SC Administrative Law Court Decisions

This matter came before the State Board of Medical Examiners (Board) for a hearing on March 2, 2001. After that hearing, the Board denied the Appellant's request to vacate the agreement to voluntarily surrender her license executed on August 11, 1997. Thereafter, this matter came before me pursuant to S.C. Code Ann. § 1-23-600(D) (1986 & Supp. 2000) of the Administrative Procedures Act upon appeal from that Final Order of the Board. Oral arguments were heard before me at the offices of the Administrative Law Judge Division (Division) in Columbia, South Carolina, on January 29, 2002.

The Appellant asserts that:

I. The voluntary surrender of her license was invalid and void ab initio on the ground she was, at the time she executed the surrender, still legally insane and incompetent to enter into any such agreement;

II. The agreement to voluntary surrender her license is voidable because the grounds that justified the surrender never existed and the surrender was based on mutual mistake of fact; and

III. The State Board of Medical Examiners erred in denying Gresham's request to modify its Order to allow her to reapply for a medical license, provided that she can show that she is physically, mentally and emotionally capable of performing duties as a medical doctor in a satisfactory manner.

Phyllis Gresham, MD, (Appellant) was a licensed doctor in the State of South Carolina. On September 16, 1997, the State Board of Medical Examiners received an initial complaint that the Appellant had been arrested and later indicted relative to numerous crimes. The indictments alleged that between October 4, 1996 and November 16, 1996, the Appellant engaged in criminal activity, including criminal conspiracy, attempted third degree arson, several drug related offenses, and one count of fraudulent check writing. Pursuant to S.C. Code Ann. § 40-47-200 (Supp. 1996), the Board initiated an investigation of the Appellant's activities.

As a result of the Board's investigation, a Formal Complaint was filed with the Board on July 11, 1997. The Complaint alleged that the Appellant violated S.C. Code Ann. §§ 40-47-200 (F)(7), (8), (9), (10) and (11) (Supp. 1996), 26 S.C. Code Ann. Regs. 81-60 (B) and (C) (Supp. 1996), and S.C. Code Ann. §§ 44-53-360(c) and (h) (1976). The Complaint alleged that the Appellant obtained Diethylpropion, a Schedule IV controlled substance, by fraud and for her own use. Furthermore, the Complaint alleged that the Appellant unlawfully distributed Dilaudid (a Schedule IV controlled substance), Lorcet 10 (a Schedule III controlled substance), Vicodin ES, and Valium 10 mg. (both Schedule IV controlled substances). The Complaint further alleged that the Appellant unlawfully conspired to burn her medical office in order to destroy records and collect insurance.

At the time the Complaint was served upon the Appellant, she was represented by Samuel C. Bauer, Esquire. On or about July 18, 1997, after consultation with Mr. Bauer, counsel for the South Carolina Department of Labor, Licensing and Regulation (Department) forwarded a proposed "Voluntary Surrender of License to Practice Medicine" (Voluntary Surrender or Agreement) for the Appellant's review. The Voluntary Surrender provided that the Appellant would give up forevermore the right to practice medicine in South Carolina. It further provided that the Agreement is irrevocable and not subject to judicial review. With advice of counsel, the Voluntary Surrender was executed by the Appellant, returned to the Board, and accepted by the Board on August 13, 1997. Counsel for the Appellant had not sought or obtained a guardian ad litem for the Appellant at the time of the negotiation and subsequent execution of the Agreement.

On June 3, 1998, approximately one year after the surrender became effective, the Appellant was found not guilty by reason of insanity as to all of the criminal charges, with the exception of the fraudulent check charge. On June 3, 1998, the court accepted the Appellant's guilty plea as to the fraudulent check charge. This charge was later reopened and nol prossed. During the period after the 'not guilty by reason of insanity adjudication,' the Appellant was committed to a state mental institute. On or about January 27, 2000, the Appellant was released into the community on an independent living status, although she is continuing to receive outpatient treatment.

On February 22, 2000, the Appellant submitted a Petition to the Board requesting that it vacate the Voluntary Surrender. Her Petition was based upon the assertion that the Appellant was legally insane at the time the Agreement was executed and, in the alternative, that the Voluntary Surrender was voidable due to lack of proper grounds or mistake of fact. The Appellant further claimed that she was not a threat to the public. On May 16, 2000, counsel for the Department submitted a return to the Board opposing the Petition to Vacate. After consideration of the matter, without oral argument, the Board denied the Petition on May 22, 2000.

