Court Opinion

ID: 1064762
Source: CourtListenerOpinion
Date Created: 2013-10-09 19:18:47.34691+00
Date Added: 2024-06-11T15:46:53.741659
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                             AT NASHVILLE
                                 September 3, 2003 Session

         MORRISTOWN SURGERY CENTER, LLC v. TENNESSEE
             HEALTH FACILITIES COMMISSION, ET AL.

                   Appeal from the Chancery Court for Davidson County
                     No. 02-258-III   Ellen Hobbs Lyle, Chancellor

                 No. M2002-02872-COA-R3-CV - Filed December 15, 2003

This appeal under the Administrative Procedures Act challenges a chancery court order affirming
the dismissal of the Appellant’s Petition for Contested Case Review. We affirm.

          Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                                Affirmed and Remanded

WILLIAM B. CAIN , J., delivered the opinion of the court, in which PATRICIA J. COTTRELL , J. and
JAMES L. WEATHERFORD , SR. J., joined.

Michael D. Brent, W. Davidson Broemel, Melissa Ballengee, Nashville, Tennessee, for the appellant,
Morristown Surgery Center, LLC.

Paul G. Summers, Attorney General and Reporter; Sara E. Sedgwick, Assistant Attorney General;
Sue Ann Sheldon, Assistant Attorney General, for the appellee, Tennessee Health Facilities
Commission.

Warren L. Gooch, Robert W. Knolton, Knoxville, Tennessee, for the appellee, Associates of the
Meridian Health Outpatient Center, LLC.

                                           OPINION

       This dispute originated with the filing of two applications for Certificates of Need (CON).
Morristown Surgery Center, LLC (MSC) sought a CON for its proposed facility across Seventh
Street North on the campus of Lakeway Regional Hospital. Associates of the Meridian Health
Outpatient Center, LLC (Meridian) sought a CON for its proposed facility to be located on West
Fourth Street North, adjacent to Morristown-Hamblen Hospital. The Tennessee Health Facilities
Commission (the Commission) scheduled these applications for simultaneous review. During the
course of the Commission’s hearing, a suggestion was made that MSC’s certificate may have been
substantially amended by the addition of certain other putative owners, namely a Dr. Robert Lane,
who had previously registered opposition to both applications. Shortly after this suggestion was
made upon the Commission’s record, MSC deferred its application, leaving Meridian’s application
remaining. During consideration of the Meridian application, the Commission heard only from Dr.
Lane in opposition.

        Prior to the deferral of MSC’s application, in opening statements, counsel for MSC made
certain comments comparing MSC’s application to that of Meridian, stating that for various reasons
MSC’s facility would be a better alternative to that of Meridian. Further, after the deferral, and
despite the continued presence of representatives of MSC in the Commission hearing, MSC made
no further statements in opposition on the record. After the hearing on December 13, 2000, the
Commission issued a Certificate of Need to Meridian.

        On January 12, 2001, MSC filed a Petition for Contested Case Review challenging the
Commission’s issuance of a CON to Meridian. The Commission and Meridian filed separate
motions to dismiss challenging MSC’s standing to contest the CON’s issuance under Tennessee
Code Annotated section 68-11-109.1 After hearing oral argument on the motions, and upon
consideration of the Commission’s record, the Administrative Law Judge dismissed MSC’s Petition
for Contested Case Review and entered findings of fact consistent with the above recitation. Of
particular note in those findings is the following description of Dr. Lane’s role in the application
process for both MSC and Meridian:

         2)      Prior to the December 13, 2000 meeting of the Commission, a written
         objection was received from Dr. Robert Lane, who entered an objection to both the
         Petitioner’s and the Respondent’s applications for certificates of need. No other
         written objections were received regarding the Respondent Meridian’s proposed
         project.
         3)      At the December 13, 2000 Commission meeting, Mr. Michael Brent, counsel
         for the Petitioner’s proposed Morristown/Lakeway project, was present to advance
         the Petitioner’s interest in receiving a CON from the Commission. When Mr. Brent
         introduced to the Commission those persons present who would be speaking on
         behalf of the project, Mr. Brent did not include Dr. Robert Lane among those he had
         assembled to speak to the Commission that day on behalf of the Petitioner’s project.
         4)      Dr. Lane appeared at the December 13, 2000 meeting of the Commission, and
         described his participation in physician discussions with supporters of both the
         Morristown/Lakeway project and the Meridian project. Dr. Lane stated to the
         Commission:

