Frederick C. Smith Clinic v. Lastrapes , 111 Ohio App. 42 ( 1959 )

I am unable to agree with the majority of the court in the construction placed upon the various written instruments before us in this case, and I must dissent from the decision.

The so-called partnership No. 4, which is the plaintiff in this action, was in effect from July 16, 1956, to January 31, 1957. During this period the following important transactions took place:

1. During July 1956, some differences of opinion arose between the defendant and Dr. Frederick G. Smith and Dr. Philip W. Smith as to credit for services performed by two surgical preceptees, employed by the clinic, which was worked out between them, and on July 31, 1956, a letter was written and signed by The Frederick G. Smith Clinic, by J. W. Bull, partner, addressed to Smoot, Roush Manter, the accounting firm employed by the clinic, being Exhibit No. 22, which contains the following:

"In connection with your accounting for direct expenses of the clinic under the partnership agreement now in effect, and thecontract of employment between the clinic and Dr. T. S.Lastrapes, dated July 1, 1955, you are hereby advised that the following changes in treatment of salaries between surgical preceptees have been agreed to effective August 1, 1956." (Emphasis added.)

Instructions were then given as to credit on production accounts to patients for services rendered by Doctors Wolf and Cameron, as well as to patients under the care of Dr. Lastrapes. At the bottom of this letter appears the following:

"Agreed to and accepted this 31st day of July, 1956. [Signed] Frederick G. Smith, Phillip W. Smith, T. S. Lastrapes."

2. On October 24, 1956, the defendant gave written notice to the clinic of his intentions of terminating his services on and after January 1, 1957; and yet, five days thereafter, on October 29th, 1956, the defendant joined in another letter to the accounting firm, being Exhibit No. 23, making further changes for charging the salaries of Drs. Wolf and Cameron, and credits to be made to the production account of Dr. Frederick G. Smith, Dr. Philip W. Smith, Dr. T. S. Lastrapes, Dr. Robert E. Logsdon, and Dr. D. H. MacPherson. This letter is also agreed to, accepted, and signed, by the five doctors involved, on October 29, 1956. This letter also uses the same instructions as the other letter, to wit:

"Under the partnership agreement now in effect, and the contract of employment between the clinic and Dr. T. S. Lastrapes dated July 1, 1954. . ."

This letter made some changes in charging some expenses incurred by the clinic, and contains this following paragraph, as Section b, which I consider very important:

"b. The above charges will be considered as direct charges, to be deducted from gross income in determining the basis for allocating general overhead of the clinic, and will be deducted from the gross income of Dr. T. S. Lastrapes in computingcompensation otherwise due him under his employment contract." (Emphasis added.)

3. During the latter part of 1956, the defendant raised a question as to his compensation for the first month of his employment. His contract of June 21, 1954, called for all moneys received for services rendered by him "for the first month of your employment." He began work on June 3rd, and his compensation was figured on money received from June 3rd to June 30th, inclusive. During this period, the defendant was out of town several days winding up his affairs in Cleveland. On September 26, 1956, the defendant had a conference with Mr. Manter, the accountant, who called Dr. Frederick Smith and told him of the defendant's contentions, and Dr. Smith told Mr. Manter to give the defendant the benefit of this discrepancy and to give the defendant one hundred per cent of all money the clinic received for his services up to July 15, 1955. This was recomputed, and the defendant met again with Mr. Manter on November 5, 1956, to go over the figures and to be sure that his compensation up to July 15th was figured at one hundred per cent of the money thus received by the clinic. Thus, the defendant, after having given written notice on October 24, 1956, that he was leaving the clinic, was still insisting with Mr. Manter on November 5th that he be paid in strict accordance with his own interpretation of his original contract of employment.

A contract is a two-way street. Would the defendant admit that if the partnership with which he had contracted would have found the contract onerous it could have relieved itself of the burden of paying him $10,775.38 for the part year of 1955, and $26,921.12 for the calendar year 1956, by the simple process of adding or withdrawing one member of the partnership? Can the defendant — and he alone — take from the contract what he wants and leave what he doesn't?

It is stated in 30 Ohio Jurisprudence, 1100, Section 117, as follows:

"Dissolution operates prospectively.

"Those partnership rights and duties which have already vested are, in general, unaffected. The joint liability of all partners persists as before dissolution. In fact any other conclusion would violate the most fundamental principles of contract. That great mass of equitable doctrine involved in the problem of marshaling and distribution of assets rests upon this hypothesis. Similarly, the entire process of winding up, with all its incidental powers, would collapse without it."

