North Miami General Hospital, Inc. v. Kovens, 74--1662

• Decision Date: 23 September 1975
• Docket Number: No. 74--1662,74--1662
• Citation: 318 So.2d 567
• Parties: NORTH MIAMI GENERAL HOSPITAL, INC., Appellant, v. Cal KOVENS and Bert Sager, Appellees.
• Court: Florida District Court of Appeals

Page 567

318 So.2d 567

NORTH MIAMI GENERAL HOSPITAL, INC., Appellant, v. Cal KOVENS and Bert Sager, Appellees.

No. 74--1662.

District Court of Appeal of Florida, Third District.

Sept. 23, 1975.

Sams, Anderson, Alper & Post, Sam Daniels, Miami, for appellant.

Sibley, Giblin, Levenson & Ward, Miami Beach, for appellees.

Before PEARSON, HENDRY and HAVERFIELD, JJ.

HAVERFIELD, Judge.

Appellant seeks review of an adverse final judgment in this action for a declaratory decree. The facts giving rise to this controversy are as follows.

In 1966 Cal Kovens and Bert Sager owned all of the outstanding stock of Keith Investments, Inc. which owned the facilities of the appellant, North Miami General Hospital, Inc. (hereinafter referred to as NMG). In November of that year, NMG entered into an agreement to purchase all of the stock from Kovens and Sager, appellees herein, and executed in favor of the appellees a promissory note and mortgage encumbering the land, building and assets of the hospital. Pursuant to the terms of these three instruments, Kovens and Sager were to be paid annually for a 15 year period a minimum of $233,333 or 2/3 of the 'adjusted net profit' ¹ derived from the hospital's operations, whichever was greater. In the years 1967, 1968, 1969 and ultimately in the year 1970, appellees received as their annual payments 2/3 of the 'adjusted net profit.'

In late 1969, the U.S. Government asserted a claim against NMG that Medicare had overpaid the hospital $1,800,000 in connection with Medicare payments made to the hospital in the years 1966 through 1969. In 1970 an additional claim of $660,000 was asserted by Medicare. NMG informed Kovens and Sager of the claims and contended that if NMG had to make any credits or rebates to Medicare for payments received in 1966 through 1970, appellees would be responsible to NMG for 2/3 of that amount because they would have been overpaid under the promissory note for those years. Kovens and Sager denied any responsibility or liability to NMG under the Medicare claim.

An additional dispute between the parties arose in 1970 with respect to the hospital's management contract ² which precipitated litigation (Circuit Court Case No. 70--16020) being instituted by the appellees against NMG. As a result of this action, NMG refused to pay appellees the 1970 annual payment due under the terms of the 1966 promissory note. Appellees then filed another complaint (Circuit Court Case No. 71--2593) against NMG to recover the 1970 payment due them. Kovens and Sager asserted therein claims against some of the trustees of the hospital for the wrongful charging of sums against NMG, which reduced the amount of net profits of the hospital and in turn reduced the amount paid and payable to Kovens and Sager under the terms of the promissory note.

All of the foregoing disputes, claims and pending litigation resulted in the parties executing a modification of the 1966 promissory note which reads in part as follows:

'MODIFICATION OF NOTE MADE AT MIAMI, FLORIDA, DECEMBER 1, 1966, BY NORTH MIAMI GENERAL HOSPITAL, INC., TO CAL KOVENS AND BERT SAGER

'THIS MODIFICATION AGREEMENT made and entered into this 19th day of February, 1971, by and between NORTH MIAMI GENERAL HOSPITAL, INC. (the 'Maker') and CAL KOVENS and BERT SAGER (the 'Payees'), their heirs, successors, legal representatives and assigns;

'WITNESSETH:

'WHEREAS, the Maker has heretofore made that certain Promissory Note at Miami, Florida, dated December 1, 1966, to CAL KOVENS and BERT SAGER, a copy of which note, consisting of 8 pages, is attached hereto as Exhibit A; and

'WHEREAS, payments have heretofore been made on account of said note; and

'WHEREAS, uncertainty and disputes exist and have arisen as to the amount due and to become due pursuant to said Promissory Note; and

'WHEREAS, the parties desire to make certain the amount of the balance of the Note remaining unpaid; and

'WHEREAS, the parties, for valuable consideration and value received, do desire to modify said note, effective this day.

'NOW, THEREFORE, in consideration of the mutual covenants of the parties and to settle such uncertainty and disputes and for other valuable consideration; receipt whereof is hereby acknowledged by the Maker and the Payees, the parties covenant and agree as follows:

'1. Said Promissory Note is, effective this 19th day of February, 1971, modified to provide and read as follows:

'The Maker, for value received, promises to pay to the order of CAL KOVENS (as to 95 per cent) and unto BERT SAGER (as to 5 per cent) the principal sum of Six Million Two Hundred Fifty Thousand Dollars ($6,250,000.00), together with interest thereon at four per cent (4%) per annum from February 19, 1971, as follows:

'2. It is understood and agreed that Six Million Two Hundred Fifty Thousand Dollars ($6,250,000.00) is the remaining unpaid indebtedness upon said Promissory Note and that no payment made on or prior to February 19, 1971, shall be deemed to reduce the said balance of said Promissory Note, the Maker having heretofore been given credit therefor in such fashion as to create the said balance of Six Million Two Hundred Fifty Thousand Dollars ($6,250,000.00).

'3. Except as above set forth in this modification agreement, all of the other terms, covenants and conditions of said Promissory Note of December 1, 1966, are hereby cancelled.'

After the execution of this agreement and dismissal of the pending lawsuits, NMG on December 20, 1972 filed the instant complaint for declaratory judgment to determine its rights under the purchase agreement and promissory note entered into between NMG and Kovens and Sager. In essence, the complaint alleged Medicare was claiming NMG had received overpayments in excess of $1,600,000, which was being contested by NMG, and that Kovens and Sager had denied any liability or responsibility for repayment of any sum to NMG or Medicare. Kovens and Sager filed an answer denying liability and alleging the February 19, 1971 modification agreement clearly settled and disposed of all claims of the parties against each other regarding past or future payments made or due under the promissory note and mortgage. The cause came on for non-jury trial, and the trial judge rendered the following final judgment after a detailed recitation of facts.

'The Court finds, from the foregoing facts and applicable law, that there is no liability, responsibility or obligation of the respondents, Cal Kovens and Bert Sager, to pay, reimburse, or account to the petitioner, North Miami General Hospital, Inc., for any claim that petitioner, North Miami General Hospital, Inc., might be required to pay to Medicare for the years 1966 through 1970, or for any year thereafter.

'IT IS, THEREUPON, CONSIDERED, ORDERED AND ADJUDGED that final judgment is entered in favor of the respondents, Cal Kovens and Bert Sager, and against the petitioner, North Miami General Hospital, Inc. and the respondents shall go hence without day. The costs of these proceedings are hereby taxed against the petitioner, the amount to be set and determined upon...