Westbrock v. W. Ohio Health Care Corp.
| Citation | 738 NE 2d 799 |
| Decision Date | 17 March 2000 |
| Docket Number | No. 17417.,17417. |
| Parties | WESTBROCK et al., Appellees, v. WESTERN OHIO HEALTH CARE CORPORATION, Appellant. |
| Court | United States Court of Appeals (Ohio) |
Faruki, Gilliam & Ireland, Paul G. Hallinan and Thomas R. Kraemer, for appellees.
Bieser, Greer & Landis, David C. Greer and John F. Haviland; and Mc-Donald, Hopkins, Burke & Haber, R. Jeffrey Pollock and William J. O'Neill, for appellant.
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Defendant-appellant, Western Ohio Health Care Corporation ("Western Ohio"), appeals a judgment entry of the Montgomery County Court of Common Pleas, awarding plaintiffs-appellees, David A. Westbrock, M.D., et al.1 ("the physicians"), $12,482,461. We affirm the judgment of the trial court.
The Western Ohio Foundation for Medical Care (the "Foundation") was formed in 1973 to promote the distribution of health care services provided by private physicians in the greater Dayton area. The Foundation members consisted of physicians, who elected trustees to operate the Foundation. In 1979, the Foundation established the Western Ohio Health Care Plan (the "Plan"), a Health Maintenance Organization ("HMO"). This was an independent practice association HMO, in which individual private practice physicians would contract with the HMO to provide medical services to subscriber-patients and fees would be charged in accordance with a schedule of fees. By forming their own HMO, the Foundation members hoped to compete with other HMOs, while retaining significant control over the private practice of medicine.
The Foundation fully operated the Plan until it transferred the Plan's assets and liabilities to its wholly owned for-profit subsidiary corporation, Western Ohio, in 1984. At the end of 1987, the Foundation exchanged all of its common stock for preferred stock and cash and sold common stock to physician-providers and other eligible buyers for $1 per share. The new shareholders assumed control of Western Ohio in 1988 and operated the Plan until 1993, when they sold all shares to United Health Care Corporation ("United") for a purchase price of $100,300,000. A distribution of $3,000,000 was paid out to the physician-providers who were working with Western Ohio at that time.
The physicians served as physician-providers for Western Ohio at various times between 1979 and the date of this lawsuit. All physician-providers who participated in the Plan in the years of 1979 through 1983 signed a contract (the "1979 contract"), and in 1984, the 1979 contract expired and was replaced with a new contract (the "1984 contract"), which was also signed by all physician-providers. Under the terms of these contracts, the physician-providers agreed to allow Western Ohio to withhold a percentage of their fees to fund a physicians' contingency reserve ("the reserve").
Western Ohio did not return approximately $2,500,000 of the reserve withheld during the years of 1979-1982 and approximately $6,000,000 of the reserve
withheld during the years of 1985-1987. In other years, the reserve was returned. Beginning in 1983, physician-providers who terminated their participation during a particular year did not have their share of the reserve returned to them.
The physicians sued Western Ohio for breach of contract, demanding the return of the reserve, which amounted to $8,500,000, plus prejudgment interest. The physicians' complaint alleged other claims in addition to breach of contract, but those issues were resolved between the parties. The trial court conducted a bench trial on the breach of contract claim.
The bench trial was held on May 22, 1996 through May 30, 1996. The trial court issued its preliminary findings of fact and conclusions of law on March 13, 1998. On July 6, 1998, the trial court filed a decision and order addressing the claims regarding terminated physician-providers and prejudgment interest, as well as modifying some of the preliminary findings of fact and conclusions of law. On September 9, 1998, the trial court filed a judgment entry that corrected some clerical errors made in the March 13, 1998 entry.
