# FILED March 16, 2000 Cecil Crowson, Jr. Appellate Cou rt Clerk 

### IN THE COURT OF APPEALS OF TENNES SEE

AT NASHVILLE
WANDA CARY SCOTT, ) Administrator

of the Estate of ) Flois C ary Snod dy, ) ) Plaintiff/Appell

ant, ) Appeal No.

) M1999-00346-COA-R3-CV VS. ) ) Cheatham Cir

cuit ASHLAND HEALTHCA RE ) No. 4737 CENTER, INC., d/b/a OAKMONT ) CARE CENTER; MONARCH ) NURSING HO

MES, INC.,

d/b/a ) OAKMONT CARE CENTE R; ) RED BIRD JET CORPORATION, ) d/b/a PARAGON HEALTHCARE ) and/or PARAGO

N COMPANIE

S; ) STEPHEN W . CREEKMOR E and ) MEDICAL HOLDINGS, LTD., ) ) Defendants/Appel

lees. ) APPEALED FROM THE CIRCUIT COURT OF CHEATHAM COUNTY

AT ASHLAND CITY, TENNESSEE THE HONORABLE ROBERT BURCH, JUDGE
STEVE R. DARNELL P. O. Box 1008 Clarksville, Te

nnessee 37041-1008 Attorney for P

laintiff/Appella

nt ROBERT L. ESTES PETER F. KLETT 424 Church Street,

Suite 1401 Nashville, Tennessee 37219-2392 Attorn eys for Defendants/Appellees Ashland Healthcare Center , I nc., Stephen W. Cre

ekmore, Jr.and Medical Holdings , Ltd.
AFFIRMED AND REMANDED

BEN H. CANTRELL, PRESIDING JUDGE, M.S.-2- 

### O P I N IO N

In this wrongful

death case against a nursing home, we are asked to deci de if the holder of the certificate of need and the license to operate th e facility may be held liable even if t

he facility is leased to and operated by another entity. The Circuit Court of Cheatham County granted summary judgment to the hold er of t he cer tific ate of need a nd th e lice nse to opera te. We a ffirm.

I.

The administrator

of the estate of Fl

ois Cary Snoddy

filed suit for his wrongful death alleging that he d ied on July 6, 1994 as a result of the treatment he received in the Oakmont C are Center in Ashland Ci ty. T he complaint

contained counts of common law negligence an d the vio lation of certain state statutes and federal regulations. Among the defendants were Stephen Creekm

ore, Ashland Hea

lthcare, Inc.,

and Medical Holdings , Ltd.
Stephen Creekmore ow

ns Medical Holdings,

Ltd., which, i

n turn, is the soleshareholder of Ashland Health Care, Inc., a corporation that built the Oakmont Care Center in Ashland

City. Neither Creekmore, Ashland Healthcare, nor Medical Holdings

are in the business of

operating nursing hom

es.

In order to build a health car

e facility, t

he builder must f

irst obtain
a“Certifica

te of Need”(hereafter CO N). Tenn. Code

Ann. § 68-11-106. I

n 1988 Ashland Healthcare retained a private attorn ey to o btain the CON for the Ashland City facil

ity. The application wa

s inadvertently filed in the nam e of-3-

Medical Holdings and issued in that name on November 21, 1988. The attorney discovered the mistake and the CON w as re issued to Ashland He althcare on September 22,

1993, as the construc

tion neared com

pletion.

A separate license

is required to operate

a health care fa

cility. Tenn. C o de Ann. § 68-11-204. S ince Ashland Heal thcare was not in th

e business of operatingnursing homes, i t leased the facili

ty to Monarch Nursing Ho mes, Inc., an unrelated Missour

i Corporation, on O

ctober 1, 1993.

Monarch applied for an operator’s license on July 6, 1993, naming the institution Oakm

ont Care Center a

nd showing Monarch Nursing H omes, Inc.
as the o wner of the b usiness. The applicat ion was signed by John M. Pugh, a Monarch employee

designated as the adm

inistrator of the fa

cility. The l

icensing board rejected that a

pplication because t

he applicant was not

the same as the holder of the CON. On September 28, 1993, another Monarch employee refiled the application in th e name of Ashland He a lthcare, Inc., D/B/A Oakmont Care Center. The applicatio n contained extensive accurate inform

ation about Ashland Healthcare, even showing the parent company as Medical Holdings, Ltd. There is a disputed question of f act, however, about wheth er A shland Healthcare, Medical Holdings, and/or Mr. Creekmore knew about and acquiesced in the use of Ashland Healthca

re’s name t

o obtain the

license. On October 1, 199 3, the Department

of Health issued a conditional six month license in the name of Ashland Healthcare, Inc., D/B/A Oakmont Care Center.