On June 23, 2000, the Appellant filed a Petition for Review with this Division, alleging essentially the same grounds for vacating the Voluntary Surrender as earlier set forth in the Petition to the Board. In response to the Petition, the matter was remanded back to the Board to conduct an evidentiary hearing. After conducting a hearing on March 2, 2001, the Board issued an Order denying the Appellant's request for relief. The Appellant later filed a motion with the Board requesting it to alter or amend its Order to allow Appellant to reapply for a medical license if she is able to show that she is physically and mentally capable of practicing medicine. That motion was denied and the present appeal was taken to this Division.

This case is before the Division as an appeal of an agency action. As such, the Administrative Law Judge sits in an appellate capacity under the Administrative Procedures Act (APA), rather than as an independent finder of fact. In South Carolina, the provisions of the APA -- specifically Section 1-23-380(A)(6) -- govern the circumstances in which an appellate body may reverse or modify an agency decision. That section states:

The court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions or decisions are:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the agency;

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative and substantial evidence on the whole record; or

(f) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

S.C. Code Ann. § 1-23-380(A)(6) (1986 & Supp. 2000).

A decision is supported by "substantial evidence" when the record as a whole allows reasonable minds to reach the same conclusion reached by the agency. Bilton v. Best Western Royal Motor Lodge, 282 S.C. 634, 321 S.E.2d 63 (Ct. App. 1984). The well-settled case law in this state has also interpreted the "substantial evidence" rule to mean that a decision will not be set aside simply because reasonable minds may differ on the judgment. Lark v. Bi-Lo, 276 S.C. 130, 276 S.E.2d 304 (1981). The fact that the record, when considered as a whole, presents the possibility of drawing two inconsistent conclusions from the evidence does not prevent the agency's finding from being supported by substantial evidence. Waters v. South Carolina Land Resources Conservation Comm'n, 321 S.C. 219, 467 S.E.2d 913 (1996); Grant v. South Carolina Coastal Council, 319 S.C. 348, 461 S.E.2d 388 (1995).

In applying the substantial evidence rule, the factual findings of the administrative agency are presumed to be correct. Rodney v. Michelin Tire Co., 320 S.C. 515, 466 S.E.2d 357 (1996), citing Kearse v. State Health and Human Services Finance Comm'n, 318 S.C. 198, 456 S.E.2d 892 (1995). Furthermore, the reviewing court is prohibited from substituting its judgment for that of the agency as to the weight of the evidence on questions of fact. Grant, supra, citing Gibson v. Florence Country Club, 282 S.C. 384, 318 S.E.2d 365 (1984). Finally, the party challenging an agency action has the burden of proving convincingly that the agency's decision is unsupported by substantial evidence. Waters, supra, citing Hamm v. AT&T, 302 S.C. 210, 394 S.E.2d 842 (1994).

The Appellant was found "not guilty by reason of insanity." "[T]he test in this State of whether an accused is criminally responsible for his actions is whether he had the mental capacity to distinguish moral or legal right from moral or legal wrong, and to recognize the particular act charged as morally or legally wrong. This is the so-called M'Naughten test." State v. Law, 270 S.C. 664, 244 S.E.2d 302 (1978). The Appellant contends that the finding that she was insane is presumptive evidence that she was incompetent to enter into the Agreement with the Board. However, the M'Naughten test is viewed from the perspective of the criminal's sanity at the time of the offense. See S.C. Code Ann. § 17-24-10 (A) (Supp. 1996) (It is an affirmative defense to a prosecution for a crime that, at the time of the commission of the act constituting the offense, the defendant, as a result of mental disease or defect, lacked the capacity to distinguish moral or legal right from moral or legal wrong or to recognize the particular act charged as morally or legally wrong.).

In 16 Am. Jur.2d Contracts § 23, the writer set forth that:

To form a contract, it is necessary that there be a party capable of contracting and a party capable of being contracted with. In other words, to enter into a valid, legal agreement, the parties must have the capacity to do so. The parties must be capable of intelligent assent in order to make a valid contract. Where there is no capacity to understand or agree, there can be no contract. Also, it has been said that there can never be a valid, enforceable agreement unless both of the contracting parties are juristic entities at the time of its supposed consummation.

It is generally accepted that before an agreement will be set aside for lack of mental capacity, it must be established that the person challenging the agreement was "so incompetent as to fail to comprehend the nature of his act." Ballenger v. City of Inman, 336 S.C. 126, 518 S.E.2d 824 (S.C. App. 1999). Furthermore, the Appellant bears the burden of showing that she lacked capacity at the time she signed the Voluntary Surrender. Id.

