Professional Billing Agency, Inc. v. Tarantino

• Citation: 350 So.2d 258
• Decision Date: 08 September 1977
• Docket Number: No. 7949,7949
• Parties: PROFESSIONAL BILLING AGENCY, INC. v. Ernest E. TARANTINO, D.D.S.
• Court: Court of Appeal of Louisiana (US)

Page 258

350 So.2d 258

PROFESSIONAL BILLING AGENCY, INC. v. Ernest E. TARANTINO, D.D.S.

No. 7949.

Court of Appeal of Louisiana, Fourth Circuit.

Sept. 8, 1977.

Rehearing Denied Oct. 12, 1977.

I. Bernard Salomon, New Orleans, for plaintiff-appellee.

Robert F. Fadaol, Gretna, for defendant-appellant.

Before LEMMON, GULOTTA and BEER, JJ.

GULOTTA, Judge.

Plaintiff, assignee of one of the defendant-doctor's accounts receivable, upon failure to collect the balance from the principal debtor, the doctor's patient, seeks reimbursement from the defendant-assignor of the principal amount due plus accrued, stipulated interest at the rate of 1 1/2% per month. Defendant appeals from an award in favor of plaintiff in the sum of $635.40, together with stipulated interest, subject to a credit in the sum of $100.00, which was paid on the account by the debtor after suit had been filed. We affirm.

On February 20, 1974, Dr. Ernest E. Tarantino and plaintiff entered into a "CONTRACT FOR THE ASSIGNMENT OF ACCOUNTS RECEIVABLE". This instrument provided that the assignee would pay the assignor 95% of the principal amount of each account assigned. The agreement also contained a "repurchase" provision relied upon by plaintiff in the instant suit. The pertinent part of the "repurchase" clause of the assignment agreement reads as follows:

"Assignor agrees that in the event the account receivable debtor fails or refuses to make payment in accordance with the credit agreement and said failure or refusal continues for a period of 90 days, then and in that event, Assignee shall have the option to designate the said account a "defaulted account," and Assignor unconditionally guarantees to repurchase any such defaulted account for the full balance thereof immediately upon demand by Assignee.

"By mutual consent of Assignor and Assignee, a defaulted account may be retained by Assignee for legal and/or judicial collection, with the understanding that Assignee may reassert its demand for repurchase at any time, and further that any portion of principal or interest and all court costs . . . not recovered by Assignee from the defaulted account debtor, shall be the responsibility of the Assignor and shall be due and collectible from Assignor upon demand."

In connection with the assignment agreement, the parties also signed a "STATEMENT OF ASSIGNMENT OF ACCOUNTS RECEIVABLE" in which the assignor declared that he "has assigned and may continue to assign, accounts receivable to PROFESSIONAL BILLING AGENCY, INC." according to the provisions of LSA-R.S. 9:3102 et seq.

Pursuant to the assignment agreement, Tarantino, on May 15, 1974, assigned the patient's account in question to plaintiff. An "AGREEMENT" entered into between the doctor and the patient stipulates, among other things, that the patient acknowledges that the doctor may assign the account to Professional Billing Agency and that the unpaid balance would be subject to a finance charge of 1 1/2% per month corresponding to an annual percentage rate of 18%. A copy of this agreement was forwarded to the plaintiff who in turn paid 95% of the principal balance to defendant. The debtor failed to pay the balance due, however, and on January 8, 1975, plaintiff, invoking the "repurchase" provision of the contract between assignor and assignee, demanded full payment of the defaulted account by the dentist.¹ On February 5, 1975, defendant was advised that the defaulted account had been sent to an attorney for collection, and demand against defendant for full payment was reasserted. Following further demands against both the debtor-patient and defendant-doctor,² the instant suit was filed against the doctor on January 15, 1976. On January 30, 1976, the debtor-patient paid $100.00 on the balance due and promised further payment. Thereafter,³ she moved to Alaska and no further payments were made.

It is defendant's first contention, on appeal, that plaintiff failed to carry out the obligations imposed upon it by the assignment agreement and that this breach prevents enforcement of the contract. According to defendant, once the debtor defaulted, the assignee had the duty to exercise one of the three following options:

1. Declare the account defaulted and make a demand upon the assignor for remittance of the amount due; or,

2. With the consent of the assignor, turn the account over to an attorney for collection; or,

3. Grant an extension to the debtor of the amount due.

Defendant argues that plaintiff granted extensions to the debtor for an inordinate amount of time (from August 31, 1974 when the account became 90 days delinquent until January 8, 1975 when permission was sought from the assignor to place the account with an attorney). Defendant complains that plaintiff's breach was in granting unreasonable extensions to the debtor permitting the debtor to leave the jurisdiction and in failing to file suit against the patient-debtor before reasserting the demand for repurchase. According to defendant, plaintiff could have availed itself of the first option provided for in the agreement by declaring the account defaulted after the expiration of a period of 90 days. In such instance, he argues, demand would have been made immediately on defendant for reimbursement and defendant could have then pursued collection against the debtor, when the debtor was still living in New Orleans and the debt was collectible.

It is true, as pointed out by defendant, that plaintiff could have demanded repurchase at the expiration of 90 days and that the debtor was permitted an inordinate amount of time to pay the indebtedness. However, as pointed out by plaintiff, the failure to file suit against the debtor was caused by the fact that the debtor's husband was in the military service, a fact known to defendant. Furthermore, plaintiff was under the reasonable impression the debtor was a friend of the assignor, and in a gesture of good will granted extensions for payment to the debtor. John K. Dewey, president of Professional Billing Agency, Inc., testified that Tarantino had been informed by telephone and computer print-out that the debtor-patient was overdue in paying her bill. Dewey further stated that it was his understanding that defendant did not want legal action to proceed against the patient because she was a friend of the assignor. Moreover, ...