                  . . . I invited all of the surgeons in town to my house to discuss the
                  possibility [of building an ambulatory surgical treatment center]. All

         1
            Inasmuch as the entirety of the proceedings below took place pursuant to the Tennessee Health Planning and
Resource Development Act of 1987, which was repealed by the legislature effective July 1, 2002; 2002 Pub. Acts, c. 780,
§ 9, the citations in this opinion shall be to the statutes as they app eared prior to this rep eal.

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       of them were enthusiastic about the opportunity to provide a center
       locally. As currently, patients desiring to go to this type of facility
       must go elsewhere [sic]. We decided at that time to approach
       Morristown-Hamblen Hospital [the Meridian project], intending to
       work with them to make this concept a reality. We subsequently had
       discussion with both hospitals, and as a group have decided to
       support the application of Lakeway Regional Hospital. Why
       Lakeway and not Morristown-Hamblen, or both? Well, it was felt
       that our community could not keep two centers busy. Our assessment
       was that the opportunity for physician input, guidance and direction
       was better with the former. This decision was made two days ago at
       the meeting to which all procedure-oriented physicians were invited
       after animated discussion and vote.

Dr. Lane’s comments were in support of the Morristown/Lakeway project, and
appeared to be related to his belief that the region could not support two centers, and
his belief that the terms of the Morristown/Lakeway project would be more favorable
to the surgeons he had organized to discuss the projects. And, as noted above, Dr.
Lane informed the Commission that “this decision was made two days ago at the
meeting to which all procedure-oriented physicians were invited after animated
discussion and vote.” Dr. Lane then ended his remarks.

       ....

8)       As noted above, at one point during the December 13, 2000 meeting of the
Commission, Petitioner Morristown/Lakeway requested that consideration of its
application be deferred to the January meeting of the Commission for their
consideration at that time. Mr. Michael Brent, Counsel for the Petitioner
Morristown/Lakeway, then apparently left the Commission meeting and did not
return. Accordingly, Petitioner Morristown/Lakeway did not formally object to the
Respondent Meridian’s application at the Commission meeting.
         Additionally, at no point did Dr. Lane, clearly and unequivocally acting on
behalf of the Petitioner Morristown/Lakeway, indicate that he was objecting to the
Meridian’s application on behalf of Morristown/Lakeway. Indeed, Dr. Lane’s status
at the Commission meeting seemed from the record to be more that of a nebulously
floating “belle” awaiting the approach of the most favorable dance partner. Because
the status of Dr. Lane (and with whom he was actually affiliated and representing at
the Commission meeting, or with whom he was not actually affiliated) is ambiguous
in the record of the Commission’s proceedings, and Dr. Lane did not clearly identify
himself for all present and concerned as representing Petitioner Morristown/
Lakeway, the undersigned will not infer such representation, especially in light of the
Petitioner’s counsel’s deferral of the Petitioner’s CON application, in order to clarify
whether Dr. Lane’s statements to the Commission triggered concerns of a

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          “substantive amendment” to the Petitioner’s CON application. The record before the
          Commission, at most, indicates that Dr. Lane was opposing both the Petitioner’s
          application and the Respondent’s application on his own behalf. Anything more, on
          this record, is sheer speculation.

          In addition to such findings, the Administrative Law Judge made the following conclusions
of law:

          1)      T.C.A. § 68-11-108(h) provides two ways in which a health care institution
          or other person may object to a CON application. As explained in section 108(h)(1),
          a party opposed to a CON application “must file a written objection” with the
          Commission 15 days before a Commission meeting. In the alternative, T.C.A. § 68-
          11-108(h)(2) provides that a party objecting may appear before the Commission and
          express opposition. Only a party that has objected to a CON application in one of
          these ways may appeal the Commission’s decision granting a CON.

