In re St. Mary Hosp.
| Decision Date | 01 August 1990 |
| Docket Number | Adv. No. 90-0211S.,Bankruptcy No. 88-11421S |
| Citation | 117 BR 125 |
| Parties | In re ST. MARY HOSPITAL, Debtor. Roger B. HISER, Trustee on behalf of St. Mary Hospital, Plaintiff, v. NEUMANN MEDICAL CENTER, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
David S. Fishbone, Ciardi, Fishbone & DiDonato, Philadelphia, Pa., for plaintiff Trustee, Roger B. Hiser, on behalf of St. Mary Hosp.
Gary Schildhorn, Adelman Lavine Gold & Levin, Philadelphia, Pa., for Creditors' Committee.
W. Jeffrey Garson, Saul, Ewing, Remick & Saul, Philadelphia, Pa., for defendant Neumann Medical Center, Inc.
James J. O'Connell, Asst. U.S. Trustee, Philadelphia, Pa.
The instant proceeding presents several disputes concerning the interpretation of a contract, an Asset Purchase Agreement ("the APA") dated October 1, 1988, by which the Defendant in this proceeding, NEUMANN MEDICAL CENTER, INC. ("Neumann"), bought the facility previously operated by ST. MARY HOSPITAL, the Debtor ("the Debtor"), effective on the date of the sale closing, apparently December 31, 1988. In resolving this series of disputes, we consistently resort, whenever possible, to the language of the APA, which we find is a comprehensive document setting forth all aspects of the parties' relationship. Specifically, we find that Neumann is entitled to commissions for all collections of "assets not sold" to it in the APA coming due between the closing date and June 30, 1989, but not for an item collected by the Debtor on December 29, 1988. However, finding no breach of the APA by the Debtor, we conclude that the only disputed credit to which Neumann is entitled is the reasonable cost of storage of medical records which the Debtor left behind after settlement. We therefore hold that the Debtor is obligated to credit Neumann with $128,244 out of $147,324 disputed commissions, leaving only $71,726 due to the Debtor prior to allowance of any credits to Neumann, but is only obliged to allow such credits of $64,090. Therefore, we will enter a net judgment of $7,626 in the Debtor's favor and allow Neumann a future credit of $884.60 for each month that it continues to store the Debtor's records.
This is the fifth and hopefully the last of the opinions to be written in this case involving the reorganization of a popular community-based hospital, saved from closure and ultimately sold to Neumann, an entity committed to continuing the Debtor's services, through the combined efforts of several of its admitting physicians, many concerned members of the community, and the services of a Chapter 11 Trustee, ROGER B. HISER, the Plaintiff in this proceeding ("the Trustee"). The ever-expanding history of this Chapter 11 case, filed April 27, 1988, is set forth in our prior reported Opinions reported at 86 B.R. 393 (Bankr.E. D.Pa.1988) (); 89 B.R. 503 (); 97 B.R. 199 (Bankr.E.D.Pa.1989) (); and 101 B.R. 451 (Bankr.E.D.Pa. 1989) ().1 The history of this case can be ascertained chiefly from perusal of the first of these Opinions, 86 B.R. at 395-97, and the third, 97 B.R. at 200-02, and will not be repeated here. This proceeding arose after this court, on April 5, 1989, confirmed a Plan of Reorganization submitted jointly by the Trustee and Franciscan Health Services, Inc., the centerpiece of which was the APA under which Neumann agreed to purchase most of the assets of the Debtor for about $5 million.
The instant proceeding, which might be viewed as the tale of a white knight who is attempting to claim his rightful payment or salary guaranteed to him from the village he saved or as a knight who is demanding unjustified ransom from the saved village, was filed on April 9, 1990, by the Trustee. The Complaint requested Neumann to turn over funds to the Trustee in the amount of $168,861.00, plus interest, representing money collected by Neumann which allegedly belonged to the Debtor's estate.
On June 5, 1990, Neumann answered by not only denying any liability to the Trustee, but asserting five Counterclaims which, if sustained, would entitle it to over $200,000 in damages from the Debtor's estate. The trial was conducted on June 20, 1990. At its outset, the parties greatly reduced our labors by presenting a comprehensive Stipulation which included a summary of all areas in dispute and agreements regarding the mathematics underlying the disputes. Each party presented only an accountant as a witness: Joseph M. Huber ("Huber") for the Trustee, and Brad Barry ("Barry") for Neumann.
On June 21, 1990, subsequent to the trial, we entered an Order according the parties an opportunity to file Proposed Findings of Fact and Conclusions of Law and Briefs on or before July 6, 1990 (the Trustee), and on or before July 20, 1990 (Neumann). The parties complied strictly with this Order. Pursuant to Bankruptcy Rule ("B.Rule") 7052 and Federal Rule of Civil Procedure ("F.R.Civ.P.") 52(a), this decision has been prepared in the form of Finding of Facts and Conclusions of Law including, where necessary, explanatory Discussion.
1. The APA is a detailed, comprehensive 48-page document, excluding numerous exhibits, which was not only drafted carefully by counsel for the parties, but was subject to input from the numerous other parties interested in this case, before we approved it.
2. By the trial date, the parties had confined their disputes as follows:
a. The "starting point" was the figure that the Debtor claimed was due before Neumann was allowed disputed commissions and credits due were deducted, i.e., $199,961 b. It was agreed that Neumann was entitled to commissions, at thirty (30%) percent, on receivables of $1,647,896. However, Neumann's right to commissions on the following four items were in dispute:
(1) June 1989 collections (in his
post-trial submissions, the
Trustee agrees that Neumann
is entitled to same) $ 77,563.00
(2) Capital and medical education
payments from third
parties 123,315.00
(3) Receivables where money
was received by St. Mary in
pre-agency period (according
to Neumann) in violation of
paragraph 13 of the APA 63,598.00
(4) Other receivables (refunds
from vendors, income on estate
bequests, insurance refunds
return of deposits) 226,603.00
___________
Total of Disputed Collections $491,979
Rate of Commission .3
____________
$147,324
(rounded)
c. It was undisputed that Neumann was entitled to credits of $46,398 for reimbursement of its payment of the salary and office support for an agent of the Debtor on its premises. However, the credits allowable to Neumann for the following items were in dispute:
Amounts Due Amounts Due
Item per Trustee per Neumann
(1) Indemnification to Neumann for certain
lawsuits against the Debtor $ -0- $ 11,330
(2) Storage of the Debtor's records by Neumann $13,600 118,235 (however
in its post-trial
submissions
Neumann reduced
this demand to
$67,595, plus future
"use")
(3) Neumann's right to reimbursement for
services to Blue Cross in-house patients
of December 31, 1988 3,116 37,068
_______ ________
Total of Allowable Credits $16,716 $105,393+
3. Pertinent to the issue of the commissions due to Neumann are the following provisions of the APA:
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