A case very similar to the one at bar comes from the Supreme Court of Iowa, and is Larsen v. Burroughs, 224 Iowa 740,277 N.W. 463. In that case, the defendant, as was the defendant in the case at bar, a young, inexperienced physician, and with no acquaintanceship in LeMars, contracted with the LeMars Clinic, a partnership, the contract providing for the payment of eighteen hundred dollars a year beginning October 1, 1934. It does not appear from the record whether this contract contained a provision for its termination in the event of the death of the defendant or the dissolution of the partnership. On page 747, the court says:

"Among the contentions of the defendant not covered by the foregoing is the claim that:

"`The original co-partnership, which was the employer of the defendant in the original written contract, Exhibit D, by the retirement of one of its co-partners, W. T. Shepard, and the taking in of a new partner, L. C. O'Toole, has become dissolved by operation of law, and the present new firm not being a party to the original contract is not entitled to maintain this action thereon.'

"Without going into the matter of whether this contention would have been sound if timely made, it is sufficient to say that the defendant was not in a position to raise it after having operated under the new partnership the full time of the written contract and the extended period thereof. No contention of this sort was suggested by him and he continued his work and accepted pay according to the understanding of the parties. It is too late to raise it now."

With the above, I agree. However, disregarding all these legal niceties, I am of the opinion that, as I have heretofore pointed out, the plaintiffs and the defendant agreed upon and executed (1) on July 31, 1956, Exhibit No. 22 and (2) on October 29, 1956, Exhibit No. 23, valid, binding and enforceable contracts whereby the employment of Dr. Lastrapes was confirmed and accepted, and his compensation, although slightly reduced, became fixed. In my opinion it is entirely immaterial whether, on July 31st or October 29th, the contract of employment of June 21, 1954, was valid or invalid. The parties could just as well and just as legally have agreed upon employment and compensation "under the partnership agreement now in effect and the contract of employment between Dr. X and the Mayo Clinic dated January 1, 1920, a copy of which is enclosed."

The terms of employment and compensation would be fixed, definite and certain; the accountants would be able to ascertain the amounts and so forth, and if the contract of Dr. X contained a no-practice agreement, the parties then and there would, on those dates, have agreed to it, when it would have been, as Exhibits No. 22 and No. 23 were, "agreed to and accepted" and signed by the parties.

In my opinion, there may occasionally arise a proper case, a proper time, or a proper circumstance, where legal hair-splitting ad infinitum might be necessary for a proper conclusion; that is, when that is necessary for a court not only to do justice, but also to seem to do justice. But, this case certainly is not one. A realistic and common sense view of this case discloses that the plaintiffs and the defendant — all highly educated and intelligent individuals — have for a period of over a year and a half consistently, persistently and conscientiously sought to do one thing, and that is to live up to and to perform to the best of their individual capabilities the agreement of July 21, 1954. Each side made concessions to the other. The clinic had the defendant's compensation for the first month recomputed, so that he could receive additional compensation in accordance with his own strict interpretation of the contract. The defendant, who made application to be admitted as a partner in December 1955, and then withdrew his application when he learned that he was making more money than most of the individual partners, made concessions by the agreements of July 31st and October 29th, in assuming a share of the salaries of the two medical preceptees who were assisting him with his patients and decreasing his work load. He even inquired of some of the partners whether they thought he would be held to the provision of his contract calling for not practicing in Marion County for four years if he terminated his contract.

Generally, contracts should be construed liberally so as to carry into effect the intentions of the parties, rather, than by resorting to technical construction, to render such contracts void. 11 Ohio Jurisprudence (2d), 398, Contracts, Section 154.

Contracts should receive a reasonable construction in order to carry out the presumed intention of the parties and not to arrive at absurd or impossible results. The parties are presumed to exercise rational rather than irrational action, and each is presumed to be exercising reason. 11 Ohio Jurisprudence (2d), 400, Contracts, Section 156.

Contracts are to be construed so as to lead to justice between the parties. 11 Ohio Jurisprudence (2d), 401, Contracts, Section 157.

The practical construction of a contract as made by the parties themselves, especially as shown by their acts and conduct in performing it after a period of operation, should be adopted by the court after a dispute has arisen between the parties, because, in such cases, the actions sometimes speak louder than words. 11 Ohio Jurisprudence (2d), 402, Contracts, Section 158.

Actions also speak much louder than afterthoughts.