          2)     T.C.A. § 68-11-109(a)(1) provides as follows:

                 Within thirty (30) days from the date of the commission’s meeting at
                 which action was taken on an application, the applicant, any health
                 care institution which filed a written objection in accordance with §
                 68-11-108(h)(1), or any other person who objected to the application
                 pursuant to § 68-11-108(h)(2) may petition the commission in writing
                 for a hearing, in the case of a commission approval or denial of an
                 application. Notwithstanding any other provision of law, all persons
                 are and shall be barred from filing any petition for a contested case
                 hearing after such thirty-day period, and the commission shall have
                 no jurisdiction to consider any late-filed petition.

          This statute identifies only three entities which may petition the Commission: the
          applicant, a health care institution which has filed a written objection, or a person
          who objected to the application at the Commission hearing. This interpretation is
          confirmed by the Commission regulations which provide:

                 Eligibility to appeal. Any person with legal standing, and who meets
                 the requirements of T.C.A. § 68-11-109 may petition the Commission
                 for a contested case hearing regarding the grant or denial of a
                 certificate of need.

          Rule 0720-6-.01(2) of the Rules of the Tennessee Health Facilities Commission.

          3)     Petitioner Morristown/Lakeway did not file a written objection to Respondent
          Meridian’s CON application. Counsel for Petitioner Morristown/Lakeway did not

                                                  -4-
       state any verbal opposition to Respondent Meridian’s CON application at the
       December 13, 2000 Commission meeting. At no time did Dr. Lane make any
       statements to the Commission that unequivocally established that he was speaking
       as a representative of Morristown/Lakeway. In fact, when Mr. Brent introduced
       those persons who were with him who were representing Morristown/Lakeway’s
       CON application, he did not list Dr. Lane as one of these representatives. [page 4,
       Transcript of December 13, 2000 proceedings before the Tennessee Health Facilities
       Commission.] Accordingly, one can only conclude that Dr. Lane’s comments at the
       Commission meeting were his gratuitous comments given to further his own
       interests, and that he was not representing Petitioner Morristown/Lakeway during the
       Commission meeting.

       4)      For the foregoing reasons, IT IS HEREBY DETERMINED that Petitioner
       Morristown Surgery Center, LLC lacks standing to file a Petition for a Contested
       Case Hearing, and it is HEREBY ORDERED that the Petitioner’s petition should be,
       and is hereby, DISMISSED.

        This order was entered October 10, 2001. MSC filed its Petition for Reconsideration on
October 25. The Administrative Law Judge denied that petition on November 8, 2001. The initial
order became final on November 26, and from that final order MSC filed its Petition for Judicial
Review in chancery court on January 24, 2002. In a Memorandum and Order entered October 23,
2002, the chancery court affirmed the dismissal by the Administrative Law Judge and dismissed the
Petition for Judicial Review with prejudice. It is from this order that MSC appeals.

       MSC asserts that its opposition to Meridian’s application for certificate of need was
expressed first by counsel for MSC in his opening remarks in the portion of the simultaneous
proceeding dealing with MSC’s application. MSC further argues that its “continued presence”
during the consideration of Meridian’s application for certificate of need, and comments of other
witnesses, “while not specifically mentioning Meridian,” supported MSC’s application and opposed
Meridian’s application.

        Administrative decisions in contested cases rise or fall pursuant to Tennessee Code
Annotated section 4-5-322(h). The decision of the Administrative Law Judge dismissing the
contested case must be upheld unless MSC can show that the decision violated constitutional or
statutory provisions, exceeded the statutory authority of the agency, was made upon unlawful
procedure, was arbitrary or capricious or unsupported by substantial and material evidence. Tenn.
Code Ann. § 4-5-322(h). MSC specifically argues that the dismissal of its petition for contested case
violated Tennessee law, was unsupported by evidence which is substantial and material, and
otherwise a clear abuse of discretion.

