Schwartz v. Brownlee

Present: Carrico, C.J., Compton, Lacy, Hassell, Keenan, and
Koontz, JJ., and Poff, Senior Justice

DAVID T. SCHWARTZ, M.D., ET AL.
                                          OPINION BY
v.   Record No. 960395               CHIEF JUSTICE HARRY L. CARRICO
                                       February 28, 1997
WILLIAM BROWNLEE

           FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA
                       Alfred D. Swersky, Judge


     In this medical malpractice case, William Brownlee

(Brownlee) was diagnosed as suffering from prostate cancer, and

David T. Schwartz, M.D. (Dr. Schwartz), removed Brownlee's

prostate gland in an operation which resulted in the successful

excision of the cancer.    Following this type of surgery, a

patient normally suffers temporarily from incontinence, but

Brownlee encountered serious difficulties during his post-

operative treatment by Dr. Schwartz and became totally
               1
incontinent.
     In an amended motion for judgment filed below, Brownlee

sought damages from Dr. Schwartz, a licensed health care

provider, and his wholly owned corporation, Metropolitan Medical

Care, Inc. (MMC), a non-health care provider (the defendants).

Brownlee alleged that he had sustained injuries as a result of

Dr. Schwartz's post-operative negligence while acting as the

agent of MMC.

       1
        Both sides to this controversy recognize that a small
percentage of prostatic surgery patients may suffer total
incontinence despite the absence of negligence on the part of the
physician in performing the surgery.       Brownlee claims here,
however, that his total incontinence resulted from the post-
operative negligence of Dr. Schwartz and not as an incident of
the surgery.
     In a trial before a jury, the trial court ruled as a matter

of law that Dr. Schwartz was the agent of MMC "during the

relevant times" and instructed the jury accordingly.   The jury

returned a verdict in favor of Brownlee against Dr. Schwartz and

MMC jointly and severally in the sum of $1,850,000.

     The trial court ordered a remittitur of the verdict against

Dr. Schwartz to $1 million, the medical malpractice cap

established by Code § 8.01-581.15.   However, the court refused to

order a remittitur in favor of MMC and entered judgment against

it in the full amount of the verdict.
     The defendants filed a petition for appeal, which this Court

refused.   Later, this Court granted the defendants' petition for

rehearing and awarded them this appeal.

     In their petition for appeal, the defendants assigned three

errors, the first alleging that Brownlee had "failed to prove a

proximate cause relationship between the negligence alleged and

his injury to a reasonable degree of medical certainty or

probability."   The gist of the defendants' argument on this point

is that Brownlee's counsel failed to incorporate the phrase

"reasonable degree of medical certainty" or "reasonable degree of

medical probability" into the questions posed to Brownlee's

expert witnesses.

     However, in their petition for rehearing, the defendants

made no mention of their first assignment of error or of any

deficiency in the proof of causation, relying solely on the two

remaining assignments of error in requesting that "this Court

grant the Petition for Rehearing and grant a writ in this case."
In our opinion, the failure to include the first assignment of

error in the petition for rehearing constitutes an abandonment of

that assignment of error.   We will consider, therefore, only the

two remaining assignments of error. They are as follows:
          2. The trial court erred when it denied defendant
     MMC's Motion to Dismiss as to it as a matter of law and
     instead directed a verdict for the plaintiff on the
     issue of whether Dr. Schwartz's performance of medical
     services was as an agent of MMC.

          3. The trial court erred when it allowed a
     judgment in excess of the Virginia Medical Malpractice
     Cap to stand as to MMC, Dr. Schwartz's wholly owned
     corporation.
          a.   MMC's liability, which was
               predicated wholly on a theory of
               respondeat superior[,] cannot be
               greater than that of Dr. Schwartz,
               MMC's alleged agent.

          b.   Plaintiff is limited to the
               malpractice cap for damages arising
               from a single indivisible injury,
               even when there are multiple
               defendants jointly and severally
               liable for same, where at least one
               of the defendants is a "health care
               provider" as defined in the
               Virginia Code.

          c.   The trial court[']s refusal to
               remit as to MMC violates the
               mandate of Va. Code § 8.01-581.15.

                              Agency.

     The defendants argue that there was a conflict in the

evidence concerning the agency question and, therefore, that the

question should have been submitted to the jury for decision.

The defendants' position is stated succinctly in their reply

brief, as follows:
     Dr. Schwartz and MMC maintained [that] Dr. Schwartz was
     not acting as MMC's agent at the time he rendered
     services to Brownlee. . . . There was admittedly
     significant evidence to the contrary. This issue
     should have been submitted to the jury.




     However, while there may have been a conflict in the

positions taken by the parties with respect to the agency

question, there was no conflict in the facts with respect to that

question.   When "[t]here is no substantial conflict in the facts

and circumstances disclosed by the evidence," it becomes "a

question of law to be decided by the court whether [one party]

was the agent of [another]."   Creech v. Massachusetts Bonding

Co., 160 Va. 567, 576, 169 S.E. 545, 548 (1933).

