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Abbott v. Ferrell

OPINION FILED JANUARY 14, 1981.

RONALD T. ABBOTT, PLAINTIFF-APPELLEE,

v.

GRIFFITH H. FERRELL, JR., DEFENDANT-APPELLANT.



APPEAL from the Circuit Court of Rock Island County; the Hon. DAN H. McNEAL, Judge, presiding.

MR. JUSTICE BARRY DELIVERED THE OPINION OF THE COURT:

Dr. Ronald T. Abbott, plaintiff, and Dr. Griffith H. Ferrell, Jr., were partners in the business of providing emergency room services to several hospitals in Illinois, Iowa, and North Dakota. Their medical partnership was known as Drs. Abbott and Ferrell, with offices in Moline, Illinois. In late 1977 the partners decided to terminate their partnership as of December 30, 1977, and after negotiating terms, they executed a dissolution agreement dividing the partnership debts and accounts receivable between the two partners and providing a formula to equalize the division by a payment of cash. The debts and accounts receivable were divided as provided in the agreement, but the equalizing payment was not made because the parties were unable to agree upon the interpretation of the formula provision. Plaintiff filed suit, seeking $28,688.34 from defendant, and defendant filed a counterclaim asking the court to determine the amount of credits due under an unwritten agreement to dissolve a leasing partnership between the same parties. Following a bench trial in the Circuit Court of Rock Island County, judgment was entered in favor of plaintiff on both the complaint and counterclaim, and defendant has appealed.

According to the testimony appearing in the record, the partnership had two different types of arrangements with the hospitals for whom emergency room services were provided. Some hospitals paid the partnership a flat contractual fee, while three hospitals (two in North Dakota and one in Illinois) used a "fee for service" arrangement whereby the partnership would bill each emergency room patient and would be responsible for collecting its bills directly from the patients. These accounts receivable were posted by each hospital, and some hospitals were more current than others. Consequently at the time the dissolution agreement was entered into, the exact amounts of the accounts receivable were not immediately ascertainable. Also, since some of the accounts would not be collectible, the accounts receivable would not be worth the full amount of their face value.

Paragraph 3 of the dissolution agreement provided that plaintiff was to assume the debts which the partnership owed to two banks in North Dakota and that defendant was to assume the debts owed to two banks in Illinois. In paragraph 4 of the agreement, the accounts receivable were divided with plaintiff to receive those from the two North Dakota hospitals and defendant to receive those from an Illinois hospital. Paragraph 4 further provided:

"The parties hereto shall make an adequate adjustment to compensate one party or the other on the basis of the following equation:

Debt obligation of Abbott under Paragraph No. 3= Ratio of Debt to Accounts Receivable of Abbott under Paragraph No. 4 Accounts Receivable for Abbott

Debt Obligation of Ferrell under Paragraph No. 3= Ratio of Debt to Accounts Receivable of Ferrell under Paragraph No. 4 Accounts Receivable for Ferrell.

It is the intent of the parties hereto that the ratio of debt to Accounts Receivable shall be equalized by the payment of cash from the party with the lower ratio to the party with the higher ratio."

It is this equation that gives rise to the litigation now before us. Other provisions of the agreement dealt with other assets and obligations of the partnership and are not involved in this appeal.

Plaintiff testified that during negotiations he knew the exact amounts of the debts that each party would assume as of December 31, 1977, but he used estimates as to the accounts receivable. Plaintiff also stated that it was his understanding the debt would not be affected by the equalizing payment but rather that the accounts receivable would be adjusted. He said, that while he did not know the exact per cent of the receivables he would be able to collect, he could make an educated guess and that was what was done.

The accountant for the partnership, Robert Wolf, testified to the dollar values of the debts and accounts receivable as of December 31, 1977, as follows:

Accounts Receivable:

Illinois Hospital (defendant) $ 95,713.62 North Dakota hospitals (plaintiff) ...


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