Hernandez v. Suburban Hospital Ass'n

MURPHY, Chief Judge. This case involves an “Authorization and Assignment” executed by a patient and her attorney for the benefit of a hospital and whether, in the circumstances, the assignment may be enforced against the patient’s attorney. I. On September 7, 1985, Giovanna Garcia was involved in an automobile accident and sustained personal injuries. She was treated for those injuries at the Suburban Hospital from September 7 through October 9, 1985, and from May 27-30, 1986.

The hospital’s charge for services amounted to $18,499. Arturo Hernandez was retained by Garcia as ²²⁹ her attorney to pursue a claim against the alleged tortfeasor to recover money damages for Garcia’s injuries. In October, 1985, at the time of Garcia’s initial release from the hospital, both she and Hernandez each signed a one-page document captioned: “Authorization and Assignment.” The document was essentially in two parts, the first signed by Garcia on October 8, and the second signed by Hernandez on October 12. The part signed by Garcia consisted of three paragraphs.

In the first paragraph, she authorized the hospital to furnish and disclose to Hernandez all medical information and records requested by him in connection with the injuries she suffered on September 7, 1985. In the second paragraph, she stated: “I further, irrevocably assign to you, and authorize and direct said attorneys to pay from the proceeds of any recovery in my case all reasonable fees for services provided by you, including fees for preparation and testimony, as a result of the injuries or conditions heretofore mentioned. I understand that this in no way relieves me of my personal primary obligation to pay for such services and that the signing of this form does not prohibit customary billing by you. All bills shall be paid promptly in the usual manner.” The third paragraph was an agreement by Garcia that the statute of limitations with respect to the hospital’s claim for services rendered to her would not begin to run until there was a denial by her in writing of any balance claimed to be due.

The second part of the document was signed by Hernandez. It stated: “THE UNDERSIGNED ATTORNEY FOR THE PATIENT REFERRED TO ABOVE HEREBY AGREES TO COMPLY FULLY WITH THE ‘AUTHORIZATION AND ASSIGNMENT’ AND AGREES TO ADVISE THE NAMED ASSIGNEE IN WRITING THE STATUS OF THE CLAIM OF THE PATIENT WITHIN TEN (10) DAYS OF THE REQUEST.” ²³⁰ On October 16,1986, prior to any recovery for her personal injuries, Garcia filed a voluntary petition for bankruptcy under Chapter 7 of the Bankruptcy Act. In the schedules attached to her petition, she listed the hospital as an unsecured creditor. She did not disclose her lawsuit as a contingent asset, or her execution of the “Authorization and Assignment” to the hospital. 1 In due course, the hospital received a form notice of the bankruptcy filing, but that notice contained the statement, prominently placed and in italics: “Creditors: Do NOT file claims at this time.

Debtor schedules indicate no assets exist from which to receive a dividend.” The hospital took no action and did not participate in the bankruptcy proceeding. . Garcia was discharged in bankruptcy on March 7, 1987. Thereafter, she settled her personal injury claim for $35,-000. On June 5, 1987, Hernandez received the settlement check from the defendant’s insurer; it was payable jointly to him and Garcia.

Without notifying the hospital of the settlement, or his receipt of the check, Hernandez deducted his fee and expenses and disbursed the balance to Garcia. The hospital had been sending Garcia bills and dunning notices since December, 1985. At some point in that month, it also wrote to Hernandez, reminding him of the Authorization and Assignment and asking that he advise the hospital of the status of the case and when it might expect payment. On June 11, 1987 — six days after he had received the check — Hernandez informed the hospital of Garcia’s discharge in bankruptcy and advised it that “any further attempt to collect on the discharged debt would be in direct violation of the [Bankruptcy Judge’s] Order.” This response provoked a demand by the hospital on Hernandez for payment of $18,499, plus interest. ²³¹ Subsequently, after Hernandez declined to pay the hospital bill, the hospital sued Hernandez in the Circuit Court for Montgomery County.