     Here, the following facts were undisputed.     Dr. Schwartz was

MMC's president and sole shareholder. 2   MMC leased from landlords

and paid the rent on and otherwise managed the three offices Dr.

Schwartz occupied in his medical practice.    MMC billed Dr.

Schwartz's patients for services rendered and collected his fees

for those services.   All the income Dr. Schwartz earned from his

medical practice was assigned to MMC.     The only income Dr.

Schwartz received was in the form of rent paid to him by MMC for

one of the offices he occupied in his practice.    MMC paid all the

expenses of Dr. Schwartz's practice, including the cost of

advertisements "designed to solicit patients for [his] medical

       2
        MMC is an S corporation chartered in Delaware.      "An S
corporation is a small business corporation for which an election
under Subchapter S of the Internal Revenue Code . . . is in
effect. I.R.C. § 136(a)(1)." Durando v. United States, 70 F.3d
548, 549 n.2 (9th Cir. 1995).    An S corporation gives a small
business the advantage of providing limited liability for
shareholders without the disadvantage of corporate taxation. Id.
at 551.
practice" as well as the cost of his medical supplies,

automobile, legal work, licensing, continuing education, and

membership in professional associations.    MMC deducted all these

expenses on its tax returns.

     The defendants cite Hadeed v. Medic-24, Ltd., 237 Va. 277,

288, 377 S.E.2d 589, 594-95 (1989), for the proposition that in

the context of medical malpractice, the crucial factor for

determining whether a physician is the agent of another is the

power of control.   The defendants then argue that MMC did not

control Dr. Schwartz, he controlled MMC.    Therefore, the

defendants conclude, it was for the jury to say whether Dr.

Schwartz was the agent of MMC, acting within the scope of the

agency at the time he rendered post-operative treatment to

Brownlee.
     We disagree with the defendants.     As the defendants

themselves point out, it is the power of control that is crucial

to the determination whether an agency relationship existed

between Dr. Schwartz and MMC.   The evidence shows that the

extensive authority Dr. Schwartz indisputably granted to MMC over

his affairs, including MMC's dominion over the purse strings,

clearly vested MMC with the power of control sufficient to

support the trial court's finding, as a matter of law, that an

agency relationship did exist between Dr. Schwartz and MMC at the

time Dr. Schwartz rendered post-operative treatment to Brownlee.

Hence, the trial court did not err in its finding.
                            Remittitur.

     The defendants argue that the trial court erred in refusing
to order a remittitur of the verdict against MMC to $1 million,

the medical malpractice cap established by Code § 8.01-581.15.

That Code section reads as follows:
     In any verdict returned against a health care provider
     in an action for malpractice where the act or acts of
     malpractice occurred on or after October 1, 1983, which
     is tried by a jury or in any judgment entered against a
     health care provider in such an action which is tried
     without a jury, the total amount recoverable for any
     injury to, or death of, a patient shall not exceed one
     million dollars.

     In interpreting this section, the definitions found in
       § 8.01-581.1 shall be applicable.

     Code § 8.01-581.1 defines the term "health care provider" in

pertinent part as
     a person, corporation, facility or institution licensed
     by this Commonwealth to provide health care or
     professional services as a physician or hospital,
     dentist, pharmacist, registered or licensed practical
     nurse, optometrist, podiatrist, chiropractor, physical
     therapist, physical therapy assistant, clinical
     psychologist, [or a] health maintenance organization.


     The defendants concede that MMC "did not fall within the

definition of health care provider in § 8.01-581.1 effective at
                                  3
the time of Brownlee's injury."       Nevertheless, the defendants

say, "because MMC was jointly and severally liable with Dr.

Schwartz, a health care provider subject to protection of The

Cap, for a single and indivisible injury, . . . Brownlee's total

recovery against all defendants is limited to what he is allowed

to recover against Dr. Schwartz."
     3
      A 1994 amendment to Code § 8.01-581.1, effective subsequent
to Brownlee's injury, added a definition of "health care
provider" to include "a corporation, partnership, limited
liability company or any other entity, except a state-operated
facility, which employs or engages a licensed health care
provider and which primarily renders health care services."
     Quoting Bulala v. Boyd, 239 Va. 218, 389 S.E.2d 670 (1990),

the defendants say that "'a single limit . . . applie[s] to an

indivisible injury to a plaintiff, even though it was caused by

the concurring negligence of two or more defendants.'"     Id. at

228, 389 S.E.2d at 675.   However, unlike the present situation,

where one defendant is a health care provider and the other is

not, both the defendants in Bulala were health care providers.

Therefore, Bulala is inapposite.
     Further, quoting Fairfax Hospital System v. Nevitt, 249 Va.