                                                -5-
I. Violation of Tennessee Law

        MSC argues that the ALJ misapplied section 68-11-108(h)(2) in excluding statements of
counsel and parties unrelated to MSC as expressions of oppositions required by that section. In so
arguing, MSC requires application of subsection 2 consistent with the well settled principles of
statutory construction. Under these principles we must give effect to the statute’s reasonable
interpretation in light of the purposes, objectives and spirit of intent of the Legislature as it is
expressed in the words of the statute. See Freeman v. Marco Transportation Co., 27 S.W.3d 909,
911 (Tenn.2000); Dorrier v. Dark, 537 S.W.2d 888, 892 (Tenn.1976). This intent is deciphered first
from the plain meaning of the statutory language, affording words of daily parlance their ordinary
meaning without tortured construction. See Carson Creek Vacation Resorts, Inc. v. State Dept. of
Revenue, 865 S.W.2d 1, 2 (Tenn.1993). Throughout Appellant’s argument, it asserts the ‘obvious’
nature of its opposition to Meridian’s application. However, in illustrating its position before the
ALJ, the chancellor and this Court, MSC points to a set of circumstances from which opposition may
be inferred. More specifically, MSC urges that the nature of simultaneous review creates a context
in which any statement in support of MSC’s application, whether it remained in the company of
Meridian’s application or was deferred, as the record suggests, amount to opposition of Meridian’s
application.

A.     SIMULTANEOUS REVIEW

        The Commission scheduled the CON applications for simultaneous review pursuant to
Tennessee Code Annotated section 68-11-106. MSC argues that section 106 is to be interpreted in
such a way as to require that petitions so reviewed are automatically competing petitions. In such
a context, the very hearing process would suggest the appearance of opposition. The appellant
buttresses this argument with citation to the administrative rule which, notwithstanding the
applicable statutory language, had yet to be amended to account for simultaneous review. This
argument fails to consider that the rules of administrative agencies go no further than the statutory
authority granted to them. See, generally, Tenn. Pub. Serv. Comm’n v. Southern Rwy. Co., 554
S.W.2d 612, 613 (Tenn.1977). The statute provides only for simultaneous review and this
simultaneous review may be of competing or comparable or companion applications for Certificates
of Need. Furthermore, this argument ignores the obvious discretion placed with the health facilities
commission in ruling on simultaneous applications, namely that it may grant or deny one or the other
or both. As appellant argues, the statutory scheme had previously provided for consideration of
competing applications. However, prior to the filing of the application which is the subject of this
appeal, the portion of the statutes dealing with competing review had been replaced with the
“simultaneous” review provisions.

        All of the events in this case occurred between September of 2000 when both parties filed
their respective applications for Certificates of Need and November 26, 2001 when the order of the
ALJ became final. This time frame is important in this case because all events occurred after the
effective date of Chapter 627 of the Public Acts of 2000 (April 5, 2000) and prior to the effective

                                                -6-
date of Chapter 780 of the Public Acts of 2002 (July 1, 2002) which latter Act repealed Tennessee
Code Annotated section 68-11-106 in its entirety.

        While Tennessee Code Annotated section 68-11-106, prior to April 5, 2000, envisioned
“competing applications” Chapter 627 of the Public Acts of 2000 specifically deleted from the
statute all references to “competing applications” and instituted in lieu thereof a system of
“simultaneous review.”

        Meticulous comparison between Chapter 627 of the Public Acts of 2000 and preexisting
Tennessee Code Annotated section 68-11-106 through 109 leads to the inescapable conclusion that
the legislature completely abolished “competing applications” and substituted in lieu thereof a
system of “simultaneous review” and made it clear that the mere filing of an application was not an
objection to another application that might previously have been referred to as “competing.”

      After deleting all references to “competing applications” section 2 of the Act amended
Tennessee Code Annotated section 68-11-106(d)(2) by deleting it in its entirety and substituting:

                (2) Persons desiring to file a certificate of need application seeking a
       simultaneous review regarding a similar project for which a letter of intent has been
       filed, shall file with the commission a letter of intent within ten (10) days after
       publication of the first filed letter of intent. A copy of any letter of intent filed after
       the first letter of intent shall be mailed or delivered to the first filed applicant, and
       shall be published in a newspaper of general circulation in the proposed service area
       of the first filed applicant within ten (10) days after publication by the first filed
       applicant. The applications shall be considered and decided by the health facilities
       commission simultaneously. The commission may refuse to consider the
       applications simultaneously, if it finds that the applications do not meet the
       requirements of “simultaneous review” under the rules of the commission.

       Section 4 of the Act specifically deleted the portions of previous section 68-11-106(d)(1)
providing:

                The published letter of intent must contain a statement (1) that any health care
       institution wishing to oppose the application must file written notice with the
       commission not later than fifteen (15) days before the commission meeting at which
       the application will be heard and (2) that any other person wishing to oppose the
       application must file a written objection with the health facilities commission at or
       prior to the consideration of the application by the health facilities commission.