A new license, therefore, h a d to be obtained befor e the six month period expired. Despite

the fact that the li

cense cou ld have be en obtained by-4-

Monarch by filing a chang e of ownership form

, a ne w administr

ator of the Oakmont Care Center fil

ed another applicat

ion in the name of

Ashland Healthcare, Inc., D/B/A Oakmont Care C enter, on March 6,

1994. This application, however, contained the addition al information

that the facility

was being operated by Monarch. The D epartment re issued the permi

t to Ashland Healthcare, I

nc., D/B/A Oa

kmont Care Ce

nter, to expire on J

une 30, 1994.

On or about June 7, 1994, another application was filed in th e name of Monarch Nursing H

om es, Inc., D/B/A Oakm

ont Care Center.This application
was also r eject ed bec ause t he name of the applicant wa s different from

the prior licensee and no change of ownership form had beenfiled. On August 1 0, 1994, anotherOakmont administrator, Duane Far nham, filed an appli catio n in t he name of Ashland Healthca

re, Inc ., D/B/A Oakmont Care Center. The license was reissued in that name.

On August 12, 1994, Mr. Fa rnham filed another application for a license in the name of M

onarch. The new license was i ssued to Monarch on August 16, 1994, even though t

he notification of

a change of

ownership was not filed until October or N

ov ember. Mr. Snoddy, ho wever, died on July

6, 1994, while the license was in the name of Ashland Healthcare.

Ashland Healthcare m

oved f or summary

judgment on the

ground that they were nev

er involved in t

he opera tion of the nursing home and shared
no responsibilit

y for Mr . Snoddy’s death. The Circuit Court of Cheatham County granted the

motion. Medical Holdings and Mr. Creekmore could be held-5-

liableonly through Ashla nd Health c are. Therefore, the court dismissed them also.

II.

We think the undisputed fac ts show that Ashland

Healthcare was not the operator of

the Oakmont Care Center. At all times the facility was under the control of

and operated by Monarch. Therefore the negligence that resulted in the harm to Mr.

Snoddy was not the

negligence of Ashla

nd Healthcare nor

of its employees. Monarch was not Ashland

Healthcare’ s agent; their rela tionship was that of landlor

d and tenant.

The plaintiff insists, h

owever, that As

hland Healthcare

can be held responsible

for Mr. Snoddy ’s injuries on oth er theories. We will discuss each theory in turn.

A.

T HE N ONTRANSFERABLE CON AND L ICENSE TO O PERATE
The transfer of

a CON will render

it null and void. Ten

n. Code Ann. § 66-11-120(a). But

the CON applies only

to the construction

of a facility,

not to i ts operation. By

the time the fa

cility is opened,

the CON has serve

d it s purpose. Therefore, t he fact that Ashland Hea lthcare ob tained th e state’s approval to construct the nursi ng home do es not make it liable for acts that occurred when the

facility was

put into operation under

other managem

ent.-6- A lice n se to operate a hea lth care facility

cannot be transfer

red or assigned, either. Tenn. Rules & Regs. 1200-8-6-.01(2)(c) makes that policy explicit: Licenses are not tra ns ferable or assignable.

U pon ch ange of ownership th e existing license is terminated

and the new owner

is required to submit an app li cationwith the licensing f ee, be inspected a

nd m eet the applicable stand ards and regulations,

or receive a waiver for th e non-complianc e from the B oard, and approved for a li cense as is require

d f o r initial licensing. Any

change of ownershi

p shall be reported to the De

partment and a

new application for licensure submittedat least thirty (30) days befor

e the change is to be im

plemented.
Rule 1200-8-6-.01(2)(e)(1) defines an “owner”: For the purpose of licens

ing , th e “owner” of a health facil ity has the ultimate responsibility f

or the operation of the facility , including the final autho rity to make or contro

l operational dec isions and legal responsibility

for the bus ine ss management. A “change of ownership” occu

rs whenever this

ultimate legal authority to contr

ol the activities and

policies of the facility is tra

nsferred to another

individual, group, or lega l entit y.

