. By notice of review, Weitzel appeals the circuit court's dismissal of his fraud claim for lack of sufficient probative evidence. We affirm that portion of Issue 1 granting Weitzel summary judgment on the existence of an employment contract, but reverse for trial as to whether there was a breach of that contract. We also reverse and remand for trial on Issue 2 as to any obligation Weitzel had to SVH on certain loans it made to him. We affirm the circuit court on Issue 3.

FACTS AND PROCEDURE

[¶ 2.] Weitzel was hired by SVH in Sioux Falls, South Dakota, as an interventional cardiologist with a starting date of August 1, 1999. The parties signed a Staff Physician Agreement on July 2, 1999 ("1999 Staff Physician Agreement"), which guaranteed Weitzel a salary of not less than $325,000 for the first two years of his employment. The "1999 Staff Physician Agreement" included a $13,000 loan for medical school loan repayment and an incentive loan of $37,000 made by SVH to Weitzel. The loans were secured by a demand note and required repayment in twenty-four monthly installments; each monthly installment payment would be forgiven as it came due as long as Weitzel continued to work for SVH for twenty-four months. The "1999 Staff Physician Agreement" also allowed Weitzel to take a twelve-month sabbatical after two years of employment in order to participate in a fellowship training program in interventional cardiology. Either party could cancel the Agreement with ninety days written notice. SVH had the option to pay Weitzel ninety days base pay in lieu of notice, and could terminate employment immediately for specified reasons, including good cause.

[¶ 3.] The "1999 Staff Physician Agreement" was modified in February 2000, and Weitzel's salary was increased to $500,000 per year through January 2003. At that time, the "1999 Staff Physician Agreement" was also modified to require Weitzel to comply with a code of conduct based on complaints by patients, nurses and physicians about his abrupt and abrasive manner.

[¶ 4.] Due to his dissatisfaction with the mentoring he was receiving in interventional cardiology, Weitzel began inquiring about fellowships in Ohio, Oklahoma and Minnesota as early as November of 1999, just three months after he began working at SVH. On April 20, 2000, Weitzel was notified he was accepted to the University of Minnesota Cardiovascular Division as a fellow in the interventional cardiology program with a starting date of August 1, 2000, at a salary of $44,666 for the year. SVH allowed Weitzel to take a leave of absence after one year of work at SVH in order to accept the fellowship despite the clause in the "1999 Staff Physician Agreement" that required him to complete two years of work before a sabbatical would be made available for such a fellowship.

[¶ 5.] A few days after receiving notice of his acceptance into the fellowship program Weitzel requested and received a third loan for $189,000 from SVH.¹ The note called for repayment in thirty-six monthly installments, and was evidenced by a demand note. The $189,000 loan also was forgivable as long as Weitzel provided services to SVH for an additional thirty-six months after returning from his fellowship.

[¶ 6.] On May 10, 2000, prior to leaving for his cardiology fellowship, Weitzel sold his home in Sioux Falls. On July 14, 2000, Weitzel signed another agreement with SVH ("July 14, 2000, Agreement"), that provided him with a $36,000 support loan for living expenses during the fellowship at the rate of $3,000 per month, with a forty-eight month repayment period. The support loan was structured as a separate forgivable loan evidenced by a demand note, for which each monthly installment payment would be forgiven as it came due as long as Weitzel remained employed at SVH. SVH also allowed Weitzel and his family to retain health insurance coverage through SVH during the one-year fellowship by paying monthly premiums.

[¶ 7.] The "July 14, 2000, Agreement" also consolidated the previous notes, except the support stipend loan, into one note with a repayment schedule of forty-eight monthly installment payments due beginning September 1, 2001, through August 1, 2005. The "July 14, 2000, Agreement" provided for forgiveness of all loans in exchange for Weitzel's continued employment with SVH from August 1, 2001, until August 1, 2005. The "July 14, 2000, Agreement" also provided that Weitzel would return to employment at SVH after completing his fellowship in July 2001, at which time the parties would execute SVH's "then current physician staff agreement (the terms and conditions of which shall not be materially different than the Current [1999 Staff] Physician Agreement, except as mandated by law or regulation) with Physician for a position as an interventional cardiologist at an annual base salary rate of $500,000." The "July 14, 2000, Agreement" also included the following: "(a) the current [1999 Staff] Physician Agreement will terminate as of July 14, 2000; and (b) no loan forgiveness of any kind shall occur under the current Physician Agreement after July 14, 2000."

[¶ 8.] After Weitzel left for his fellowship, members of the cardiology group began hearing that referring physicians did not want Weitzel to see their patients, and intended not to make referrals to SVH if Weitzel remained with the group. In late 2000, early 2001, the cardiologists discussed their concerns with Michael Nickell, M.D. (Nickell), president of Sioux Valley Clinic, that Weitzel's abrasive and abrupt manner might harm the developing practice. Nickell made the decision that Weitzel would not return to the cardiology group upon completion of his fellowship.² However, no direct communication between Nickell and Weitzel ever occurred. Instead, Kim Patrick (Patrick), in-house counsel for SVH, communicated to Steven Sanford (Sanford), Weitzel's attorney, the group's feelings and Nickell's suggestion that Weitzel should consider looking for other employment. The communication took place via a telephone conversation in February 2001 and three letters between Patrick and Sanford in April and May 2001.

[¶ 9.] Sanford stated during his deposition that he recalled Patrick saying during a telephone conversation that if Weitzel returned to SVH his employment would be terminated immediately. In his deposition, Patrick stated he did not recall making such a statement. A May 31, 2001, letter from Patrick to Sanford stated in part:

As we discussed, certain of the Heart Partners physicians have made it known that they would strongly prefer not having Weitzel return to that practice group. This is not to say that Sioux Valley would necessarily terminate Weitzel's employment but does suggest that it would be in the best interest of both parties if Weitzel were to find another position prior to August 1, 2001. This would permit the parties to agree to a mutual termination of the employment portion of the Loan Agreement and Amendment to Staff Physician Agreement without penalty to either party.

In your May 15 letter, you further indicated Weitzel's concern that his failure to return on said date would be deemed an event of default under his Loan Agreement and Amendment to Staff Physician Agreement. As stated (and contemplated by a mutual termination of the employment portion of that Agreement), Weitzel's failure to return would certainly not be deemed by Sioux Valley to be an event of default triggering damages liability to Sioux Valley. Weitzel would however, remain responsible for his loan commitments to Sioux Valley. A portion of those loans represented the costs of Weitzel's medical school expense or were otherwise used by Weitzel to further his medical education and training. As such, those loans benefited Weitzel directly by improving his skills, credentials and marketability for the balance of his medical career. Therefore, he should repay these loans.

In sum, Sioux Valley is not terminating Weitzel's employment agreement at this time but is only offering Weitzel the opportunity to procure other employment without being deemed in breach of his employment contract with Sioux Valley.

Weitzel began seeking other employment opportunities in the spring of 2001, and was offered positions in Oklahoma practicing interventional cardiology on April 19, and 28, 2001. He had accepted one of the positions in Oklahoma by the end of April. Weitzel never made any payments on the SVH loans.

[¶ 10.] Weitzel brought suit against SVH alleging breach of contract and breach of good faith and fair dealing. He sought damages for breach of contract in the amount of ninety days base pay from SVH per the "July 14, 2000, Agreement." Weitzel subsequently amended his complaint to allege fraud. SVH denied any liability and counterclaimed for payment of the $241,583.36 in principal and interest outstanding on the loans.

[¶ 11.] Both parties entered ...