       Section 6 of the Act provided:

              Tennessee Code Annotated, Section 68-11-106(d)(4), is amended in the first
       sentence by deleting the language “if two (2) or more applications are competing,”

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       and substituting in lieu thereof, the language “if there are two (2) or more
       applications to be reviewed simultaneously”; and in the second sentence by deleting
       the language “as competing.”

       Section 9 of the Act added a new subsection, codified as section 68-11-108(h) which
provided:

               (h)(1) Subject to subdivision (2) below, any health care institution wishing
       to oppose a certificate of need application must file a written objection with the
       health facilities commission and serve a copy on the contact person for the applicant,
       not later than fifteen (15) days before the commission meeting at which the
       application will be heard. An application for which the commission has received
       opposition shall be designated on the commission’s agenda as an opposed
       application.

                (2) A health care institution or other person may appear before the
       commission and express opposition to an application without complying with the
       requirements of subdivision (1), provided that if a health care institution does not
       provide notice of its opposition as required by subdivision (1), and if such health care
       institution initiates a contested case pursuant to Section 68-11-109, then such health
       care institution shall be solely responsible for the commission’s costs of the contested
       case proceeding and shall reimburse to the applicant the filing fee paid by the
       applicant, notwithstanding any other provision of law. Noncompliance with
       subdivision (1) shall not preclude a health care institution from intervening in a
       contested case proceeding initiated by the applicant.

       Finally, section 10 of the Act provided:

               SECTION 10. Tennessee Code Annotated, Section 68-11-109(a), is amended
       by deleting from the first sentence the phrase “or any person who filed directly with
       the commission a prior objection to the granting of a certificate of need,” and
       substituting instead the phrase “any health care institution which filed a written
       objection in accordance with section 68-11-108(h)(1), or any other person who
       objected to the application pursuant to section 68-11-108(h)(2)”; and by deleting
       from the second sentence the phrase “or a petition for intervention.”

       The legislative history, unnecessary to consider in the absence of ambiguity, only reinforces
the appellee’s position that simultaneous review does not automatically create competing
applications.

       Indeed, a review of the administrative record reveals that each application retains its
individual character despite the simultaneous consideration. Both applications retain their own
application numbers, and the consideration of each is individualized. It is also well to note that at

                                                  -8-
the time Meridian’s application was considered, the nature of that consideration had lost its
simultaneous character due to MSC’s deferral of consideration of its own application beforehand.
In our review of the administrative record we note that at each of the Commission invitations for
opposition, the only individual responding to each request would have been Dr. Lane had he not, as
the Administrative Law Judge had suggested, sought a different dance partner. The review of the
applications as borne out in the administrative record shows that the only effect of simultaneous
review is to take up two applications in the same session. That simultaneous character does not
convert simultaneous applications to competing applications. To apply this reasoning would be to
give a tortured construction to the simultaneous review language in Tennessee Code Annotated
section 68-11-106-109, in a situation where statutory construction is not required.

       In addressing the effect of Chapter 627 of the Public Acts of 2000 both the ALJ and the
chancellor implemented the long standing admonition of the Tennessee Supreme Court relative to
an unambiguous statute:

       Where the language contained within the four corners of a statute is plain, clear, and
       unambiguous and the enactment is within legislative competency, “the duty of the
       courts is simple and obvious, namely, to say sic lex scripta, and obey it.” Miller v.
       Childress, 21 Tenn. (2 Hum.) 319, 321-22 (1841). The rule stated in Miller has
       retained its pertinence as a guide to modern courts in statutory construction. See,
       Austin v. Memphis Publishing Company, 655 S.W.2d 146 (Tenn.1983).

                       . . . if [the legislative intent] is expressed in a manner devoid
               of contradiction and ambiguity, there is no room for interpretation or
               construction, and the judges are not at liberty, on consideration of
               policy or hardship, to depart from the words of the statute; that they
               have no right to make exceptions or insert qualifications, however
               abstract justice or the justice of a particular case may require it.

       Austin, supra at 148, quoting Heiskell v. Lowe, 126 Tenn. 475, 499, 153 S.W. 284,
       290 (1912).

