Appeal from the Order of the Superior Court entered 10-15-2008, reconsideration denied 01-14-2009, at No. 2327 EDA 2007 Affirming the Order of Bucks County Court of Common Pleas entered 08-24-2007 at No. 0402253. Appeal from the Order of the Superior Court entered 10-15-2008, reconsideration denied 01-14-2009, at No. 2328 EDA 2007 Affirming the Order of Bucks County Court of Common Pleas entered 08-24-2007 at No. 0402253.
The opinion of the court was delivered by: Mr. Justice Eakin
CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
In 2004, Kathleen Bernath brought a medical malpractice claim against appellants for injuries sustained following surgery at Frankford Hospital. In 2005, she entered into a written settlement agreement with appellants. Section 1.4 of the agreement provided, "[Bernath] acknowledges and agrees that the release and discharge set forth above is a general release. ... The total consideration as outlined in Sections 2.0, 2.1, 2.2 and 2.3 below is in the amount of Six Million Three Hundred Thousand Dollars ($6,300,000.00)." Settlement Agreement, 12/12/05, at 3, § 1.4. Sections 2.1 and 2.2 stated medical insurance and appellants would directly pay Bernath lump sums of $400,000 and $4,239,890, respectively. Id., at 3-4, § 2.1-2.2. Of particular importance, Section 2.3 provided:
Frankford Hospital of the City of Philadelphia agrees to make payment in the following manner:
(i) The sum of Twenty Thousand Dollars ($20,000.00) per month commencing on or about January 15, 2006. Said payment of Twenty Thousand Dollars ($20,000.00) per month shall continue for the life of Kathleen Bernath. Said payment of Twenty Thousand Dollars ($20,000.00) per month shall increase by Four Percent (4.00%) compounded annually effective each anniversary of commencement date. No payments shall be due on or after the date of Kathleen Bernath's death.
Id., at 4, § 2.3. Bernath agreed these periodic payments could not be accelerated, deferred, increased, or decreased. Id., at 5, § 3.0. Frankford Hospital reserved the right to fund the periodic payment liability via the purchase of an annuity policy from New York Life Insurance and Annuity Company, which would then take full responsibility for the obligations of Section 2.3. Id., at 6, § 5.0. Bernath specifically agreed to this assignment. Id., at 5, § 4.1.
In accordance with the agreement, Frankford Hospital issued a $4,239,890 check to Bernath. It also issued a $1,660,100 check to New York Life for the annuity purchase, but some two weeks after the check was sent to New York Life, Bernath died. Though Frankford Hospital had sent the check to New York Life, at the time of Bernath's death, the annuity contract had not yet been executed. Frankford Hospital asked New York Life to refund the $1.6 million check, claiming the annuity obligation was premised on Bernath being alive at the time the payments commenced. Appellee, as executrix of Bernath's estate, challenged the claim and requested the $1.6 million be paid to the estate.
After several months of complicated procedural history, the trial court ordered appellants to pay Bernath's estate $1,660,100. The trial court found the settlement agreement unambiguously revealed the parties' intent that the total to be paid was $6.3 million, and appellants' portion of that amount was $5.9 million - the $4.24 million lump sum and the $1.6 million paid to New York Life to fund the annuity. Trial Court Opinion, 11/1/07, at 14. It held the obligation to pay the annuity arose when the parties entered into the agreement; thus, as Bernath's death made the annuity purchase impossible, the $1.6 million should be paid to her estate. Id.
Appellants appealed, and the Superior Court affirmed, finding the duty to pay the $1.6 million to obtain an annuity was not stipulated upon an event but arose when the contract was executed. Lesko v. Frankford Hospital, No. 2327 & 2328 EDA 2007, unpublished memorandum at 10 (Pa. Super. filed October 15, 2008). The court believed appellants recognized their obligation to pay the $1.6 million by sending the check to New York Life to purchase the annuity, and would not have contracted to pay the $20,000 per month annuity themselves because Bernath might have remained alive for many years, costing appellants more than the agreed upon amount. Id. The Superior Court concluded changed circumstances, which made it impossible for appellants to purchase the agreed upon annuity, failed to release them from their promise to pay Bernath's estate the entire amount specified in the settlement agreement; instead, only the form of the obligation changed following her death, and the estate was owed $1.6 million to satisfy the $6.3 million "total consideration" mentioned in the contract. Id., at 11. We ...