Blount v. Smith, 40530

• Citation: 231 N.E.2d 301,12 Ohio St.2d 41
• Decision Date: 29 November 1967
• Docket Number: No. 40530,40530
• Parties: , 41 O.O.2d 250 BLOUNT, Appellee, v. SMITH et al., Appellants.
• Court: United States State Supreme Court of Ohio

Page 41

12 Ohio St.2d 41

231 N.E.2d 301, 41 O.O.2d 250

BLOUNT, Appellee, v. SMITH et al., Appellants.

No. 40530.

Supreme Court of Ohio.

Nov. 29, 1967.

Syllabus by the Court

The provisions of a contract, explicitly delineating the respective interests of the contracting parties upon the withdrawal of any one of them from such contract, will not be disturbed in the absence of evidence of circumstances surrounding the execution, performance and termination of the contract tending at least to show misapprehension upon the part of, and undue disadvantage imposed upon, the party seeking to escape from such provisions, or that the penalty claimed to be imposed upon such party bears no relationship to the loss which may reasonably have been sustained by the other parties to the contract.

Dunbar, Kienzle & Murphey, James P. Jones, and David J. Young, Columbus, for appellee.

Knepper, White, Richards & Miller, William E. Knepper, William L. Clark, Columbus, Halberstein & Mitchell and Edwin L. Mitchell, Marion, for appellants.

SCHNEIDER, Judge.

From February 1, 1957, to November 14, 1961, Dr. Henry C. Blount, Jr., the plaintiff-appellee here, was engaged in the practice of medicine in Marion, Ohio, as a 'partner' in the Frederick C. Smith Clinic. The eleven defendants (six of whom are appellants here) are also physicians and were all of the other members of the Clinic from February 1, 1961, to November 14, 1961.

During the latter period, the business of the Clinic was governed by a written 'Articles of Copartnership,' in which 'net partnership income' is defined as all amounts collected by the Clinic for professional services rendered by its members, plus all amounts received by the Clinic for services rendered not involving direct professional services by any of the physicians, less all proper expenses.

All billings and collections were 'made through the partnership and in its name'; all moneys received by the Clinic were deposited in the Clinic bank account; and books of account (including balance sheet, profit and loss statement, production statement, trustee account and accounts receivable statement) were kept by the business office of the Clinic and in its name.

Each physician's share of the Clinic's net income for each fiscal year was determined by crediting him with all fees collected for professional services rendered by him, plus interest on his capital investment (each originally contributed $1,500), and by charging him with all expenses for drugs, supplies, space and equipment used by him, for all employees directly assisting him, and for his share of general operating expenses.

This income division plan did not involve the pooling of any fees for professional services. Thus, each physician's distributable net income was limited to a return on his capital contribution and to his professional fees less expenses attributable to those fees. There was, in addition, provision for nonprofessional services rendered by the Clinic, the total amount and each individual's share of which are undisclosed.

The 'Articles' were to continue in effect until January 31, 1962, and thereafter from year to year unless sooner terminated under the provisions thereof.

On or about October 11, 1961, by a writing addressed 'to the partners of the Frederick C. Smith Clinic,' plaintiff gave the following notice:

'This is to inform you that I am withdrawing from the partnership as of the close of business on November 14, 1961. I regret that I am unable to give longer notice of my departure but feel that you will have no difficulty in obtaining adequate radiological coverage until you can find an acceptable replacement.

'Mr. James P. Jones, my attorney, advises me that the withdrawal provisions of our partnership agreement contravene a specific section of the Ohio statutes and for that reason are unenforceable. Accordingly, I would appreciate it if you would have Mr. Mitchell, the partnership's attorney, contact Mr. Jones to work out the details of my withdrawal as promptly as possible.'

Plaintiff thereupon withdrew from the Clinic as of the close of business on the date stated.

Provisions of the 'Articles' relating to the rights of the plaintiff under the circumstances as related heretofore are:

'9. Termination of Partnership: The partnership herein created shall terminate upon the happening of any one of the following events:

'(a) The giving of notice, in writing, by any one of the partners to the other partners of his withdrawal from said partnership, specifying a future date to become effective as of the close of the fiscal year in which the partnership is then operating;

(There follows a description of other events which will effect a termination, i. e., absence without leave for 30 days, death, total disability, bankruptcy or assignment for the benefit of creditors, and receivership.)

'* * *

'10. Rights of Withdrawing Partner: In the event of the happening of any of the events specified in 9 above, or in the event a partner, for any reason, ceases to be a member of the partnership, the remaining partners, excluding the one involved therein, shall continue partners, subject to all of the terms and provisions hereof. The liability of said remaining partners to such former partner or the estate thereof, except as hereinafter specifically provided, shall be limited to the payments thereto, within a reasonable time after the happening of any one of the events described above, of the interest of said withdrawing deceased, disabled, bankrupt or insolvent partner in the net worth according to the books of said partnership, as disclosed upon the balance sheet thereof as of the end of the month when such withdrawal becomes effective. It is expressly understood and agreed that the term 'net worth' as used above shall, under no circumstances, be deemed to include accounts receivable.

'* * *

(Articles 11 and 12 provide for the payment, as collected, of the accounts receivables, representing fees for services rendered by a member withdrawing by reason of death or total disability,...