However, there is no evidence in the record showing that the Appellant was incompetent at the time she executed the Voluntary Surrender. The Appellant was represented by able counsel at the time the Agreement was executed and no attempt was ever made by that attorney to obtain the appointment of a guardian ad litem. In fact, a review of the record shows not only a lack of evidence as to her alleged incapacity, but it also contains persuasive evidence that the Appellant knew what she was doing when she signed the Voluntary Surrender. The Appellant testified that while she was on steroids she was having "fugues." However, after she quit taking the steroids she was "back to [her] normal self a couple weeks after the crime." In particular, the Appellant testified that when she surrendered her license, she had been off oral steroids for three to four months and she was back to normal. She testified before the Board that she was feeling well when she surrendered her license but that she received bad legal advice from her attorney concerning signing the Agreement.

Moreover, the Appellant seeks the presumption that she was incompetent as a result of a finding made during a criminal legal proceeding. "The test of whether an accused is mentally competent to stand trial is whether, at the time of trial, 'he has sufficient present ability to consult with his lawyer with a reasonable degree of rational understanding and whether he has a rational as well as a factual understanding of the proceedings against him.' " State v. Law, 270 S.C. 664, 244 S.E.2d 302 (1978) (emphasis added), (quoting Dusky v. U.S., 362 U.S. 402, 80 S.Ct. 788, 4 L.Ed.2d 824, 825 (1960)). However, in the criminal legal proceeding, though the Appellant was found insane at the time of the commission of the offense, she was also found competent to stand trial. Therefore, the very court upon whose finding of insanity the Appellant relies also found she had "sufficient capability to consult with [her] lawyer with a reasonable degree of rational understanding and have a rational as well as factual understanding of the proceedings against [her]." Jeter v. State, 308 S.C. 230, 417 S.E.2d 594 (1992).

No court has ever addressed the issue of the Appellant's competence at the time of the Voluntary Surrender and absolutely no evidence has been offered which shows that her competence was even an issue at the time her attorney advised execution of the Voluntary Surrender. The record shows that the Appellant understood what she was doing at the time she surrendered her license. Therefore, her burden has not been met and the ground of mental incapacity fails to sustain the request to vacate the Voluntary Surrender.

The Agreement in which the Appellant surrendered her license set forth, in part, that:

Whereas the State Board of Medical Examiner (the Board) has received an initial complaint of misconduct with respect to Phyllis Gresham, MD (Respondent) regarding her conviction of, pleading guilty to, or pleading nolo contendere to a felony or other crime involving moral turpitude or drugs. . . .

When the Appellant executed the Agreement in 1997, she had not been, nor was she ever, convicted of, nor had she plead guilty or nolo contendere to any felony or other crime involving moral turpitude or drugs. Both the Appellant and the Board knew that her charges had not yet come to trial. The Appellant contends that it must be assumed that, under the circumstances then existing, that the Appellant and the Board incorrectly assumed that she would be convicted. Therefore, the Appellant argues that the Voluntary Surrender was based upon a conviction of the criminal charges against her and that since she was never convicted, the Agreement must be voided on mutual mistake of fact.

The Appellant is indeed correct that a contract can be voided on mutual mistake of fact. See Truck South, Inc. v. Patel, 339 S.C. 40, 528 S.E.2d 424 (2000). However, in Patel the South Carolina Supreme Court held that "[t]he mistake must be common to both parties and, by reason of it, each has done what neither intended." Furthermore, in Chet Adams Co. v. James F. Pedersen Co., 308 S.C. 410, 418 S.E.2d 337 (Ct. App. 1992), the South Carolina Court of Appeals held that:

It is true a contract may be avoided or reformed on the ground of mutual mistake of fact where the mistake is common to both parties and, by reason of it, each has done what neither intended. However, if, in the expression of the intention of one of the parties to an alleged contract, there is error, and that error is unknown to, and unsuspected by, the other party, that which was so expressed by the one party and agreed to by the other is a valid and binding contract, which the party not in error may enforce.

Moreover, in 268 Am. Jur.2d Contracts § 392, the writer set forth that:

Since recitals indicate only the background of a contract, that is, the purposes and motives of the parties, they do not ordinarily form any part of the real agreement. Generally, they do not have the force of contractual stipulations. However, recitals may have a material influence in construing the contract and determining the intent of the parties, and in such respect they should, so far as possible, be reconciled with the operative clauses and be given effect.

Generally, if the recitals in a contract are clear and the operative part is ambiguous, the recitals govern the construction; but if the recitals are ambiguous and the operative part is clear, the operative part must prevail. If both the recitals and the operative part are clear, but they are inconsistent with each other, the operative part must control.