The regul atory s cheme requires the license to be held by the per son
or entity that

is operating the fac

ility. But it does not purport to ma ke the holder of the license liable for the acts of the “owner” . In fact, the regula tions make it clear thatthe chang e in responsibility for the operation is

what triggers the requirement of a license change.

Thesestatutes and regulations make it clear that neither a CON nor
alicense tooperate a medical facility may be transferred without the concurrence of the health facilities commission (CON) or the board for licensing health care-7-

facilities (the

operator’s lice

nse). They st

op short, however, of imposing strict liability on the holder of eithe

r. The statutes a

nd regulations provide

the state withthe autho ri ty to regulate th e delivery of he

alth care services and with the remedi es to apply when the letter of the law

has been violated, b

ut they do not make a license

holder vicariously

liable for the act

s of third parties.

B. T HE N ON -D ELEGABLE D UTY

The appellant asse

rts th at Ashland Health Care had a duty of care to the Oakmo nt pati ents an d that t he duty could no t be delegated to an indepe n dent

contractor. This assertion is based on the rule that certain duties that are “intrinsi

cally dangerous ,” cannot be delegated. International Harvester Co. v. Sartain , 222 S.W.2d 854 at 867 (Tenn. 1948). In Sartain the defendant undertook

t o supply electric power to an area of a construction site. Since “electri city, if not

properly safe

guarded, is one of th

e most dangerous

and lethal agencies known to man,” Tennessee Electric Power Co. v. Sims , 108 S.W.2d 801 (Tenn. Ct. App. 1937), the defendant could no t delegate the duty

to install the lines ata safe di stance from st ructures on the site.

Therefore, th

e defendant couldbe held liable for an in dependent contracto

r’s negligence in

the placement of the line.

In on e case the court held that the duty of a “general acute-care hospital” to furnish non-negligent emergencyroom care cou ld not be delegated to an independent con tractor. Jackson v. Power , 743 P.2d 1376 (Alaska 1987). After reciting the in stances where the courts h ad found duties to be non--8-

delegable, the Alaska Suprem e Court concluded tha

t the question cam

e down to whether “the responsibility is so important to the community thatthe employer should not be perm

itted to transfer it

to another.” 743 P. 2d at 1384.

We know of n o authority say ing that the operation

of a nursing home falls into this category. Even if it does, however, the first question that has to be answered is whether the duty has been assumed by or imposed on the personor entity

charged with violat

ing the duty. As

the Alaska Supreme court recognized, “aparty cannot be held to have delegated away a duty it nev er had.” 743 P.2d at 1382. As w e have pointed out, ne

ither the stat utes nor the regulations impose on

Ashland Healthca

re the duty to ope

rate the nursing

home, and the uncontradicted proof in the record shows that Ashland Healthcare never undertook

the operation of

the Oakmont Care Center. The facility w as constructed for the s ole purpose of leasin g it to someone el se. Ashland Healthcare leased the building to Monarch in October of 1993 an

d Monarch at all times operate

d the facility.Therefore, w e think the uncontradic

ted proof shows that Ashland Heal

thcare did not have

a non-delegable duty

to the public.

C. E STOPPEL

The plaintiff asserts t

hat by a llowing the operatio n of the nursing home under its license, Ashland Healthcare is now estopped to deny that it was the operator. Estoppel, however, requires relianc e on therepresentation tha t is
now denied. Lawrence Co. v. White , 288 S.W.2d 735 (T enn. 1956). Ther

e is no proof that th e plain tiff, or Mr. Snod dy himsel f, had an y k nowledge of the factthat the license to opera te Oakmon t Heal th Cen ter wa s in t he name of Ashland Healthcare. The plai ntiff discovered tha t fact only aft

er the lawsuit wa

s filed. Therefore, Ashland Healthcare is not estopped to deny that it ever operat

ed the nursing home.

III.

The judgment of the

court bel ow is affirm

ed and the cause is remanded to the Circuit Court

of Cheatham

County for any

further proceedi

ngs necessary. T

ax the costs on appeal

to the appellant, W

anda Cary Sco

tt.

_______________________________ BEN H. CANTRELL, PRESIDING JUDGE, M.S.
CONCUR:

____________________________ WILLIAM B. CAIN, JUDGE

____________________________ PATRICIA J. COTTRELL, JUDGE