574 S.E.2d 567 (Ga.App. 2002), A02A0903, Acree v. McMahan

Docket Nº:A02A0903.
Citation:574 S.E.2d 567, 258 Ga.App. 433
Party Name:ACREE et al. v. McMAHAN.
Attorney:Bouhan, Williams & Levy, Walter C. Hartridge, David M. Conner, John G. Odom, Savannah, for appellants., O. Wayne Ellerbee, Valdosta, Tom W. Thomas, for appellee.
Case Date:November 19, 2002
Court:Court of Appeals of Georgia

Page 567

574 S.E.2d 567 (Ga.App. 2002)

258 Ga.App. 433

ACREE et al.



No. A02A0903.

Court of Appeals of Georgia

November 19, 2002.

Casemaker Note: Portions of this opinion were specifically rejected by a later court in 267 Ga.App. 147.

Casemaker Note: Portions of this opinion were specifically rejected by a higher court in 585 S.E.2d 873

Casemaker Note: Portions of this opinion were specifically rejected by a later court in 605 S.E.2d 32

Certiorari Granted Feb. 25, 2003.

Page 568

[Copyrighted Material Omitted]

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[258 Ga.App. 440] Bouhan, Williams & Levy, Walter C. Hartridge, David M. Conner, John G. Odom, Savannah, for appellants.

O. Wayne Ellerbee, Valdosta, Tom W. Thomas, for appellee.

SMITH, Presiding Judge.

Dr. Howard McMahan brought suit against Dr. Russell Acree and Memorial Health Services, Inc. to recover damages for breach of contract. A jury trial resulted in a verdict for McMahan, and the two defendants appeal. They raise issues regarding the propriety of applying the doctrine of piercing the corporate veil and allege several errors regarding proof of and interpretation of the contract in issue. We find no error and affirm.

The evidence presented at trial showed that Acree formed Memorial Health Services, Inc. (MHS), a corporation in which he was the principal shareholder, to manage and sometimes purchase various small hospitals in South Georgia. In 1984, McMahan began practicing medicine in a group in Adel with Acree. When MHS acquired management rights to a hospital in Hahira, Acree and McMahan recruited Dr. Gene Jackson, an old friend of McMahan, to relocate his practice to Hahira. In the fall of 1990, Acree approached McMahan with a proposal to relocate to Ocilla, in Irwin County, where Acree was in the process of finalizing an agreement for MHS to manage the hospital. Although McMahan was not at first receptive, he eventually agreed. He, Acree, and Jackson formed a corporation, AJM, Inc., to formalize the structure of their practice, management, and potential ownership agreement with regard to the Ocilla relocation. Under the agreement, he and Jackson were to relocate to Ocilla and practice there. They agreed to be on the hospital staff and assist in turning around the hospital's finances by admitting patients and using the hospital facilities. Eventually they were to become part of the management team. The management agreement MHS had with the hospital included a purchase option, and under the AJM agreement, if the hospital were sold, McMahan and Jackson would be offered an equity position in the hospital.

In November 1990, after the AJM agreement was executed, McMahan and Jackson relocated their medical practices to Ocilla. McMahan's family followed in early 1991. In essence, MHS assigned its management contract with the hospital in Ocilla to AJM, with Acree providing the expertise acquired through previous experience, and McMahan and Jackson providing the manpower for daily operations. As time went on, however, it became apparent that differences of opinion, both philosophical and practical, existed between McMahan and Jackson, on the one hand, and Acree on the other hand. Because of these differences, in May 1992 the principals in AJM reached a buyout agreement, whereby Acree would purchase the shares in AJM of both McMahan and Jackson.

Under this agreement, Acree agreed to pay the other two doctors [258 Ga.App. 434] $750,000 each for their shares, in certain prescribed payments. Acree also agreed to maintain the hospital as an acute care facility, improve its physical plant and equipment as the budget permitted,

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maintain the hospital staff, assist in recruitment efforts, and promote the hospital. For their parts, McMahan and Jackson agreed to maintain their practice in Ocilla, continue to use the hospital as their primary inpatient facility, keep up their committee work, and cover the emergency room and the nursing home 24 hours a day. They also agreed to try to recruit two additional doctors, maintain their relationship with the community, and promote the hospital.

The first payment required under the agreement was for $150,000 each to McMahan and Jackson. This was made on time, by MHS. In June 1992, monthly payments of $5,000 began to McMahan and Jackson. These checks were drawn on the account of Irwin County Hospital. In August 1993, after disagreements with Acree over another doctor recruited by Acree, updating hospital equipment, and Acree's announcement that he would open a practice in Ocilla, Jackson decided to leave and announced his departure.

After Jackson left, McMahan continued active participation in emergency room call and admitted patients to the hospital. His monthly checks were sometimes delayed. In January 1994, when McMahan had not received his check by mid-month he telephoned Acree, who informed him that he was unhappy with McMahan's...

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