Here, the Appellant never testified that she did not voluntarily surrender her license. Rather, she testified that though she knew she was surrendering her license, she was told that she could get her license back at a later date. In other words, she contended to the Board that she simply received bad legal advice from her attorney concerning signing the "surrender." More importantly, there is no testimony that the Board incorrectly assumed that the Appellant would be convicted. To the contrary, the Board, without evidence to the contrary, could have been relying solely upon the existing facts. In fact, though the Appellant was found not guilty by reason of insanity of most of the crimes charged, the Appellant still referred to her action(s) as a "crime" in her testimony before the Board.

The Voluntary Surrender was based upon the Formal Complaint filed with the Board. The mere misstatement in the recitals of the procedural situation of the Appellant's criminal case does not affect the validity of the surrender of her medical license. The disposition of the criminal charges notwithstanding, the Appellant was facing numerous disciplinary charges before the Board. The misstatement in the Agreement appears to be purely ministerial in nature and does not show a mutual mistake of fact. To the contrary, the record shows that the Appellant knowingly opted to surrender her license to practice. The Voluntary Surrender was presented to the Appellant's counsel after the Board's pending disciplinary action was made known to the Appellant. It is abundantly clear that the Voluntary Surrender was predicated on the impending Board action and was offered as a way to avoid such action. Therefore, the Voluntary Surrender is a valid Agreement.

In the surrender Agreement, the Appellant agreed to "surrender forevermore her right to practice medicine in South Carolina." "Forevermore" means "forever" or "for a limitless time." Merriam-Webster OnLine (2002), available at http://www.m-w.com/. The Appellant contends that her agreement to "forevermore" surrender her license exceeds the bounds of decency and fairness to deny her the right to reapply for her license to practice medicine because "she has never committed any crime" and her execution of the Voluntary Surrender "was made under the mistaken belief that she had, in fact, committed several crimes." Therefore, she contends that the Board erred when it denied her request to modify its Order to allow her to reapply if she can make a proper showing to the Board that she is physically, mentally and emotionally capable of performing her medical duties as a doctor.

In the State of South Carolina, the Board is vested with the responsibility of regulating the practice of medicine pursuant to the South Carolina Medical Practice Act. See S.C. Code Ann. §§ 40-47-5, et seq. (2001); § 40-1-70 (2001). Necessarily, decisions as to licensure and disciplinary matters are within the purview of the Board's discretion. The Appellant was facing a pending disciplinary action before the Board. Any disciplinary action that would have taken place would have been totally independent of the criminal case pending at the time of the Voluntary Surrender.

However, the Board argued that "[t]his is not a matter of the punishment fitting the crime, rather, it is a matter of the Board enforcing a legally valid agreement. When physicians enter into such agreements, the expectation of all involved parties is that the terminology will be strictly followed. To allow physicians to later change their mind works to undermine both the validity and finality of Board settlement agreements."

The Appellant avoided facing a Board disciplinary action when she surrendered her license and avoided the potential sanction of fines levied by the Board. See S.C. Code Ann. § 40-1-110 (2001). The mistake, if any, in this case was unilateral. A contract can be voided upon unilateral mistake but "only when the mistake has been induced by fraud, deceit, misrepresentation, concealment, or imposition of the party opposed to the rescission, without negligence on the part of the party claiming rescission, or when the mistake is accompanied by very strong and extraordinary circumstances which would make it a great wrong to enforce the agreement." Scott v. Mid Carolina Homes, Inc., 293 S.C. 191, 359 S.E.2d 291 (1987) (emphasis added). The evidence does not support an inference that the surrender Agreement was entered into by "fraud, deceit, misrepresentation, concealment, or imposition." Nevertheless, the Appellant's agreement to voluntarily surrender her license "forevermore" was the most severe sanction the Board could have levied against her license. In light of the not guilty verdict, the permanent surrender by the Appellant of her license under these facts appears to be a mistake that is accompanied by very strong and extraordinary circumstances.

IT IS THEREFORE ORDERED that the Final Order of the Board is hereby affirmed as to Issues I and II.

IT IS FURTHER ORDERED that the Voluntary Surrender Agreement is reformed as follows:

The Appellant may petition for reinstatement after she has served a minimum of five years suspension of her license.

IT IS FURTHER ORDERED that this case is remanded to the Board for the Board to determine the appropriate circumstances under which the Appellant would be allowed to reapply for her license.

AND IT IS SO ORDERED.

__________________________________

Ralph King Anderson, III

Administrative Law Judge

March 26, 2002

Columbia, South Carolina