591, 457 S.E.2d 10 (1995), which involved joint tortfeasors, the

defendants state that "'in any judgment entered against a health

care provider, the quantum of the recovery for a medical

malpractice injury cannot exceed the aggregate amount capable of

recovery.'"   Id. at 598, 457 S.E.2d at 14.   The defendants also

quote from Nevitt to the effect that it is "'wholly immaterial'"

that one of the tortfeasors was not a health care provider.      Id.

However, Nevitt presented a different issue.    That case involved

the interplay between Code § 8.01-581.15, which contains the

medical malpractice cap, and Code § 8.01-35.1, which provides

that the amount recovered against one tortfeasor shall be reduced

by the amount paid in settlement by another tortfeasor.    The

issue in Nevitt was whether the amount paid in settlement by one
tortfeasor should be deducted before or after the medical

malpractice cap was applied to an excessive verdict against the

other tortfeasor.   It was in this context, differing

substantially from the present situation, that we said it was

"wholly immaterial" that the settling tortfeasor was not a health
care provider.

     The most analogous case is Taylor v. Mobil Corp., 248 Va.

101, 444 S.E.2d 705 (1994).    There, the negligent physician had

allowed his license to lapse.    Yet, he and his employer, a non-

health care provider, both claimed entitlement to the protection

of the medical malpractice cap from a $4 million verdict returned

against them.    The trial court ordered a remittitur of the

verdict to $1 million with respect to both defendants.   We said

that "[s]ince [the physician] was not licensed in the

Commonwealth when he rendered the services to [the patient], he

was not a health care provider within the purview of the

statute," id. at 109, 444 S.E.2d at 709, and we held that "the
trial court erred in its application of the medical malpractice

cap to the verdict," id. at 110, 444 S.E.2d at 710.

     Taylor is clear authority for the proposition that one who

is unlicensed as a health care provider in this Commonwealth,

whether principal or agent, is not entitled to the protection of

the medical malpractice cap.    MMC was not licensed as a health

care provider in this Commonwealth.   Hence, it is not entitled to

the protection of the cap.

     The defendants argue, however, that "the only theory on

which MMC could conceivably have been held liable for any injury

to Brownlee is upon the derivative liability arising from the

respondeat superior doctrine."    Under the common law, the

defendants continue, the amount of a judgment against a principal

cannot be greater than the amount of the judgment against the

agent tortfeasor.   Hence, the defendants conclude, the trial
court erred in refusing to order a remittitur of the verdict

against MMC to $1 million.     We have no quarrel with the

defendants' argument that, at common law, the liabilities of

principals and agents are coterminous.    That view has been

recognized in Virginia.   In    Monumental Motor Tours v. Eaton, 184

Va. 311, 35 S.E.2d 105 (1945), we said that when a master and

servant are sued together and the master's liability rests solely

upon the servant's negligence, "a verdict which in terms finds

for the servant and against the master or is silent as to the

servant and finds against the master, is . . . predicated upon a

misapprehension of the law."     Id. at 314-15, 35 S.E.2d at 106

(quoting Barnes v. Ashworth, 154 Va. 218, 229, 153 S.E. 711, 713

(1930)).

      The common law continues in full force in Virginia except

as altered by the General Assembly.    Code § 1-10.   The General

Assembly may abrogate the common law, but its intent to do so

must be plainly manifested.     Wackwitz v. Roy, 244 Va. 60, 65, 418

S.E.2d 861, 864 (1992).   "Statutes in derogation of the common

law are to be strictly construed and not to be enlarged in their

operation by construction beyond their express terms."       Blake

Construction Co. v. Alley, 233 Va. 31, 34, 353 S.E.2d 724, 726

(1987) (quoting C. & O. Railway Co. v. Kinzer, 206 Va. 175, 181,

142 S.E.2d 514, 518 (1965)).

     We are of opinion that in the enactment of Code § 8.01-

581.15, the General Assembly has abrogated the common law and

that its intent to do so is plainly manifested.    By making the

medical malpractice cap applicable only to licensed health care
providers and denying the protection of the cap to non-health

care providers, the General Assembly has provided in medical

malpractice cases an exception to the rule that the liabilities

of principals and agents are coterminous.

     In the medical malpractice context, the exception is a rule

of reason.   The General Assembly enacted the medical malpractice

cap for the purpose of enabling licensed health care providers to

secure medical malpractice insurance at affordable rates.   See
Etheridge v. Medical Center Hospitals, 237 Va. 87, 93-94, 376

S.E.2d 525, 527-28 (1989).   It would not serve that purpose to

extend the protection of the cap to non-health care providers,

and we will not ascribe to the General Assembly an intent to make

such an extension.   Rather, as indicated supra, we think it was

the legislative intent, clearly manifested, to except such non-

health care providers from the protection of the cap.

     For the reasons assigned, we will affirm the judgment of the

trial court.
                                                         Affirmed.