The complaint, which had appended to it a copy of the Authorization and Assignment, alleged that Hernandez signed the document “in exchange for Suburban agreeing to provide medical records and bills [to him] and deferring collection procedures as to Garcia”; and that Hernandez agreed to pay the hospital “from the proceeds of any recovery by Garcia in connection with the accident.” After a hearing on cross-motions for summary judgment, the court (McAuliffe, James S., Jr.) entered judgment for the hospital in the amount of its bill, plus interest. He concluded that in signing the second part of the Authorization and Assignment, “[w]hat Hernandez, as the attorney, agreed to do was a separate and collateral undertaking.” More specifically, Judge McAuliffe described Hernandez’s “undertaking” in these words: “[H]is undertaking was that in consideration of your cooperating with me, furnishing me with the information that I need concerning my client, the bills, the reports, the records that I need, in consideration of that, I will protect your interest, and monies that come into my hands will be held there and will not be paid out until you are paid. That’s a separate and collateral undertaking, and is not part of a primary responsibility which remained always with the debtor.” Hernandez appealed to the Court of Special Appeals, contending that (1) The Authorization and Assignment did not suffice to create a contractual liability on his part; (2) The court’s conclusion that he had failed to comply with his agreement was “clearly erroneous”; (3) Garcia’s discharge in bankruptcy precludes any collateral enforcement of the debt against him; and (4) The hospital’s claim was barred by the doctrines of waiver and estoppel. ²³² We granted certiorari prior to decision by the intermediate appellate court to consider the important issues raised in the case.

II

The hospital contends that Garcia irrevocably assigned to it all of her interest in any settlement of her claim, up to the amount of its bill, and that, when Hernandez received the settlement check, that part of the money previously assigned legally belonged to the hospital. Hernandez is liable, it urges, because, with notice of the assignment and the hospital’s right to the fund, he paid the money to Garcia rather than to it. Hernandez, on the other hand, views the document merely as an authorization to him to pay Garcia’s debt to the hospital from the proceeds of any recovery realized from her personal injury claim. He contends that Garcia alone was responsible for that debt, and that her responsibility was extinguished by her discharge in bankruptcy, which occurred before the settlement proceeds were received.

In determining whether the document constituted a valid assignment and, if so, what it assigned, we must first “determine the intentions of the parties from the language of the contract itself, not by what a party to the contract intended it to mean, or thought it meant, but ‘what a reasonable person in the position of the parties would have thought it meant.’ ” James v. Goldberg, 256 Md. 520, 527 , 261 A.2d 753 (1970), quoting in part from Chesapeake Isle, Inc. v. Rolling Hills Development Company, Inc., 248 Md. 449, 453 , 237 A.2d 1 (1968). As earlier observed, the first paragraph of the document authorized the hospital to disclose medical information to Hernandez. In the second paragraph, Garcia stated that “I further, irrevocably assign to you [the hospital], and authorize and direct said attorneys to pay from the proceeds of any recovery in my case all reasonable fees for services provided by you____” In the part of the document signed by Hernandez, the hospital is ²³³ referred to as “the named assignee.” A fair and reasonable reading of this language can leave little doubt that the document signed by Garcia and Hernandez was intended to constitute an assignment, the subject of which was “the proceeds” from any monetary recovery obtained in Garcia’s tort case. The language cannot reasonably be read otherwise.

III

It was the common law rule that causes of action for personal injuries could not be assigned. See 6 Am.Jur.2d Assignments § 37 (1963); Annotation, Assignability of Proceeds of Claim for Personal Injury or Death, 33 A.L.R.4th 82 (1984). The rule seemed to be predicated on the common law principle that such actions did not survive the death of the plaintiff-assignor. Moreover, some courts found public policy objections to the assignment of those kinds of claims, principally the fear of champerty and maintenance.

See Karp v. Speizer, 132 Ariz. 599 , 647 P.2d 1197 (App.1982); City of Richmond v. Hanes, 203 Va. 102 , 122 S.E.2d 895 (1961). Other courts, while continuing to recognize the non-assignability of personal injury claims, have distinguished between the assignment of the claim itself and an assignment of all or part of the proceeds that may be recovered from the claim.