Carson Creek Resorts v. Dept. of Revenue, 865 S.W.2d 1, 2 (Tenn.1993).

      Neither the ALJ, the chancery court, nor this Court has any authority but to implement that
mandate of the legislature.

B.     EXPRESSED OPPOSITION

         In this simultaneous review context each applicant was given the opportunity to introduce
their representatives. The party expressing opposition to each application was given a separate
opportunity to do so. The clerk would have been made aware of any formal opposition due to the
filing requirement under 68-11-108(h)(1). The only opposition registered to Meridian’s application

                                                 -9-
was that of Dr. Lane, who had registered written opposition to MSC’s application also, as did
Meridian. For whatever reason, MSC did not register any written opposition to Meridian’s
application. Likewise, MSC did not express oral opposition at the three opportunities afforded it by
the Commission. Rather, MSC urges as opposition the comments of counsel during the
consideration of its own application and the statements of Dr. Lane, who is admittedly unaffiliated
with MSC. This argument not only flies in the face of the language of the statute, but also in the face
of plain logic.

        Since the ALJ and the trial court applied this plain and common sense interpretation to the
statutory language, this Court finds no violation of Tennessee law therein.

II.    Substantial and Material Evidence

       Considering the substantial and material evidence standard, this Court recognizes that the
ALJ’s determination was reviewed in the first instance by the chancellor, who affirmed the ALJ’s
findings of fact. As our supreme court has stated:

               Findings of fact made by the agency may not be reviewed de novo by the trial
       or appellate courts, and courts should not substitute their judgment for that of the
       agency as to the weight of the evidence on factual issues. Southern Ry. Co. v.
       Tennessee Bd. of Equalization, 682 S.W.2d 196, 199 (Tenn.1984); CF Indus. v.
       Tennessee Pub. Serv. Comm’n, 599 S.W.2d 536 (Tenn.1980); National Council on
       Compensation Ins. v. Gaddis, 786 S.W.2d 240, 242 (Tenn.Ct.App.1989). However,
       the “substantial and material evidence standard” in Tenn.Code Ann. § 4-5- 322(h)(5)
       requires a searching and careful inquiry that subjects the agency’s decision to close
       scrutiny. Wayne County v. Solid Waste Disposal Control Bd., 756 S.W.2d 274, 280
       (Tenn.Ct.App.1988).

Sanifill of Tennessee, Inc. v. Tennessee Solid Waste Disposal Control Board, 907 S.W.2d 807, 810
(Tenn.1995). Furthermore, our supreme court has provided the following guidance when the
chancellor and the administrative law judge concur in their findings:

        We cannot, as a general rule, “afford any broader or more comprehensive review to
        cases arising under the Act than is afforded to them by the trial court in the first
        instance . . . .” Humana of Tenn. v. Tenn. Health Facilities Com’n., 551 S.W.2d 664,
        668 (Tenn.1977). Further a concurrent finding between the agency and the trial court
        on any issue of fact is conclusive upon this Court.

CF Industries v. Tennessee Public Service Comm’n, 599 S.W.2d 536, 540 (Tenn.1980).

       The ALJ and the chancellor agreed that Dr. Lane was no ally of MSC and expressed no
opposition on its behalf. In addition, the petitions for certificates of need in the record before the

                                                 -10-
Commission suggest no competition between the two. We find that substantial and material
evidence support the conclusions of the Administrative Law Judge and the chancellor.

III.   Arbitrary and Capricious Standard

       Having examined the statutes as they existed at the time of the simultaneous review of
MSC’s and Meridian’s applications, and having reviewed the administrative record in its entirety,
this Court cannot find that the Commission or the Administrative Law Judge made a clear error in
judgment. See Jackson Mobilphone Co. v. Tennessee Public Service Comm’n, 876 S.W.2d 106, 110-
11 (Tenn.Ct.App.1993). On the contrary, we find, in light of MSC’s tacit appearance during the
consideration of Meridian’s application, after the deferral and eventual withdrawal of its own
application, and in the face of three requests for the expression of opposition, a denial of the motion
to dismiss would be arbitrary and capricious. The action of the chancellor is affirmed. Costs on
appeal are assessed against Appellant for which execution may issue.

                                                        ___________________________________
                                                        WILLIAM B. CAIN, JUDGE

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