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Northlake Community Hospital v. Cadkin





APPEAL from the Circuit Court of Cook County; the Hon. CHARLES J. GRUPP, Judge, presiding.


Defendant appeals from a judgment of the circuit court in favor of the plaintiff for $6,098.10. The issues on appeal are (1) whether a promissory note for $6,098, executed by the defendant and made payable to the hospital, was supported by consideration, and (2) whether the hospital failed to prove ownership of the note at trial.

Plaintiff (hospital) and defendant, a medical doctor, entered into an oral agreement on or about October 1, 1970, whereby defendant was to associate himself with the hospital for the purpose of practicing the medical specialty of anesthesia. The arrangement was characterized by the parties at trial as a "fee for service" basis. Under this arrangement, defendant was to bill his patients directly rather than draw a salary. In addition, the parties agreed that for any month in which defendant's cash receipts from his private patients failed to exceed the sum of $3,000, the hospital would issue a check to defendant for the difference between the cash receipts and $3,000.

Defendant commenced to perform services for plaintiff in the first part of October 1970. Between October and January, 1971, the hospital issued to defendant six checks on a semi-monthly basis for a total of $6,098.10. The record does not reflect that any checks were issued after January 4, 1971.

Defendant's association with the hospital lasted for only a period of approximately one year. On September 24, 1971, shortly before the end of the association, the hospital business manager and comptroller, Raymond Priem, summoned defendant to his office. There, defendant executed a demand promissory note for $6,098 payable to `NCH Partnership D/B/A Northlake Comm. Hospital."

Subsequently, several demands were made upon defendant to pay the note. On May 30, 1972, plaintiff commenced this action.

Raymond Priem testified that he was present at a meeting prior to the commencement of defendant's association with the hospital, at which the terms of the oral agreement were discussed and agreed upon. According to Priem, the agreement between the hospital and defendant was that defendant "should earn" at least $3,000 per month and that the hospital would loan him the difference between "whatever he billed" and $3,000. When defendant's "billings" for a given month exceeded the sum of $3,000, defendant was to apply the excess to repay the loan. The agreement was not, to Priem's knowledge, reduced to writing, nor was it for a specific period of time.

After defendant began to work at the hospital, Priem testified, he and defendant would meet once a month to go over defendant's records, total his billings and his cash receipts, and determine whether or not the hospital should issue a check.

Priem also testified that he met with defendant on September 24, 1971, to discuss the amount of money defendant owed the hospital. They agreed to a figure of $6,098. Prior to leaving Priem's office, defendant executed the promissory note in that amount. Priem did not know the total amount of defendant's income from his patients during the period he was associated with the hospital.

John Cannaven, who testified that he was a "partner" and had an ownership interest in the plaintiff hospital, testified that he was also present when the oral agreement with defendant was discussed. He testified that defendant told hospital administrators that he was accustomed to a lifestyle which required a monthly income of $3,000, and that there would be a 30- to 60-day lag between the date on which he would render his services to a given patient and the date on which he would receive payment. Recognizing that in the first 30 days of the association defendant was not likely to have any income from his billings to his patients, the hospital agreed to advance him up to $3,000 for any month in which his cash receipts were less than that amount. When defendant's billings and cash receipts reached an "equilibrium," defined by Cannaven as the point at which defendant's cash receipts exceeded $3,000 a month, defendant was to begin to repay the amount of the advances on a month-by-month basis.

At the end of the hospital's fiscal year, it became apparent to Cannaven that defendant's billing-cash receipts cycle had caught up, and that he was then earning more than $3,000 per month. From time to time, Cannaven would ask Priem if defendant was still drawing checks or if he was repaying the advances. Priem told him that defendant was doing neither, and that defendant had offered a number of explanations for his delay in commencing repayment.

Cannaven testified that he and Priem discussed the idea of obtaining a note from defendant. He testified that he was present at the September 24, 1971, meeting in Priem's office where he observed defendant sign the note. The meeting took four or five minutes "at the most." Defendant was there long enough to have read the note. He also testified on cross-examination that if, during the year in which defendant was associated with the hospital, he earned less than the sum of $36,000 from his private patients, defendant would not owe the hospital any money. He also testified, however, that the hospital did not deduct the amounts advanced to defendant as a business expense on its tax returns.

Dr. Cadkin testified that his status with the hospital was that of a private physician on the hospital's staff. He handled his own billing. The basic terms of the disputed oral agreement with the hospital were decided upon in a meeting between a Mr. Doyle and him. *fn1 No one else was present at that meeting. According to defendant, he told Doyle that he needed an income "for the year" of $36,000, or $3,000 per month. Doyle assured him that he would make that much and that, because defendant was taking on responsibilities at the hospital in addition to his regular duties as anesthesiologist, the hospital would "help" him out. Doyle agreed to guarantee defendant an income of $36,000 from October 1, 1970, to October 1, 1971, and to advance him up to $3,000 per month until such time as his income became greater than that amount, at which time the payments were to cease. A meeting was to take place at the end of the year, at which it would be determined whether his income had exceeded $36,000. If it had, he was to repay the advances to the hospital in the amount by which his income had exceeded $36,000. As it turned out, the meeting contemplated by the agreement never occurred.

Defendant went on to testify that at the end of 1970, he received from the hospital a copy of Internal Revenue Service Form 1099 ("U.S. Information Return for Calendar Year") which showed that the hospital had made certain payments to him during 1970. However, as the amount shown on the form exceeded the total of the advances actually made during 1970 under the agreement, it was incorrect. He paid income tax on the correct amount of the advancements and notified the government that the 1099 form was incorrect. He requested a corrected form from the hospital. On the morning of September 24, 1971, while he was in surgery, he was twice notified that Priem wanted to see him before he left the hospital that day. Because September 24 was a Jewish holiday, and defendant had to leave the hospital early to attend religious services, he did not wish to meet with Priem that day. As he was changing his clothing to leave, Priem called and told him that he had a corrected tax form for him to sign and that it would only take a second. Defendant went to Priem's office and Priem handed him what he thought was the corrected tax form, which turned out to be the note for $6,098. ...

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