The trial court found that both the 1979 and 1984 contracts had been breached by failure to return the reserve to the physician-providers. The trial court determined that Western Ohio was obligated to return the reserve funds that had remained undistributed once Western Ohio had achieved financial stability sufficient to allow it to do so. The trial court further found that a provision in the 1984 contract that purported to allow Western Ohio to cancel the reserve account of a physician-provider who is terminated without cause was an unenforceable forfeiture provision; therefore, the amount of the reserve to be returned was not to be reduced by the reserve accounts of terminated physicians. Finally, the trial court awarded the physicians prejudgment interest from October 1, 1992, the date that the trial court determined Western Ohio had been sufficiently financially secure to distribute the amounts held in the reserve.
In a September 9, 1998 judgment entry, the trial court calculated the amount of the judgment award to be $12,482,461. This figure included a principal of $8,081,054 and $4,401,407 in prejudgment interest. Western Ohio appeals, raising four assignments of error.
Assignment of Error No. 1:
"The trial court committed reversible error in `interpreting' the two relevant contracts to conclude that the physicians had a right to require payment to them of PCR Physicians' Contingency Reserve used in the past to cover plan expenses."
In its first assignment of error, Western Ohio argues that pursuant to the 1979 and 1984 contracts, the physicians have no legal entitlement to reserve funds
previously spent for Plan purposes. Western Ohio contends that the trial court's finding that the reserve funds collected were "loans" owed to the physicians was unsupported by the terms of the contract.
The construction of written contracts is a matter of law. Long Beach Assn., Inc. v. Jones (1998), 82 Ohio St.3d 574, 576, 697 N.E.2d 208, 209-210, citing Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, Inc. (1984), 15 Ohio St.3d 321, 322, 15 OBR 448, 448-449, 474 N.E.2d 271, 272-273. Questions of law require de novo review by this court. Long Beach at 576, 697 N.E.2d at 209-210, citing Ohio Bell Tel. Co. v. Pub. Util. Comm. (1992), 64 Ohio St.3d 145, 147, 593 N.E.2d 286, 287.
"The cardinal purpose for judicial examination of any written instrument is to ascertain and give effect to the intent of the parties." Foster Wheeler Enviresponse, Inc. v. Franklin Cty. Convention Facilities Auth. (1997), 78 Ohio St.3d 353, 361, 678 N.E.2d 519, 526. Where a written instrument is unambiguous, a court must give effect to the expressed intentions of the parties. United States Fid. & Guar. Co. v. St. Elizabeth Med. Ctr. (1998), 129 Ohio App.3d 45, 55, 716 N.E.2d 1201, 1207-1208, citing Aultman Hosp. Assn. v. Community Mut. Ins. Co. (1989), 46 Ohio St.3d 51, 53, 544 N.E.2d 920, 922-923. Contractual language is "ambiguous" where its meaning cannot be derived from the four corners of the contract or where the language may be reasonably interpreted in more than one way. United States Fid. at 55, 716 N.E.2d at 1207-1208, citing Potti v. Duramed Pharmaceuticals, Inc. (C.A.6, 1991), 938 F.2d 641, 647. "A contract is ambiguous if the rights and duties it imposes on the parties to it are reasonably subject to conflicting interpretations." Matthews v. Morris Sons Co. (1997), 118 Ohio App.3d 345, 349, 692 N.E.2d 1055, 1058.
Western Ohio argues that the trial court improperly considered extrinsic evidence when interpreting the terms of the contracts. However, a review of the trial court's judgment entries reveals that the trial court did not rely on extrinsic evidence for its contract interpretation; rather, the trial court found that the 1979 and the 1984 contracts were unambiguous and interpreted these contracts on their faces. The determination of whether a contract is ambiguous is a question of law. Potti v. Duramed Pharmaceuticals, Inc. (C.A.6, 1991), 938 F.2d 641, 647, citing D.L. Baker & Co. v. Acosta (N.D.Ohio 1989), 720 F.Supp. 615, 618. Therefore, the trial court's determination that the contracts were not ambiguous is subject to de novo review. See Potti at 647.
The 1979 contract gave a committee authority to withhold a portion of each physician-provider's fees to fund a reserve. Specifically, paragraph eleven of the 1979 contract states the following:
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